00-16105. Notice of Preliminary Results of Antidumping Duty Administrative Review: Industrial Phosphoric Acid From Belgium

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Notice of Preliminary Results of Antidumping Duty Administrative Review.

SUMMARY:

In response to requests from petitioner and one domestic producer, the Department of Commerce (“the Department”) is conducting an administrative review of the antidumping duty order on industrial phosphoric acid (“IPA”) from Belgium. The period of review (“POR”) is August 1, 1998, through July 31, 1999. This review covers imports of IPA from one producer, Societe Chimique Prayon-Rupel S.A. (“Prayon”).

We have preliminarily determined the dumping margin for Prayon to be 1.82 percent during the period August 1, 1998, through July 31, 1999. Interested parties are invited to comment on these preliminary results. Parties who submit arguments are requested to submit with the argument (1) a statement of the issue and (2) a brief summary of the argument.

EFFECTIVE DATE:

June 26, 2000.

FOR FURTHER INFORMATION CONTACT:

Frank Thomson or Jim Terpstra, AD/CVD Enforcement, Group II, Office IV, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone [phone], and 482-3965, respectively.

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 citations to the Department's regulations are to the current regulations at 19 CFR Part 351 (1999).

Background

On August 20, 1987, the Department published in the Federal Register (52 FR 31439) the antidumping duty order on IPA from Belgium. On August 11, 1999, the Department published in the Federal Register (64 FR 43649) a notice of opportunity to request an administrative review of this antidumping duty order. On August 30, 1999, in accordance with 19 CFR 351.213(b)(1), the petitioner FMC Corporation (“FMC”), and Albright & Wilson Americas Inc. (“Wilson”), a domestic producer of the subject merchandise, requested that the Department conduct an administrative review of Prayon's exports of subject merchandise to the United States. We published the notice of initiation of this review on October 1, 1999 (64 FR 53318).

Scope of the Review

The products covered by this review include shipments of IPA from Belgium. This merchandise is currently classifiable under the Harmonized Tariff Schedule (“HTS”) item numbers 2809.2000 and 4163.0000. The HTS item numbers are provided for convenience and Customs purposes. The written description remains dispositive.

Verification

As provided in section 782(i) of the Act, we conducted verification of the information provided by Prayon. We used standard verification procedures, including examination of relevant sales and financial records and selection of relevant source documentation as exhibits. Our verification findings are detailed in the memoranda dated June 16, 2000, the public versions of which are on file in the Central Records Unit, Room B-099 of the Main Commerce building (“CRU-Public File”).

Product Comparisons

The IPA exported by Prayon to the United States is PRAYPHOS P5, a refined IPA, and is the identical merchandise sold by Prayon in its home market in Belgium. Therefore, we have compared U.S. sales to contemporaneous sales of identical merchandise in Belgium.

Constructed Export Price

Prayon sells to end-users in the United States through its affiliated sales agent, Quadra Corporation (“Quadra”). The sales documentation on the record in this proceeding indicates that Prayon's U.S. sales occurred in the United States between Quadra and the unaffiliated U.S. purchaser. Specifically, we have found the following facts: (1) Quadra contacts the U.S. customer and discusses prices, (2) there is a contract between Quadra and the U.S. customers, (3) Quadra arranges for shipping and other services, (4) Quadra issues the invoice to the U.S. customer, and (5) Quadra accepts payment from the U.S. customer. Given these facts, we preliminarily determine that these sales were made in the United States by a seller affiliated with the producer and, thus, should be treated as constructed export price (“CEP”) transactions (see Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea, Final Results of Administrative Review, 65 FR 13359 (March 13, 2000) and accompanying Decision Memorandum at Comment 12; and Porcelain-on-Steel Cookware from Mexico, Final Results of Administrative Review, 65 FR 30068 (May 10, 2000) and accompanying Decision Memorandum at Comment 2) (“Porcelain-on-Steel Cookware from Mexico”).

We based CEP on the delivered prices to unaffiliated purchasers in the United States. We made deductions for movement expenses in accordance with section 772(c)(2)(A) of the Act; these included, where appropriate, inland insurance, foreign brokerage and handling, cost of wharfage, storing and handling in Canada, ocean freight, U.S. customs duties (including brokerage and merchandise processing fees), and U.S. inland freight expenses (freight from warehouse to the customer). In accordance with section 772(d)(1) of the Act, we deducted those selling expenses associated with economic activities occurring in the United States, including direct selling expenses (commissions and credit expenses), inventory carrying costs, and other indirect selling expenses. We also made an adjustment for profit in accordance with section 772(d)(3) of the Act.

