[Federal Register Volume 59, Number 87 (Friday, May 6, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10993]


[[Page Unknown]]

[Federal Register: May 6, 1994]


-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE
International Trade Administration
[A-421-805]

 

Notice of Final Determination of Sales at Less Than Fair Value: 
Aramid Fiber Formed of Poly-Phenylene Terephthalamide From the 
Netherlands

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: May 6,1994.

FOR FURTHER INFORMATION CONTACT: Jennifer Katt or Michael Ready, Office 
of Antidumping Investigations, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW.; Washington, DC 20230; telephone: (202) 482-
0498 or (202) 482-2613, respectively.

FINAL DETERMINATION: We determine that imports of aramid fiber formed 
of poly-phenylene terephthalamide (PPD-T aramid fiber) from the 
Netherlands are being, or are likely to be, 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 weighted-
average margins are shown in the ``Continuation of Suspension of 
Liquidation'' section of this notice.

Case History

    Since our preliminary determination on December 9, 1993 (58 FR 
65699, December 16, 1993), the following events have occurred:
    On December 16, 1993, we received a request from the sole 
respondent in this investigation, Aramide Maatschappij V.O.F. (Arami) 
and Akzo Fibers, Inc. (the U.S. selling agent) (collectively Akzo) to 
postpone the final determination in this investigation until 135 days 
after the date of publication of the preliminary determination. On 
December 22, 1993, we did so and postponed this final determination 
until May 2, 1994 (58 FR 69329, December 30, 1993).
    On February 23, 1994, petitioner (E.I. Du Pont de Nemours & 
Company) requested that references to tire cord fabric be deleted from 
the scope of the investigation. On April 21, 1994, petitioner revised 
its previous request, asking that tire cord fabric be expressly 
excluded from the scope of this investigation. (See ``Scope of the 
Investigation'' section of this notice, below.) Akzo submitted 
supplemental responses to sections B (third-country sales), C (United 
States sales) and D (cost of production/constructed value) of the 
questionnaire, revisions and corrections to its sales responses, and/or 
revised computer tapes in December 1993, as well as February, March and 
April of 1994.
    We conducted verification of Akzo's sales and cost questionnaire 
responses in the Netherlands and the United States in February and 
March of 1994, respectively.
    Akzo and petitioner submitted case and rebuttal briefs on March 28 
and 31, 1994, respectively. At Akzo's request, a public hearing was 
held on April 1, 1994.

Scope of the Investigation

    The products covered by this investigation are all forms of poly 
para-phenylene terephthalamide aramid fiber from the Netherlands. These 
consist of PPD-T aramid in the form of filament yarn (including single 
and corded), staple fiber, pulp (wet or dry), spun-laced and spun-based 
nonwovens, chopped fiber and floc. Tire cord fabric is excluded from 
the class or kind of merchandise under investigation. PPD-T aramid 
fiber is classifiable under subheadings 5402.10.3020, 5402.10.3040, 
5402.32.3000, 5503.10.0000, 5601.30.0000 and 5902.10.0000 of the 
Harmonized Tariff Schedule of the United States (HTSUS). Although the 
HTSUS numbers are provided for convenience and customs purposes, our 
written description of the scope of this investigation is dispositive.

Changes to the Scope of the Investigation

    Prior to our preliminary determination, petitioner requested that 
we clarify that ``tire cord fabric'' constructed of PPD-T aramid fiber 
is included within the scope of this investigation. After considering 
comments from both parties, we preliminarily determined that this 
product is included within the scope of this investigation (58 FR 
65699, December 16, 1993). We also invited comments from interested 
parties on this issue. Subsequent to the preliminary determination, 
petitioner requested that tire cord fabric be expressly excluded from 
the scope of this investigation. Also, Akzo submitted arguments 
opposing the inclusion of tire cord fabric. We have therefore excluded 
tire cord fabric from the class or kind of merchandise covered by this 
investigation.
    Petitioner also requested that the term ``nonwovens'', as used in 
the description of the scope of the investigation, be clarified to 
include only spun-based and spun-laced nonwovens composed of PPD-T 
aramid fiber. We have made this clarification.
    Finally, at the request of the U.S. International Trade Commission, 
we have replaced the words ``this includes'' with the words ``these 
consist of'' to further clarify the products covered by this 
investigation.

