[Federal Register Volume 61, Number 192 (Wednesday, October 2, 1996)]
[Notices]
[Pages 51424-51427]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-25241]
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DEPARTMENT OF COMMERCE
[A-423-602]
Industrial Phosphoric Acid From Belgium; 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 May 24, 1996, the Department of Commerce (the Department)
published the preliminary results of review of the antidumping duty
order on industrial phosphoric acid (IPA) from Belgium (52 FR 31439;
August 20, 1987). The review covers one manufacturer, Societe Chimique
Prayon-Rupel (Prayon), and exports of the subject merchandise to the
United States during the period August 1, 1994, through July 31, 1995.
We gave interested parties an opportunity to comment on the
preliminary results of review. Based on our analysis of the comments
received, we have not changed our analysis for the final results from
that presented in the preliminary results of review.
EFFECTIVE DATE: October 2, 1996.
FOR FURTHER INFORMATION CONTACT: David Genovese or Joseph Hanley,
Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, NW.,
Washington, DC 20230, telephone: (202) 482-5254.
SUPPLEMENTARY INFORMATION:
The Applicable Statute
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to the Department's regulations are to the
current regulations, as amended by the interim regulations published in
the Federal Register on May 11, 1995 (60 FR 25130).
Background
On August 25, 1995, FMC Corporation and Monsanto Company requested
an administrative review of the antidumping duty order on IPA from
Belgium with regard to Prayon. The Department initiated the review on
September 15, 1995 (60 FR 47930), covering the period August 1, 1994,
through July 31, 1995. On May 24, 1996, the Department published the
preliminary results of review (61 FR 26160). The Department has now
completed this review in accordance with section 751 of the Tariff Act
of 1930, as amended (the Act).
Scope of the Review
The products covered by this review include shipments of IPA from
Belgium. This merchandise is currently classifiable under the
Harmonized Tariff Schedule (HTS) item number 2809.20. The HTS item
number is provided for convenience and U.S. Customs purposes. The
written description remains dispositive.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results of review. We received comments from Prayon and FMC
Corporation and Monsanto Company, two domestic producers of industrial
phosphoric acid.
Comment 1
Prayon argues that the Department does not have the legal authority
to exclude from the home market sales listing Prayon's sales to
Europhos, an affiliate which does not resell the IPA.
Prayon argues that section 773(a)(1)(B)(i) of the Act defines
normal value (NV) as the price at which the foreign like product is
first sold for consumption in the exporting country, in the usual
commercial quantities and in the ordinary course of trade. Prayon notes
that section 771(15) of the Act specifies types of sales considered
outside the ordinary course of trade (e.g., sales made below the COP).
Prayon further notes that section 773(a)(5) of the Act deals with sales
through affiliates (i.e., sales through affiliates can be disregarded
and the price of the sale by the affiliated party may be used to
determine NV). However, Prayon argues that, the Act makes no provision
for excluding from the calculation of NV sales made to an affiliated
party that are not for resale, but for consumption by that party.
Prayon further argues that the Department does not have the
authority under section 353.45 of its regulations (``Transactions
between related persons'') to disregard home market sales to affiliated
parties for consumption by those parties. Prayon argues that section
353.45(b) merely reiterates the provisions of 773(a)(5) and that
section 353.45(a) rests on the authority of 773(a)(5) and therefore
only applies where there are sales made through affiliated parties, not
to affiliated parties.
Prayon concludes that in the absence of any legal authority to
exclude such sales, sales to Europhos must be considered in calculating
NV.
Petitioner argues that it is a fundamental tenet that ``(t)the
antidumping law attempts to construct value on the basis of arm's
length transactions.'' Smith-Corona Group v. United States, 713 F.2d
1568, 1572 (Fed. Cir. 1983)(Smith-Corona). Thus, asserts Petitioner,
the Department has routinely exercised the power to exclude sales
between affiliated parties from its dumping margin calculations.
Moreover, argues Petitioner, this power has, on a number of occasions,
been reviewed and sanctioned by the courts.
Department's Position
We disagree with Prayon. Prayon's sales to Europhos have not been
shown to be at arm's-length prices (i.e., the weighted-average sales
price to Europhos was less than 99.5 percent of the weighted-average
sales price to unaffiliated parties); therefore, the Department must
exclude them. See Usinor Sacilor v. United States, 872 F. Supp. 1000,
1004 (CIT 1994) (hereinafter Usinor).
While section 771 of the Act does specify certain types of sales
which are considered outside the ordinary course of trade, this list is
not exhaustive and
[[Page 51425]]
is meant only to provide examples. See section 771(15) (A) and (B).