Normal Value

We compared the aggregate quantity of home market and U.S. sales and determined that the quantity of the company's sales in its home market was more than five percent of the quantity of its sales to the U.S. market. Consequently, in accordance with section 773(a)(1)(B) of the Act, we based normal value (“NV”) on home market sales.

However, we excluded from our NV analysis sales to affiliated home market customers where the weighted-average sales prices to the affiliated party was less than 99.5 percent of the weighted-average sales price to unaffiliated parties. See Usinor Sacilor v. United States, 872 F. Supp. 1000, 1004 (CIT 1994).

We calculated monthly weighted-average NVs based on ex-works or delivered prices to unaffiliated customers or prices to affiliated customers that we determined to be at arm's-length prices. We made adjustments to the starting price, where appropriate, for billing adjustments. We made deductions, where appropriate, from the starting price for early payment discounts, inland insurance, and inland freight. We made circumstance of sale (“COS”) adjustments, in accordance with section 773(a)(6)(c)(iii) of the Act, for direct selling expenses, including credit expenses.

Level of Trade

In accordance with section 773(a)(1)(B) of the Act, to the extent practicable, we determine NV based on sales in the comparison market at the same level of trade (“LOT”) as the export price (“EP”) or CEP transaction. The NV LOT is that of the starting-price sales in the comparison market or, when NV is based on constructed value (“CV”), that of the sales from which we derive selling, general and administrative (“SG&A”) expenses and profit. With respect to U.S. price and CEP transactions, the LOT is the level of the constructed sale from the exporter to the importer.

To determine whether NV sales are at a different LOT than EP or CEP, we examine stages in the marketing process and selling functions along the chain of distribution between the producer and the unaffiliated customer. 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 the sales on which NV is based and comparison-market sales at the LOT of the export transaction, we make a LOT adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is more remote from the factory than the CEP level, and there is no basis for determining whether the difference in the levels between NV and CEP affects price comparability, we adjust NV under section 773(a)(7)(B) of the Act (the CEP-offset provision). 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 (November 19, 1997).

Prayon reported two customer categories (i.e., end-users and distributors) and three channels of distribution in the home market (i.e., sales made by Prayon directly to end-users (Channel 1), sales from Prayon through its affiliated sales agent, Zinchem Benelux, to end-users (Channel 2), and sales from Prayon through Zinchem Benelux, to distributors (Channel 3)).

Based upon an analysis of the information provided on the record, we conclude that there is no difference in the selling functions performed by Prayon in making sales through these three channels of distribution. Therefore, using the information on the record, the Department preliminarily determines that Prayon makes all sales at the same LOT in the home market (see Preliminary Determination: Level of Trade Analysis. (“Preliminary LOT Memorandum”) from Frank Thomson, Import Compliance Specialist, through James Terpstra, Program Manager, to the File, dated June 19, 2000, on file in the CRU).

Prayon reported only one LOT in the United States during the POR. This LOT involved one channel of distribution: sales made by Prayon through its affiliated sales agent, Quadra, to end-users (Channel 1).

In order to determine whether sales in the United States are at a different LOT than sales in the home market, we reviewed the selling activities associated with each channel of distribution. We compared the selling activities between Prayon and Quadra on U.S. CEP transactions, after all relevant deductions under section 772(d) of the Act, to the selling activities performed for the home market LOT sales by Prayon. We found that fewer and different selling functions were performed for Prayon's CEP sales than for sales at the home market LOT, and that the totality of these differences constitutes a difference in LOT. See the Preliminary LOT Memorandum for a detailed explanation of the above.

Therefore, we examined whether a LOT adjustment was appropriate. The Department makes this adjustment when it is demonstrated that a difference in LOTs affects price comparability. See Statement of Administrative Action accompanying the URAA, H.R. Doc. No. 103-316 at 829-830 (1994) (hereinafter, the “SAA”). However, where the available data do not provide an appropriate basis upon which to determine a LOT adjustment, and where the NV is established at a LOT that is at a more advanced stage of distribution than the LOT of the CEP transactions, we adjust NV under section 773(a)(7)(B) of the Act (the CEP offset provision).

As discussed above, we preliminarily find that all respondent's home market sales are made at the same LOT. Further, we find that the home market LOT is different from the U.S. LOT. Finally, because of the significantly larger amount of selling activities performed, we found that the home market sales were at a more advanced stage of distribution compared to sales made at the U.S. LOT. Further, the data available do not provide an appropriate basis upon which to determine a LOT adjustment. Accordingly, we granted a CEP offset for all sales by Prayon in Belgium which are compared with CEP sales in the United States. We applied the CEP offset to NV, as appropriate. See the Preliminary LOT Memorandum for a detailed explanation of the above.

