[Federal Register Volume 62, Number 135 (Tuesday, July 15, 1997)]
[Notices]
[Pages 37958-37970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-18446]



[[Page 37957]]

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Part II





Department of Commerce





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International Trade Administration



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Final Results of Antidumping Duty Administrative Reviews: Elemental 
Sulphur From Canada; Notices

  Federal Register / Vol. 62, No. 135 / Tuesday, July 15, 1997 / 
Notices  

[[Page 37958]]



DEPARTMENT OF COMMERCE

International Trade Administration
[A-122-047]


Elemental Sulphur From Canada: 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.

-----------------------------------------------------------------------

SUMMARY: On January 7, 1997, the Department of Commerce (the 
Department) published in preliminary results of its administrative 
review of the antidumping duty order on elemental sulphur from Canada 
(62 FR 969). This review covers two manufacturers/exporters of the 
subject merchandise to the United States and the period December 1, 
1994 through November 30, 1995. We gave interested parties an 
opportunity to comment on our preliminary results. Based upon our 
analysis of the comments received, the results presented in the 
preliminary results of review have changed.
    We determine that sales have been made below normal value (``NV'') 
by companies subject to these reviews. Thus, we will instruct U.S. 
Customs to assess antidumping duties based on the difference between 
the export price (``EP'') and the NV.

EFFECTIVE DATE: July 15, 1997.

FOR FURTHER INFORMATION CONTACT: Rick Johnson or Jean Kemp, Office of 
Antidumping and Countervailing Duty Enforcement, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230; 
telephone: (202) 482-3793.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

    Unless otherwise indicated, all citations to the statute refer 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 January 7, 1997, the Department published in the Federal 
Register (62 FR 969) the preliminary results of its administrative 
review of the antidumping duty order on elemental sulphur from Canada 
(hereafter referred to as ``Preliminary Results''). We gave interested 
parties an opportunity to comment on our preliminary results. We 
received written comments on February 10 and February 21, 1997 from 
Mobil Oil Canada (``Mobil'') and Husky Oil Canada (``Husky''), 
respondents; and from petitioners, Pennzoil and Freeport McRoran.
    No antidumping duty absorption request was made by interested 
parties, therefore for this review we have not made a determination of 
whether antidumping duties have been absorbed.
    Under the Act, the Department may extend the deadline for 
completion of administrative reviews if it determines that it is not 
practicable to complete the review within the statutory time limit of 
365 days. On August 5, 1996, the Department extended the time limits 
for the preliminary and final results in this case. See Elemental 
Sulphur from Canada: Extension of Time Limit for Antidumping Duty 
Administrative Review 61 FR 40604 (1996).
    We have now completed the administrative review in accordance with 
section 751 of the Act.

Scope of the Review

    Imports covered by these reviews are shipments of elemental sulphur 
from Canada. This merchandise is classifiable under Harmonized Tariff 
Schedule (HTS) subheadings 2503.10.00, 2503.90.00, and 2802.00.00. 
Although the HTS subheadings are provided for convenience and for U.S. 
Customs purposes, the written description of the scope of this finding 
remains dispositive.

