02-11076. Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Sulfanilic Acid from Portugal

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Notice of Preliminary Determination of Sales at Less Than Fair Value

SUMMARY:

We preliminarily determine that sulfanilic acid from Portugal is being, or is likely to be, sold in the United States at less than fair value, as provided in section 733(b) of the Tariff Act of 1930, as amended. Interested parties are invited to comment on this preliminary determination (see the “Public Comment” section of this notice).

EFFECTIVE DATE:

May 6, 2002.

FOR FURTHER INFORMATION CONTACT:

S. Anthony Grasso, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230; telephone: [phone].

SUPPLEMENTARY INFORMATION:

The Applicable Statute

Unless otherwise indicated, all citations to the Tariff Act of 1930, as amended (“the Act”), are references to the provisions effective January 1, 1995, the effective date of the amendments made to the Act by the Uruguay Round Agreements Act (“URAA”). In addition, unless otherwise indicated, all citations to the Department of Commerce (“Department”) regulations are to 19 CFR Part 351 (April 2001).

Background

Since the initiation of this investigation (Notice of Initiation of Antidumping Duty Investigations: Sulfanilic Acid from Hungary and Portugal, 66 FR 54214, 54218 (October 26, 2001) (“Initiation Notice”)), the following events have occurred:

On October 25, 2001, we solicited comments from interested parties regarding the criteria to be used for model-matching purposes. We received these comments on October 30, 2001.

On November 20, 2001, the United States International Trade Commission (“ITC”) preliminarily determined that there is a reasonable indication that imports of sulfanilic acid from Portugal are materially injuring the United States industry (see ITC Investigation No. 731-TA-984-985 (Publication No. 3472)).

We issued an antidumping questionnaire to Quimigal - Quimica de Portugal S.A. (“Quimigal”) on November 19, 2001. We received responses to the questionnaire from Quimigal on December 10, 2001, and on January 14, 2002. We issued supplemental questionnaires to Quimigal on January 31, 2002, and March 5, 2002, to which we received responses on February 25, 2002, and March 19, 2002, respectively.

On February 14, 2002, the petitioner made a request to postpone the preliminary determination pursuant to 19 CFR 351.205(e). On February 15, 2002, we postponed the preliminary determination until no later than April 8, 2002. See Notice of Postponement of Preliminary Antidumping Duty Determinations: Sulfanilic Acid from Hungary and Portugal, 67 FR 8525 (February 25, 2002).

On April 4, 2002, the Department again postponed the preliminary determination until not later than April 26, 2002. For the reasons for the postponement, see Notice of Postponement of Preliminary Antidumping Duty Determinations of Antidumping Duty Investigations: Sulfanilic Acid from Hungary and Portugal, 67 FR 17968 (April 12, 2002).

Postponement of Final Determination and Extension of Provisional Measures

Pursuant to section 735(a)(2) of the Act, on April 3, 2002, Quimigal requested that, in the event of an affirmative preliminary determination in this investigation, the Department postpone its final determination until not later than 135 days after the date of the publication of the preliminary determination in the Federal Register, and extend the provisional measures to not more than six months. In accordance with 19 CFR 351.210(b), because (1) our preliminary determination is affirmative, (2) Quimigal accounts for a significant proportion of exports of the subject merchandise, and (3) no compelling reasons for denial exist, we are granting the respondent's request and are postponing the final determination until not later than 135 days after the publication of this notice in the Federal Register. Suspension of liquidation will be extended accordingly.

Scope of Investigation

Imports covered by this investigation are all grades of sulfanilic acid, which include technical (or crude) sulfanilic acid, refined (or purified) sulfanilic acid and sodium salt of sulfanilic acid.

Sulfanilic acid is a synthetic organic chemical produced from the direct sulfonation of aniline and sulfuric acid. Sulfanilic acid is used as a raw material in the production of optical brighteners, food colors, specialty dyes and concrete additives. The principal differences between the grades are the undesirable quantities of residual aniline and alkali insoluble materials present in the sulfanilic acid. All grades are available as dry, free-flowing powders.

Technical sulfanilic acid, currently classifiable under subheading 2921.42.22 of the Harmonized Tariff Schedule (“HTS”), contains 96 percent minimum sulfanilic acid, 1.0 percent maximum aniline, and 1.0 percent maximum alkali insoluble materials. Refined sulfanilic acid, also currently classifiable under 2921.42.22 of the HTS, contains 98 percent minimum sulfanilic acid, 0.5 percent maximum aniline and 0.25 percent maximum alkali insoluble materials.

Sodium salt (sodium sulfanilate), currently classifiable under HTS subheading 2921.42.90, is a powder, granular or crystalline material which contains 75 percent minimum equivalent sulfanilic acid, 0.5 percent maximum aniline based on the equivalent sulfanilic acid content, and 0.25 percent maximum alkali insoluble materials based on the equivalent sulfanilic acid content.

Although the HTS subheadings are provided for convenience and customs purposes, the written description of the scope of this investigation is dispositive.

In accordance with the preamble to the Department regulations (see Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 27323 (May 19, 1997)), we set aside a period of time for parties to raise issues regarding product coverage and encouraged all parties to submit comments within 20 calendar days of publication of the Initiation Notice. We did not receive any such comments.

Period of Investigation

The period of investigation (“POI”) is July 1, 2000, through June 30, 2001.

Date of Sale

We used the sale invoice date as the date of sale. Although Quimigal negotiated a contract with its buyer that established a fixed price and quantity prior to the POI, the terms of the contract fluctuated throughout the POI according to documented and undocumented agreements. Because record evidence indicates that the material terms of the sale contract were subject to change up until invoicing, we preliminarily determine that the invoice date more accurately represents the date of sale than the contract date.

Fair Value Comparisons

To determine whether sales of sulfanilic acid from Portugal to the United States were made at less than fair value, we compared the export price (“EP”) to the normal value (“NV”), as described in the “Export Price” and “Normal Value” sections of this notice, below. In accordance with section 777A(d)(1)(A)(i) of the Act, we compared POI weighted-average EPs to POI weighted-average NVs. Any company-specific changes to the EP and NV calculations made by the Department are discussed in the company's calculation memorandum, which is on file at the Department's Central Records Unit in Room B-099 of the main Department building. See Memorandum from team to the file, “Preliminary Determination Calculation Memorandum for Quimigal - Quimica de Portugal, S.A.,” (“Calculation Memo”) dated April 8, 2002.

Product Comparisons

In accordance with section 771(16)(A) of the Act, we considered all products produced and sold by the respondent in the third-country market during the POI that fit the description in the “Scope of Investigation” section of this notice to be foreign like products for purposes of determining appropriate product comparisons to U.S. sales. We compared U.S. sales to sales made in the third-country market. In making the product comparisons, we matched foreign like products based on the physical characteristics reported by the respondent in the following order of importance: form; product type; aniline impurity content; alkali insoluble impurity content; and sulfanilic content.

Export Price

We calculated EP, in accordance with section 772(a) of the Act, for those sales where the merchandise was sold to the first unaffiliated purchaser in the United States prior to importation by the exporter or producer outside the United States, or to an unaffiliated purchaser for exportation to the United States, based on the facts of record. We based EP on the ex-works price to an unaffiliated purchaser/reseller. We made no adjustments to this price.

Normal Value

A. Home Market Viability

In order to determine whether there is a sufficient volume of sales in the home market to serve as a basis for calculating NV (i.e., whether the aggregate volume of home market sales of the foreign like product is equal to or greater than five percent of the aggregate volume of U.S. sales), the Department compares the respondent's volume of home market sales of the foreign like product to the volume of U.S. sales of the subject merchandise, in accordance with section 773(a)(1)(C) of the Act. We determined that Quimigal has no home market sales. Therefore, we have based NV for Quimigal on third-country sales in the usual commercial quantities and in the ordinary course of trade. For the reasons described in the Memorandum to Richard Moreland, “Selection of Third Country Comparison Market,” dated April 26, 2002, we used sales to the United Kingdom (“UK”) as third-country comparison sales. The UK was Quimigal's largest third-country market for sulfanilic acid in terms of both value and quantity.

B. Cost of Production Analysis

Based on our analysis of an allegation contained in the petition, we found that there were reasonable grounds to believe or suspect that sales of sulfanilic acid in the third-country market were made at prices below their cost of production (“COP”). Reasonable grounds exist when an interested party provides specific factual information on costs and prices, observed or constructed, indicating that sales in the comparison market in question are at below-cost prices. Accordingly, based on the allegation in the petition and pursuant to section 773(b)(1) of the Act, we initiated a country-wide sales-below-cost investigation to determine whether sales were made at prices below their respective COP (see Initiation Notice, 66 FR at 54214, 54215-17).

1. Calculation of COP

In accordance with section 773(b)(3) of the Act, we calculated COP based on the sum of the cost of materials and fabrication for the foreign like product, plus an amount for selling, general and administrative expenses (“SG&A”), interest expenses, and home market packing costs (see “Test of Foreign Market Sales Prices” section below for treatment of third-market selling expenses). We relied on the COP data submitted by Quimigal, except in the following instance. To calculate the fixed overhead, we used Quimigal's depreciation as it is recorded in its financial accounts according to Portuguese GAAP (i.e., accelerated depreciation), rather than relying upon Quimigal's reported unit which was calculated using straight line depreciation. See Calculation Memo.

2. Test of Foreign Market Sales Prices

We compared COP to the sales prices of the foreign like product, as required under section 773(b) of the Act, in order to determine whether these sales had been made at prices below the COP. In determining whether to disregard foreign market sales made at prices below the COP, we examined whether such sales were made (1) within an extended period of time in substantial quantities, and (2) at prices which permitted the recovery of all costs within a reasonable period of time, in accordance with sections 773(b)(1)(A) and (B) of the Act. On a product-specific basis, we compared the COP to foreign market prices, less any applicable movement charges, discounts, and rebates.

3. Results of the COP Test

Pursuant to section 773(b)(2)(C), where less than 20 percent of the respondent's sales of a given product are at prices less than the COP, we do not disregard any below-cost sales of that product, because we determine that in such instances the below-cost sales were not made in “substantial quantities.” Where 20 percent or more of a respondent's sales of a given product are at prices less than the COP over a period of at least six months, we determine that the below-cost sales represent “substantial quantities” within an extended period of time, in accordance with section 773(b)(1)(A) of the Act. In such cases, we also determine whether such sales were made at prices which would not permit recovery of all costs within a reasonable period of time, in accordance with section 773(b)(1)(B) of the Act and, if so, we disregard the below-cost sales.

We found that, for certain products, more than 20 percent of Quimigal's third-country market sales were at prices less than the COP and did not provide for the recovery of costs. Therefore we excluded these sales and used the remaining above-cost sales, if any, as the basis for determining NV, in accordance with section 773(b)(1) of the Act.

C. Calculation of Constructed Value

Section 773(a)(4) of the Act provides that where normal value cannot be based on comparison market sales, normal value may be based on constructed value (“CV”). Accordingly, for Quimigal, when sales of comparison products could not be found, either because there were no sales of a comparable product or all sales of the comparable products failed the COP test, we based NV on CV.

In accordance with sections 773(e)(1), (e)(2)(A), and (e)(3) of the Act, we calculated CV based on the sum of the cost of materials and fabrication for the subject merchandise, plus amounts for selling expenses, G&A (including interest), profit and U.S. packing costs. We calculated the cost of materials and fabrication based on the methodology described in the “Calculation of COP” section of this notice. In accordance with section 773(e)(2)(A) of the Act, we based selling expenses, G&A, and profit on the amounts incurred and realized by Quimigal in connection with the production and sale of the foreign like product in the ordinary course of trade for consumption in the foreign country.

D. Level of Trade

Section 773(a)(1)(B)(i) of the Act states that, to the extent practicable, the Department will calculate NV based on sales at the same level of trade (“LOT”) as the EP or the constructed export price. Sales are made at different LOTs if they are made at different marketing stages (or their equivalent) according to 19 CFR 351.412(c)(2). Substantial differences in selling activities are a necessary, but not sufficient, condition for determining that there is a difference in the stages of marketing. Id; see also Notice of Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate From South Africa, 62 FR 61731, 61732 (November 19, 1997). In order to determine whether the comparison sales were at different stages in the marketing process than the U.S. sales, we reviewed the distribution system in each market (i.e., the “chain of distribution”), including selling functions, class of customer (“customer category”), and the level of selling expenses for each type of sale.

Pursuant to section 773(a)(1)(B)(i) of the Act, in identifying levels of trade for EP and comparison market sales (i.e., NV based on either home market or third-country prices^[1] ), we consider the starting prices before any adjustments.

When the Department is unable to match U.S. sales to sales of the foreign like product in the comparison market at the same LOT as the EP LOT, the Department may compare the U.S. sale to sales at a different LOT in the comparison market. If the comparison market sales are at a different LOT, and the difference affects price comparability, as manifested in a pattern of consistent price differences between sales at different LOTs in the country in which NV is determined, we make a level of trade adjustment under section 773(a)(7)(A) of the Act. See Notice of Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from South Africa, 62 FR 61731, 61732 (November 19, 1997).

We obtained information from Quimigal regarding the marketing stages involved in making the reported third-country market and U.S. sales, including a description of the selling activities performed by the respondent for each channel of distribution. In the comparison market, all sales reported by Quimigal were direct sales to a trading company. Sales through this single channel of distribution to the sole customer category were similar with respect to all selling activities and, therefore, Quimigal's foreign market sales constituted a single level of trade.

In the U.S. market, Quimigal had only EP sales. Quimigal reported direct EP sales to a trading company through only one channel of distribution and one customer category, and therefore had only one level of trade for its EP sales. This EP level of trade was similar to the foreign market level of trade with respect to selling activities. Consequently, we matched the EP level of trade to sales at the same level of trade in the foreign market.

E. Calculation of Normal Value Based on Comparison Market Prices

We calculated NV based on ex-works/ex-warehouse prices to unaffiliated customers that we determined to be at arm's-length. In addition, where appropriate, we made adjustments under section 773(a)(6)(C)(iii) of the Act for differences in circumstances of sale for imputed credit expenses. We deducted foreign market packing costs and added U.S. packing costs in accordance with section 773(a)(6)(A) and (B) of the Act.

F. Calculation of Normal Value Based on Constructed Value

For price-to-CV comparisons, we made adjustments to CV in accordance with section 773(a)(8) of the Act. Where we compared CV to EP, we made circumstance-of-sale adjustments.

Currency Conversion

We made currency conversions into U.S. dollars in accordance with section 773A(a) of the Act based on the exchange rates in effect on the dates of the U.S. sales as reported by the Federal Reserve Bank.

Verification

As provided in section 782(i) of the Act, we will verify all information relied upon in making our final determination.

Suspension of Liquidation

In accordance with section 733(d)(2) of the Act, we are directing the Customs Service to suspend liquidation of all imports of subject merchandise that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the Federal Register. We will instruct the Customs Service to require a cash deposit or the posting of a bond equal to the weighted-average amount by which the NV exceeds the EP or constructed export price, as indicated in the chart below. These suspension-of-liquidation instructions will remain in effect until further notice. The weighted-average dumping margins are as follows:

Exporter/Manufacturer	Weighted Average Margin Percentage
Quimigal	75.52
All Others	75.52

ITC Notification

In accordance with section 733(f) of the Act, we have notified the ITC of our determination. If our preliminary determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after our final determination whether these imports are materially injuring, or threaten material injury to, the U.S. industry.

Disclosure

We will disclose the calculations used in our analysis to parties to this proceeding in accordance with 19 CFR 351.224(b).

Public Comment

Case briefs for this investigation must be submitted to the Department not later than August 6, 2002. Rebuttal briefs must be filed by August 12, 2002. See 19 CFR 309(c)(1)(i). A list of authorities used, a table of contents, and an executive summary of issues should accompany any briefs submitted to the Department. Executive summaries should be limited to five pages total, including footnotes. Section 774 of the Act provides that the Department will hold a public hearing to afford interested parties an opportunity to comment on arguments raised in case or rebuttal briefs, provided that such a hearing is requested by an interested party. If a request for a hearing is made in this investigation, the hearing will tentatively be scheduled for two days after the submission of rebuttal briefs, i.e., on August 14, 2002, at the U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230. Parties should confirm by telephone the time, date, and place of the hearing 48 hours before the scheduled time.

Interested parties who wish to request a hearing, or to participate if one is requested, must submit a written request to the Assistant Secretary for Import Administration, U.S. Department of Commerce, Room 1870, within 30 days of the publication of this notice. Requests should contain: (1) the party's name, address, and telephone number; (2) the number of participants; and (3) a list of the issues to be discussed. Oral presentations will be limited to issues raised in the briefs.

We will make our final determination not later than 135 days after the date of publication of the Department's preliminary determination. See 19 CFR 351.210(b).

This determination is published pursuant to sections 733(f) and 777(i) of the Act.

DATED: April 26, 2002

Faryar Shirzad,

Assistant Secretary for Import Administration.

Footnotes

1.  Where NV is based on CV, we determine the NV LOT based on the LOT of the sales from which we derive selling expenses, G&A, and profit for CV, where possible.