Specifically, section 771(15) states that the Department considers
sales made below the COP and certain transactions used to determine COP
and CV, among others, to be outside the ordinary course of trade and
therefore excluded from the calculation of NV. Among other types of
transactions considered by the Department to be outside the ordinary
course of trade are sales to an affiliate that are determined not to be
at arm's-length prices.
Furthermore, section 353.45(a) clearly states that the Department
will consider a sale to an affiliate in determining NV ``only if
satisfied that the price is comparable to the price at which the
producer * * * sold such or similar merchandise to a person not related
to the seller.'' This approach has been upheld by the Court of
International Trade (CIT) and the Court of Appeals for the Federal
Circuit (Federal Circuit). See, e.g., Conners Steel Co. v. United
States, 527 F. Supp. 350, 354 (CIT 1981) (hereinafter Conners Steel)
(``it need only be stated that the law does not remove sales to a
related purchaser from consideration as part of home market sales.
Common sense, of course, would indicate that strictly by themselves
sales to a related purchaser would be a questionable guarantee of a
fair home market price. However, if they are made at the same price as
sales to independent purchasers, there is no reason why they cannot
form part of the total quantity of home market sales used as a
benchmark.''); and NEC Home Electronics, Ltd. v. United States, 54 F.3d
736, 739 (Fed. Cir. 1995) (hereinafter NEC) (``There is a perceived
danger that a foreign manufacturer will sell to related companies in
the home market at artificially low prices, thereby camouflaging true
[foreign market value] and achieving a lower antidumping duty margin *
* *. Thus, regulation provides that the ITA will use the home-market,
related-party sale in computing [NV] `only if satisfied that the price
is comparable to the price at which the [seller] sold such or similar
merchandise to a person not related to the seller.' 19 CFR
353.45(a)(1994).'')
Therefore, in accordance with the Department's regulations, the Act
and judicial precedent, the Department compared Prayon's weighted-
average sales price to Europhos to its weighted-average sales price to
unaffiliated parties in order to determine whether the sales to
Europhos should be used when calculating NV. Because the weighted-
average sales price to Europhos was less than 99.5 percent of the sales
price to unaffiliated parties, the Department has continued to exclude
sales to Europhos when calculating NV.
Comment 2
Prayon argues that even if the Department had the legal authority
to disregard sales to Europhos, in this case they should not have been
excluded because, contrary to the Department's determination in the
preliminary results of review, such sales were made at arm's-length.
Prayon, quoting British Steel PLC v. United States, Slip. Op. 96-88
(CIT 1996) at 71 (quoting NLRB v. Baptist Hosp., Inc., 442 U.S. 773,787
(1993)), argues that ``an agency presumption must be both consistent
with the intent of the statute and based on a rational connection
between the facts proven and the facts presumed.'' Prayon states that
the arm's-length test applied by the Department is not consistent with
the intent of the statute because the test distorts NV by excluding
many transactions between affiliates at prices below the weighted-
average price to unrelated parties but including all affiliated party
transactions at prices above the weighted-average price to unaffiliated
party sales. Prayon states that this practice does not permit a fair
comparison between export price and NV as required by the Statute.
Furthermore, Prayon argues that the arm's-length test is not based
on a rational connection between the facts considered (i.e., that the
weighted-average sales price to an affiliate is less than 99.5 percent
of the weighted-average sales price to unrelated parties) and the facts
presumed (i.e., that the prices to the affiliate were not the result of
arm's-length negotiations).
Moreover, Prayon argues that the Department cannot merely rely on a
sales price comparison as a conclusive basis for excluding affiliated
party sales from the NV sales base. See NEC. Prayon argues that in NEC,
the Federal Circuit held that the Department must conduct an inquiry
into other facts relevant to whether or not the sales concerned were at
arm's-length. Accordingly, asserts Prayon, the Department should take
into consideration the fact that (1) while Prayon holds a 50 percent
stake in Europhos it is much smaller in size than its joint venture
partner and is, therefore, unable to manipulate transactions with
Europhos; (2) it is not in Prayon's interest to lower the price to
Europhos in order to lower U.S. dumping margins since Prayon sells a
large volume of IPA to Europhos; and (3) since Prayon wishes to
maximize profits and Europhos wishes to minimize material costs, it
follows that Prayon's prices to Europhos are the result of hard, arm's-
length negotiations that took into consideration the large volume of
IPA sold to Europhos and the long-term nature of the purchase contract.
Prayon claims that sales prices to Europhos were negotiated on an
arm's-length basis, and that therefore the Department should include
those sales in the home market sales base for the purposes of
calculating NV in the final determination.
Petitioner argues that the Department's regulations permit sales
between affiliated parties only if they are at arm's-length; and, that
the Department's arm's-length test has been upheld by the Courts.
Moreover, Petitioner asserts that the Department's use of sales price
as a conclusive basis to judge the arm's-length nature of a transaction
between affiliates has also been upheld by the Courts.