Interested Party Comments

Husky

Comment 1
    Petitioners allege that Husky's reported liquid sulphur cost of 
manufacturing at one plant is understated as a result of Husky's 
allegedly improper allocation of certain common costs. Petitioners 
argue that Husky's treatment of these costs essentially is based on 
what they claim to be the ``faulty'' premise that these costs are 
purely indirect costs and that the other three cost centers at the 
facility (pouring, forming, and remelt) contain the only costs incurred 
for direct production activity at this facility. The result, according 
to petitioners, is a distortive allocation because liquid sulphur is 
handled at the plant in question, sulphur is stored in major block 
storage facilities there, and significant costs are associated with 
these activities.
    Furthermore, petitioners point to Husky's reported pouring costs 
(which cannot be zero in any month, according to petitioners), as an 
impossible result, given that block storage was performed at this plant 
throughout the POR. Additionally, petitioners assert that the common 
costs, as a percentage of total costs at this plant, are such that 
these common costs cannot be purely indirect costs that may be 
allocated to other cost centers.
    Finally, petitioners allege that Husky's treatment of these common 
costs departs from the Department's sulphur cost methodology, as found 
in the preliminary results of the 1992/93 and 1993/94 reviews, by 
assigning liquid sulphur handling and block storage costs to the 
process of forming, thereby understating the cost of manufacture (COM) 
of liquid sulphur.
    Husky rebuts petitioners' contention, stating foremost that the 
facility in question is a forming facility. Therefore, the vast 
majority of operating (and indirect) costs are related solely to the 
forming process, even if the Department allocates some costs to the 
liquid sulphur input for purposes of the antidumping proceeding.
    Husky states that the functional unit in question is not a direct 
operating cost unit, but instead is the unit where general facility 
and/or indirect costs are booked. Husky maintains that the Department's 
treatment of these costs in its preliminary results of the 1992/93 and 
1993/94 reviews arose from the fact that the Department mistook this 
functional unit to be a direct cost unit. Husky claims that it has 
clarified the issue in the current review, and that the Department 
therefore properly accepted Husky's allocation of these indirect costs 
for this review.
    Further, Husky claims that all direct costs related to liquid 
sulphur have been allocated. According to Husky, the insignificant 
percentage of the facility's total costs accounted for by the two 
functional units considered joint costs by the Department is consistent 
with the fact that all of the activities at this facility are related 
to forming.
    With regard to petitioners' assertion concerning the feasibility of 
having zero block storage costs in any month, Husky states that the 
record shows otherwise for the period of review. Husky explains this by 
noting that when it forms all of the sulphur collected from its gas 
production, it does not incur costs for pouring sulphur to block or 
maintaining the block. Therefore, Husky maintains

[[Page 37959]]