Class or Kind

    Prior to our preliminary determination, Akzo argued that this 
investigation should involve at least three classes or kinds of 
merchandise: Yarn, staple fiber and pulp. After considering extensive 
comments from both parties, we preliminarily determined that the 
products covered by this investigation constitute a single class or 
kind of merchandise, and three such or similar categories. (See 
Preliminary Concurrence Memorandum, dated December 9, 1993, on file in 
room B-099 of the main building of the Department of Commerce). In our 
preliminary determination, we invited additional comments from 
interested parties on this issue. However, no additional evidence 
supporting a finding of three classes or kinds has been submitted. In 
addition, no comments in opposition to our preliminary determination 
have been filed. We therefore continue to find that the products 
covered by this investigation constitute a single class or kind of 
merchandise.

Period of Investigation

    The period of investigation (POI) is January 1, 1993, through June 
30, 1993.

Such or Similar Comparisons

    We made fair value comparisons using the following such or similar 
categories: (1) Yarn; (2) staple fiber; and (3) pulp. Where we were not 
able to compare U.S. sales to sales of identical merchandise, we made 
similar merchandise comparisons on the basis of the criteria defined in 
Appendix V to the antidumping duty questionnaire, on file in room B-099 
of the main building of the Department of Commerce. In accordance with 
19 CFR 353.58, we made comparisons at the same level of trade, where 
possible.

Fair Value Comparisons

    To determine whether Akzo's sales to the United States of PPD-T 
aramid fiber 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.

United States Price

    We calculated USP according to the methodology described in our 
preliminary determination, with the following exceptions:
    1. We included certain sales in our calculation of USP which Akzo 
contends were pursuant to a long-term contract negotiated prior to the 
POI. (For a further discussion of these sales, see comment 1 below.)
    2. We increased U.S. indirect selling expenses by the amount of G&A 
expenses allocated to the aramid fibers business unit of Akzo Fibers 
Inc. by its parent company, Akzo America Inc. (see comment 6 below).
    3. We recalculated inventory carrying costs incurred in the 
Netherlands on U.S. sales to reflect the short-term borrowing rate of 
Arami, (i.e., the actual producer and seller of subject merchandise), 
(see comment 8 below).
    4. We used the date of the start of the Dutch sales verification 
for all missing payment dates.

Foreign Market Value

    As stated in our preliminary determination, we determined that the 
home market was not viable for any of the three such or similar 
categories. We selected Germany as the third country market for sales 
of yarn and staple fiber, and Japan as the third country market for 
sales of pulp. We calculated FMV as noted in the ``Price-to-Price'' and 
``Price to Constructed Value (CV)'' sections of this notice.

Cost of Production

    Petitioner alleged that Akzo's third country sales were made at 
prices below the cost of production (COP). On the basis of petitioners' 
allegations, we gathered and verified data on production costs.
     We compared Akzo's third country prices to the COP as explained in 
our preliminary determination.
     In order to determine whether third country prices were above the 
COP, we calculated the COP based on the sum of Arami's (i.e., the 
actual producer and seller of subject merchandise) submitted costs of 
materials, fabrication, general expenses, and packing, except in the 
following instances where the costs were not appropriately quantified 
or valued:
    1. We recalculated interest expense based solely on Arami's 
financial statements (see DOC position for comment 12);
    2. We included certain non-operating expenses in general and 
administrative (G&A) expenses (see DOC position for comment 17); and
    3. We disallowed Arami's claimed reduction in fixed overhead for 
certain intercompany charges (see DOC position for comments 14 and 15).
     Accordingly, we increased its submitted cost of manufacturing.

Price-to-Price Comparisons

    For those products for which we had an adequate number of sales at 
prices equal to or greater than the COP, we based FMV on third country 
prices. We calculated FMV using the methodology described in our notice 
of preliminary determination, with the following exceptions:
    1. We recalculated inventory carrying costs incurred in the 
Netherlands on German and Japanese sales and German credit expenses to 
reflect the short-term borrowing rate of Arami (see comment 7 below).
    2. We used the average credit days of all transactions with a 
reported shipment and payment date for sales missing both a shipment 
and payment date. We have inserted the date of the start of the Dutch 
sales verification for those sales with missing payment dates only.
    3. We corrected a clerical error in the calculation of third 
country indirect selling expenses.

Price to CV Comparisons

    For those products without an adequate number of sales at prices 
above the COP, we based FMV on CV. We calculated CV based on the sum of 
the cost of materials, fabrication, general expenses, and U.S. packing 
cost. In accordance with section 773(e)(1)(B) (i) and (ii) of the Act 
we: (1) Included the greater of Arami's reported general expenses or 
the statutory minimum of ten percent of the cost of manufacture (COM), 
as appropriate and; (2) for profit, we used the higher of the statutory 
minimum of eight percent of the sum of COM and general expenses or the 
actual profit incurred as calculated on a market specific basis (see 
Comment 18). As a result, for the German market we used actual profit 
and for the Japanese market we used the statutory minimum of eight 
percent. We calculated CV based on the methodology described in the 
calculation of COP above, with the following exceptions:
    1. In the financing calculation, we included additional interest 
expense based on market value (See Comment 13).
    2. We corrected a clerical error in the calculation of third 
country profit.
     In instances where we compared Akzo's U.S. prices to CV, we made 
deductions, where appropriate, for the weighted-average third country 
direct selling expenses. We also deducted the weighted-average third 
country indirect selling expenses. We limited this adjustment by the 
amount of indirect selling expenses incurred on U.S. sales, in 
accordance with 19 CFR 353.56(b)(2).

