[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