that only when it pours to block does it incur such expenses.
    Husky also points to the fact that Husky's operating costs for 
liquid sulphur at the plant in question are virtually identical to its 
operating costs for liquid sulphur at another plant (about which 
petitioners have not made the same allegation). Husky asserts that this 
fact shows that Husky's allocation of costs to the liquid input are 
thus reflective of the actual operating costs incurred to produce the 
liquid input at this plant.
    Department's Position: In the final results of review for the 1992/
93 and 1993/94 periods, the Department agreed with Husky that the 
``common'' costs for this facility should be allocated to all of the 
direct cost centers at that facility. Moreover, we stated that it is 
reasonable that this facility's ``common'' cost center should be 
treated as general expenses and allocated to the three functional units 
because the other cost centers are direct and this facility must incur 
common (indirect) expenses. Therefore, we concluded that it was 
appropriate to allocate these common costs to all functional units of 
the facility based on direct costs. See Final Results of Antidumping 
Duty Administrative Review: Elemental Sulphur from Canada (1992/93 and 
1993/94) (``1992/93 and 1993/94 Final Results'') published concurrently 
with this notice of final results.
    In the current review, in its September 4, 1996 submission to the 
Department (at page 12), Husky describes the unit in question as a 
common cost unit which covers three direct functional units--forming, 
pouring, remelt--for a particular facility. Husky further states that 
``all costs charged to this common unit are allocable to sulphur 
production, and were reported in the column `allocated general 
expenses.' ''
    With regard to petitioners' assertion that there cannot be zero 
pouring costs when block storage was performed throughout the POR, we 
agree with Husky that record evidence submitted by Husky shows 
otherwise. Moreover, we do not find it unreasonable to accept the fact 
that, when all sulphur collected from gas production is formed, Husky 
incurs no costs at this facility for pouring sulphur to block or 
maintaining the block.
    Based on the Department's determinations in the two prior reviews 
regarding the treatment of costs in this cost center, and information 
on the record of this review, we determine that Husky properly 
allocated these common (and indirect) costs in calculating cost of 
manufacture for liquid sulphur.
Comment 2
    Petitioners argue that Husky misallocated the complex-wide costs 
incurred for production of all joint products at one facility. Because 
common cost centers are part of the complex, some portion of complex-
wide costs, such as certain administrative and communications expenses, 
necessarily are attributable to activities that occur in the common 
cost centers. However, according to petitioners, since Husky allocated 
none of the complex-wide costs to a specific common cost center, it 
improperly allocated zero complex-wide costs to the processes of liquid 
sulphur handling at the facility and operation of the block storage 
facilities. Petitioners assert that under generally accepted cost 
accounting principles, it is proper to allocate the costs recorded in a 
particular indirect cost center to all cost centers that benefit from 
the services provided by that particular indirect cost center.
    Finally, petitioners maintain that this underallocation of the 
complex-wide cost to sulphur results in a corresponding underallocation 
of depreciation to sulphur.
    Husky maintains that common costs were properly allocated to all 
direct functional units related to both liquid and formed sulphur, 
based on each direct functional unit's percentage of operating costs 
within the facility, and complex-wide common costs and utilities were 
allocated on the same basis. Petitioners' proposed allocation, 
according to Husky, is inappropriate in that common costs would be 
allocated to other common cost units. Husky claims that petitioners 
have failed to establish any basis for allocating complex-wide common 
costs to the other indirect cost units. Nevertheless, Husky argues that 
the inclusion of common cost units in the allocation does not alter the 
results, as long as common costs for the gas plant and common costs for 
the sulphur handling facilities are both accounted for in the equation.
    Department's Position: As evidenced in our position on Comment One 
of the 1992/93 and 1993/94 Final Results, the Department's practice in 
these reviews has been to allocate common (general) costs based on the 
direct cost centers which relate to the functional units within the 
facility. See 1992/93 and 1993/94 Final Results. Because, as we noted 
above, the common cost unit at a particular facility is an indirect 
unit, we find that Husky reported the cost information in accordance 
with the Department's practice of allocating general costs by 
allocating complex-wide common costs based on direct cost centers. 
Based on the above, petitioners' argument with respect to depreciation 
is therefore moot.
Comment 3
    Petitioners claim that Husky failed to report the sulphur handling 
costs prior to a certain point in the sulphur production process at one 
plant. Petitioners note that the Department has instructed Husky, in 
the previous two reviews, to report all costs ``incurred by each 
facility after sulphur recovery, including . . . liquid sulphur 
storage.'' Petitioners maintain that these costs which Husky has not 
reported are incurred after liquid sulphur is produced at the plant, 
and thus are sulphur costs under the Department's methodology, 
regardless of where these costs are recorded in Husky's accounting 
system.
    Furthermore, petitioners argue that there must be, at the least, 
labor and maintenance costs in addition to energy costs incurred for 
operating one of the two assets allegedly omitted in Husky's cost 
reporting.
    Petitioners assert that given Husky's alleged reporting 
deficiencies, the Department should rely on facts available to 
determine the liquid sulphur storage costs incurred prior to a certain 
point at this plant.
    Husky notes that it has stated for the record that no sulphur 
handling costs are incurred prior to those associated with the point in 
the sulphur production process identified by petitioners. Husky argues 
that its reporting is consistent with the Department's prior decisions 
on the appropriate split-off point (i.e., subsequent to the sulphur 
recovery unit).
    Department's Position: Husky has certified for the record that no 
sulphur handling costs are incurred prior to those associated with the 
point in the sulphur production process identified by petitioners. 
However, Husky's statement seems to be founded on the presumption that 
if a cost has been ascribed to the sulphur recovery unit, Husky does 
not consider that cost to be a sulphur handling cost. In this instance, 
that presumption stands against the Department's methodology. As the 
Department stated in supplemental cost questionnaires in both the 1992/
93 and 1993/94 reviews, ``the reported costs of manufacturing should 
include costs incurred by each facility after sulphur recovery, 
including costs associated with pouring sulphur straight to block, 
liquid sulphur storage, transferring of the product, and a portion of 
general facilities costs.'' See

[[Page 37960]]