Final Determination of Critical Circumstances

    Petitioner alleged that ``critical circumstances'' exist with 
respect to imports of PPD-T aramid fiber from the Netherlands. Pursuant 
to section 733(e)(1) of the Act and 19 CFR 353.16, we have analyzed the 
allegations using the Department's standard methodology as discussed in 
our preliminary determination, except that for purposes of determining 
whether there have been massive imports we compared imports in five-
month periods rather than four-month periods (see DOC position for 
comment 4). Accordingly, we find that critical circumstances do not 
exist.

Currency Conversion

    We made currency conversions based on the official exchange rates 
in effect on the dates of the U.S. sales as certified by the Federal 
Reserve Bank of New York.

Verification

    As provided in section 776(b) of the Act, we verified information 
provided by Akzo by using standard verification procedures, including 
the examination of relevant sales and financial records, and selection 
of original source documentation containing relevant information.

Interested Party Comments

    Certain comments cannot be discussed in this notice due to their 
business proprietary nature. The comments which have been excluded do 
not lend themselves to public summarization, and therefore have been 
discussed in the business proprietary version of the Final Concurrence 
Memorandum dated May 2, 1994 (Final Concurrence Memorandum), on file in 
room B-099 of the main building of the Department of Commerce.
    Comment 1: Petitioner argues that the Department of Commerce (the 
Department) should include in its calculation of U.S. price Akzo's 
shipments during the POI made pursuant to a long-term agreement 
negotiated prior to the POI. Petitioner contends that the particular 
terms and circumstances of Akzo's agreement with this customer do not 
create a binding commitment on the part of either the buyer or seller 
and therefore do not create an enforceable sales contract.
     Akzo argues that these shipments were pursuant to a long-term 
contract established prior to the POI and therefore are properly 
excluded from the U.S. database. Akzo further argues that certain terms 
and circumstances of the agreement should not prevent it from being 
considered a contract with a date of sale prior to the POI because the 
two parties acted upon and adhered to the contract. Finally, respondent 
points out that the Department confirmed at verification that all sales 
to this customer during the period of the contract were at the contract 
price.
    DOC Position: In order for this agreement to be considered a long-
term contract established prior to the POI, the agreement must fix both 
the price and quantity. At verification we examined all invoices to the 
customer for sales pursuant to the agreement during its effective 
period. Although we found that all sales were made at the specified 
price, we also found that the quantity purchased was substantially less 
than the amount specified in the contract.
    Therefore, we conclude that the quantity was not fixed by the terms 
of the agreement because the quantities actually purchased over the 
period of the agreement were unrelated to those specified by the 
agreement. For this reason, we determine that the date of the agreement 
does not constitute the date of sale. Accordingly, we have used the 
date of shipment as the date of sale and have included all shipments to 
this customer during the POI in our calculation of U.S. price.
    Comment 2: Petitioner argues that the Department should include in 
its calculation of U.S. price Akzo's shipments during the POI pursuant 
to a supply agreement which was signed prior to the POI but modified 
during the POI. Petitioner asserts that the modification to the 
agreement, in effect, created a new agreement with a date of sale 
within the POI.
     Akzo argues that the contract modification did not alter the 
essential terms of the contract. Therefore, according to Akzo, all POI 
shipments pursuant to this agreement have a date of sale prior to the 
POI and thus are properly excluded from the U.S. sales database.
    DOC Position: We agree with Akzo. We verified that the essential 
terms of the contract, the price and quantity, were not altered as a 
result of the modification. Therefore, we consider Akzo's agreement 
with this customer to be a long-term contract with a date of sale prior 
to the POI. Consequently, the shipments in question were properly not 
reported.
    Comment 3: Petitioner argues that Akzo's shipments made pursuant to 
supply contracts with two customers during the POI should be reported 
as U.S. sales, if not already reported.
     Akzo contends that these sales have been reported.
    DOC Position: The sales in question were reported.
    Comment 4: Petitioner argues that the Department should find that 
imports of subject merchandise were massive over a relatively short 
period of time and that consequently, critical circumstances exist in 
this investigation under 735 (a)(3)(B) of the Act. In its analysis, 
petitioner compared shipments to the United States with a base period 
prior to the filing of the petition of May-July, 1993, with shipments 
to the United States in the post-petition comparison period of August-
October, 1993. Using this comparison, petitioner found that imports had 
