[Federal Register Volume 61, Number 160 (Friday, August 16, 1996)]
[Notices]
[Pages 42585-42589]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20891]


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DEPARTMENT OF COMMERCE
[A-588-839]


Notice of Preliminary Determination of Sales at Less Than Fair 
Value and Postponement of Final Determination: Sodium Azide from Japan

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

EFFECTIVE DATE: August 16, 1996.

FOR FURTHER INFORMATION CONTACT: William Crow or Magd Zalok, Office of 
AD/CVD Enforcement II, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 
482-0116 or (202) 482-4162, respectively.

The Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (the Act) are references to the provisions effective 
January 1, 1995, the effective date of the amendments made to the Act 
by the Uruguay Rounds Agreements Act.

Preliminary Determination

    We preliminarily determine that there is a reasonable basis to 
believe or suspect that sodium azide from Japan is being, or is likely 
to be, sold in the United States at less than fair value (LTFV), as 
provided in section 733 of the Act. The estimated margins of sales at 
LTFV are shown in the ``Suspension of Liquidation'' section of this 
notice.

Case History

    Since the initiation of this investigation, the following events 
have occurred (Notice of Initiation of Antidumping Duty Investigations: 
Sodium Azide from Japan, 61 FR 4959, (February 9, 1996) (Initiation 
Notice):
    On March 8, 1996, the United States International Trade Commission 
(ITC) issued an affirmative preliminary injury determination in this 
case (see ITC Investigation No. 731-TA-740).
    On March 20, 1996, we determined the appropriate recipients of the 
AD questionnaire (see the March 20, 1996 Memorandum to the file through 
David L. Binder) and issued the complete questionnaire to Masuda 
Chemical Corporation (Masuda), Nippon Carbide Industries Co. Ltd. 
(NCI), and Toyo

[[Page 42586]]

Kasei Koygo Co., Ltd. (TKK). Also, on April 1, 1996, the Department 
instructed respondents to report the date of sale based on the date of 
invoice as recorded in the responding companies' records in the 
ordinary course of business, according to the Department's amended date 
of sale practice. (See the April 1, 1996, letters to respondents from 
David L. Binder.)
    We received Masuda's questionnaire responses to section A (dealing 
with general corporate information), as well as sections B and C 
(dealing with home market and U.S. market sales information), on April 
19 and May 31, 1996, respectively.
    On May 9, 1996, American Azide Corporation, the petitioner in this 
investigation, requested that the Department postpone the preliminary 
determination. Consequently, the Department postponed the preliminary 
determination until no later than August 13, 1996. (61 FR 26878 May 29, 
1996). The petitioner also submitted an allegation on June 21, 1996, 
that Masuda had made home market sales below cost of production (COP) 
during the POI. On July 17, 1996, the Department initiated an 
investigation of home market sales below cost (see the July 17, 1996, 
memorandum from the Team to Gary Taverman), and issued a letter to 
Masuda instructing it to respond to section D of the March 20, 1996, 
questionnaire.
    On August 7, 1996, Masuda requested an extension until September 
16, 1996, to respond to section D. The Department granted Masuda an 
extension to respond to the section D questionnaire until no later than 
September 5, 1996. Because of the filing date of the cost allegation we 
will be unable to address it until the final determination.

