[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