Supplemental Request for Cost Information for Husky in the 1992/93 
Administrative Review, at page 3 (February 2, 1996); Supplemental 
Request for Cost Information for Husky in the 1993/94 Administrative 
Review, at page 3 (February 2, 1996). This language clearly indicates 
the Department's determination that liquid sulphur storage costs are 
incurred after the sulphur recovery functional unit, and should be 
reported as a cost of manufacture of sulphur for the Department's 
purposes. Whether these costs are subsumed in the sulphur recovery 
functional unit at this facility, as Husky has stated they are, is not 
relevant in light of the Department's statements on this point. That 
is, because liquid sulphur storage occurs after sulphur recovery, the 
Department considers it to be a part of the COM of sulphur.
    Husky has stated for the record, in its December 6, 1996 
submission, that the only sulphur recovery costs associated with a 
certain tank located prior to the sulphur pipeline are energy costs. 
Husky also provided an estimate of those costs. Petitioners' assertion 
that there must be labor and maintenance costs, in light of Husky's 
statement, is speculative and not supported by evidence on the record 
of this review. Therefore, we have taken Husky's estimated costs 
provided in that submission and added it to the sulphur COM for the 
plant.
    With regard to the other asset to which petitioners have referred 
(and about which respondents have not commented), Section 776(a)(1) of 
the Act stipulates that if the ``necessary information is not available 
on the record * * * the administering authority * * * shall, subject to 
section 782(d), use the facts otherwise available in reaching the 
applicable determination under this title.'' We have no record 
information regarding costs associated with this other asset. 
Therefore, for reasons discussed in the analysis memorandum, for the 
final results of review the Department has also applied the costs for 
the certain tank discussed above as facts available to this other 
asset. We have not, as petitioners suggested in their case brief, used 
block storage costs as facts available to assign a cost to liquid 
storage, because petitioners have provided no basis which would lead 
the Department to conclude that block storage costs and liquid storage 
costs are in any way related.
Comment 4
    Petitioners state that the Department should include in COP/CV 
depreciation reflective of the actual depreciation costs of the sulphur 
handling assets at one plant. Petitioners insist that, despite Husky's 
claim to the contrary, Husky must possess or have access to information 
regarding construction costs for the plant, because respondent is an 
owner and one of the original developers of this plant. Furthermore, 
petitioners note that the Department determined in the 1991/92 review 
that it is distortive for antidumping purposes not to assign sulphur 
handling costs to sulphur, even if the respondent does not assign these 
costs to sulphur in its normal accounting records. Therefore, 
petitioners maintain that the Department should require Husky to report 
the information available to it regarding these costs, or, if the 
Department does not obtain this information, it should determine 
Husky's depreciation for a particular sulphur handling asset using 
public information (in this case, a newspaper article) regarding 
Husky's share of the cost of the asset.
    Husky asserts that it has certified that it does not maintain 
depreciation by asset, that it has adhered to the methodology accepted 
by the Department in an earlier review of this case, and that the 
Department should not base Husky's depreciation expense on a newspaper 
article when Husky has provided actual data. Furthermore, Husky claims 
that petitioners' recommendations for calculating the cost of 
production result in a distortion of the costs, as is demonstrated by 
the fact that petitioners' method would lead to a depreciation expense 
for the pipeline significantly higher than the depreciation expense 
associated with forming the sulphur.
    Department's Position: We agree with respondents. In the 
Department's supplemental cost questionnaire of November 26, 1996 (at 
page 2), we asked Husky to indicate whether it possesses or can obtain 
sufficient information to determine the specific depreciation expenses 
associated with sulphur handling assets at any of its plants. Husky 
clearly stated, in its December 6, 1996 response, that it does not 
possess and cannot obtain such information, noting that under Canadian 
GAAP, the net book value of property, plant and equipment associated 
with oil and gas production is pooled on a property-by-property basis. 
See Supplemental Cost Questionnaire Response of Husky Oil Ltd., page 6 
(Public Version) (December 9, 1996). Therefore, Husky has reported 
depreciation expenses allocated to the functional units connected to 
sulphur production on the basis of cost. We agree that this methodology 
is consistent with the Department's final determination in the 1991/92 
administrative review and have accepted it here. See Elemental Sulphur 
from Canada; Final Results of Antidumping Finding Administrative 
Review, (``1991/92 Final Results'') at 8239, 8245 (March 4, 1996). 
While petitioners appear to believe that Husky must nevertheless 
possess or have access to such information because Husky is an owner 
and one of the original developers of the plant, such speculation 
cannot form the basis of an adverse ruling from the Department when it 
stands in direct conflict with Husky's record statement. Moreover, 
petitioners' proposal to calculate depreciation based on an unaudited 
figure from a newspaper article is not, in the Department's view, in 
any way preferable to basing depreciation on actual figures, as the 
Department has accepted in the prior three reviews of this case. See, 
e.g, 1991/92 Final Results, pp. 8245-46.
Comment 5
    Petitioners assert that Husky overallocated its crown royalties at 
one facility to formed sulphur and by doing so ``greatly understated'' 
its liquid sulphur COM. According to petitioners, Husky's method 
derives a different per-unit Crown royalty expense for formed sulphur 
than for liquid sulphur when Husky paid the same amount of Crown 
royalties on each metric ton of liquid sulphur produced regardless of 
whether that sulphur was to be formed, poured to block or loaded for 
sale in liquid form. Petitioners claim that under the Department's cost 
methodology, the sulphur common costs at a given plant are not divided 
between liquid and formed sulphur based on production volume, as Husky 
did for Crown royalties. Rather, petitioners claim that the sulphur 
common costs at a plant should be added together, and divided by the 
common production volume (the sulphur either formed or loaded for sale 
in liquid form) at that plant. Then, the same resulting per-unit amount 
of common costs should be included in the COMs of liquid and formed 
sulphur for that plant.
    Husky contends that it has calculated royalty correctly, and that 
following petitioners' proposed remedy would lead to the ``ludicrous'' 
result that royalty would become the largest cost element of the cost 
of liquid sulphur produced at the facility in question, accounting for 
over half of the total cost.
    Husky notes that, for Crown royalties, it paid 16\2/3\ percent of 
the average price of sulphur for each ton of sulphur produced at 
facilities owned by the