increased during the comparison period by more than 15 percent, the 
Department's benchmark.
     Akzo argued that imports were not massive, and that the 
petitioner's methodology was not consistent with the practice of the 
Department.
    DOC Position: We agree with Akzo. In this case, the petition was 
filed on July 2, 1993. It is the Department's standard policy, in cases 
where the petition is filed during the first half of the month, to 
include the month of filing in the post-petition comparison period, not 
the base period, as petitioner suggests (See, e.g., Certain Portable 
Electronic Typewriters from Singapore, 58 FR 43337 (1993)). 
Additionally, although 19 CFR 353.16(g) requires that we examine at 
least three months, it is the Department's practice to examine the 
longest period for which information is available up until the 
preliminary determination (See, e.g., Certain Cut-to-Length Carbon 
Steel Plate from the United Kingdom, 58 FR 37216 (1993)). When the five 
month period subsequent to and including the month that the petition 
was filed is compared to the previous five months, we find that imports 
were not at levels we consider massive.
    Comment 5: Petitioner argues that certain sales of scrap (which 
were excluded from our analysis in the preliminary determination 
because the quantity involved was insignificant) should be included in 
the calculation of U.S. price for the following reasons: (1) The fact 
that the quantities are small is irrelevant; (2) other sales of the 
merchandise in question are included in the cost of production 
calculations; and (3) according to product specifications in Akzo's 
invoices, the merchandise in question is clearly a form of PPD-T aramid 
fiber which is subject to investigation.
    Akzo argues that the Department properly excluded sales of scrap 
from its preliminary determination because the quantities sold in the 
United States were small and there were no similar sales of scrap in 
the comparison third country markets. Additionally, Akzo asserts that 
exclusion of scrap sales is consistent with the treatment of non-prime 
material in the recent carbon flat steel cases, where the Department 
disregarded sales of second quality merchandise in the U.S. market 
where there were no similar sales in the home market and they 
constituted an insignificant portion (less than five percent) of the 
respondent's total U.S. sales, (Final Determination of Sales at Less 
Than Fair Value: Certain Hot-Rolled and Certain Cold-Rolled Steel from 
the Netherlands, 58 FR 37199, 37201 (July 9, 1993)).
    Akzo further argues that petitioner's reliance on the product 
designations on the invoices is misplaced because scrap is generated as 
part of the beaming (i.e., repacking) process in the United States.
    DOC Position: We agree with Akzo. The volume of scrap sales is 
insignificant and there are no comparable third country sales. 
Therefore, we have continued to exclude these sales from our 
calculations. In addition, at verification we verified that most of the 
scrap is tailings generated by the U.S. repacking operation and that, 
invoice descriptions notwithstanding, the product is sold as waste and 
the customer has no recourse to quality claims.
    Comment 6: Petitioner argues that we should not exclude certain 
(G&A) expenses incurred by Akzo America, Inc. in the calculation of 
indirect selling expenses for purposes of the ESP deduction from U.S. 
price. Petitioner further argues that it is long-standing Department 
practice to consider G&A expenses incurred by the U.S. selling arms of 
a foreign producer to be indirect ``selling expenses'' for purposes of 
this deduction.
    Akzo argues that it has captured all expenses of the selling 
affiliate, Akzo Fibers, in its calculation of indirect selling 
expenses. In addition, Akzo asserts that it has captured all selling-
related expenses which were allocated to the aramid fiber business unit 
of Akzo Fibers by Akzo America. Akzo contends that all remaining G&A 
expenses carried on the books of Akzo America are not associated with 
the selling function at Akzo Fibers and therefore are properly not 
included in the calculation of U.S. indirect selling expenses.
    DOC Position: We agree with petitioner. Akzo America is the parent 
company that provides administrative, accounting and finance services 
for all of Akzo's North American subsidiaries. In addition, there is no 
evidence that it provides any services for Akzo N.V. (its parent 
company in the Netherlands) other than to facilitate the activities of 
the subsidiaries in the United States. Therefore, all expenses incurred 
by Akzo America, including those classified on its books as G&A, are 
indirectly related to the selling activities of the subsidiaries. 
Consequently, we have included in the calculation of U.S. indirect 
selling expenses the amount of Akzo America's G&A expenses which have 
been allocated to the aramid fibers business unit of Akzo Fibers.
    Comment 7: Petitioner argues that certain other G&A expenses listed 
on the June 1993 financial statement of Akzo America have not been 
allocated to any of the North American subsidiaries and that the 
representative portion attributable to the aramid fiber business unit 
should be included in the calculation of indirect selling expenses for 
purposes of the ESP deduction from U.S. price.
    Akzo argues that these G&A costs are the same G&A expenses which 
