[Federal Register Volume 59, Number 102 (Friday, May 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-13093]


[[Page Unknown]]

[Federal Register: May 27, 1994]


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DEPARTMENT OF COMMERCE
International Trade Administration
[A-307-809]

 

Notice of Preliminary Determination of Sales at Less Than Fair 
Value: Phthalic Anhydride From Venezuela

May 20, 1994.
AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: May 27, 1994.

FOR FURTHER INFORMATION CONTACT: Kimberly Hardin, Office of Antidumping 
Investigations, Import Administration, U.S. Department of Commerce, 
14th Street and Constitution Avenue, NW., Washington, DC 20230; 
telephone (202) 482-0371.

PRELIMINARY DETERMINATION: We preliminarily determine that phthalic 
anhydride (PA) from Venezuela is being, or is likely to be, sold in the 
United States at less than fair value, as provided in section 733 of 
the Tariff Act of 1930 (the Act), as amended. The estimated margins are 
shown in the ``Suspension of Liquidation'' section of this notice.

Scope of Investigation

    The product covered by this investigation is PA, an aromatic 
synthetic organic chemical usually produced from a primary 
petrochemical called orthoxylene, although it is sometimes produced 
from naphthalene. PA is predominately used in the production of 
plasticizers, unsaturated polyester resins, and alkyd resins, which in 
turn are generally used to produce plastics and paints. This 
investigation covers PA sold in either flaked or molten form.
    PA is classifiable under subheading 2917.35.00 of the Harmonized 
Tariff Schedule of the United States (HTSUS). The HTSUS subheading is 
provided for convenience and customs purposes. Our written description 
of the scope of this investigation is dispositive.

Period of Investigation (POI)

    The period of investigation is May 1, 1993, to October 31, 1993.

Case History

    Since the notice of initiation on November 12, 1993 (58 FR 60847, 
November 18, 1993), the following events have occurred.
    On November 12, 1993, we sent a cable to the U.S. consulate in 
Caracas requesting a list of all known producers and exporters of the 
subject merchandise and information about the producer/exporter named 
in the petition.
    On November 26, 1994, we presented an Antidumping Survey to 
Oxidaciones Organicas, C.A. (Oxidor). Oxidor was named in the petition 
as the primary producer/exporter of PA from Venezuela. On December 6, 
1994, Oxidor submitted its response to the Department's Antidumping 
Survey.
    On December 1, 1993, the International Trade Commission (ITC) 
issued an affirmative preliminary determination (USITC Publication 
2709, December 1993).
    On December 20, 1993, we issued an antidumping questionnaire to 
Oxidor. We presented the questionnaire to Oxidor at its facility in 
Caracas, Venezuela, on January 4, and 5, 1994.
    On January 5, 1994, Oxidor requested a one-week extension of time 
in which to respond to Section A, the general information section, of 
the Department's antidumping questionnaire. On January 6, 1994, we 
granted the extension. On January 18, 1994, we received Oxidor's 
Section A questionnaire response.
    On January 18, 1994, Oxidor requested a three-week extension of 
time in which to respond to Sections B (sales in the home market or to 
third countries) and C (sales to the United States) of the 
questionnaire. On January 19, 1994, we granted Oxidor a partial 
extension of two weeks for the responses to these sections of the 
questionnaire.
    On January 21, 1994, Oxidor submitted corrections to its Section A 
questionnaire response.
    On February 7, 1994, we received Oxidor's Sections B and C 
questionnaire response. On February 8, 1994, Oxidor submitted one 
corrected page to its Section C questionnaire response.
    On February 14, 1994, petitioners requested an 11-day postponement 
of the preliminary determination.
    On February 15, 1994, we issued a deficiency letter to Oxidor 
regarding its response to Sections A, B, and C of the questionnaire.
    On February 22, 1994, Oxidor objected to petitioners' request for 
an 11-day postponement of the preliminary determination. On February 
23, 1994, petitioners requested a 50-day postponement of the 
preliminary determination in order to permit full consideration of 
whether Oxidor made home market sales at prices below the cost of 
production (COP).
    On February 25, 1994, Oxidor requested an extension of time in 
which to respond to the Department's Section A, B, and C deficiency 
letter. On February 25, 1994, we granted the extension.
    On March 2, 1994, petitioners submitted an allegation of sales 
below COP using company-specific data previously reported by Oxidor.
    On March 10, 1994, we published, in the Federal Register, a notice 
announcing the postponement of the preliminary determination until not 
later than May 20, 1994, pursuant to petitioners' request.
    On March 11, 1994, Oxidor submitted comments concerning 
petitioners' request for a COP investigation. On March 14, 1994, 
petitioners submitted a response to Oxidor's comments concerning the 
COP allegation.
    On March 15, 1994, we received Oxidor's Sections A, B, and C 
deficiency response. On March 16, 1994, Oxidor submitted corrections to 
its deficiency response.
    On March 17, 1994, Oxidor submitted further comments concerning 
petitioners' COP allegation. On March 28, 1994, petitioners responded 
to Oxidor's March 17, 1994 submission. On April 5, 1994, we initiated a 
COP investigation. On April 6, 1994, we issued a Section D 
questionnaire to Oxidor. On May 4, 1994, Oxidor requested an extension 
of time to respond to Section D of the questionnaire. On May 6, 1994, 
we granted the extension. On May 10, 1994, Oxidor submitted its 
response to Section D of the questionnaire.