Department's Position
We disagree with Prayon. First, the Department's practice of
excluding sales to affiliates that are less than 99.5 percent of the
weighted-average sales price to unrelated parties does not violate the
intent of the statute, which is to provide a fair comparison between
the export price and NV. Rather, by ensuring that home market sales to
affiliates are excluded if the price of such sales are not similar to
the sale prices to unrelated parties, the Department's test promotes a
fair comparison between the export price and NV.
Prayon's interpretation of the facts proven and the facts presumed
is inaccurate. The fact presumed is that sales to an affiliate are a
questionable guarantee of a fair home market price. The fact proven is
that the weighted-average sales price to Europhos is well below the
weighted-average sales price to unrelated parties and, therefore, not
representative of a fair home market price. See Conners Steel, cited
above.
In addition, contrary to Prayon's assertions, the Department's
regulations make clear that we will use the price on a sale between
affiliated parties in calculating dumping margins ``only if satisfied
that the price is comparable to the price at which the producer or
reseller sold such or similar merchandise to a person not related to
the seller.'' See section 353.45(a) of the Department's regulations. In
short, the burden of satisfying the Department that the sales are at
arm's-length is on Prayon.
It is not self-evident that the profit motive cited by Prayon will
always
[[Page 51426]]
cause affiliated companies to use arm's-length transfer prices.
Furthermore, since Prayon's sales price to Europhos were below the
standard arm's-length price, the question of whether the transfer price
was controlled by Prayon or Europhos is not useful to determine whether
sales were made on an arm's-length basis. In addition, while the
pricing arrangement between Prayon and Europhos may predominantly
benefit either party or both parties, it does not indicate that
transactions were made on an arm's-length basis.
Moreover, the Department's use of the price comparability test
(i.e., treating sales to affiliates as being at arm's-length only if
the weighted average price to the affiliate is at least 99.5 percent of
the price to an unrelated party) has been upheld by the CIT. See Usinor
Sacilor, 872 F. Supp. at 1004.
Additionally, the CIT has upheld the Department's practice of using
price rather than other factors as the basis for determining the arm's-
length nature of a transaction. See NTN Bearing Corp. of America v.
United States, 905 F. Supp. 1083 (CIT 1995) (hereinafter NTN). In NTN,
the CIT stated that it ``disagrees with [respondent] that Commerce's
arms-length test is flawed because Commerce did not take into account
certain factors proposed by [the respondent].'' See NTN at 1099.
Moreover, in the NEC case cited by Prayon, the CIT did not state
that the Department must always consider factors other than price
comparisons in determining the arm's-length nature of a transaction
between affiliates. Rather, the CIT remanded the case to the Department
to address NEC's argument that compliance with the Japanese commodity
tax law ensured that the transaction was at arm's-length. (NEC, 54 F.3d
at 743, 744 (taking no position on the merits of NEC's argument but
holding that the ITA's conclusion that NEC had not provided data
indicating sales were at arm's length was not supported by substantial
evidence because it did not address NEC's claim)). In the review
underlying NEC, the Department did not make a statistical comparison
between home market prices to related parties and those to unrelated
parties because, in the home market, NEC sold only to related parties.
In this review, in contrast, the Department addressed Prayon's Belgian
law argument based on a comparison of prices on the record that shows,
despite the Belgian law, that prices to Prayon's related party are not
comparable to those of unrelated parties. Accordingly, the Department's
practice continues to be compared to the price to affiliates with the
price to unrelated parties in order to determine whether sales to
affiliates are made at arm's-length.
Based on the foregoing, we have, in these final results, continued
to exclude sales to Prayon's affiliate, Europhos, since the weighted-
average price of such sales was less than 99.5 percent of the weighted-
average price to unrelated parties.
Comment 3
Prayon argues that the Department is not justified in disregarding
the discount taken by the affiliated coordination center to which
Prayon sells its receivables, and that this discount should be
considered Prayon's actual home market credit expense. Prayon states
that the discount taken is required by Belgian law to reflect
prevailing market interest rates. Therefore, Prayon asserts that there
is no basis for disregarding the discount and substituting an
artificial imputed credit expense.
Moreover, Prayon argues that if the Department uses an imputed
credit expense, that expense should be recalculated using corrected
interest rates. Prayon argues that the interest rates it provided to
the Department were Belgian interbank rates (BIBOR), which by their
nature are lower than the rates that would apply to commercial loans to
non-bank parties. Additionally, Prayon claims that for short term
borrowings, a lender would add a premium onto the BIBOR rate.
Petitioner argues that the Department's reliance on the imputed
credit expense rather than the discount offered by Prayon's affiliated
party is reasonable and fully consistent with prior practice.