[[Page 37961]]

Crown during fiscal year 1995. Since liquid and formed revenues differ 
(as do liquid and formed costs), Husky claims that as a consequence, 
the average price is the weighted average of lower-priced liquid 
sulphur sales and high-priced formed sulphur sales. Husky stresses that 
the ad valorem nature of the royalty charge indicates that this cost 
differs depending on the sales price of the product. Liquid sulphur, 
Husky contends, has a lower sales price, a lower production cost, and 
accordingly must be assigned a smaller portion of the royalty expense.
    Department's Position: In the 1992/93 and 1993/94 final results of 
reviews notice, the Department determined that ``because sulphur poured 
to block must be remelted and then processed through either liquid or 
forming facilities before it can be sold, block sulphur is not 
considered finished production.'' Therefore, we did not include the 
block volume in the allocation of sulphur costs or the weighted-average 
COM for the final results. See Comment 5 of 1992/93 and 1993/94 Final 
Results.
    Husky has calculated its royalty expense for the facility in 
question based on the presumption that there is a liquid sulphur cost 
element embedded in the sulphur poured to block which must be captured 
in Husky's liquid sulphur COM. However, based on the above-referenced 
Departmental determination in the 1992/93 and 1993/94 reviews that 
block production is not finished production, no royalty expense should 
be allocated to sulphur poured to block for the purposes of calculating 
a liquid sulphur COM.
    Furthermore, we note that Husky did not have any sales of liquid 
sulphur for the POR for the facility in question. Therefore, we 
determine that all of Husky's royalty expense for this facility should 
be assigned to formed sulphur. We have recalculated Husky's per unit 
COM for liquid sulphur accordingly. See Memorandum to the File: 
Analysis Memorandum for Husky Oil, Ltd. for the Final Results of the 
Antidumping Administrative Review of Elemental Sulphur from Canada 
(1994/95) page 3 (May 7, 1997).
Comment 6
    Petitioner claims that Husky's crown royalty allocation is 
distortive because it double-allocates the royalties to formed sulphur. 
Specifically, by first splitting the royalties between liquid and 
formed sulphur based on production volume, Husky assigned an 
inappropriate portion of the royalties directly to formed sulphur. 
Then, according to petitioners, Husky indirectly allocated most of the 
other portion of the royalties to that same formed sulphur by dividing 
that other portion by a volume including the volume of formed sulphur.
    Husky argues that its approach in calculating the royalty assessed 
on formed sulphur is consistent with that taken for all other costs 
incurred in the sulphur handling facility (except the loading costs 
which are assigned to specific products). The allocated portion of the 
royalty payment to liquid sulphur, according to Husky, represents the 
portion of the royalty associated with the liquid production processes, 
while the portion charged to the formed sulphur is associated with the 
formed production process.
    Department's Position: Because we have determined that all of 
Husky's royalty expense for this facility should be assigned to formed 
sulphur (see Comment 5), the question of double-allocation is moot.
Comment 7
    Petitioners assert that Husky failed to include in COM the cost of 
transferring liquid sulphur to one plant. Petitioners argue that under 
the Department's sulphur cost methodology, the cost of transferring 
liquid sulphur is a common cost, and as such must be included in the 
COMs of both formed and liquid sulphur. Furthermore, petitioners claim 
that, despite Husky's statements to the contrary, sulphur trucked from 
