[Federal Register Volume 59, Number 30 (Monday, February 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-3393]
[[Page Unknown]]
[Federal Register: February 14, 1994]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-508-604]
Industrial Phosphoric Acid From Israel; Final Results of
Antidumping Duty Changed Circumstances Review
AGENCY: International Trade Administration/Import Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty changed
circumstances review.
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SUMMARY: On November 5, 1993, the Department of Commerce published the
preliminary results of its changed circumstances review concerning its
examination of whether Rotem Fertilizers, Ltd. (Rotem) is the successor
to Negev Phosphates, Ltd. (Negev). The review covers one manufacturer/
exporter of this merchandise to the United States, Negev, and its
merger with Rotem. We have now completed this review and determine
that, for purposes of applying the antidumping duty law, Rotem is the
successor to Negev and, as such, is subject to the revocation which
applied to Negev.
EFFECTIVE DATE: February 14, 1994.
FOR FURTHER INFORMATION CONTACT: Gayle Longest or Kelly Parkhill,
Office of Countervailing Compliance, International Trade
Administration, U.S. Department of Commerce, Washington, DC 20230;
telephone: (202) 482-2786.
SUPPLEMENTARY INFORMATION:
Background
On November 5, 1993, the Department of Commerce (the Department)
published in the Federal Register the preliminary results of its
antidumping duty changed circumstances review on industrial phosphoric
acid from Israel (58 FR 59010). We have now completed this changed
circumstances review in accordance with section 751 of the Tariff Act
of 1930, as amended (the Act).
Scope of Review
Imports covered by this review are shipments of industrial
phosphoric acid (IPA). This product is currently classifiable under
item number 2809.20.00 of the Harmonized Tariff Schedule (HTS). The
written description remains dispositive.
The review covers one manufacturer/exporter of this merchandise to
the United States, Negev, and its merger with Rotem.
Successorship
In December 1991, Rotem and Negev, two companies within the Israeli
Chemicals, Ltd. (ICL) group, merged to become one corporate entity,
Rotem. Subsequent to the merger, Negev was revoked from the antidumping
duty order. (See Final Results of Antidumping Duty Administrative
Review and Revocation In Part of the Antidumping Duty Order (57 FR
10008; March 23, 1992).) Before the merger, Rotem was not a producer of
the subject merchandise and was never reviewed under this order.
Negev notified the Department in a March 30, 1992 letter that the
company had merged with Rotem. The merger, which was finalized December
31, 1991, was effective retroactively to January 1, 1991. During
verification, the Department examined Rotem's sales and found no
evidence of industrial phosphoric acid sales prior to the merger. In
the March 30, 1992 letter, Negev also identified Rotem as its successor
and requested that the Department issue a determination applying
Negev's revocation to Rotem. Rotem began to ship the subject
merchandise to the United States on January 1, 1992. Its shipments have
entered under the ``all other'' rate applicable to companies that had
never been reviewed under the order.
The Department has determined that Rotem is the successor to Negev
for purposes of applying the antidumping duty law. For a complete
discussion of the basis for this decision see Industrial Phosphoric
Acid From Israel; Preliminary Results of Antidumping Duty Changed
Circumstances Review, November 5, 1993, (58 FR 59010).
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results. We received comments from the petitioners, FMC
Corporation and Monsanto, and from Rotem, the manufacturer/exporter
covered by this review.
Comment 1: Petitioners argue that the legal test for determining
successorship with respect to an antidumping duty order is that ``the
Department will consider the acquiring company to be a successor if its
resulting operation is essentially similar to that of its
predecessor.'' Brass Sheet and Strip from Canada: Preliminary Results
of Antidumping Duty Administrative Review, (57 FR 5128, 5129; February
12, 1992). Petitioners maintain that after the merger, Rotem's
operation was not essentially similar to either that of Rotem or the
former Negev because, after the merger, Rotem became a fully integrated
producer of both fertilizer and industrial grade acid, as well as a
producer of rock phosphate. Thus, the newly merged operations of Rotem
constitute a company with a more integrated and expanded phosphoric
acid production.
Petitioners also claim that in the preliminary results of the
changed circumstances review, the Department failed to consider Rotem
as a new business entity because the Department was only looking at
industrial phosphoric acid. Petitioners argue that the proper legal
standard for determining successorship is whether the ``resulting
operation'' of the acquiring company is essentially similar to its
predecessor.'' See Brass Sheet and Strip preliminary results.
Therefore, the merged Rotem should be examined with respect to its
overall operations, not just its operations with respect to the subject
merchandise. Petitioners argue that since Rotem's operations are not
the same as they were prior to the merger with respect to all types of
merchandise, Rotem should not be treated as a successor to Negev.