are the subject of Comment 6 above.
    DOC Position: We agree with petitioner that the G&A expenses of 
Akzo America should be included in the calculation of indirect selling 
expenses for purposes of the ESP deduction from U.S. price (see comment 
6). However, we agree with Akzo that these G&A costs are the same G&A 
expenses which are the subject of Comment 6 (see memorandum to the 
file, dated April 22, 1994). Therefore, no additional increase to U.S. 
indirect selling expenses is necessary.
    Comment 8: Petitioner argues that in calculating the Dutch portion 
of U.S. inventory carrying costs, the Department should use the short-
term borrowing rate of Arami (i.e., the actual producer and seller of 
the subject merchandise), rather than the rate of Akzo N.V., the parent 
company. Petitioner asserts that Arami's borrowing rate is appropriate 
because Arami is the company which actually financed the inventory and 
is a separate corporate entity from Akzo N.V.
    Akzo argues that Akzo N.V.'s short-term borrowing rate should be 
used in calculating the Dutch portion of the inventory carrying cost 
for the same reasons it argues that Akzo N.V. and Arami should be 
consolidated for determining a financial expense ratio for CV and COP. 
(See the discussion below at Comment 11). Respondent also argues, in 
the event that the Department decides not to collapse the two companies 
and uses Arami's short-term borrowing rate in calculating U.S. 
inventory carrying cost, that the Department should also use Arami's 
short-term borrowing rate in the calculation of inventory carrying 
costs incurred in the Netherlands on sales made in Japan and Germany 
and in the calculation of German credit.
    DOC Position: As noted in our response to Comment 11 below, we have 
determined that it is not appropriate to collapse Arami and Akzo N.V. 
Therefore, we agree with petitioner and have used the short-term 
borrowing rate of Arami in calculating the inventory carrying costs 
incurred in the Netherlands on U.S., German and Japanese sales. We have 
also applied Arami's rate in the calculation of German credit expense, 
as suggested by Akzo.
    Comment 9: Petitioner argues that Akzo's U.S. customs duty 
calculation may be incorrect because there are discrepancies between 
the list of customs entries for subject merchandise entering Akzo's 
warehouses in the United States during the POI and the list of all 
shipments to the United States provided by Akzo in connection with the 
critical circumstances allegation.
    Akzo argues that petitioner has erroneously assumed that the 
entries included in the two lists should correspond exactly. In fact, 
respondent argues, the list of shipments includes additional entries 
that did not enter Akzo's warehouse but were transferred directly to 
U.S. customers, entries made after the POI, and invoices that were 
cancelled.
    DOC Position: We agree with Akzo. The two lists will not correspond 
exactly. One list represents the volume of subject merchandise entering 
Akzo's U.S. warehouses during the POI, while the other represents the 
volume of subject merchandise shipped from the Netherlands during the 
POI. In addition, at verification we determined that the list of 
entries used for Akzo's U.S. duty calculation was complete and 
accurate.
    Comment 10: Akzo argues that the Department made clerical errors in 
its calculation of the ESP offset and difference in merchandise 
adjustment in its preliminary determination.
    DOC Position: We agree with respondent. We have corrected these 
errors in our final determination. Also, see our response to Comment 
18.
    Comment 11: Petitioner argues that Arami and Akzo N.V. should not 
be consolidated for COP or CV calculations. Petitioner states that 
while they were clearly related, Akzo N.V. held only a 50 percent 
equity interest in Arami and their operations were never consolidated 
for financial reporting or any other purposes. According to both Dutch 
and U.S. generally accepted accounting principles (GAAP), consolidation 
is required when one company holds more than a 50 percent equity 
interest in another company. Petitioner asserts that the reorganization 
of the Arami joint venture should not be factored into the Department's 
cost analysis because this development occurred after the POI. 
Petitioner claims that if the Department departed from its practice of 
investigating costs and prices during the POI, it would constitute an 
arbitrary departure from established practice as well as an invitation 
for post-POI cost and price manipulation by foreign producers.
    Petitioner maintains that the Department's reason for collapsing 
transactions between related parties which do not reflect ``arm's 
length'' costs is to eliminate any substantial risk of price and cost 
manipulation between those companies. Petitioner states that the legal 
and operational structure of Arami was designed so that its operations 
would not be consolidated under Dutch law. Additionally, petitioner 
asserts that the actual cost of producing aramid fiber is more 
accurately reflected by Arami's own books and records instead of its 
records consolidated with the Akzo Group. Petitioner contends that the 
companies in the cases cited by Arami do not relate to this case 
because the companies met the requirements for consolidation and should 