Fair Value Comparisons

    To determine whether sales of PA from Venezuela 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.

United States Price

    For sales by Oxidor directly from Venezuela to the United States, 
we based USP on purchase price, in accordance with section 772(b) of 
the Act, because the subject merchandise was sold to unrelated 
purchasers in the United States prior to importation and because 
exporter's sales price methodology was not otherwise indicated.
    We calculated purchase price based on packed prices to unrelated 
customers. In accordance with section 772(d)(2)(A) of the Act, we made 
deductions, where appropriate, for foreign inland freight, foreign 
inland insurance, foreign brokerage and handling (which Oxidor reported 
as commission expenses), ocean freight and other miscellaneous handling 
fees.
    We made an adjustment to USP for the tax paid on the comparison 
sales in Venezuela. In this investigation, there is one tax, the 
Impuesto al Valor Agregado (IVA), which is a value-added tax (VAT), 
levied on sales of the subject merchandise in the home market, 
beginning on October 1, 1993. Sales invoiced prior to October 1, 1993, 
are not subject to the IVA. The IVA is a fixed percentage rate tax of 
ten percent of the gross unit price. We have only performed the tax 
calculations on U.S. sales invoiced on or after October 1, 1993, 
compared to home market sales invoiced on or after October 1, 1993. 
(See ``Concurrence Memorandum: Preliminary Determination in the 
Antidumping Duty Investigation of Phthalic Anhydride from Venezuela,'' 
dated May 17, 1994, on file in room B-099 of the main Commerce 
Department Building, 14th and Constitution, NW., Washington, DC 20230.)
    On October 7, 1993, the Court of International Trade (CIT), in 
Federal-Mogul Corp. and The Torrington Co. v. United States, Slip Op. 
93-194 (CIT, October 7, 1993), rejected the Department's methodology 
for calculating an addition to USP under section 772(d)(1)(C) of the 
Act to account for taxes that the exporting country would have assessed 
on the merchandise had it been sold in the home market. The CIT held 
that the addition to USP under section 772(d)(1)(C) of the Act should 
be the result of applying the foreign market tax rate to the price of 
the United States merchandise at the same point in the chain of 
commerce that the foreign market tax was applied to foreign market 
sales. Federal-Mogul, Slip Op. 93-194 at 12.
    The Department has changed its methodology in accordance with the 
Federal-Mogul decision, and has applied this new methodology in making 
the preliminary determination in this investigation. We have added to 
USP the product of the foreign market tax rate and the price of the 
United States merchandise at the same point in the chain of commerce 
that the foreign market tax was applied to foreign market sales. We 
have also deducted from the USP and the FMV those portions of the 
foreign market tax and the USP tax adjustment attributable to expenses 
included in the foreign market and United States bases of the tax if 
those expenses are later deducted to calculate FMV and USP. These 
adjustments to the foreign market tax and the USP tax adjustment are 
necessary to prevent the methodology for calculating the USP tax 
adjustment from creating antidumping duty margins where no margins 
would exist if no taxes were levied upon foreign market sales.
    This margin creation effect is due to the fact that the basis for 
calculating both the amount of tax included in the price of the foreign 
market merchandise and the amount of the USP tax adjustment include 
many expenses that are later deducted when calculating USP and FMV. 
After these deductions are made, the tax included in FMV and the USP 
tax adjustment still reflect the inclusion of these expenses in the 
bases. Thus, a margin may be created that is not dependent upon a 
difference between USP and FMV, but is the result of the price of the 
United States merchandise containing greater expenses than the price of 
the foreign market merchandise. This adjustment to avoid the margin 
creation effect is in accordance with the United States Court of 
Appeals' holding that the application of the USP tax adjustment under 
section 772(d)(1)(C) of the Act should not create an antidumping duty 
margin if pre-tax FMV does not exceed USP. Zenith Electronics Corp. v. 
United States, 988 F.2d 1573, 1581 (Fed. Cir. 1993). In addition, the 
CIT has specifically held that an adjustment should be made to mitigate 
the impact of expenses that are deducted from FMV and USP upon the USP 
tax adjustment and the amount of tax included in FMV. Daewoo 
Electronics Co., Ltd. v. United States, 760 F. Supp. 200, 208 (CIT, 
1991). However, the mechanics of the Department's adjustments to the 
USP tax adjustment and the foreign market tax amount as described above 
are not identical to those suggested in Daewoo.