Commissions

The Department operates under the assumption that commission payments to affiliated parties (in either the United States or home market) are not at arm's length. The Court of International Trade has held that this is a reasonable assumption. See Outokumpu Copper Rolled Products AB v. United States, 850 F. Supp. 16, 22 (CIT 1994). Accordingly, the Department has established guidelines to determine whether affiliated party commissions are paid on an arm's-length basis such that an adjustment for such commissions can be made. See Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan, 61 FR 57629 (November 7, 1996).

First, we compare the commissions paid to affiliated and unaffiliated sales agents in the same market. If there are no commissions paid to unaffiliated parties, we then compare the commissions earned by the affiliated selling agent on sales of merchandise produced by the respondent to commissions earned on sales of merchandise produced by unaffiliated sellers or manufacturers. If there is no benchmark which can be used to determine whether the affiliated party commission is an arm's-length value (i.e., the producer does not use an unaffiliated selling agent and the affiliated selling agent does not sell subject merchandise for an unaffiliated producer), the Department assumes that the affiliated party commissions are not paid on an arm's-length basis.

In this case, Prayon used an affiliated sales agent in the home market. In its January 20, 2000, response, Prayon submitted its commission rates paid to its affiliated sales agent in the home market. We issued a supplemental questionnaire to Prayon, requesting that it indicate whether the commissions were paid at arm's length by reference to commission payments to unaffiliated parties in the foreign market and other markets, and to submit evidence demonstrating the arm's-length nature of the commissions. Prayon then submitted documentation illustrating its commission rates with unaffiliated parties in other markets, including Europe, North America, and South America. We examined Prayon's submitted rates with its unaffiliated agents throughout Europe to compare its affiliated commission rate in Belgium. Our examination of Prayon's unaffiliated European market commission rates indicate that these rates are comparable to its affiliated party commission rate.

As a consequence, our preliminary analysis of the submitted documentation indicates that the affiliated commissions in the home market are made at arm's length. Therefore, for purposes of the preliminary determination, we are accepting Prayon's reported home market commissions. Accordingly, we preliminarily determine to make a COS adjustment for commissions in the home market.

Currency Conversion

Pursuant to section 773A(a) of the Act, we made currency conversions into U.S. dollars based on the exchange rates in effect on the dates of the U.S. sales as certified by the Federal Reserve Bank.

Preliminary Results of the Review

As a result of this review, we preliminarily determine that a 0.60 percent dumping margin exists for Prayon for the period August 1, 1998, through July 31, 1999.

The Department will disclose calculations performed within five days of the date of publication of this notice to the parties of this proceeding in accordance with 19 CFR 351.224(b). An interested party may request a hearing within 30 days of publication of these preliminary results. See 19 CFR 351.310(c). Any hearing, if requested, will be held 44 days after the date of publication, or the first working day thereafter. Interested parties may submit case briefs and/or written comments no later than 30 days after the date of publication of these preliminary results of review. Rebuttal briefs and rebuttals to written comments, limited to issues raised in such briefs or comments, may be filed no later than 37 days after the date of publication. Further, we would appreciate it if parties submitting written comments also provide the Department with an additional copy of those comments on diskette. The Department will issue the final results of this administrative review, which will include the results of its analysis of issues raised in any such comments, within 120 days of publication of these preliminary results.

Upon completion of this administrative review, the Department shall determine, and the Customs Service shall assess, antidumping duties on all appropriate entries. We have calculated Prayon's duty assessment rate based on the ratio of the total amount of antidumping duties calculated for the examined sales to the total entered value of examined sales. The rate will be assessed uniformly on all entries made during the POR. The Department will issue appraisement instructions directly to Customs.

Furthermore, the following deposit requirements will be effective upon completion of the final results of this administrative review for all shipments of IPA from Belgium entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of this administrative review, as provided by section 751(a)(1) of the Act: (1) The cash deposit rate for Prayon will be the rate established in the final results of this administrative review; (2) for merchandise exported by manufacturers or exporters not covered in this review but covered in the original less-than-fair-value (“LTFV”) investigation or a previous review, the cash deposit will continue to be the company-specific rate published for the most recent period; (3) if the exporter is not a firm covered in this review, or the original 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 (4) if neither the exporter nor the manufacturer is a firm covered in this or any previous review, the cash deposit rate will be 14.67 percent, the “all-others” rate established in the LTFV investigation.

These deposit requirements, when imposed, shall remain in effect until publication of the final results of administrative review for a subsequent review period.

This notice also serves as a preliminary 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 the subsequent assessment of double antidumping duties.

This administrative review and notice are in accordance with sections 751(a)(1) and 777(i)(1) of the Act.

Dated: June 19, 2000.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.