Facts Available for TKK and NCI

A. TKK
    We did not receive a response from TKK to the Department's 
questionnaire. Section 776(a)(2) of the Act provides that if an 
interested party withholds information that has been requested by the 
Department, fails to provide such information in a timely manner or in 
the form or manner requested, significantly impedes a determination 
under the antidumping statute, or provides such information but the 
information cannot be verified, the Department shall use facts 
otherwise available in reaching the applicable determination. Because 
TKK failed to submit the information that the Department had 
specifically requested, it is necessary to use of facts otherwise 
available for TKK.
    Section 776(b) provides that adverse inferences may be used against 
a party that has failed to cooperate by not acting to the best of its 
ability to comply with requests for information (see also the Statement 
of Administrative Action (SAA) accompanying the URAA, clarifies that 
the petition is secondary information). See SAA, published in H. Doc. 
103-316, 103d Cong., 2d Sess. At 870. Again, TKK's failure to provide 
any information to the Department demonstrates that TKK has failed to 
cooperate in this investigation. Thus, the Department has determined 
that, in selecting from among the facts otherwise available, an adverse 
inference is warranted. As facts otherwise available, we are assigning 
to TKK the highest margin in the petition, 65.80 percent.
    Section 776(c) provides that when the Department relies on 
secondary information in using the facts otherwise available it must, 
to the extent practicable, corroborate that information. When analyzing 
the petition, the Department reviewed all of the data the petitioner 
had submitted and the assumptions that petitioner made in calculating 
estimated dumping margins. In accordance with section 776(c) of the 
Act, the Department attempted to corroborate the petition information 
by comparing the petition information on export price to U.S. Customs 
data. This source records prices based on the HTSUS subheading 
2850.00.50.00 and confirms that the prices contained in the petition 
have probative value. Moreover, we compared the petitioner's estimated 
home market prices on which the normal value in the petition was based 
to home market prices available on the record of this investigation. We 
found that the estimated normal value in the petition has probative 
value. (See Memorandum dated August 8, 1996 from the team to Gary 
Taverman.)
B. NCI
    On April 10, 1996, NCI responded to the Department's questionnaire 
by stating that it made no sales of sodium azide in the United States 
during the POI. NCI, however, stated that it made a shipment of sample 
sales of the subject merchandise during the POI. In response to our 
request for information on the sample sales, NCI submitted a letter on 
April 17, 1996, providing argument and data to support its contention 
that the date of sale for a sample sale which it claimed to be the only 
possible sale of subject merchandise, was on a date preceding the POI.
    On May 31, 1996, the Department requested additional information 
from NCI concerning possible ``likely sales,'' as defined in 19 CFR 
353.2(t), made during the POI. On June 10, 1996, NCI submitted its 
response that ``it clearly could not have been involved with any likely 
sales during the period of investigation,'' and stating that ``NCI has 
determined that it cannot justify incurring further costs at this time. 
Accordingly, NCI can no longer respond to the Department's requests for 
information.'' On July 11, 1996, the Department contacted NCI's counsel 
to request clarification on its refusal to further cooperate in this 
investigation. As recorded in the July 31, 1996, memorandum to the file 
from Jennifer Stagner, counsel for NCI declined to continue to 
participate in the investigation. Counsel for NCI confirmed that NCI 
would not permit the Department to conduct verification of its claim 
that there were no sales, nor likely sales, of subject merchandise to 
the United States during the POI.
    The verification of NCI's response was material to the Department's 
ability to confirm that it did not need to include NCI as a respondent 
in this investigation. Therefore, the Department finds that, because 
NCI has stated that it will not respond to any additional requests for 
information nor permit verification, it has failed to cooperate to the 
best of its ability to comply with our request for information. 
Accordingly, for purposes of the preliminary determination the 
application of section 776(b) is warranted. In this case, the petition 
is the only information on the record which could form the basis for a 
dumping calculation for NCI (see the Facts Available for TKK section 
above for detail on corroborating the information in the petition). 
Therefore, the Department has based the margins for NCI on information 
in the petition. As facts otherwise available, we are assigning to NCI 
the highest margin in the petition, 65.80 percent. We note, however, 
that since NCI has responded sufficiently to the Department's 
questionnaires, the Department's decision as to whether adverse facts 
available should be used for NCI may be revisited for purposes of the 
final determination in the event NCI allows the Department to collect 
any necessary additional information and conduct verification.