Petitioner asserts that Prayon has offered no justifiable reason why
the Department should change its approach. Moreover, Petitioner argues
that Prayon has had ample opportunity to submit information to the
Department on its home market sales and credit expenses, and the
Department should not, as suggested by Prayon, reopen the record to
request additional information from Prayon.
Department's Position
We disagree with Prayon. The facts of this case are identical to
the facts in the 1993/94 review. In the final determination for that
review we stated that, ``the Department is not satisfied that the
discount rate ``charged'' by Prayon Services, when factoring Prayon's
accounts receivables, is representative of market rates.'' We noted
that ``(i)n almost all home market observations, the credit expense
calculated using the discount rate method is substantially higher than
the imputed credit expense (i.e., the market rate) Prayon would have
incurred had it not sold its accounts receivable to Prayon Services.''
We concluded that:
(D)ue to the substantial difference between the two
methodologies, the Department is not satisfied that the discount
rate ``charged'' by Prayon Service is representative of market
rates. Moreover, since Prayon sold all of its accounts receivable to
Prayon Services, the Department is unable to compare the discount
rate charged by Prayon Services with a discount rate charged by an
unrelated party to insure that the rate is comparable to market
rates.
Additionally, we are not convinced that Prayon Service's legal
obligation under Belgian law is sufficient proof that Prayon
Services actually charged an arm's-length discount rate to Prayon.
Prayon states that Prayon Services was established under Belgian
law, which provides certain tax benefits for companies organized and
operated according to certain specified requirements. However, the
requirement that the factoring of accounts meet Belgian law
requirements in order to capture certain tax benefits may not be a
reliable benchmark for U.S. antidumping purposes. This is supported
by the Department's determination 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, 37158 (July 9, 1993) (``There is no requirement that
U.S. antidumping practice conform to Japanese antitrust laws or
practices which have entirely different purposes and standards'').
Therefore, because the standard established by Belgian law is
not sufficiently similar to that established by the Department, as
evidenced by the substantial difference between Prayon's discount
rate and the Department's date of payment method, we cannot rely on
Prayon's compliance with that law as evidence that the rate charged
by Prayon Services to Prayon is at arm's-length. [footnote excluded]
Industrial Phosphoric Acid from Belgium; Final Results of Antidumping
Duty Administrative Review, 61 FR 20227, 20229-20230 (May 6, 1996).
Accordingly, for these final results, the Department, when
determining credit expense incurred by Prayon on its home market sales,
has relied upon the imputed credit expense incurred by Prayon as
determined by the following formula: ((Pay date-Shipment date)/
365)*short-term home market interest rates.
We also disagree with Prayon that the Department should reopen the
record to ensure that the correct interest rates are used. In response
to a request for information on the home market short-term interest
rates used to calculate imputed inventory carrying costs in the home
market, Prayon supplied the Department with the monthly average
[[Page 51427]]
short-term rates offered by Credit Lyonnais Belgium for loans in
Belgian francs. See Prayon's submission of April 26, 1996. The
Department used these rates to calculate the imputed credit expense
incurred by Prayon for the preliminary results of review, and sees no
reason not to use these rates in the final results of review.
Moreover, the Department's regulations permit factual information
to be submitted for consideration in the final results of review up to
the date of publication of the preliminary results of review or 180
days after the date of publication of the notice of initiation of the
review, whichever comes first. See section 353.31(a)(1)(ii) of the
Department's regulations. Both of these deadlines have passed (the
preliminary results of review were published on May 24, 1996, and this
review was initiated on September 15, 1995). Furthermore, it is the
Department's stated practice to not consider in final results of review
information untimely submitted. See section 353.31(a)(3).
Final Results of Review
Based on our analysis of the comments received, we have determined,
as we did in the preliminary results, that a margin of 11.36 percent
exists for Prayon for the period August 1, 1994 through July 31, 1995.
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 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 Prayon will be
11.36 percent; (2) for merchandise exported by manufacturers or
exporters not covered in this review but covered in a previous review
or the original less-than-fair-value (LTFV) investigation, the cash
deposit rate will continue to be the rate published in the most recent
final results or determination for which the manufacturer or exporter
received a company-specific rate; (3) if the exporter is not a firm
covered in this review, earlier reviews, or the original investigation,
but the manufacturer is, the cash deposit rate will be that established
for the manufacturer of the merchandise in these final results of
review, earlier reviews, or the original investigation, whichever is
the most recent; and (4) the ``all others'' rate, as established in the
original investigation, will be 14.67 percent.
These deposit requirements, when imposed, shall remain in effect
until publication of the final results of the next administrative
review.
This notice also serves as a final 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 the
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: September 26, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-25241 Filed 10-1-96; 8:45 am]
BILLING CODE 3510-DS-P