certain facilities to another facility could not have all been formed.
    Husky states that it would be economically impractical, and 
``completely illogical,'' for Husky to incur additional expense to 
transfer liquid sulphur from one facility to another to sell the 
sulphur as liquid or to pour it to block. Husky stated for the record 
that it transferred liquid sulphur to one plant only to form that 
sulphur. Husky claims that petitioners' supposition that Husky would 
not know if a portion of the truck volume was poured to block because 
Husky noted that forming costs cannot be tracked by source begs the 
question of whether Husky actually incurred the transportation expense 
for liquid production. Husky concludes that the allocation of transfer 
costs to liquid sulphur is nonsensical given the fact that the transfer 
price is greater than the cost of producing the liquid, and that the 
volume of sulphur affected is so small that the importance of the 
subject has been overstated by petitioners.
    Department's Position: We disagree with petitioners' 
characterization of the Department's policy with regard to treatment of 
the cost of transferring liquid sulphur. Specifically, petitioners 
appear to have concluded from two separate statements from different 
prior reviews that the Department necessarily views the cost of 
transferring liquid sulphur during manufacturing as a cost of producing 
liquid sulphur, regardless of whether that liquid sulphur is all formed 
during a particular review period. First, petitioners state that the 
Department specifically determined in the 1991-92 review that costs 
incurred in ``transferring of the product'' are sulphur production 
costs. See Memorandum from Joseph A. Spetrini to Susan G. Esserman, 
Regarding Team Recommendation Related to the Cost Accounting Treatment 
of Elemental Sulphur from Canada in the 1991-92 Administrative Review, 
page 6 (public version) (June 29, 1995). Second, they note that the 
Department wrote in the 1993/94 review that Husky ``should have 
included the liquid sulphur costs at certain plants * * *. in the 
calculation of its weighted-average COM for liquid sulphur, and 
deducted the forming costs from the total reported sulphur costs to 
determine the liquid sulphur costs at those plants.'' See Memorandum 
from Holly A. Kuga to Joseph A. Spetrini in the 1993/94 Administrative 
Review, page 4 (public version) (June 4, 1996). Finally, petitioners 
seem to suggest that Husky itself has treated the cost of transferring 
liquid sulphur at certain plants as common costs, notwithstanding the 
fact that all liquid sulphur transferred within these plants was either 
formed or poured to block during the POR. See Petitioners' Case Brief, 
page 14 (footnote 41).
    With regard to petitioners' citation to the 1991/92 review period, 
we note that the Department was discussing costs incurred in the 
sulphur handling facility, such as the costs of prilling, slating, 
remelting, loading, etc., in addition to the costs of transferring the 
product. The Department considers the cost of prilling to be associated 
with formed sulphur, and not a common cost of sulphur production. Thus, 
one cannot reasonably assume that the Department recommended in that 
review that liquid transferral of the product must necessarily be a 
common cost. Given that transferral of liquid sulphur is not 
necessarily a cost of producing liquid sulphur, petitioners' cite to 
the 1993/94 memorandum concerning the inclusion of liquid sulphur costs 
in Husky's weighted-average COM for liquid sulphur does not support its 
point on this issue.
    Lastly, we note that there is no indication from the record that 
all liquid sulphur transferred between certain other plants, which was 
either formed

[[Page 37962]]