Postponement of Final Determination

    On August 7, 1996, Masuda requested that, pursuant to section 
735(a)(2)(A) of the Act, in the event of an affirmative preliminary 
determination in this investigation, the Department postpone

[[Page 42587]]

its final determination until not later than 135 days after the 
publication of the affirmative preliminary determination in the Federal 
Register. In accordance with 19 CFR 353.20(b), inasmuch as our 
preliminary determination is affirmative, the respondent accounts for a 
significant proportion of exports of the subject merchandise, and there 
are no compelling reasons for denying the request, we are granting 
respondent's request and postponing the final determination. Suspension 
of liquidation will be extended accordingly. See Preliminary 
Determination of Sales at Less Than Fair Value: Large Newspaper 
Printing Presses and Components thereof, whether Assembled or 
Unassembled, from Japan, (61 FR 8029 March 1, 1996).

Scope of Investigation

    The product covered by this investigation is sodium azide 
(NaN3) regardless of use, and whether or not combined with silicon 
oxide (SiO2) or any other inert flow assisting agent. The 
merchandise under investigation is currently classifiable under item 
2850.00.50.00 of the Harmonized Tariff Schedule of the United States 
(HTSUS). Although the HTSUS subheading is provided for convenience and 
customs purposes, our written description of the scope of this 
investigation is dispositive.

Period of Investigation

    The period of investigation is January 1, through December 31, 
1995.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced by the respondent, covered by the description in the 
Scope of Investigation section, above, and sold in the home market 
during the POI, to be foreign like products for purposes of determining 
appropriate product comparisons to U.S. sales. In addition, in this 
case we found all home market merchandise to be identical to the U.S. 
merchandise. (See the March 20, 1996, Memorandum to the file through 
David L. Binder.)

Classification of Grinding Costs

    For purposes of the preliminary determination, we have rejected 
Masuda's classification of grinding costs as direct selling expenses 
subject to a circumstance-of-sale adjustment. We have determined that 
grinding costs represent a production cost and should be included in 
the calculation of the costs associated with physical differences in 
merchandise. However, as explained below, the Department will consider 
whether to make a ``quantity adjustment'' for differences in grinding 
costs under 19 CFR 353.55 for the final determination.

Quantity Adjustment

    The Department's regulations provide that ``the Secretary will make 
a reasonable allowance for any difference in quantities, to the extent 
that the Secretary is satisfied that the amount of any price 
differential is wholly or partly due to that difference in 
quantities.'' See 19 CFR 353.55(a). The Department's position is that 
``to be eligible for a quantity based adjustment, a respondent must 
demonstrate a clear and direct correlation between price differences 
and quantities sold or costs incurred. See Brass Sheet and Strip from 
the Federal Republic of Germany, Final Results of Antidumping Duty 
Administrative Review, (56 FR 60087 November 27, 1991); see also Brass 
Sheet and Strip from the Netherlands, (53 FR 2341 June 22, 1988). In 
the case of a claim based on cost differences, the respondent must 
provide evidence of savings which are specifically attributable to the 
purchase of materials or provision of services at a discount due to the 
quantity purchased. In the instant case, Masuda has indicated that the 
cost of grinding provided by a third party are lower when larger 
quantities are processed. However, Masuda has not provided sufficient 
evidence that there is a clear and direct correlation between price 
differences and quantities sold or costs incurred; the grinding cost 
data provided by Masuda is not evidence per se of specific discounts 
due to quantities purchased. Accordingly, for this preliminary 
determination, we have not made a quantity adjustment. However, if 
Masuda provides additional, timely, and verifiable information on this 
claimed adjustment, we will reconsider it for the final determination.

Technical Services

    Masuda reported a technical service expense as a direct selling 
expense, claiming that the Department has previously allowed claims for 
services rendered for assisting the customer in solving problems with 
products purchased during the POI. We believe that the information on 
the record does not sufficiently substantiate Masuda's claim. 
Therefore, for purposes of the preliminary determination, we are 
rejecting Masuda's classification of this cost as a direct selling 
expense. However, we will request additional information regarding this 
expense, which will be analyzed, verified, and considered for the final 
determination.