have been consolidated under GAAP (i.e., equity ownership was greater 
than 50 percent).
    Arami claims that Akzo N.V. exerted significant control over its 
operation not only in 1993, but in all preceding years. Arami states 
evidence of this close interrelationship is illustrated by its 
financing transactions as well as evidence of organizational and 
operational control. Arami argues that it is the Department's practice 
to combine financing activities of companies where one company exerts 
significant control over the other company. It also claims that this is 
in keeping with the Department's position on fungibility of capital. 
Arami has informed the Department that Akzo Fibers Aramide B.V., a 
wholly-owned subsidiary of Akzo N.V., increased its equity interest in 
Arami to 95 percent effective December 31, 1993. Arami concludes that, 
based on the fungibility of capital, increased equity ownership and 
significant control, the Department should consolidate Arami with Akzo 
N.V. for cost of production and constructed value purposes. Arami 
states that it was consolidated with Akzo N.V. for balance sheet 
reporting purposes as of December 31, 1993, and would be fully 
consolidated on both the income statement and balance sheet in the 
fiscal year 1994.
    Additionally, Arami claims that in previous cases, the Department 
has combined the parent and subsidiary's costs even though 
consolidation did not occur in the normal course of business. In citing 
the Final Determination of Sales at Less Than Fair Value: Certain 
Carbon Steel Butt-weld Pipe Fittings from Thailand (pipe fittings), 57 
FR 21065 (1992), respondent quotes the Department as saying: ``* * * it 
is the Department's policy to combine the financing activities of a 
parent and subsidiary when the parent exercises control over the 
subsidiary (i.e. meets the requirements for consolidation).'' 
Respondent also cites the Final Determination of Sales at Less Than 
Fair Value: Ferrosilicon from Brazil (Ferrosilicon), 59 FR 732 (1994), 
to further support its claim.
    DOC Position: We agree with petitioner, and have not consolidated 
Arami and Akzo N.V. for purposes of this antidumping investigation. The 
corporate reorganization which was effective December 31, 1993, was not 
considered by the Department because it occurred subsequent to the POI.
    Each of the joint venture partners had equal control over decisions 
involving Arami's operations until the new agreement was signed in 
1994. Under Dutch GAAP, if a company does not have equity ownership of 
greater than 50 percent, but still has control over another company, it 
is required to consolidate. Since Arami was not consolidated with Akzo 
prior to reorganization, we can reasonably conclude that Akzo did not 
have sufficient control over Arami to warrant consolidation under Dutch 
GAAP. Therefore, consolidation of Arami and the Akzo N.V. for 
antidumping purposes based on a significant control argument is 
unwarranted.
    In the two cases cited by Arami, the GAAP of those countries 
required consolidation when one company owned more than 50 percent of 
another. In the Pipe Fittings case, the Japanese parent company, Awaji 
Sangyo K.K. Company Ltd. (ASK) owned more than 50 percent of Awaji 
Sangyo Co. Ltd., (AST) of Thailand. Although ASK and AST did not 
prepare consolidated financial statements, the Department in its cost 
verification report (April 4, 1992, pg.3) noted ``* * * the operations 
should have been consolidated in accordance with generally accepted 
accounting principles.'' In Ferrosilicon, the parent company owned 
greater than 50 percent of Minasligas, its subsidiary under 
investigation. Brazilian and U.S. GAAP require consolidation when the 
equity interests exceed 50 percent. In each of those cases, control was 
indicated by equity ownership and GAAP required consolidation. In 
contrast to the above cases, Arami did not meet the requirements for 
consolidation. For further analysis of this issue, see the Final 
Concurrence Memorandum.
    Comment 12: Since Arami was not consolidated with Akzo N.V. during 
the POI, petitioner asserts interest expense should be calculated based 
solely on Arami's 1992 audited financial statements. Petitioner argues 
that the Department must disregard the reorganization finalized 
subsequent to the POI which resulted in Arami being consolidated with 
Akzo N.V. for balance sheet purposes. In addition, petitioner states 
this consolidation did not affect the income statement encompassing the 
POI.
    Arami argues that the combined 1992 financial statement data of 
Arami and Akzo N.V. is the correct basis for computing interest expense 
because Akzo N.V. exerts significant control over Arami's operations 
and capital is fungible. Arami argues that the consolidation for 
balance sheet purposes as of December 31, 1993, affects the entire 
fiscal year 1993.
    DOC Position: We disagree with respondent. A company's balance 
sheet presents a snapshot of its assets and claims on those assets 
(liabilities and equity) as of a specific point in time (i.e., 12/31/
93). An income statement reports a company's performance over a 
specified period of time (i.e., 1/1/93-12/31/93). Arami's operating 
results were not consolidated with the results of the Akzo N.V. Group 
in 1993. Based on the Department's decision not to consolidate Arami 
with Akzo N.V., we calculated interest expense for COP and CV based 
