[Federal Register Volume 60, Number 59 (Tuesday, March 28, 1995)]
[Notices]
[Pages 15897-15901]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-7609]



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DEPARTMENT OF COMMERCE

International Trade Administration
[A-428-810]


High-Tenacity Rayon Filament Yarn From Germany; Final Results of 
Antidumping Duty Administrative Review

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

ACTION: Notice of final results of antidumping duty administrative 
review.

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SUMMARY: On June 22, 1994, the Department of Commerce published the 
preliminary results of review of the antidumping duty order on rayon 
filament yarn from Germany. The review covers the subsidiaries of one 
producer/importer, Akzo Faser N.V. Its subsidiaries are Akzo Fibers, 
Inc., in the United States, and Akzo Faser A.G., in Germany.
    We gave interested parties an opportunity to comment on the 
preliminary results. Based on our analysis of the comments received, 
and the correction of clerical errors, we have changed the final 
results from those presented in the preliminary results of review.

EFFECTIVE DATE: March 28, 1995.

FOR FURTHER INFORMATION CONTACT: Matthew Blaskovich or Zev Primor, 
Office of Antidumping Compliance, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-
5831/4114.

SUPPLEMENTARY INFORMATION:

Background

    On June 29, 1993, Akzo Faser N.V. and its subsidiaries (Akzo) 
requested that the Department of Commerce (the Department) conduct an 
administrative review of the antidumping duty order on high-tenacity 
rayon filament yarn from Germany. We initiated the review, which covers 
the period February 20, 1992 through May 31, 1993, on July 21, 1993 (58 
FR 39007). On June 22, 1994, the Department published the preliminary 
results of the administrative review (59 FR 32181). The Department has 
now completed the administrative review in accordance with section 751 
of the Tariff Act of 1930, as amended (the Act).

Scope of the Review

    The product covered by this administrative review is high-tenacity 
rayon filament yarn from Germany. High-tenacity rayon filament yarn is 
a multifilament single yarn of viscose rayon with a twist of five turns 
or more per meter, having a denier of 1100 or greater, and a tenacity 
greater than 35 centinewtons per tex. During the review period, such 
merchandise was classifiable under Harmonized Tariff Schedule (HTS) 
item number 5403.10.30.40. The HTS item number is provided for 
convenience and Customs purposes. The written description remains 
dispositive as to the scope of the product coverage.

Analysis of Comments Received

    We gave interested parties an opportunity to comment on the 
preliminary results. We received comments from North American Rayon 
Corporation (the petitioner) and the respondent on July 22, 1994. We 
received rebuttal comments from the petitioner and the respondent on 
July 29, 1994. At the request of the respondent, we held a public 
hearing on August 5, 1994.
[[Page 15898]]

General Comments

Comment 1

    Petitioner argues that significant issues within this review could 
have been resolved during a verification, and challenges the accuracy 
of the dumping margin because of the lack of verification. Petitioner 
contends that key issues addressed in the following comments, such as 
Research and Development expenses (R&D), General and Administrative 
(G&A) expenses, and restructuring costs, could have been reconciled 
through verification. Petitioner argues that the Department should not 
assume that information relating to these issues is accurate simply 
because it was verified during the investigation, as the issues and 
calculations change between investigations and reviews.
    Akzo states that the absence of verification does not undermine the 
integrity of its responses, and that verification was not required in 
this review. Referring to the statute and regulations, Akzo claims that 
verification is required only if it was not performed in either of the 
two immediately preceding reviews and it was requested by an interested 
party within 120 days from publication of the notice of initiation of 
the review. Akzo contends that neither element was satisfied in this 
review. Moreover, Akzo asserts that it submitted all of its responses 
with appropriate certifications of accuracy and completeness as 
required by statute and regulation. Akzo cities Calcium Aluminate 
Cement, Cement Clinker and Flux from France (59 FR 14,136, 14,140, 
March 25, 1994), as an example of the Department's verification 
practices.

Department's Position

    The Department agrees with respondent that, in accordance with 
section 776(b)(3) of the Tariff Act, in conducting an administrative 
review, the Department will verify all information relied upon in 
making a determination (1) if verification is timely requested and no 
verification was made during the two immediately preceding reviews, or 
(2) if good cause exists for verification. This administrative review 
is the first review of the antidumping duty order in this case, and 
verification was not timely requested. The Department has undertaken 
verification for good cause only in exceptional circumstances. In 
conducting this review, the Department determined that there was not 
good cause for a verification. Section 776(b)(3) of the Tariff Act, and 
the Department's regulations do not require verification under these 
circumstances. See Tapered Roller Bearings, Finished and Unfinished, 
and Parts Thereof, From Japan; Final Results of Antidumping Duty 
Administrative Review (57 FR 4953, February 11, 1992), and Calcium 
Aluminate Cement, Cement Clinker and Flux from France (59 FR 14136, 
March 25, 1994).