Foreign Market Value

    In order to determine whether there were sufficient sales of PA in 
the home market to serve as a viable basis for calculating FMV, we 
compared the volume of home market sales of PA to the volume of third 
country sales of PA in accordance with section 773(a)(1)(B) of the Act. 
Based on this comparison, we determine that Oxidor had a viable home 
market with respect to sales of PA during the POI.
    Petitioners alleged that Oxidor was selling in the home market at 
prices below COP. Based on petitioners' allegation, we initiated a COP 
investigation, and requested data on Oxidor's production costs. 
Oxidor's cost data was not submitted in time to be considered for the 
preliminary determination. However, Oxidor's submitted cost data will 
be examined at verification and will be analyzed for purposes of our 
final determination.
    In accordance with 19 CFR 353.58, we compared U.S. sales to home 
market sales made at the same level of trade, where possible.
    We calculated FMV based on packed ex-factory prices charged to 
related and unrelated customers in the home market. For purposes of the 
preliminary determination, we included arm's-length sales to related 
customers, pursuant to 19 CFR 353.45.
    In light of the Court of Appeals of the Federal Circuit's (CAFC) 
decision in Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland 
Cement v. United States, Slip Op. 93-1239 (Fed. Cir., January 5, 1994), 
the Department no longer can deduct home market movement charges from 
FMV pursuant to its inherent power to fill in gaps in the antidumping 
statute. We instead will adjust for those expenses under the 
circumstance-of-sale provision of 19 CFR 353.56 and the exporter's 
sales price offset provision of 19 CFR 353.56(b) (1) and (2), as 
appropriate.
    Accordingly, in the present case, we deducted post-sale home market 
movement charges from FMV under the circumstance-of-sale provision of 
19 CFR 353.56. This adjustment included home market inland freight and 
inland insurance. Pursuant to 19 CFR 353.56(a)(2), we made 
circumstance-of-sale adjustments, were appropriate, for differences in 
credit expenses and warehousing expenses.
    We deducted home market packing costs and added U.S. packing costs, 
in accordance with section 773(a)(1) of the Act.
    As discussed above, the IVA was only levied on sales in the home 
market invoiced on or after October 1, 1993. Therefore, we calculated 
two FMVs, one covering the period May-September, 1993, and one covering 
October, 1993, of the POI, to account for the application of the IVA 
tax only on sales invoiced on or after October 1, 1993. See 
``Concurrence Memorandum'' for further details. We also calculated the 
amount of the tax that was due solely to the inclusion of price 
deductions in the original tax base (i.e., the sum of any amounts that 
were deducted from the tax base). This amount was deducted from the FMV 
after all other additions and deductions had been made. By making the 
additional tax adjustments, we avoid a distortion that would create a 
dumping margin even when pre-tax dumping is zero.