solely on Arami's financial statements. For further analysis of this 
issue, see the Final Concurrence Memorandum.
    Comment 13: Petitioner asserts that interest on loans provided by a 
related party should be included in the calculation of Arami's 
financing costs for COP and CV purposes. Petitioner states that 
according to the Court of Appeals for the Federal Circuit in IPSCO, 
Inc. v. U.S., 965 F.2d 1056 (1992), cost of production is linked to 
constructed value. Thus, the petitioner states that the constructed 
value provision authorizing the Department to disregard related party 
transactions which are not arms-length in nature can be applied to cost 
of production calculations. Petitioner asserts that Arami's argument 
for consolidation does not eliminate the costs associated with these 
loans. Furthermore, the year end reorganization does not modify costs 
incurred during the POI. Petitioner contends that consolidation did not 
affect the income statement for the period January 1 through December 
31, 1993.
     Arami claims that as a result of the new joint venture agreement 
signed in 1994, Arami's balance sheet was consolidated with that of 
Akzo N.V., eliminating all related party loans. Therefore, the 
Department cannot impute an interest cost to loans that do not exist as 
of December 31, 1993. Arami claims its 1992 audited financial statement 
data should be used in calculating interest expense, but adds that the 
significant change in Arami's corporate structure must be considered. 
Arami continues that if the Department determines consolidation is 
unwarranted, and decides imputation of interest expense is necessary 
for CV, it should not impute interest for COP. Arami argues that the 
Department's long standing policy is to compute COP based on a 
company's actual costs, thus, there is no basis on which to impute 
interest for COP.
    DOC Position: According to section 773(e)(2) of the Act, for CV, if 
a transaction between related companies does not fairly reflect the 
market value, the Department may determine that element of value using 
the best evidence available. In this case, we found that the loans in 
question were at below-market interest rates. Thus, we included the 
interest incurred on the loans provided by Arami's related party in the 
calculation of financing costs for CV purposes.
    We determined that no related party financing adjustment is 
necessary for COP purposes. In determining actual costs of production, 
the Department normally adheres to the GAAP of the respondent's home 
country. Under Dutch GAAP, economic activities are normally 
consolidated for all companies that have direct or indirect ownership 
greater than 50 percent. In accordance with ITA's standard practice, 
the supplier's actual costs of production should be used to value 
inputs acquired from companies that are directly or indirectly related 
by more than 50 percent. Inputs acquired from companies that have 
direct or indirect ownership of 50 percent or less, should normally be 
valued using transfer prices (i.e., purchaser's actual cost). 
Accordingly, for COP purposes, we used Arami's transfer prices.
    For further analysis of these issues, see the Final Concurrence 
Memorandum.
    Comment 14: Petitioner states that certain charges were paid by 
Arami for services rendered by related Akzo companies. Since certain of 
these charges are used to approximate the price charged in an arm's 
length transaction and were actual costs incurred, Petitioner states it 
is appropriate to include these costs in the cost of manufacturing.
    Arami claims certain of these charges are intracompany transactions 
which do not represent true costs and will be discontinued in 1994, 
therefore, these costs should be excluded from the cost of 
manufacturing for both COP and CV purposes.
    DOC Position: We disagree with respondent. These charges relate to 
intercompany transactions between Arami and another company, which 
represent actual costs incurred by Arami and recorded on its books 
during the POI. Arami incorrectly categorized these costs as 
intracompany transactions which relates to transactions between 
divisions within a company. The fact that this charge may be 
discontinued in 1994 does not mean the costs should be excluded for 
1993. Accordingly, we included these charges in Arami's COP and CV 
calculations.
    Comment 15: Petitioner states that certain costs incurred by Akzo 
N.V. prior to the POI and recorded in Arami's 1992 audited financial 
statements in accordance with GAAP should be included in the COP. 
Petitioner states that this expense should be either charged to U.S. 
sales as a selling expense or to all sales as a general and 
administrative expense.
    Akzo argues that these costs incurred by Akzo N.V. do not represent 
true costs for Arami during the POI. The accrual on Arami's books for 
this cost has not been paid to Akzo N.V. and the expense will no longer 
be charged in 1994. Therefore, this intercompany transaction should be 
excluded from the submitted cost of manufacturing.
    DOC Position: Since this expense relates to the general production 
activity of Arami, we included it in Arami's general and administrative 
expense calculation for COP and CV purposes. This expense represents an 
actual cost recorded on Arami's books during the POI and the fact that 