Comment 2

    Petitioner argues that Akzo did not provide cost data maintained in 
the normal course of business; rather, petitioner contends that Akzo 
generated this data solely for purposes of this review. Petitioner 
maintains that, with respect to fixed costs, Akzo claimed that 
differences between actual and standard costs were not maintained in 
the normal course of business. It is the petitioner's viewpoint that 
Akzo does maintain records of actual costs for its fixed costs, but has 
not provided this information. Also, petitioner claims that Akzo did 
not provide the information necessary for the Department to calculate 
an actual per-unit cost on a product-specific or plant basis. 
Petitioner asserts that Akzo instead provided the Department with a 
plant-wide ``variance'' used to calculate cost of manufacture.
    Respondent states that it reported actual costs by calculating the 
product-specific per-unit costs through the application of plant-wide 
variances, according to questionnaire instructions and Departmental 
practice. Therefore, respondent argues that the costs, as reported, are 
correct and valid.

Department's Position

    We agree with Akzo, in that there is no evidence that Akzo's costs 
were incorrectly reported. Akzo stated in its questionnaire response 
that it based its costs on the standard cost system used in its normal 
course of business. As Akzo explained in its rebuttal brief and 
questionnaire submission, it based its costs on the standard costs 
system, and deviated from this basis only when necessary to comply with 
certain calculations as required by the Department's questionnaire. The 
plant-wide variance was calculated as the difference between total 
standard costs and total actual costs of production. The Department has 
accepted the use of plant-wide variances in similar cases. See Tapered 
Roller Bearings, Finished and Unfinished, and Parts Thereof, From 
Japan; Final Results of Antidumping Duty Administrative Review (57 FR 
4956, February 11, 1992).

General and Administrative Expenses

Comment 3

    Petitioner argues that the extraordinary costs incurred by Akzo 
Faser N.V. due to plant closure are not fully reflected in the cost of 
manufacture. Petitioner believes that the Department handled these 
expenses correctly when it reallocated all of the industrial rayon-
specific shutdown expenses to the product under review. The petitioner 
contends that Akzo has two facilities in Germany which produce the 
subject merchandise, and that one of them was in the process of closing 
during the period of review (POR). Petitioner adds that such a dramatic 
change in operations results in higher product-specific costs. 
Petitioner also contends that the methodology used by the respondent 
virtually eliminates these costs by allocating them over all of the 
production of Akzo Faser N.V.
    Akzo states that it included the extraordinary loss associated with 
the plant closure in its reported G&A expenses, using the methodology 
it used in the less than fair value (LTFV) investigation. See High 
Tenacity Rayon Filament Yarn from Germany (57 FR 21773, May 22, 1992). 
Akzo argues that it is inappropriate to allocate all of the expenses of 
a plant closure solely to industrial rayon yarn when such expenses 
relate to the operations of the entire corporation. Akzo also contends 
that an expense can be applied solely to rayon yarn operations only if 
it is not extraordinary and, as a plant closure has not occurred in 
years, this expense qualified as ``extraordinary.'' Akzo cites 
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts 
Thereof from the Federal Republic of Germany (54 FR 18992, 1976, May 5, 
1989), as an example of the Department's practice regarding 
extraordinary expenses.

Department's Position

    We disagree with Akzo's characterization of the plant closing costs 
as extraordinary losses and with the company's contention that 
extraordinary losses cannot be charged specifically to the subject 
merchandise. The fact that plant closings are infrequent in occurrence 
does not necessarily make the costs associated with such events 
extraordinary. Nor does it dictate how the Department will treat these 
costs for purposes of computing COP and CV.
    Nonetheless, after further examination of the record, it is not 
evident that the plant closing losses reported by Akzo relate solely to 
the company's rayon [[Page 15899]] yarn production. Consequently, the 
Department regards these costs as general in nature rather than 
specific to the subject merchandise. For the final results, the 
Department has, therefore, accepted Akzo's plant closing cost 
calculation which was based on an allocation across all products 
manufactured by the company.