In response to petitioners' argument that Rotem has become an
integrated producer of phosphoric acid, respondent claims that Negev's
production of the subject merchandise was in fact fully integrated
before the merger. Although the merger further integrated the
production of fertilizer grade acid, no changes have occurred with
regard to the production of the subject merchandise.
Department's Position: We disagree with petitioners' assertion that
the proper legal standard for determining successorship is whether the
acquiring company is similar to its predecessor with respect to its
overall operations. In the preliminary results for Brass Sheet and
Strip, the Department found that ``concerning production and sales of
brass sheet and strip,'' the acquiring company was operating
essentially as the same business entity as its predecessor. See Brass
Sheet and Strip from Canada; Preliminary Results of Antidumping Duty
Administrative Review, (57 FR 5128, 5129; February 12, 1992). Moreover,
in the final results for Brass Sheet and Strip, the Department agreed
that since respondent's business operation was essentially the same as
that of its predecessor ``with regard to the production of brass sheet
and strip,'' the acquiring company was essentially the same operation
as its predecessor. See Brass Sheet and Strip from Canada; Final
Results of Antidumping Duty Administrative Review, (57 FR 20460, 20462;
May 13, 1992). Thus, in this review, the Department has applied the
same standard for determining successorship as the standard which was
applied in the preliminary and final results of Brass Sheet and Strip.
Insofar as no explicit legal standard for determining successorship
is provided by the statute or the Department's regulations, the
Department has discretion in deciding how to determine whether one
company is a successor to another for purposes of the antidumping duty
law. In Brass Sheet and Strip, the Department examined the described
factors in terms of the operations which produce the subject
merchandise. This has continued to be our approach in the instant
review. The operation producing the subject merchandise is the
appropriate level at which to focus our analysis because under the
antidumping duty laws, we are examining pricing practices with respect
to the subject merchandise. For example, in this case, the antidumping
duty order applies only to industrial phosphoric acid and reviews are
conducted only on sales of this merchandise. Thus it follows that an
inquiry into the validity of a claim of successorship to a respondent
company should focus on that company's sales and production of the
merchandise encompassed by the order.
Comment 2: Petitioners claim that when examining the four elements
for determining successorship: (1) Management, (2) production
facilities, (3) supplier relationships, and (4) customer base, Rotem's
operations are not a continuation of Negev's operations.
With regard to management, petitioners argue that with the
resulting changes in the board of directors and the production
management, there is a new and different management team in charge.
Petitioners claim that there has not been a continuation of the former
Negev management in the new Rotem.
Petitioners also claim that since Rotem acquired Negev's production
facilities, Rotem's total production facilities are much more extensive
than Negev's were. As a result of the merger, Rotem is a larger full-
service phosphate and related products producer and is not the same
company that Negev was before the merger.
Petitioners further maintain that supplier relationships have also
changed as a result of the merger. The former Negev obtained important
raw material inputs from Rotem, which was then a separate company.
Since the merger, raw material input for the production of the subject
merchandise is now supplied by captive internal production, which
petitioners argue constitutes a significant change in supplier
relationships.
As a result of the merger, petitioners also argue that Rotem now
has a much larger and more diverse customer base than Negev had.
Furthermore, prior to the merger, Rotem, as a fertilizer producer, had
no customers in the United States and made no sales to the United
States. Therefore, the merger opened up an entirely new market for
Rotem.
In contrast, the respondent maintains that the petitioners have
presented no arguments that had not already been taken into account in
the preliminary results. Therefore, the Department has no grounds for
reversing the preliminary determination.
With regard to changes in management, the respondent maintains that
personnel changes as the result of the merger are minimal. Furthermore,
respondent argues that sales staff for the subject merchandise remained
the same and most of management, including top management in the
company, retained their positions.
Respondent claims that when addressing changes in production
facilities, petitioners focus, as when addressing other factors to
determine successorship, on the production of non-subject merchandise.
Prior to the merger, Negev and Rotem formed a part of the same parent
company. These two companies were both located at the same plant site
and shared some infrastructure. Moreover, products that were
transferred from one company to another were transferred on special
intra-company terms. According to the respondent, these elements
demonstrate that there was no change in production facilities with
regard to the subject merchandise.
Respondent argues that petitioners' premise regarding supplier
relationships is completely erroneous. Respondent maintains that the
raw material inputs obtained by Negev from Rotem are not essential or
even necessary in the production of the subject merchandise.
Furthermore, when these raw materials were obtained from Rotem prior to
the merger, they were purchased under an intra-company pricing formula
determined by the parent company. Therefore, there has been no change
in suppliers.
