[Federal Register Volume 64, Number 219 (Monday, November 15, 1999)]
[Notices]
[Pages 61822-61825]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29749]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-421-805]
Aramid Fiber Formed of Poly Para-Phenylene Terephthalamide From
the Netherlands; Final Results of Antidumping Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of the antidumping duty administrative
review; aramid fiber formed of poly para-phenylene terephthalamide from
the Netherlands.
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EFFECTIVE DATE: November 15, 1999.
SUMMARY: On July 8, 1999, the Department of Commerce (``the
Department'') published the preliminary results of its administrative
review of the antidumping duty order on aramid fiber formed of poly
para-phenylene terephthalamide (``PPD-T aramid'') from the Netherlands.
The review covers one manufacturer/exporter and the period June 1, 1997
through May 31, 1998.
We gave interested parties an opportunity to comment on our
preliminary results. Based on our analysis of the comments received, we
have revised the results from those presented in the preliminary
results of review.
FOR FURTHER INFORMATION CONTACT: Russell Morris, Office of AD/CVD
Enforcement VI, Group II, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230; Telephone: (202)
482-1775.
SUPPLEMENTARY INFORMATION:
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (``the Act'') by
the Uruguay Round Agreements Act (``URAA''). In addition, unless
otherwise indicated, all references to the Department's regulations are
to 19 CFR 351 (1998).
Background
The Department published in the Federal Register the antidumping
duty order on PPD-T aramid from the Netherlands on June 24, 1994 (59 FR
32678). On June 10, 1998, we published in the Federal Register (63 FR
31717) a notice of ``Opportunity to Request an Administrative Review''
of this order covering the period June 1, 1997, through May 31, 1998.
In accordance with 19 CFR 351.213(b), Aramid Products V.o.F. and Akzo
Nobel Aramid Products, Inc. (collectively ``Akzo'' or respondent), and
E.I. DuPont de Nemours and Company (``petitioner''), requested that we
conduct an administrative review of the aforementioned period of review
(``POR''). On July 28, 1998, the Department published a notice of
``Initiation of Antidumping Review'' (63 FR 40258). On July 8, 1999,
the Department published the preliminary results of the review. See
Aramid Fiber Formed of Poly-Phenylene Terephthalamide from the
Netherlands: Preliminary Results of Antidumping Administrative Review,
64 FR 36841 (July 8, 1999). The Department has now completed the review
in accordance with section 751 of the Act.
Scope of Review
The products covered by this review are all forms of PPD-T aramid
from the Netherlands. These consist of PPD-T aramid in the form of
filament yarn (including single and corded), staple fiber, pulp (wet or
dry), spun-laced and spun-bonded nonwovens, chopped fiber, and floc.
Tire cord is excluded from the class or kind of merchandise under
review. This merchandise is currently classifiable under the Harmonized
Tariff Schedule of the United States (``HTSUS'') item numbers
5402.10.3020, 5402.10.3040, 5402.10.6000, 5503.10.1000, 5503.10.9000,
5601.30.0000, and 5603.00.9000. The HTSUS item numbers are provided for
convenience and Customs purposes. The written description of the scope
remains dispositive.
Fair Value Comparisons
We calculated constructed export price (``CEP'') and normal value
(``NV'') based on the same methodology used in the preliminary results.
Changes From the Preliminary Results
The Department corrected a clerical error that involves a missing
variable which affected the assessment rate. See Comment 3.
Analysis of the Comments Received
We gave interested parties an opportunity to comment on the
preliminary results of review. We received comments from respondent and
petitioner on August 9, 1999, and rebuttal comments from Akzo on August
16, 1999.
[[Page 61823]]
Comment 1: Use of Parents' Consolidated Financial Statements.
Petitioner contends that the Department should revise Akzo's reported
U.S. indirect selling expenses, arguing that the calculation of the net
interest expense, a component of indirect selling expenses, was
improperly based on the consolidated financial statements of Akzo Nobel
Inc., and should have instead been based upon the financial statements
of Akzo Nobel Aramid Product Inc. (``ANAPI''--the exclusive sales agent
of Aramid Products V.o.F. in the United States (``Aramid'')).
Petitioner also asserts that the Department should reject Akzo's
use of consolidated financial data in calculating the net interest
expenses included in Aramid's cost of production, because the
consolidated financial data does not reflect Aramid's actual financing
expenses.