Comment 4

    Akzo disagrees with the Department's re-allocation of its G&A 
expenses in the preliminary results. Akzo argues that the Department 
should not have disregarded Akzo's submitted G&A costs, which were 
allocated to different groups based on specific allocation 
methodologies.
    Akzo states that the Department's re-allocation of G&A expenses 
across all operations was not in accordance with Departmental 
practices, and that the ratios, as submitted by Akzo, are in accord 
with Departmental practice and case precedent. Akzo states that, 
because of the organizational structure and the integrated nature of 
its operations across national borders, the reported ratios are clearly 
more accurate than any overall average ratios for Akzo Faser. Akzo also 
states that the G&A expense ratios it reported are in accord with the 
audited financial statements of Akzo N.V., and have been reconciled to 
the audited financial statements.
    Akzo argues further that the expenses accumulated at each 
organization unit do not relate to operations outside that unit. 
According to Akzo, the Department's allocation methodology attributes 
to Akzo Faser itself G&A expenses incurred solely by Akzo Fibers B.V. 
(an affiliate of Akzo Faser not involved in the review). Akzo also 
argues that if the Department follows its position in Certain Hot 
Rolled Carbon Steel Flat Products, Certain Cold Rolled Carbon Steel 
Flat Products, and Certain Corrosion-Resistant Carbon Steel Flat 
Products from Japan (58 FR 37154, July 9, 1993), it should reject 
Akzo's methodology only if the facts specific to the situation indicate 
that the divisional G&A expenses are not accurate.
    Petitioner argues that the Department's recalculation of the G&A 
expenses is the most accurate and transparent method, and is in accord 
with Akzo's financial statement and the Department's standard 
practices. Petitioner argues further that there are discrepancies 
between Akzo's three-tiered G&A expense levels and Akzo's financial 
statements. Petitioner asserts that the best methodology of measuring 
G&A expenses is using Akzo's financial statements and not the tier 
methodology that Akzo used for the response.

Department's Position

    We agree with the petitioner. Akso submitted company-specific G&A 
expenses based on a three-tiered calculation methodology consisting of 
the company's business, divisional, and corporate levels. Akzo's G&A 
calculation, however, did not reconcile to Akzo Faser AG's audited 
financial statements. Nor did the Akzo's submitted G&A expense include 
amounts for certain miscellaneous items that were treated as G&A in the 
company's annual report. Because of these inconsistencies, for the 
final results, the Department computed Akzo's G&A expenses using the 
company's unconsolidated audited financial statements and including an 
amount representing an allocated share of G&A incurred by companies 
related to Akzo and involved in the production of the subject 
merchandise. The Department calculated per unit G&A expenses for the 
subject merchandise based on a factor derived as the ratio of Akzo's 
total G&A to the company's cost of sales. This method is consistent 
with our past practice. See Certain Hot Rolled Carbon Steel Flat 
Products, Certain Cold rolled Carbon Steel Flat Products, and Certain 
Corrosion-Resistant Carbon Steel Flat Products from Japan; Final 
Determination of Sales at Less Than Fair Value (58 FR 37154, July 9, 
1993), and Frozen Concentrated Orange Juice From Brazil; Final 
Determination of Sales at Less Than Fair Value (52 FR 8329, March 17, 
1987).

Research and Development

Comment 5

    Akzo disagrees with the Department's allocation of its R&D expenses 
over all of its product lines, and asserts that a product-specific 
breakdown of R&D expenses would be more accurate and in accordance with 
prior Department decisions. Akzo allocates R&D expenses on a product-
specific or product-line basis, according to the nature of the research 
being performed. Akzo explains that the vast majority of R&D expenses 
listed in Akzo Faser AG's annual report are specifically related to 
products other than industrial rayon, and thus are not general in 
nature and do not relate to all operations. Akzo contends that it acted 
properly and in accordance with precedent by not allocating these R&D 
costs to subject merchandise. Akzo cites Certain Hot Rolled Carbon 
Steel Flat Products, Certain Cold Rolled Carbon Steel Flat Products, 
Certain Corrosion-Resistant Carbon Steel Flat Products, and Certain 
Cut-to-Length Carbon Steel Flats From France (58 FR 37125, July 9, 
1993), and Antifriction Bearings (Other than Tapered Roller Bearings 
and Parts Thereof from France, Germany, Italy, Japan, Romania, 
Singapore, Sweden, Thailand, and United Kingdom (58 FR 39729, July 26, 
1992).
    Petitioner argues that the Department's recalculation of R&D 
expenses in the preliminary results of review was the most accurate and 
transparent, and is in accord with Akzo's financial statement and the 
Department's standard practices.