or poured to block during the POR, was formed for offshore sales. 
Therefore, petitioners' reference to Husky's treatment of transferral 
costs for these plants is inapposite. Most importantly, Husky has 
stated for the record that during the POR, all sulphur transferred from 
the plant in question was formed for offshore sales. See Supplemental 
Cost Questionnaire Response at page 5 (public version) (September 4, 
1996). Contrary to petitioners' allegation, this statement does not 
necessarily contradict Husky's August 2, 1996 response, in which Husky 
stated that a portion of sulphur from a certain other facility is 
poured to block or formed for offshore sale at this plant. 
Specifically, this earlier response may be interpreted as a general 
description of the disposition of transferred sulphur, and not 
necessarily as a description pertaining only to the POR. In contrast, 
the September 4 submission clearly indicated that the applicable time 
period was the POR.
    In this case, because Husky has certified that all liquid sulphur 
transferred from the facility in question to another facility is formed 
for offshore sale, the cost associated with that transfer are 
associated with formed sulphur, not liquid sulphur, much as prilling is 
considered a cost of formed sulphur. Because all of the sulphur in 
question was sold offshore, this information is not pertinent to our 
margin analysis, since we are comparing U.S. sales of liquid sulphur to 
home market sales of liquid sulphur.
Comment 8
    Petitioners claim that the Department should include an allocated 
portion of plant-wide general facilities expenses at one plant in the 
calculation of COP/CV. Petitioners assert that Husky did not identify 
plant-wide general facilities costs at the plant or state whether a 
portion of these expenses was allocated to sulphur handling, despite 
the explicit request of the Department. Thus, petitioners argue that 
the Department should either require Husky to answer the questions 
originally posed in a supplemental cost questionnaire, or the 
Department should resort to adverse facts available to calculate these 
costs.
    Husky responds that the Department has determined in every review 
since Husky was named as a respondent that the gas plant general 
facilities expenses in a particular lease unit at the plant in question 
are not related in any way to sulphur production. Husky also states 
that the Department determined, based on a verification in an earlier 
review, that the only general facilities costs allocable to sulphur at 
this plant are contained in the sulphur handling functional unit.
    Department's Position: In response to the Department's question 
requiring Husky to identify all plant-wide expenses incurred relating 
to the operation of the entire plant in question, Husky stated that its 
general facilities functional units were distinct, for the gas plant 
and for the sulphur handling facility, with ``no overlap of costs.'' 
See Supplemental Cost Questionnaire Response at page 11 (public 
version) (September 4, 1996). This corresponds to Husky's description 
of the cost accumulation system in place which the Department verified 
in the 1991/92 segment of this proceeding. See Memorandum to the File: 
Elemental Sulphur from Canada: Final Results of Antidumping 
Administrative Review (March 4, 1996), at page 2 (March 29, 1996), in 
which the Department noted that ``at verification, we reviewed evidence 
demonstrating that {a certain lease} related solely to natural gas 
production while {a certain other lease} related solely to sulphur 
production.'' There is no indication that the cost accounting system 
has changed for this plant since that review (while Husky notes that 
there have been leases added since then, such a change cannot 
reasonably be described as the type of change in the accounting system 
referred to on page D-9 of the Department's original questionnaire in 
this review). Thus, we find that Husky adequately responded to the 
Department's inquiry regarding the identification of all plant-wide 
general expenses relating to the operation of the entire plant. 
Furthermore, given the structure of cost accounting at this plant, 
Husky was not compelled to identify lease 630 (another general 
facilities lease) in response to any of the Department's questions: 
that lease did not apply to sulphur production in any way.
Comment 9
    Petitioners contend that the Department should obtain information 
necessary to account for the depreciation incurred for sulphur 
belonging to another company at one plant. Petitioners claim that Husky 
has added the sulphur production volume of this company for the purpose 
of calculating the per-unit depreciation expense at this plant, but has 
not accounted for the other company's depreciation associated with the 
additional volume. Furthermore, petitioners note that Husky has not 
``even'' asserted that it incurs all of the depreciation for the other 
company's production volume, and that in this review, unlike the 1991/
92 proceeding, petitioners specifically asked the Department prior to 
the preliminary results to investigate whether the other company 
incurred any depreciation for its volume.
    Husky notes that, in the 1991/92 review, the Department verified 
and accepted Husky's allocation of the depreciation expense incurred at 
this plant over the total production of Husky and the other company. 
Husky insists that it has followed the same allocation methodology, and 
the agreement between the two companies has not changed.
    Department's Position: In the final results of the 1991/92 review, 
we stated that ``* * * it is appropriate to include a certain company's 
sulphur production quantity in the calculation of per-unit depreciation 
expense. Therefore, we have accounted for all quantities processed at 
the facility, regardless of whether the product was owned by Husky, in 
establishing the per-unit depreciation costs.'' See 1991/92 Final 
Results at page 8246. The record is clear that the allocation 
methodology followed by Husky in this review is the same as in the 
1991/92 segment of this proceeding. