[Federal Register Volume 60, Number 88 (Monday, May 8, 1995)]
[Notices]
[Pages 22550-22557]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11261]
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DEPARTMENT OF COMMERCE
[A-791-802]
Final Determination of Sales at Less Than Fair Value: Furfuryl
Alcohol From South Africa
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
[[Page 22551]] EFFECTIVE DATE: May 8, 1995.
FOR FURTHER INFORMATION CONTACT: John Brinkmann or Donna Berg, Office
of Antidumping Investigations, Import Administration, U.S. Department
of Commerce, 14th Street and Constitution Avenue, N.W., Washington,
D.C. 20230; telephone (202) 482-5288 or 482-0114, respectively.
Final Determination
We determine that furfuryl alcohol from South Africa is being sold
in the United States at less than fair value (LTFV), as provided in
section 735 of the Tariff Act of 1930, as amended (``the Act''). The
estimated margins are shown in the ``Suspension of Liquidation''
section of this notice.
Case History
Since the preliminary determination of sales at LTFV on December 9,
1994, (59 FR 65012, December 16, 1994), the following events have
occurred:
On January 25, 1995, ISL submitted its response to Section D of the
Department's questionnaire which requests information on the COP and
constructed value (CV). The Department issued a supplemental cost
questionnaire on January 30, 1995. ISL submitted its response to this
supplemental questionnaire on February 8, 1995. QO Chemicals, Inc. (the
petitioner) submitted comments concerning the respondent's Section D
responses on February 14, 1995.
On January 17, 1995, the respondent submitted relevant audited
financial statements for 1994. On January 20, 1995, ISL and Harborchem
submitted revisions to its U.S. sales data.
The Department issued its verification outline to the respondent on
January 24, 1995. Verifications of the respondent's sales and cost
questionnaire responses were conducted during the months of January,
February, and March 1995. The Department issued reports concerning
these verifications in March 1995.
The respondent and the petitioner submitted case briefs on March
30, 1994, and rebuttal briefs on April 4, 1995. At the request of both
the respondent and the petitioner, we held a public hearing on April 6,
1995.
Scope of Investigation
The product covered by this investigation is furfuryl alcohol
(C4H3OCH2OH). Furfuryl alcohol is a primary alcohol, and
is colorless or pale yellow in appearance. It is used in the
manufacture of resins and as a wetting agent and solvent for coating
resins, nitrocellulose, cellulose acetate, and other soluble dyes.
The product subject to this investigation is classifiable under
subheading 2932.13.00 of the Harmonized Tariff Schedule of the United
States (HTSUS). Although the HTSUS subheading is provided for
convenience and customs purposes, our written description of the scope
of this proceeding is dispositive.
Period of Investigation
The period of investigation (POI) is December 1, 1993, through May
31, 1994.
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute and to the
Department's regulations are in reference to the provisions as they
existed on December 31, 1994.
Such or Similar Comparisons
For purposes of the final determination, we have determined that
furfuryl alcohol constitutes a single ``such or similar'' category of
merchandise. Further, because the respondent had sales in the home
market of merchandise identical to that sold to the United States,
similar comparisons were not necessary.
Fair Value Comparisons
To determine whether sales of furfuryl alcohol from South Africa to
the United States were made at less than fair value, we compared the
United States price (USP) to the foreign market value (FMV), as
specified in the ``United States Price'' and ``Foreign Market Value''
sections of this notice. In accordance with 19 CFR 353.58, we made
comparisons at the same level of trade, where possible.
United States Price
We have found that ISL and its exclusive selling agent, Harborchem,
are related parties pursuant to section 771(13)(A) of the Act (see
Comment 1 and the concurrence memorandum, dated May 1, 1995, on file in
Room B-099 of the Main Commerce Department building), and that all of
ISL's U.S. sales to the first unrelated purchaser took place after
importation into the United States. Therefore, we based USP on
exporter's sales price (ESP), in accordance with section 772(c) of the
Act.
We calculated ESP based on FOB U.S. storage facility or delivered
prices to unrelated customers in the United States. We made deductions,
where appropriate, for the following movement charges in accordance
with section 772(e) of the Act: foreign loading on ship, foreign inland
freight, ocean freight, marine insurance, tank car rental, U.S. inland
freight, U.S. inland insurance, U.S. brokerage and handling, and U.S.
duty. We also made deductions, where appropriate, for credit expenses,
indirect selling expenses incurred in South Africa, and indirect
selling expenses incurred in the United States, including quality
control testing, inventory carrying expenses, warehousing expenses, and
U.S. storage insurance. We also increased U.S. price, as appropriate,
to account for additional freight revenue (see Comment 8).
In accordance with our standard practice, and pursuant to the
decision of the U.S. Court of International Trade in Federal-Mogul
Corp. v. United States, 834 F. Supp. 1391 (CIT 1993), our calculations
include an adjustment to U.S. price for the consumption tax levied on
comparison sales in South Africa. See Preliminary Antidumping Duty
Determination: Color Negative Photographic Paper and Chemical
Components from Japan, 59 FR 16177, 16179 (April 6, 1994), for an
explanation of this methodology.
Cost of Production
As indicated in the preliminary determination, the Department
initiated an investigation of sales below the COP in the home market on
December 9, 1994. In order to determine whether home market sales
prices were below COP within the meaning of section 773(b) of the Act,
we calculated COP based on the sum of the respondent's cost of
materials, fabrication, general, and packing expenses, in accordance
with 19 CFR 353.51(c). We made the following adjustments to
respondent's reported COP data:
1. We recalculated the cost of furfuryl, the primary material input
into FA, used in the production of furfuryl alcohol during the POI
based on ISL's normal first-in first out inventory valuation method;
2. We removed selling, general and administrative costs from the
cost of sales figure used in the denominator of the submitted general
and administrative rate calculation;
3. We increased ISL's reported furfuryl steam overhead expenses by
the amount actual steam costs exceeded budgeted costs; and
4. We disallowed ISL's reduction of furfuryl production costs for a
certain proprietary item.
After computing COP, we added the sales-specific VAT to the COP figure.
We compared product-specific COP to reported prices that were net of
movement charges, direct and indirect selling expenses, and inclusive
of VAT. In accordance with section 773(b) of the [[Page 22552]] Act, we
followed our standard methodology to determine whether the home market
sales of each product were made at prices below their COP in
substantial quantities over an extended period of time, and whether
such sales were made at prices that would permit recovery of all costs
within a reasonable period of time in the normal course of trade.
To satisfy the requirement of section 773(b)(1) that below-cost
sales be disregarded only if made in substantial quantities, we apply
the following methodology. Where we find that over 90 percent of a
respondent's sales were at prices above the COP, we do not disregard
any below-cost sales because we determine that a respondent's below-
cost sales are not made in substantial quantities. If between ten and
90 percent of a respondent's sales were at prices above the COP, we
disregard only the below-cost sales if made over an extended period of
time. Where we find that more than 90 percent of a respondent's sales
were at prices below the COP and were sold over an extended period of
time, we disregard all sales and calculate FMV based on CV, in
accordance with section 773(b) of the Act.
In accordance with section 773(b)(1) of the Act, in order to
determine whether below-cost sales had been made over an extended
period of time, we compare the number of months in which below-cost
sales occurred to the number of months in the POI in which the product
was sold. If a product is sold in three or more months of the POI, we
do not exclude below-cost sales unless there are below-cost sales in at
least three months during the POI. When we find that sales occur in one
or two months, the number of months in which the sales occur
constitutes the extended period of time; i.e., where sales are made in
only two months, the extended period of time is two months, where sales
are made in only one month, the extended period of time is one month.
(See Final Determination of Sales at Less Than Fair Value: Certain
Carbon Steel Butt-Weld Pipe Fittings from the United Kingdom (60 FR
10558, 10560, February 27, 1995)).
In this case, we found that none of the respondent's sales of
furfuryl alcohol were at prices below the COP. As a result, we did not
need to test whether below-cost sales had been made over an extended
period of time. Therefore, we included all home market sales in
calculating a weighted-average FMV.
Foreign Market Value
As stated in the preliminary determination, we found that the home
market was viable for sales of FA, in accordance with 19 CFR 353.48(a).
We calculated FMV based on FOB storage facility or delivered prices
to unrelated customers. We treated both pre-sale home market movement
expenses and pre-sale home market warehousing expenses as indirect
expenses because these expenses could not be tied directly to specific
sales. We also treated ISL's home market rebate as an indirect, rather
than direct, expense because ISL did not adequately tie the rebate to
specific home market sales (see Comment 4). We deducted these indirect
selling expenses along with inventory carrying costs, capped by the sum
of U.S. indirect selling expenses, in accordance with 19 CFR
353.56(b)(1) and (2).
FMV was reduced by home market packing costs and increased by U.S.
packing costs in accordance with section 773(a)(1) of the Act. We
deducted post-sale home market inland freight from FMV under the
circumstance-of-sale provision of 19 CFR 353.56(a). The Department also
made other circumstance-of-sale adjustments for home market direct
selling expenses, which included imputed credit expenses, as
recalculated by the Department, in accordance with 19 CFR 353.56(a)(2).
The Department recalculated home market credit expenses based on gross
prices exclusive of imputed valued added tax expenses.
We adjusted for the consumption tax in accordance with our practice
(see ``United States Price'' section of this notice).
No deduction was made for the claimed quantity discount because ISL
failed to place adequate information on the record to demonstrate that
the discount met the criteria for quantity discounts set forth in 19
CFR 353.55(b) (see Comment 5). We did not exclude home market sales of
furfuryl alcohol packed in drums from the base of home market sales
used for comparison to U.S. sales, as requested by ISL, because ISL did
not demonstrate that these sales were outside the ordinary course of
trade (see Comment 7).
Currency Conversion
We have made currency conversions based on the official exchange
rates, as certified by the Federal Reserve Bank of New York, in effect
on the dates of the U.S. sales, pursuant to 19 CFR 353.60.
Verification
As provided in section 776(b) of the Act, we verified the
information used in making our final determination.
Interested Party Comments
Comment 1: Purchase Price versus Exporter's Sales Price
In the preliminary determination, the Department relied on ESP
methodology to calculate USP because we found that Harborchem was ISL's
agent and thus, a related party within the meaning of section
771(13)(A) of the Act.
The petitioner argues that the Department should revise its
methodology and base USP on purchase price because Harborchem failed to
meet the criteria for an agent under either the law of agency or the
Department's four-part test.
ISL asserts that reliance on ESP is appropriate in the final
determination, maintaining that the information on the record, which
the Department verified, confirms that ISL and Harborchem are related
parties.
DOC Position
We agree with the respondent. Based on the findings at
verification, the Department has determined that ISL and its exclusive
U.S. selling agent, Harborchem, constitute the ``exporter'' pursuant to
section 771(13)(A) of the Act (see concurrence memorandum, dated May 1,
1995), and that all of ISL's U.S. sales to the first unrelated
purchaser took place after importation into the United States.
Therefore, it is appropriate to base USP on exporter's sales prices, in
accordance with section 772(c) of the Act.
In evaluating related party claims based on agency, the Department
examines: (1) Whether the foreign manufacturer participates in the
marketing of the product to the U.S. customers; (2) whether the foreign
manufacturer participates in setting prices and in the negotiation of
other terms of sales to U.S. customers; (3) whether U.S. customers look
to the U.S. importer or the foreign manufacturer for product testing
and quality control; and (4) whether the foreign manufacturer interacts
directly with U.S. customers. See Electrolytic Manganese Dioxide from
Japan: Final Results of Antidumping Duty Administrative Review, 58 FR
28551, 28555 (May 14, 1993), and Final Determination of Sales at Not
Less Than Fair Value: Certain Forged Steel Crankshafts from Japan, 52
FR 36984, 36985 (October 2, 1987) (Crankshafts).
During verification, we were able to confirm that ISL and
Harborchem view their relationship as one of principal and agent and
communicate continually on matters related to U.S customer marketing
and sales of furfuryl alcohol. Based on our examination of
[[Page 22553]] correspondence files and interviews with company
personnel we also determined that ISL: (1) Participates directly with
Harborchem in marketing furfuryl alcohol to U.S. customers; (2)
participates directly in pricing and sales negotiations with U.S.
customers; (3) interacts directly, as well as through Harborchem, with
U.S. customers on product testing and quality control matters; and (4)
interacts with U.S. customers directly.
Therefore, because Harborchem meets the criteria established in
Crankshafts, we determine that Harborchem is ISL's agent for sales made
in the U.S. during the POI.
Comment 2: Related Party ``Commission'' Paid to Harborchem
Should the Department employ its ESP methodology in the final
determination, the petitioner urges the Department to adjust USP to
reflect the commission received by Harborchem. The adjustment is
necessary, argues the petitioner, because the Department's practice is
to deduct commissions paid to related parties from USP under the ESP
methodology. Specifically, section 772(e)(1) of the Act provides that
the exporter's sales price shall be reduced by the amount of
``commission for selling in the United States the particular
merchandise under consideration.'' See also 19 CFR 353.41(e)(1).
ISL maintains that its compensation arrangement with Harborchem
does not fit the traditional definition of commission for antidumping
calculations, and, as such, an adjustment to USP is not appropriate.
DOC Position
We disagree with the petitioner. The petitioner's characterization
of Departmental practice is misleading. Under the ESP methodology, the
foreign exporter and its related importer are effectively treated as
one unit. Thus, any compensation paid by ISL to its agent Harborchem,
whether or not specifically called a commission, is considered a
related party transfer and ignored for the purposes of the margin
calculation. Instead, the Department deducts the amount of the related
importer's (i.e., Harborchem's) U.S. indirect and direct selling
expenses pursuant to section 772(e)(2) of the Act. This methodology
avoids double-counting the same expenses (i.e., the commission which
includes an amount for the related importer's selling expenses, and
indirect selling expenses) and avoids deducting any profit of the
related importer as established in Timken Co. v. United States, 630 F.
Supp. 1327, 1343 (CIT 1986) (Timken).
These practices are fully described in the notice of the Final
Determination of Sales at Less Than Fair Value: Fresh Cut Roses from
Colombia and Ecuador 60 FR 7019, 7028 (February 6, 1995) (Roses), and
are consistent with the Department's past practice on this issue (see
e.g., Antifriction Bearings (Other than Tapered Roller Bearings) and
Parts Thereof, 56 FR 39729 (July 26, 1993); LMI--La Metalli
Industriale, S.p.A. v. United States, 912 F.2d 455, 459 (Fed. Cir.
1990); Certain Fresh Cut Flowers from Colombia; Final Results of
Administrative Review, 55 FR 20491 (May 17, 1990); and Porcelain-on-
Steel Cooking Ware from Mexico, 51 FR 36438 (October 10, 1986)).
Comment 3: Misreported Ocean Freight, Marine Insurance, and U.S. Duty
The petitioner contends that the respondent vastly underreported
its ocean freight and marine insurance costs to the Department. It
alleges that the underreporting is discernible from the official U.S.
Customs entry documents for ISL's U.S. shipments, which indicate a
difference between the CIF and FOB values greater than ISL's reported
freight and insurance costs. Furthermore, contends the petitioner, this
underreporting is also discernible from the responses which indicate
that ISL reported the ocean freight and insurance charges for only one
of the shipments corresponding to U.S. sales of furfuryl alcohol during
the POI. Based on these contentions, the petitioner argues that the
Department should reject the respondent's information and apply the
amount deduced from the official Customs documents for ocean freight
and marine insurance costs as the best information available.
According to the respondent, the Department should rely on the
actual ocean freight, marine insurance, and U.S. duty charges as
verified, not unverified estimates deduced from customs forms. The
respondent argues that if the Department believes an adjustment is
necessary, it should revise the amount of U.S. duty applicable to U.S.
sales during the POI. ISL suggests that the adjustment to U.S. duty
should equal the amount which would have been paid had the deductions
to calculate FOB price been correctly calculated and applied in the
customs entry documents.
DOC Position
Consistent with our treatment of minor changes to submitted data,
the Department has used verified data for ocean freight and marine
insurance (see Roses, 60 FR at 7035; and Final Determination of Sales
at Less Than Fair Value: New Minivans from Japan, 57 FR 21937, 21952
(May 26, 1992)). Inasmuch as the Department has the necessary
information to determine the actual ocean freight and insurance charges
applicable to U.S. sales during the POI, it is appropriate to apply
this information to the final margin calculations.
With respect to U.S. duty, we determined that it was appropriate to
recalculate the amount applicable to the respondent's U.S. sales during
the POI. This recalculation was necessary because we verified that the
entry documents for the respondent's U.S. shipments incorrectly
reflected the FOB value which was used to calculate U.S. duty and
therefore, the actual duty paid by ISL was understated.
Comment 4: Home Market Rebate
ISL claims the rebates granted to one customer during the POI are
related to POI sales and thus should be taken into account in the
Department's final margin calculations. ISL reports that it granted
rebates to a home market customer that manufactures and exports resins
using furfuryl alcohol purchased from ISL. According to ISL, this
rebate was granted based on the customer's providing documentation
concerning the actual amount of furfuryl alcohol used in the resins
exported from South Africa.
The petitioner alleges that ISL's claimed rebate should be rejected
because there is no information on the record that ties ISL's rebate to
specific sales in the POI.
DOC Position
We agree with the petitioner that ISL was unable to demonstrate
that the reported rebates were directly linked to POI sales. However,
it is the Department's practice in such instances to reclassify the
adjustment as an indirect selling expense (see e.g., Tapered Roller
Bearings, Four Inches or Less in Outside Diameter, and Components
Thereof, From Japan: Final Results of Antidumping Duty Administrative
Review, 57 FR 4976, 4982-83 (February 11, 1992)). Accordingly, we have
treated ISL's home market rebate as an indirect expense in the
calculations for the final determination.
Comment 5: Home Market Quantity Discount
The respondent contends that it has met the criterion established
by section 353.55(b)(1) of the Department's [[Page 22554]] regulations
to qualify for a quantity discount adjustment insofar as the quantity
discount was granted to one home market customer that accounts for over
20 percent of home market sales of the same magnitude during the POI.
ISL submits that no other home market customer receives the discount
because no other home market customer regularly places orders of the
same size as the customer in question.
According to the petitioner, the respondent's claim is defective
because the quantity discount at issue was available to only one
customer and not, as the Department requires, to any prospective
purchasers. Furthermore, the petitioner argues that ISL failed to
establish the necessary linkage between the discount in question and
the volume of individual sales, as required by 19 CFR 353.55(b)(1). For
these reasons, the petitioner argues that the Department should reject
this claimed adjustment.
DOC Position
We agree with the petitioner. The Department requires that (1)
quantity discounts are available to any prospective purchaser; (2) and
that the discount is based on the quantity of the sale in question.
This policy was articulated in Circular Welded Non-Alloy Steel Pipe
from Mexico: Final Determination, 57 FR 42953, 42955, (September 17,
1992) and Color Television Receivers from the Republic of Korea, 55 FR
26225 (June 27, 1990). ISL was unable to establish that the discount
was available to any prospective home market customer. ISL also was
unable to sufficiently support its claim that the discount is linked to
the volume of individual sales. Therefore, we have determined, pursuant
to section 353.55(b) of the Department's regulations, that the
information on the record does not justify granting ISL's claimed
adjustment for quantity discounts.
Comment 6: Home Market Export Incentive Payments
ISL reports that it receives export incentive payments from the
South African government for all of its exports of FA. ISL argues that
the amount earned from the subsidy payments during the POI should be
added to the gross unit price of each U.S. sale for the purpose of
calculating dumping margins.
The petitioner argues that the Department abandoned its former
practice of making circumstance of sale adjustments to account for
payments from export programs. The Department's current practice is to
make no adjustments to either FMV or to USP for payments received
pursuant to export subsidy programs. Moreover, the petitioner contends
that the Department has concluded that it does not have the statutory
authority to adjust USP for the payments received from an export
subsidy program. See Oil Country Tubular Goods from Israel: Final
Determination of Sales At Less Than Fair Value, 52 FR 1511 (January 14,
1987) (OCTG).
DOC Position
We agree with the petitioner and reject the respondent's request
for this adjustment to USP. Section 772(d)(1) of the Act permits the
Department to increase U.S. price for purposes of fair value
comparisons only under four specific circumstances: by the amount of
the packing, if not included in the U.S. price; by the amount of import
duties imposed and rebated upon export; by the amount of any taxes
imposed on the merchandise that are rebated upon export; and by the
amount of countervailing duties levied to offset an export subsidy. The
Department does not make adjustments to the USP for export subsidy
payments because payments of this type are not enumerated within
section 772(d)(1) of the Act (see OCTG, 52 FR 1513).
There is no CVD investigation or order on the subject merchandise,
thus, as required by section 772(d)(1)(D), we cannot adjust USP for an
export subsidy.
Comment 7: Exclusion of Sales of Furfuryl Alcohol in Drums
ISL requests that the Department exclude its home market sales of
furfuryl alcohol in drums in the pool of home market sales used for
comparison to U.S. sales. ISL argues that exclusion of the drummed
furfuryl alcohol sales is appropriate because they are not
representative of home market sales in terms of price and quantity and
because of the small amount of total sales involved.
The petitioner argues that the Department should uphold its
decision in the preliminary determination to reject ISL's request. The
petitioner maintains that there are two primary reasons for rejecting
ISL's request. First, the petitioner argues that furfuryl alcohol is
physically identical, whether sold on a drummed or semi-bulk basis. And
second, the petitioner contends that ISL's sales listing indicates the
drummed sales are comparable to ISL's bulk transactions.
DOC Position
We agree with the petitioner. There is no physical difference
between furfuryl alcohol that is sold in drums and that sold on a semi-
bulk basis. Furthermore, the quantities of these drum sales are
comparable to many of ISL's sales on a semi-bulk basis. Accordingly,
the Department has included these sales in the pool of home market
sales used for comparison to U.S. sales.
Comment 8: U.S. Freight Charges
The respondent requests that the Department include the adjustment
for U.S. freight cost reimbursement claimed by Harborchem. Although the
Department disallowed the adjustment in the preliminary determination
based on the lack of adequate information, ISL indicates that the
Department specifically reviewed data on customer reimbursement of
these freight expenses at verification. Inasmuch as the reported data
verified, ISL requests that the Department include an adjustment to USP
in the final margin calculations.
DOC Position
We agree with the respondent. The Department fully verified the
respondent's information concerning the freight cost reimbursement.
Accordingly, this information was included in the calculation of USP
for the final determination.
Comment 9: Untimely Data
The petitioner alleges that ISL submitted new factual information
in Exhibit 1 of its case brief concerning the COPs for furfuryl and FA.
According to the petitioner, the Department should strike this
information from the record.
DOC Position
We disagree with the petitioner. Careful examination of this
information revealed Exhibit 1 to be a reconfiguration of information
already on the record in this investigation. The majority of
information contained in Exhibit 1 was submitted by ISL in its original
and supplemental response to Section D of the questionnaire. Other data
was derived from exhibits to the cost verification (see cost
verification exhibits 4 and 13). Accordingly, this information is not
new factual information, and the Department has allowed this
information to remain on the record of this investigation.
Comment 10: Rescinding the COP Investigation
The respondent contends that the information on the record does not
support the Department's finding that there are reasonable grounds to
believe or suspect that sales below COP have been made. Rather, ISL
argues that the information used to support the COP
[[Page 22555]] investigation should properly be viewed as amounting to
statistical aberrations in the data reported. Therefore, ISL requests
that the Department rescind the COP investigation in this case.
According to the petitioner, the Department properly initiated the
COP investigation after it conducted a thorough examination of the
petitioner's allegation. Based on this examination, the Department
determined that there were reasonable grounds to believe or suspect
that sales were made at prices which were less than ISL's COP.
Accordingly, the petitioner argues that ISL's request should be
rejected.
DOC Position
We agree with the petitioner that the COP investigation should not
be rescinded. Based on our analysis of the petitioner's COP allegations
at the time they were made, we determined, in accordance with section
773(b) of the Act, that there was a reasonable basis to believe or
suspect that home market sales of ISL were made at less than the COP.
(For a description of the Department's analysis, see concurrence
memorandum, dated December 9, 1994). As a result, initiation of the COP
investigation was appropriate.
Comment 11: Use of Best Information Available (BIA)
The petitioner asserts that ISL has purposely impeded this
investigation by failing to provide all of the costs for furfuryl used
in furfuryl alcohol production during the POI. The petitioner contends
that the Department has repeatedly asked ISL to submit actual cost data
for all of the furfuryl used to produce furfuryl alcohol during the
POI. In response to these requests, however, the petitioner maintains
that ISL submitted two flawed furfuryl costing methodologies.
Accordingly, pursuant to section 776(c) of the Act, the petitioner
urges the Department to use noncooperative BIA to determine ISL's
antidumping duty margin.
According to ISL, the petitioner's claim that ISL has significantly
impeded the investigation by failing to provide sufficient furfuryl
cost information is totally without merit. ISL maintains that it has
complied with all of the Department's requests regarding the actual
cost of furfuryl consumed during the POI. ISL submitted furfuryl cost
data covering an eighteen-month period, including the six months of the
POI. Moreover, ISL notes that it has submitted furfuryl costs using
three different methodologies.
DOC Position
We have not found that ISL has impeded this investigation. Rather,
ISL has cooperated in every aspect of this investigation. Therefore, we
have determined that it is appropriate to use ISL's information in our
margin calculation.
Comment 12: Furfuryl Costs
The petitioner argues that all three of ISL's submitted furfuryl
costing methodologies fail to accurately reflect the cost of furfuryl
used in production during the POI. The petitioner therefore contends
that the Department should reject these methodologies and resort to BIA
as the basis for computing ISL's antidumping margin.
ISL maintains that each of the methodologies used in the
questionnaire responses to calculate furfuryl production costs are
reasonable and should be accepted by the Department. However, ISL
contends that its fiscal year furfuryl cost calculation is most
appropriate because it represents all costs normally incurred during a
full seasonal cycle.
DOC Position
We agree with the petitioner that none of the three methodologies
ISL has proposed properly values the cost of furfuryl consumed in the
furfuryl alcohol process during the POI. ISL's first methodology
included the cost of furfuryl produced after the POI, June through
September 1994. ISL's second methodology reflected furfuryl production
costs for only part of the furfuryl consumed during the POI. Lastly,
the furfuryl costs computed by the company under the third methodology
were based on a weighted-average cost rather than on ISL's normal
first-in first-out (FIFO) inventory valuation method. However, the
information on the record is sufficient to allow the Department to
recalculate the furfuryl cost.
We have recalculated the cost of furfuryl used to produce furfuryl
alcohol during the POI based on ISL's normal FIFO inventory valuation
method. The Department normally follows the respondent's inventory
valuation method unless it fails to reasonably reflect the costs
associated with producing the merchandise. There is no information on
the record to indicate that ISL's FIFO method distorts per-unit
furfuryl costs.
Comment 13: Accounting Adjustment
The petitioner argues that ISL's submission methodology for a
particular proprietary adjustment distorts the COP. The respondent
argues that its submission methodology provides a reasonable basis for
the calculation of the effect of this item on the COP.
DOC Position
Because of the business proprietary nature of this item, we have
addressed the parties comments and analyzed the issue in detail in the
proprietary concurrence memorandum dated May 1, 1995. But, our
determination was not to allow respondent's submitted methodology but
rather to rely on respondent's normal accounting practice with respect
to this adjustment.
Comment 14: Bagasse
The petitioner asserts that ISL failed to properly account for the
value of its bagasse used to produce furfuryl and that the value should
be included in ISL's COP. The petitioner notes that during the POI, ISL
sold bagasse generated from one of its sugar mills to an unrelated
paper producer located near the mill. It argues that the Department
should utilize this sales value in assigning a cost to bagasse consumed
during the POI.
The respondent maintains that its submission methodology of
assigning no cost to bagasse usage is reasonable and consistent with
its financial and cost accounting systems. The respondent contends that
its methodology considers the value of bagasse based on its energy
content. Additionally, respondent argues that there is no market for
bagasse from its Sezela mill where the company produced the subject
merchandise. Furthermore, respondent notes that the sale of bagasse
from one of ISL's other mills was possible only because of the close
proximity of this mill to the purchaser's manufacturing plant.
DOC Position
ISL's furfuryl and furfuryl alcohol plant is located adjacent to
its sugar cane processing plant. Bagasse is generated from the
processing of sugar cane. Bagasse generated at the sugar mill is
transferred to the furfural plant. In the first stage of the furfural
process, ISL extracts a chemical from bagasse called pentosan. After
the furfural plant performs the extraction, the remaining bagasse
residue is transferred to the boiler as an energy source. The bagasse
loses a minimal amount of its energy content from the extraction
process. ISL has one boiler which generates high pressure steam for
both its sugar mill and furfural process. ISL uses coal, bagasse and
bagasse residue to fuel this boiler.
In its normal accounting system, ISL assigns no costs to the
bagasse used to [[Page 22556]] extract pentosan and as a fuel source
for the boiler. All coal costs incurred for the boiler are charged to
furfural production.
During verification, we noted that the energy content of the coal
charged to the furfural process exceeded the sum of the energy content
of steam used in the furfural process plus the net energy loss from
bagasse used in furfural production. Consequently, we found that ISL's
actual reported coal costs charged to furfural exceeded the value of
the bagasse and steam used in the furfural production process. We
therefore consider it reasonable for ISL to assign no cost to the
bagasse consumed in the furfural production process.
We believe that the circumstances surrounding ISL's bagasse sales
during the POI do not reflect the operations of the Sezela mill where
ISL produces the subject merchandise. The Sezela sugar mill has no
bagasse customers located within its vicinity, whereas the bagasse
customer of ISL's other mill is located next to that mill. Thus, unlike
the Sezela mill, sales between the other ISL sugar mill and the
unrelated company were economically feasible because transportation of
bagasse between seller and customer was reasonably available and
relatively inexpensive.
Comment 15: General and Administrative (G&A)
The petitioner maintains ISL's G&A calculation methodology is
flawed for numerous reasons and urges the Department to reject it.
Specifically, the petitioner maintains that ISL's G&A expense
calculation methodology failed to compute G&A on a company-wide basis
and included both G&A and selling expenses in the denominator.
ISL contends its reported G&A expense methodology is appropriate.
The G&A expenses were based on amounts recorded in separate general
ledger accounts for the chemical division G&A departments and were
properly allocated to the operations receiving the benefit. However,
respondent agrees that the denominator incorrectly included both G&A
and selling expenses.
DOC Position
To compute G&A expenses for COP, ISL calculated a company-wide G&A
rate for G&A expenses that related to the operations of the company as
a whole. In addition, ISL calculated separate G&A rates for its
chemical operations and the operations of its Sezela furfuryl alcohol
plant. These rates excluded G&A expenses relating to the company's
sugar operations (i.e., non-subject merchandise).