Department's Position

    The Department agrees with Akzo. The R&D expenses submitted by Akzo 
were allocated on a product-specific or product line basis, according 
to the nature of the research being performed. The methodology used to 
allocate the R&D is that used in Akzo's normal course of business and 
reconciles to the financial statements. Further, the Department has 
accepted the submitted methodology in similar cases. See Certain Hot 
Rolled Carbon Steel Flat Products, Certain Cold Rolled Carbon Steel 
Flat Products, Certain Corrosion-Resistant Carbon Steel Flat Products, 
and Certain Cut-to-Length Carbon Steel Plate from France (58 FR 37125, 
July 9, 1993), and Antifriction Bearings (Other than Tapered Roller 
Bearings) and Parts Thereof from France, Germany, Italy, Japan, 
Romania, Singapore, Sweden, Thailand, and United Kingdom (58 FR 19729, 
July 26, 1992).

Foreign Market Value Adjustments

Comment 6

    Petitioner disagrees with the Department's decision in the 
preliminary results to allow an adjustment to FMV for a third-party 
payment. Petitioner contends that this payment is based on the sale of 
a further-manufactured product, rather than the subject merchandise, 
unprocessed yarn, which Akzo sells to a converter. In the petitioner's 
viewpoint, the payment appears to have no impact on the price of the 
unprocessed yarn.
    According to Akzo, it sells rayon in the home market to a 
converter, who alters the rayon yarn for a specific use and then sells 
the rayon to a third party. Akzo provides a rebate directly to this 
third party. Akzo argues that, in the preliminary results, the 
Department treated the third-party payments in a manner consistent with 
the final determination of sales at LTFV in the original investigation. 
Akzo asserts that there can be no other purpose for the third-party 
payment except to encourage certain third parties to use the 
[[Page 15900]] respondent's merchandise. Therefore, Akzo contends that 
the third-party payment represents a price decrease for the third 
party, and that the payment does have an impact on the price of the 
yarn when sold to the first unrelated party.

Department's Position

    We agree with respondent. Based upon the record evidence for this 
review, the Department has concluded that these expenses should be 
considered direct expenses to be deducted from the FMV.
    When making adjustments attributable to differences in 
circumstances of sale, it is incumbent upon the Department to ensure 
that such adjustments account only for those expenses that have a 
direct impact upon any existing U.S. and home market price 
differentials. Section 773(a)(4) of the Tariff Act states that an 
adjustment shall be made only ``if it is established to the 
satisfaction of the administering authority that the amount of any 
difference between United States price and foreign market value'' is 
due to differences in circumstances of sale.
    Since Akzo's third party payments qualify as variable and 
reasonably attributable to the subject merchandise, Akzo met the 
Department's criteria for identifying whether an expense can have a 
direct impact upon price. Therefore, Akzo's payments can qualify as a 
circumstance of sale adjustment.
    In the LTFV verification report, the Department, indicated that:

    Akzo makes payments to tire manufacturers based upon their 
purchases of Akzo-sourced yarn from converter-customers of Akzo's. 
The converters provided additional finishing to the Akzo yarn.

    Given that those expenses fluctuate depending on a tire company's 
purchases from a converter and correspondingly, such expenses would not 
have been incurred were it not for certain sales of the subject 
merchandise, those payments are then considered variable. Furthermore, 
the Department is in agreement with Akzo's assertion that the third 
party payments are primarily made as an inducement to purchase 
responsent's merchandise. In this regard, these expenses are 
promotional in nature and thereby have a direct relationship to Akzo's 
sales to the converter.
    As the respondent established its claim to the adjustments with 
record evidence, the Department will adjust FMV for this expense in the 
final results.

Differences in Merchandise

Comment 7

    Petitioner argues that, if the third party payment for the 
converted rayon yarn (as discussed above in Comment 6) is allowable, 
then a difference-in-merchandise calculation should be conducted in 
order to compare the converted rayon yarn (and not the unprocessed 
rayon yarn) to similar U.S. sales.
    Akzo argues that a difference-in-merchandise calculation is not 
warranted, as the merchandise, when sold to the first unrelated party, 
is subject merchandise; Akzo maintains that it is only after sale to 
the first unrelated party that the merchandise undergoes further 
manufacturing.

Department's Position

    We agree with Akzo in that a difference-in-merchandise calculation 
would be necessary, in this case, only when the product sold to the 
first unrelated purchaser in the home market differs physically from 
the product sold in the United States. (See 19 CFR 353.57.) However, as 
the Department determined that the third party payment expense was 
directly attributable to the subject merchandise and applicable as a 
deduction to the FMV, a difference-in-merchandise calculation is 
unnecessary.