Petitioner acknowledges that the Department generally uses
consolidated financial expense data to calculate a subsidiary's
financing expenses. However, petitioner asserts that this is not an
automatic requirement. Further, petitioner contends that the Department
must not use consolidated data where using the consolidated data would
distort actual financing expenses. Petitioner asserts that such would
be the case in the instant circumstance because Akzo's reported
financial interest expense factor is unrelated to the financing
requirements of Akzo's PPD-T aramid fiber business in the United
States. Moreover, petitioner argues that Akzo justifies its use of
consolidated figures on the grounds that the U.S. parent borrows on
behalf of its related companies, and then charges the units a share of
this cost, without explaining how it allocates the financing expenses.
Petitioner argues that Akzo calculated the reported financing
expenses based on outstanding loans between the U.S. parent and ANAPI
and speculates as to the reasons why ANAPI borrowed money from its
parent company to finance its U.S. operations. Petitioner further
argues that the Department and the Court of International Trade
(``CIT'') misapplied binding precedent when affirming the Department's
use of Akzo's consolidated data in E.I. DuPont de Nemours & Co. v.
United States, No. 96-11-02509, Slip Op. 98-7, 1998 WL 42598 (CIT
January 29, 1998) (hereinafter ``DuPont I''). Moreover, petitioner
contends that the Department and the CIT in DuPont I failed to follow
the express mandate of the 1994 amendments to the antidumping statute,
which directs the Department to capture ``all of the actual costs
incurred in producing and selling'' the subject merchandise and to
ensure that reported costs constitute a representative measure of the
respondent's true costs.
Akzo argues that the CIT's decisions in DuPont I and more recently
in E.I. DuPont de Nemours & Co. v. United States, No. 97-08-1335, Slip
Op. 99-47, (CIT June 2, 1999) (hereinafter ``DuPont II''), properly
affirmed the Department's use of Akzo's consolidated financial expense
in the first, second, and third administrative reviews, respectively.
Akzo urges the Department to follow the same methodology in the final
results of this administrative review. Further, Akzo emphasizes that
petitioner did not point to any evidence or provide any new information
to justify a deviation from the Department's standard practice of using
the parent's consolidated interest expense in cases where there is a
consolidated group of companies.
Additionally, Akzo argues that the petitioner's claim that the
amendments to the antidumping statute set a new standard for
calculating interest expense is in error. Contrary to petitioner's
argument, Akzo contends that neither the SAA nor the amended section
773(f) of the antidumping statute directs the Department to change its
existing practice. Akzo refers to the CIT's analysis of the statutory
amendment and the SAA and the CIT's subsequent finding that neither the
amended statute nor the SAA mandated a change in Commerce's past
practice at issue here. See DuPont I at 7-9. Moreover, Akzo points out
that the petitioner's argument on the issue was dismissed by the CIT
both in DuPont I and in DuPont II.
Akzo claims that the only loans and corresponding interest expense
on the books of ANAPI and Aramid are intercompany loans from the parent
companies, Akzo Nobel Inc. and Akzo Nobel N.V. In addition, Akzo argues
that the Department has repeatedly verified that the financial
statements of the subsidiary companies reconcile to the financial
statements of the parent companies. Akzo explains that the only actual
interest expense is recorded on the books of the parent companies
because it is only these entities that actually borrow money and incur
the related interest expense. Akzo asserts that it is only the parent
that determines the sources of money, borrows the money, and incurs the
actual interest expense and that therefore, petitioner's speculations
on how and why companies borrow money and how a parent determines the
amount of loans and interest are irrelevant because these are internal
decisions that take into account a variety of factors.
Department's Position: We agree with Akzo. In the first, second and
third administrative reviews, petitioner similarly urged the Department
to rely on Aramid's own financial records to determine its net interest
expense, instead of following the Department's normal practice of using
the parent company's financing expenses incurred on behalf of the
consolidated group of companies. In the second and third reviews,
petitioner's emphasis has been on the interest expense included in U.S.
indirect selling expenses rather than on the interest expense included
in the cost of production (``COP'') and constructed value (``CV'') (as
was the case in the first review). Nevertheless, the issues are the
same. Petitioner disagrees with the Department's long-standing practice
of basing financing expenses on consolidated interest expenses. The
Department has consistently disagreed with petitioner's position,
explaining in detail that any departure from the Department's normal
practice in this case was not warranted in light of Akzo Nobel N.V.''s
majority ownership interest in Aramid, which constituted prima facie
evidence of the parent's corporate control. For a detailed explanation
of this issue, see Aramid Fiber Formed of Poly-Phenylene
Terephthalamide from the Netherlands: Final Results of Antidumping
Administrative Review, 61 FR 51406 (October 2, 1996) (``Final Aramid
Fiber I''); Aramid Fiber Formed of Poly-Phenylene Terephthalamide from
the Netherlands: Final Results of Antidumping Administrative Review, 62
FR 38058 (July 16, 1997) (``Final Aramid Fiber II''); and Aramid Fiber
Formed of Poly-Phenylene Terephthalamide from the Netherlands: Final
Results of Antidumping Administrative Review, 63 FR 37516 (July 13,
1998) (``Final Aramid Fiber III'').