Currency Conversion

    Because certified exchange rates from the Federal Reserve were 
unavailable, we made currency conversions based on the official monthly 
exchange rates in effect on the dates of the U.S. sales as certified by 
the International Monetary Fund. Oxidor has requested that we use a 
currency conversion methodology different from the Department's normal 
practice given the sustained increase in the bolivar/U.S. dollar 
exchange rate during the POI. We have disallowed Oxidor's alternate 
currency conversion methodologies as Oxidor has not met the 
requirements of currency conversion using the ``Special Rule'' in 19 
CFR 353.60(b). See ``Concurrence Memorandum'' for further details.

 Verification

    As provided in section 776(b) of the Act, we will verify the 
information used in making our final determination.

Suspension of Liquidation

    In accordance with section 733(d)(1) of the Act, we are directing 
the Customs Service to suspend liquidation of all entries of phthalic 
anhydride from Venezuela, as defined in the ``Scope of Investigation'' 
section of this notice, that are entered, or withdrawn from warehouse, 
for consumption on or after the date of publication of this notice in 
the Federal Register. The Customs Service shall require a cash deposit 
or the posting of a bond equal to the estimated preliminary dumping 
margins, as shown below. The suspension of liquidation will remain in 
effect until further notice. The weighted-average dumping margins are 
as follows:

------------------------------------------------------------------------
                                                                 Margin 
                Manufacturer/producer/exporter                   percent
------------------------------------------------------------------------
Oxidor C.A....................................................      3.03
All Others....................................................      3.03
------------------------------------------------------------------------

ITC Notification

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

Public Comment

    In accordance with 19 CFR 353.38, case briefs or other written 
comments in at least ten copies must be submitted to the Assistant 
Secretary for Import Administration no later than July 8, 1994, and 
rebuttal briefs no later than July 13, 1994. In accordance with 19 CFR 
353.38(b), we will hold a public hearing, if requested, to give 
interested parties an opportunity to comment on arguments raised in 
case or rebuttal briefs. Tentatively, the hearing will be held on July 
18, 1994, at 1:30 p.m. at the U.S. Department of Commerce, room 3708, 
14th Street and Constitution Avenue, NW., Washington, DC 20230. Parties 
should confirm by telephone the time, date, and place of the hearing 48 
hours before the scheduled time.
    Interested parties who wish to request a hearing must submit a 
written request to the Assistant Secretary for Import Administration, 
U.S. Department of Commerce, room B-099, within ten days of the 
publication of this notice in the Federal Register. Request should 
contain: (1) The party's name, address, and telephone number; (2) the 
number of participants; and (3) a list of the issues to be discussed. 
In accordance with 19 CFR 353.38(b), oral presentation will be limited 
to issues raised in the briefs.
    This determination is published pursuant to section 733(f) of the 
Act (19 U.S.C. 1673b(f)) and 19 CFR 353.15(a)(4).

    Dated: May 20, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-13093 Filed 5-26-94; 8:45 am]
BILLING CODE 3510-DS-P