Ministerial Errors

Comment 8

    The respondent asserts that the Department made a clerical error 
with respect to the extraordinary expenses of Akzo N.V., in that the 
Department calculated a ratio of extraordinary expenses, denominated in 
guilders, to the cost of sales, which is denominated in Deutschemarks. 
Further, the respondent asserts that the Department should capture 
these costs at the corporate level using the methodology submitted in 
the response, and not at the company level as the Department did for 
the preliminary results. The respondent states these costs relate to 
the operations of the entire corporation and not solely to industrial 
yarn.
    While petitioner does not specifically address this clerical error, 
petitioner does state that it supports the Department's position of 
allocating the plant closure expenses directly to the product under 
review. Petitioner further states that the Department has not fully 
applied the actual cost of restructuring Akzo's yarn production 
facilities to Akzo's actual costs, and that the calculations for G&A 
expenses presented by Akzo were not useable.

Department's Position

    We agree with Akzo that we calculated the ratio in two different 
currencies. However, as discussed in our response to Comment 3, we have 
disregarded this ratio for these final results, and have instead used 
Akzo's submitted plant closure costs and extraordinary losses. 
Therefore, although we agree with respondent, this issue is moot.
    We also agree with Akzo that its extraordinary expenses should be 
captured at the corporate level because, as discussed in our response 
to Comment 3, there is no evidence on the record to indicate that the 
extraordinary losses, as reported, relate solely to rayon yarn. 
Therefore, we adjusted for the expenses at a corporate level, and not 
at a product-specific level. As Akzo submitted its expenses at a 
corporate level, no adjustment to its reported plant closure and 
extraordinary losses was deemed necessary.

Comment 9

    The respondent asserts that the Department made a clerical error 
with respect to the foreign unit price in dollars (FUPDOL) 
calculations, in that the Department treated U.S. packing costs as a 
Deutschemark per pound expense, rather than a Deutschemark per kilogram 
expense, and that the Department should divide the reported packing 
costs by the pounds-to-kilograms conversion rate to arrive at the 
correct unit amount.
    Petitioner does not contest this clerical error.

Department's Position

    We agree that the calculation should be corrected to reflect the 
metric measurement, and have changed the calculation accordingly.

Final Results of Review

    Based on our analysis of comments received and the correction of 
ministerial errors, we have determined that a final margin of 0.56 
percent exists for Akzo for the period February 20, 1992, through May 
31, 1993.
    The Department will instruct the U.S. Customs Service to assess 
antidumping duties on all appropriate entries. Individual differences 
between United States price (USP) and FMV may vary from the percentage 
stated above. The Department will issue appraisement instructions 
directly to the U.S. Customs Service.
    Furthermore, the following deposit requirements will be effective 
for all shipments of the subject merchandise, entered or withdrawn from 
warehouse, for consumption on or after the [[Page 15901]] publication 
date of these final results of administrative review, as provided by 
section 751(a)(1) of the Act: (1) The cash deposit rate for Akzo will 
be 0.56 percent; (2) for merchandise exported by manufacturers or 
exporters not covered in this review but covered in the original less-
than-fair-value (LTFV) investigation, the cash deposit rate will 
continue to be the rate published in the most recent final 
determination for which the manufacturer or exporter received a 
company-specific rate; (3) if the exporter is not a firm covered in 
this review, or the original investigation, but the manufacturer is, 
the cash deposit rate will be that established for the manufacturer of 
the merchandise in the original investigation; and (4) the ``all 
others'' rate will be 24.58 percent, established in the LTFV 
investigation, and in accordance with the Department's practice. See 
Floral Trade Council v. United States, 822 F. Supp. 766 (2993), and 
Federal Mogul Corp., 822 F. Supp. (1993).
    These deposit requirements shall remain in effect until publication 
of the final results of the next administrative review.
    This notice services as a reminder to importers of their 
responsibility under 19 CFR 353.26 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 notice also serves as a reminder to parties subject to 
administrative protective orders (APOs) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 353.34(d). Timely written notification of 
return/destruction of APO materials or conversion to judicial 
protective order is hereby requested. Failure to comply with 
regulations and the terms of an APO is a sanctionable violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.

    Dated: March 16, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-7609 Filed 3-27-95; 8:45 am]
BILLING CODE 3510-DS-M