the expense will no longer be charged in 1994 is not relevant.
    Comment 16: Petitioner asserts that the Department should disallow 
a certain adjustment to Arami's fixed overhead costs for grants because 
it is not recorded in Arami's cost accounting system and the reduction 
in costs attributed to this adjustment distorts Arami's true cost of 
manufacturing. Petitioner notes that if the Department allows this 
reduction, we should self-initiate a countervailing duty investigation.
    Arami claims that it properly adjusted its fixed overhead costs by 
a certain amount because this adjustment is recorded in Arami's 
financial accounting system, and is included in its audited financial 
statements. Arami notes that inclusion of this adjustment in no way 
distorts Arami's costs, because it reflects amounts actually incurred. 
Additionally, Akzo notes that because not all grants are 
countervailable, the Department should resist petitioner's statements 
requesting self-initiation of a countervailing duty investigation.
    DOC Position: This adjustment reflects actual costs incurred by 
Arami as recorded on its books in accordance with GAAP, and was 
properly included in its submitted COP and CV. We believe subsidies are 
more properly handled in the context of the countervailing duty law. 
Petitioner is free to submit a countervailing duty petition. Should 
such a petition be submitted and meet the requirements of the 
countervailing duty regulations (19 CFR 355.12), the Department would 
initiate such an investigation. However, no justification has been 
presented here for a departure from the Department's general policy of 
not self-initiating countervailing duty investigations.
    Comment 17: Petitioner claims that several other non-operating 
expense items should be included in G&A costs because each of these 
expenses relate to the aramid fibers business. Petitioner asserts all 
G&A expenses related to the subject merchandise should be included in 
cost of production and constructed value.
    Arami claims that no additional adjustment to G&A expense for non-
operating expenses is warranted. Arami asserts that two of the expenses 
noted by petitioner are already included in the submitted G&A 
calculation. Additionally, Arami contends that the related party 
provision included in other non-operating expenses is an intracompany 
payment and has no relevance in the context of this dumping 
investigation.
    DOC Position: We adjusted the G&A calculation to include the 
related party payment and two other non-operating expense items noted 
in the cost verification report which were associated with the general 
operations of Arami. The related party payment is an actual cost 
incurred by Arami and recorded on its books in accordance with GAAP. 
Two of the other non-operating expenses mentioned by the petitioner are 
already included in submitted G&A costs, thus no adjustment is 
necessary.
    Comment 18: Arami contends that for purposes of constructed value, 
the Department should calculate a weighted-average profit figure for 
pulp sales in Japan and yarn and staple sales in Germany.
    DOC Position: We disagree with Arami. We believe that it is 
appropriate to calculate all selling expenses and profit specific to 
the market in which the products in question were sold rather than 
average profit across two or more countries. Consequently, we 
calculated one average profit for pulp sold in Japan and another for 
yarn and staple sold in Germany.
    However, we corrected a clerical error in the calculation of profit 
noted by Arami which resulted in double counting.

Continuation of Suspension of Liquidation

    We are directing the Customs Service to continue to suspend 
liquidation of all entries of PPD-T aramid fiber from the Netherlands 
that are entered, or withdrawn from warehouse, for consumption on or 
after December 16, 1993, the date of publication of our preliminary 
determination in the Federal Register. The Customs Service shall 
require a cash deposit or posting of a bond equal to the estimated 
amount by which the FMV of the merchandise subject to this 
investigation exceeds the U.S. price, as shown below. This suspension 
of liquidation will remain in effect until further notice. The 
weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                              Weighted- 
              Producer/manufacturer exporter                   average  
                                                                margin  
------------------------------------------------------------------------
Akzo.......................................................        55.84
All Others.................................................        55.84
------------------------------------------------------------------------

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
U.S. International Trade Commission of our determination.

Notification to Interested Parties

    This notice also serves as the only reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the return or destruction of proprietary information 
disclosed under APO in accordance with 19 CFR 353.34(d). Failure to 
comply is a violation of the APO. This determination is published 
pursuant to section 735(d) of the Act and 19 CFR 353.20(a)(4).

    Dated: May 2, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-10993 Filed 5-5-94; 8:45 am]
BILLING CODE 3510-DS-P