On January 29, 1998, the CIT affirmed the Department's
determination on this issue in the first administrative review, ruling
that neither the SAA nor the amended statute mandate a change of
practice with respect to using a parent company's consolidated
statements when calculating the respondent's interest expense ratio,
and that this practice is consistent with the principle of allocating
costs in a manner that reasonably reflects the actual costs. See DuPont
I at 8-9. (Emphasis added). Citing Gulf States Tube Div. of Quanex
Corp. v. United States, Slip Op. 97-124, Consol. Court No. 95-09-01125,
at 38-39 (CIT August 29, 1997), the Court noted in DuPont I that the
focus of the analysis is on whether the consolidated group's
controlling entity has the power to determine the capital structure of
each member of the group. The Court
[[Page 61824]]
concluded that the administrative record in prior reviews was supported
by the Department's finding that Akzo Nobel N.V. was a controlling
entity. In DuPont II, the CIT adopted its reasoning from DuPont I and
again sustained the Department's determination on this issue in the
second administrative review.
In the instant administrative review, petitioner reiterates its
position argued in the previous three reviews but does not point to any
new evidence in the administrative record, which would demonstrate that
the parent, Akzo Nobel N.V., does not exercise corporate control over
the respondent company. Thus, consistent with the Department's prior
determinations and the CIT's decisions in DuPont I and DuPont II, we
are using Akzo Nobel N.V.''s consolidated financial interest expense in
computing the respondent's net interest ratio.
Similarly, petitioner's contention that we should revise Akzo's
reported U.S. indirect selling expense lacks merit. As the Department
stated in the prior administrative reviews, the Department bases its
calculations on the consolidated financial statements of the parent,
not the subsidiary when calculating the financial interest expense.
This method is grounded in a well-established practice. See Final
Aramid Fiber I at 51407 and Final Aramid Fiber II at 38060. As stated
above, the focal point of the analysis is upon the parent company's
control over the subsidiary. See also, Final Administrative Review:
Porcelain-on-Steel Cooking Ware from Mexico, 58 FR 32095 at comment 9
(indicating the parent has the power to decide the composition of the
subsidiary's capital structure (i.e., to what extent the subsidiary
will be financed by debt and equity)). More importantly, the petitioner
has failed to produce any evidence to rebut the prima facie evidence of
Akzo's control over ANAPI. For the reasons stated above, we are
adhering to the Department's current practice in this final
determination.
Comment 2: Treatment of Goodwill Expenses. Petitioner contends that
Akzo's reported cost of production fails to include an amount for
amortized goodwill expenses that should be added to Akzo's general
expenses. Moreover, the petitioner argues that the Department's
treatment of Akzo's goodwill expenses in the first, second and third
administrative reviews is not supported by substantial evidence on the
record and is contrary to law, which requires the calculation of actual
costs attributable to the production of the subject merchandise.
Petitioner argues that the Department should amortize these costs over
a period that covers the POR to avoid improperly understating the
actual cost of producing PPD-T aramid fiber during the POR.
Akzo argues that petitioner's position is unsubstantiated and
contrary to law. Akzo notes that the proper treatment of the goodwill
expense was the focus of the first administrative review and was
addressed by the CIT in DuPont I and DuPont II. Respondent further
notes that the Department spent a significant amount of time gathering
and analyzing all aspects of the purchase. See Final Aramid Fiber I at
51406. Akzo cites the CIT's rulings in DuPont I and DuPont II to affirm
the Department's treatment of goodwill in the instant review.
Respondent cites specifically to the CIT's approval of the Department's
analysis, affirming that it was appropriate to isolate those components
of goodwill that pertained to assets used in the production of subject
merchandise. Akzo states that in preparing the questionnaire response
for this review, it complied with the Department's determination in the
first three administrative reviews. Finally, Respondent contends that
no circumstances exist warranting any deviation from the Department's
prior approach, as affirmed twice by the CIT.
Department's Position: The Department agrees with Akzo. As
explained at length in the final results of the first, second and third
administrative reviews, and affirmed by the CIT in DuPont I and DuPont
II, the Department accepted Akzo's accounting method for the
amortization of goodwill expense as reasonable. See Final Aramid Fiber
I at 51406; Final Aramid Fiber II at 38063; and Final Aramid Fiber III
at 37516.
The Department gathered and analyzed all aspects of the facts
surrounding the goodwill issue during the first administrative review.