During verification, ISL demonstrated that it normally records
certain G&A expenses by product line for chemical operations (including
furfuryl and furfuryl alcohol) and sugar. The company showed that it
recorded these product-line expenses in specific G&A accounts
maintained in its general ledger. Since ISL demonstrated that some of
its G&A expenses relate exclusively to the company's non-subject sugar
operation, we consider respondent's submitted G&A expense methodology
reasonable.
We further note that because we are applying the G&A rate to cost
of manufacturing exclusive of selling, general and administrative
(SG&A) expenses, we recalculated ISL's G&A rate by excluding SG&A from
the cost of sales figure used as the denominator in the calculation.
Comment 16: Decentralization Incentive
ISL claims its decentralization incentive payments were approved by
and received from the South African government during fiscal year 1994.
Since the revenue was recorded in its audited financial statements, ISL
maintains that it appropriately included this amount in its submitted
G&A rate calculation.
The petitioner argues the Department should exclude ISL's
decentralization incentive revenue as the revenue relates to expenses
incurred before the POI. Additionally, the petitioner argues this
revenue is not linked to the sales made during the POI.
DOC Position
According to both South African and U.S. generally accepted
accounting principles (GAAP), companies do not normally recognize
revenue in the income statement unless they are relatively certain that
the amount will be collected. In ISL's case, even though the government
approved ISL's grant application in 1993, the company did not record
the revenue for financial statement purposes until the money was
received in 1994. We consider ISL's conservative treatment of not
recording the grant revenue for financial statement purposes until the
year of receipt a reasonable approach. Accordingly, we included the
grant revenue in ISL's G&A calculation.
Comment 17: Overhead Expense Allocation
ISL contends that the method used to allocate overhead costs for
submission purposes is the same as that applied in its normal
accounting records.
The petitioner contends ISL's overhead allocation method distorts
costs. According to the petitioner, ISL understated furfuryl costs by
allocating an excessive amount of overhead expenses to the furfuryl
alcohol process.
ISL maintains that, contrary to the petitioner's arguments, its
normal overhead allocation methodology is reasonable. Moreover, ISL
asserts that the method of allocation between furfuryl and furfuryl
alcohol does not significantly effect the overall furfuryl alcohol
costs.
DOC Position
The Department normally relies on the respondent's books and
records prepared in accordance with the home country GAAP unless these
accounting principles do not reasonably reflect the COP of the
merchandise. ISL's reported overhead costs were based on its normal
accounting books and records. We have found no evidence on the record
to indicate ISL's allocation of overhead costs between furfuryl and
furfuryl alcohol distorts the production costs. Accordingly, we
accepted ISL's submission methodology for allocating overhead costs.
Comment 18: Steam Costs
The petitioner asserts the Department should increase ISL's steam
costs by the amount suggested in the cost verification report. The
respondent agrees with this adjustment to steam costs.
DOC Position
We increased ISL's reported steam cost.
Continuation of Suspension of Liquidation
In accordance with section 735(d) of the Act, we are directing the
Customs Service to continue to suspend liquidation of all entries of
furfuryl alcohol from South Africa, as defined in the ``Scope of
Investigation'' section of this notice, that are entered, or withdrawn
from warehouse, for consumption on or after December 16, 1994, the date
of publication of our preliminary determination notice in the Federal
Register.
The Customs Service shall require a cash deposit or posting of a
bond on all entries equal to the estimated dumping margin, as shown
below. The suspension of liquidation will remain in effect until
further notice.
[[Page 22557]]
------------------------------------------------------------------------
Margin
Producer/manufacturer/exporter percentage
------------------------------------------------------------------------
Illovo Sugar Limited........................................ 15.48
All Others.................................................. 15.48
------------------------------------------------------------------------
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
ITC of our determination. The ITC will make its determination whether
these imports materially injure, or threaten injury to, a U.S. industry
within 45 days of the publication of this notice. If the ITC determines
that material injury or threat of material injury does not exist, the
proceeding will be terminated and all securities posted as a result of
the suspension of liquidation will be refunded or canceled.
However, if the ITC determines that such injury does exist, we will
issue an antidumping duty order directing the Customs Service officers
to assess an antidumping duty on furfuryl alcohol from South Africa,
that are entered, or withdrawn from warehouse, for consumption on or
after the date of suspension of liquidation, equal to the amount by
which the foreign market value of the merchandise exceeds the United
States price.
This determination is published pursuant to section 735(d) of the
Act (19 U.S.C. 1673(d)) and 19 CFR 353.20.
Dated: May 1, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-11261 Filed 5-5-95; 8:45 am]
BILLING CODE 3510-DS-P