Level of Trade

    As set forth in section 773(a)(1)(B)(i) of the Act and in the SAA 
accompanying the Uruguay Round Agreements Act, at 829-831, to the 
extent practicable, the Department will calculate normal values based 
on sales at the same level of trade as the U.S. sales. When the 
Department is unable to find sales in the comparison market at the same 
level of trade as the U.S. sale(s), the Department may compare sales in 
the U.S. and foreign markets at different levels of trade. See also, 
Final Determination of Sales at Less Than Fair Value: Certain Pasta 
from Italy (61 FR 30326, June 14, 1996) (Pasta from Italy).
    In accordance with section 773(a)(7)(A) of the Act, if sales at 
different levels of trade are compared, the Department will adjust the 
normal value to account for the difference in level of trade if two 
conditions are met. First, there must be differences between the actual 
selling functions performed by the seller at the level of trade of the 
U.S. sale and the level of trade of the normal value sale. Second, the 
differences must affect price comparability as evidenced by a pattern 
of consistent price differences between sales at the different levels 
of trade in the market in which normal value is determined.
    In implementing this provision, the Department's first task was to 
obtain information about the selling activities of the producers/
exporters. Information relevant to level of trade comparisons and 
adjustments was requested in our supplemental questionnaire. We asked 
the respondent to establish any claimed levels of trade based on the 
selling functions provided to each proposed customer group, and to 
document and explain any claims for a level of trade adjustment.
    Our review of these submissions shows that Masuda has identified 
levels of trade based on its selling activities by customer categories. 
In order to confirm whether separate levels of trade actually existed 
within or between the U.S. and home markets, we reviewed the selling 
functions attributable to the customer categories claimed by Masuda. 
Pursuant to section 773(a)(1)(B)(i) of the Act, and the SAA at 827, in 
identifying levels of trade for directly observed (i.e., not 
constructed) export price and normal value sales, we considered the 
selling functions reflected in the starting price, before any 
adjustments.
    We examined certain selling functions indicated in the August 8, 
1996, memorandum from Jennifer Stagner to the file. In addition to the 
selling

[[Page 42588]]

functions reported by Masuda for each claimed level of trade, we 
considered all types of selling functions reported in all sections of 
the response. Where possible, we further examined whether the selling 
function was performed on a substantial portion of sales. In analyzing 
the record evidence, we examined selling functions in aggregate. (See, 
Notice of Proposed Rulemaking and Request for Public Comments, (61 FR 
7307, 7348 February 27, 1996) (Proposed Regulations).
    We preliminarily determined that there is one U.S. level of trade 
and two home market levels of trade, one of which is identical in 
aggregate selling functions to that found in the United States. We 
compared sales at the sole level of trade in the U.S. market to sales 
at the identical home market level of trade. We found matches for each 
U.S. sale at the same level of trade. Therefore, we did not need to 
compare sales at the next most similar level of trade and determine 
whether a level of trade adjustment was appropriate.

Fair Value Comparisons

    To determine whether sales of sodium azide by Masuda to the United 
States were made at less than fair value, we compared the export price 
(EP) to the Normal Value (NV), as described in the ``Export Price'' and 
``Normal Value'' sections of this notice. In accordance with section 
777A(d)(1)(A)(i), we calculated weighted-average EPs for comparisons to 
weighted-average NVs.

Export Price

    We calculated EP, in accordance with subsections 772(a) and (c) of 
the Act, where the subject merchandise was first sold in Japan to an 
unaffiliated purchaser prior to importation and CEP was not otherwise 
warranted based on the facts of record.
    We calculated EP based on prices to the unaffiliated trading 
companies in Japan. Where appropriate, we made deductions from the 
starting price (gross unit price) for foreign inland freight.
    For all U.S. sales, Masuda reported the sale of subject merchandise 
to an unaffiliated trading company in Japan. Section 772(a) of the Act 
defines the export price as the price at which the subject merchandise 
is first sold (or agreed to be sold) by the producer to an unaffiliated 
purchaser for exportation to the United States. Where the respondent 
producer of the merchandise under investigation knew at the time of the 
sale to the trading company that the merchandise was destined for the 
United States, the export price would be the price between the 
respondent and the unaffiliated trading company. Masuda has stated that 
it knew or had reason to know at the time of sale that the ultimate 
destination of the merchandise was the United States because the 
manufacture and packing of sodium azide is to the exact specifications 
of the ultimate U.S. market end-users. Therefore, we determined that 
Masuda's U.S. export price is the price to the unaffiliated trading 
company.
    We recalculated Masuda's credit expenses to account for missing 
data in the reported interest rate calculation. As facts available, we 
applied the single highest reported monthly interest rate to those 
months in the POI for which no rate was reported because the 
information on the record indicated that the highest rate was the most 
appropriate estimate of the missing data. We then recalculated a simple 
average interest rate for the entire year. Because the U.S. sales were 
denominated in Yen, we calculated interest expenses by applying the 
average yen interest rate reported by Masuda.
    The Department explained its policy in selecting the interest rate 
applicable in calculating imputed credit expenses in the Final 
Determination of Sales at LTFV: Oil Country Tubular Goods from Austria, 
(60 FR 33551, 33555 June 28, 1995) (OCTG from Austria):

    A company selling in a given currency (such as sales denominated 
in dollars) is effectively lending to its purchasers in the currency 
in which its receivables are denominated (in this case, in dollars) 
for the period from shipment of its goods until the date it receives 
payment from its purchaser. Thus, when sales are made in, and future 
payments are expected in, a given currency, the measure of the 
company's extension of credit should be based on an interest rate 
tied to the currency in which its receivables are denominated. Only 
then does establishing a measure of imputed credit recognize both 
the time value of money and the effect of currency fluctuations on 
repatriating revenue.

    Since Masuda receives payment from Japanese trading companies in 
Yen, its receivables are denominated in Yen, and therefore the 
applicable interest rate should be a Yen rate. We also added duty 
drawback to EP in accordance with section 772(c)(B) of the Act.

Normal Value

    In order to determine whether there was a sufficient volume of 
sales in the home market to serve as a viable basis for calculating NV, 
we compared Masuda's volume of home market sales of the foreign like 
product to the volume of U.S. sales of the subject merchandise, in 
accordance with section 773(a)(1)(C) of the Act. Since Masuda's 
aggregate volume of home market sales of the foreign like product was 
greater than five percent of its aggregate volume of U.S. sales for the 
subject merchandise, we determined that the home market was viable for 
Masuda. Therefore, we have based NV on home market sales.
    Masuda requested that the Department exclude certain sales in the 
home market during the POI, claiming that these sales were made outside 
the ordinary course of trade. According to Masuda, the sales in 
question were made in smaller quantities than other home market sales, 
at substantially higher than average prices, and for testing purposes. 
For this preliminary determination, we have rejected Masuda's request 
because, generally, it is the Department's practice to include in its 
analysis sales for testing purposes. See Color Picture Tubes From 
Korea: Final Results of Administrative Review, (56 FR 19084 April 25, 
1991); Kerr- 
McGee Chemical Corp v. U.S., 739 F.S. 613 (CIT 1990). Moreover, we 
found that other home market sales in Masuda's database had unit prices 
higher than (and quantities comparable to) those of the sales which 
Masuda has sought to exclude from the margin calculations.
    We calculated NV based on prices to unaffiliated customers. Where 
appropriate we made deductions from the starting price (gross price) 
for foreign inland freight, in accordance with section 773(a)(6)(B)(ii) 
of the Act. In addition, we adjusted for differences in circumstances 
of sale for imputed credit expenses. We recalculated Masuda's credit 
expenses to account for missing data in the reported interest rate 
calculation. As facts available, we applied the highest reported 
monthly interest rate to those months in the POI for which no rate was 
reported and then re-calculated a simple average interest rate for the 
entire year. (See the Export Price section for further detail on the 
facts available related to the interest rate).

Currency Conversion

    Section 773A(a) of the Act directs the Department to convert 
foreign currencies based on the dollar exchange rate in effect on the 
date of sale of the subject merchandise, except if it is established 
that a currency transaction on forward markets is directly linked to an 
export sale. When a company demonstrates that a sale on forward markets 
is directly linked to a particular export sale in order to minimize its 
exposure to exchange rate losses, the Department will use the rate of 
exchange in the forward currency sale agreement.
    Section 773A(a) also directs the Department to use a daily exchange 
rate

[[Page 42589]]

in order to convert foreign currencies into U.S. dollars, unless the 
daily rate involves a ``fluctuation.'' It is the Department's practice 
to find that a fluctuation exists when the daily exchange rate differs 
from the benchmark rate by 2.25 percent. The benchmark is defined as 
the rolling average of rates for the past 40 business days. When we 
determined a fluctuation existed, we substituted the benchmark for the 
daily rate, in accordance with established practice. Further, section 
773A(b) directs the Department to allow a 60-day adjustment period when 
a currency has undergone a sustained movement. A sustained movement has 
occurred when the weekly average of actual daily rates exceeds the 
weekly average of benchmark rates by more than five percent for eight 
consecutive weeks. (For an explanation of this method, see, Policy 
Bulletin 96-1: Currency Conversions, 61 FR 9434, March 8, 1996.). Such 
an adjustment period is required only when a foreign currency is 
appreciating against the U.S. dollar.

Verification

    As provided in section 782(i) of the Act, we will verify all 
information determined to be acceptable for use in making our final 
determination.

Suspension of Liquidation

    In accordance with section 733(d) of the Act, we are directing the 
Customs Service to suspend liquidation of all entries of sodium azide 
from Japan, that are entered, or withdrawn from warehouse for 
consumption, on or after the date of publication of this notice in the 
Federal Register. We are also instructing the Customs Service to 
require a cash deposit or the posting of a bond equal to the weighted-
average amount by which the normal value exceeds the export price, as 
indicated in the chart below. These suspension of liquidation 
instructions will remain in effect until further notice.

------------------------------------------------------------------------
                                                              Weighted- 
                                                               average  
                   Exporter/manufacturer                        margin  
                                                              percentage
------------------------------------------------------------------------
Masuda.....................................................        29.50
NCI........................................................        65.80
TKK........................................................        65.80
All Others.................................................        29.50
------------------------------------------------------------------------

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 before the later of 120 days after the date of 
this preliminary determination or 45 days after our final determination 
whether these imports are materially injuring, or threaten material 
injury to, the U.S. industry.

Public Comment

    Case briefs or other written comments in at least ten copies must 
be submitted to the Assistant Secretary for Import Administration no 
later than November 20, 1996, and rebuttal briefs, no later than 
November 27, 1996. A list of authorities used and an executive summary 
of issues should accompany any briefs submitted to the Department. Such 
summary should be limited to five pages total, including footnotes. In 
accordance with section 774 of the Act, we will hold a public hearing, 
if requested, to afford interested parties an opportunity to comment on 
arguments raised in case or rebuttal briefs. Tentatively, the hearing 
will be held on November 29, 1996, the time and place to be determined, 
at the U.S. Department of Commerce, 14th Street and Constitution 
Avenue, N.W., Washington, D.C. 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, or to participate 
if one is requested, 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. Requests 
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. Oral presentations will be limited to issues raised in the 
briefs. If this investigation proceeds normally, we will make our final 
determination by 135 days after the publication of this notice in the 
Federal Register.
    This determination is published pursuant to section 733(d) of the 
Act.

    Dated: August 9, 1996.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 96-20891 Filed 8-15-96; 8:45 am]
BILLING CODE 3510-DS-P