Upon completion of its analysis, the Department determined that, for
cost calculation purposes, it was appropriate to isolate those
components of goodwill that pertained to assets used in the production
of subject merchandise. See Final Aramid Fiber I at 51406. The
Department verified that Akzo complied with the Department's decision
in the first administrative review, and calculated the reported
depreciation expenses exclusive of goodwill expenses in preparing its
response for the subsequent reviews. The methodology used in the
instant review is consistent with the final results of the first,
second and third administrative reviews.
Moreover, in DuPont I and DuPont II, the CIT rejected petitioner's
arguments with respect to goodwill, affirming the Department's
treatment of inventory write-downs and residual goodwill expenses. See
DuPont I at 15--24 and DuPont II at 13. Therefore, for purposes of the
instant review, the Department is using Akzo's reported cost of
production and constructed value data in calculating the antidumping
duty margin.
Comment 3: Calculation Errors in Preliminary Results
Akzo claims that the computer program used in calculating the
preliminary results contained two errors that must be corrected for the
final determination. First, Akzo states that the constructed export
price (``CEP'') profit ratio is based on the ratio of total revenues
and costs, without regard to the unit of measure in which the sales and
costs were reported. Akzo argues that by dividing the total home market
revenue (``TOTREVH'') and the individual components of the total home
market expenses (i.e., cost of goods sold (``TOTCOGSH''), selling
expenses (``TOTSELLH''), and movement expenses (``TOTMOVEH'')) by
2.2046 (conversion of kilograms to pounds), the Department incorrectly
cut the revenue and expenses by more than half. Akzo contends that this
error minimized the contribution of home market sales in the
calculation of the CEP profit and resulted in an overstatement of the
CEP profit ratio, which in turn caused a higher than appropriate
deduction from the U.S. price.
Second, Akzo claims that in calculating the assessment rate, the
margin program fails to specify a variable for the unit margin, thereby
incorrectly calculating the first numeric variable for the amount due
and overstating the assessment rate. Akzo provided suggested changes to
correct the alleged errors.
Petitioner did not rebut any of Akzo's aforementioned suggested
corrections.
Department's Position: The Department agrees with Akzo and has
revised the final margin program to reflect the appropriate changes. We
have reviewed our calculations and agree that we made an unintentional
error when we divided the fields TOTREVH, TOTCOGSH, TOTSELLH, and
TOTMOVEH by 2.2046, for purposes of calculating the CEP profit ratio.
Concerning the second issue, we have reexamined our calculations, and
agree with Akzo's observations. We found that the assessment rate was
inappropriately calculated and, therefore, we inserted the proper
variable name in the margin program to sum the amount due.
[[Page 61825]]
Final Results of Review
As a result of our review, we determine that the following
weighted-average margin exists:
------------------------------------------------------------------------
Exporter/
manufacturer
Weighted-average margin
(percent)
------------------------------------------------------------------------
Akzo...................................................... 2.90
------------------------------------------------------------------------
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. The Department
will issue appraisement instructions on each exporter directly to the
Customs Service. Because we have only one importer of the subject
merchandise, we have calculated an importer specific duty assessment
rate for the merchandise based on the ratio of the total amount of
antidumping duties calculated for the examined sales to the total
entered value of sales examined.
Furthermore, the following deposit requirements will be effective
upon publication of this notice of final results of review for all
shipments of PPD-T aramid fiber from the Netherlands entered, or
withdrawn from warehouse, for consumption on or after the publication
date, as provided by section 751(a)(1) of the Act: (1) The cash deposit
rate for the reviewed company will be the rate listed above; (2) if the
exporter is not a firm covered in this review, a prior review, or the
original Less Than Fair Value (``LTFV'') investigation, but the
manufacturer is, the cash deposit rate will be the rate established for
the most recent period for the manufacturer of the merchandise; and (3)
for all other producers and/or exporters of this merchandise, the cash
deposit rate shall be 66.92 percent, the ``all others'' rate
established in the LTFV investigation (59 FR 32678, June 24, 1994).
These deposit requirements shall remain in effect until publication of
the final results of the next administrative review.
Notification to Interested Parties
This notice serves as a final reminder to importers of their
responsibility under 19 CFR 351.402(f) to file a certificate regarding
the reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and subsequent assessment
of double antidumping duties.
This notice also serves as a reminder to parties subject to
administrative protective order (``APO'') of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 351.305 and 19 CFR 351.306. Timely
written notification of return/destruction of APO materials or
conversion to judicial protective order is hereby requested. Failure to
comply with the regulations and the terms of an APO is a sanctionable
violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act and 19 CFR 351.221.
Dated: November 5, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-29749 Filed 11-12-99; 8:45 am]
BILLING CODE 3510-DS-P