With regard to customer base, respondent claims that the customer
base for the subject merchandise did not change. Respondent argues that
petitioners are focusing on sales of non-subject merchandise, as
illustrated by their example of sales to new customer groups such as
the farming community. According to the respondents, the farming
community does not have a need for the subject merchandise, industrial
phosphoric acid.
Department's Position: We do not agree with petitioners assertion
that Rotem's operations are not essentially similar to Negev's
operations prior to the merger in terms of: (1) Management, (2)
production facilities, (3) supplier relationships, and (4) customer
base, with regard to sales and production of the subject merchandise.
With regard to executive personnel, Negev and Rotem's board of
directors consists of seven and five members, respectively. The
president and three members of the board of directors, including the
chairman of the board, are the same for both Negev and Rotem.
Therefore, Rotem's five member board of directors includes three
members that were also on Negev's board.
An examination of production management shows that production
management was consolidated after the merger. Before the merger, there
were two site managers and two operations managers, one set for Negev
operations and the other for Rotem operations. Now there is one site
manager and one operations manager for Rotem's industrial phosphoric
acid and fertilizer acid facilities. After the merger, Negev's former
vice-president became a Rotem executive vice-president. The Negev plant
manager prior to the merger left the company, and Rotem's plant manager
became the plant manager for both the Rotem and Negev plant facilities.
Negev's former industrial phosphoric acid site manager remained with
Rotem for about six months after the merger and was then replaced by
Rotem's operations manager whose responsibilities became the management
of both industrial phosphoric acid and fertilizer acid facilities. See
Verification of the Questionnaire Response-- Antidumping Duty Order on
Industrial Phosphoric Acid from Israel-- Changed Circumstances Review;
October 6, 1993.
The Department has considered these changes in Rotem's management
and finds that the differences are minimal. The changes in Rotem's
personnel are well within the normal range of personnel changes that
one would expect over time within the same operation. For example, in
the final results of Brass Sheet and Strip, the Department found one
company to be the successor of another despite the fact that the
successor company had replaced the two top managers at the acquired
plant. See Brass Sheet and Strip Final Results of Antidumping Duty
Administrative Review, (57 FR 20462; May 13, 1992).
With regard to production facilities, we agree with respondents
that petitioners improperly focus on the production of non-subject
merchandise to support their claim that Rotem's total production is
more extensive and diverse. Rotem did not alter production or the
production facilities of the subject merchandise at the time of the
merger. Moreover, the subject merchandise continued to be manufactured
in the former company's plant facilities. Furthermore, eleven months
after the merger, the Department verified that Rotem had not altered
production or production facilities for the subject merchandise
subsequent to the merger.
When reviewing supplier relationships, petitioners argue that as a
result of the merger, Rotem now has a captive source of supply for
certain raw material inputs necessary for production of the subject
merchandise. During verification, the Department carefully examined
supplier relationships for all raw material inputs in the production of
the subject merchandise and found that the source of supplies for these
inputs did not change after the merger. As respondents point out,
before the merger Negev purchased raw material inputs from Rotem at
intra-company prices and, after the merger, Rotem continued to supply
these inputs.
Finally, in their discussion of changes in customer base,
petitioners submit that as a result of the merger, Rotem has a larger
and more diverse customer base. As in their evaluation of other
factors, petitioners focus on the inclusion of Rotem's customers for
non-subject merchandise. As stated in our response to comment one, the
appropriate focus of our analysis is the subject merchandise. We agree
with the respondents that the customer base for Rotem's sales of the
subject merchandise did not change after the merger.
Finally, as requested, Rotem has submitted an agreement as set
forth at Sec. 353.25(a)(2)(iii) to be reinstated in the order should
the Secretary conclude under Sec. 353.22(f) that the company,
subsequent to revocation, sold industrial phosphoric acid at less than
foreign market value.
In conclusion, after reviewing all comments, the Department
determines that Rotem is the successor to Negev.
Final Results of Review
After reviewing the comments received, we determine that Rotem is
successor to Negev and, accordingly, is not subject to the antidumping
duty order. We will instruct customs to liquidate all entries of this
merchandise produced by Rotem, exported to the United States and
entered, or withdrawn from warehouse, for consumption, on or after
January 1, 1991. In addition, the Department will instruct the Customs
Service to terminate suspension of liquidation on entries from Rotem
and to liquidate, without regard to antidumping duties, merchandise
exported by Rotem on or after January 1, 1991.
This changed circumstances review and notice are in accordance with
section 751(b)(1) of the Act (19 U.S.C. 1675(b)(1)) and 19 CFR
353.22(f).
Dated: February 8, 1994.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 94-3393 Filed 2-11-94; 8:45 am]
BILLING CODE 3510-DS-P
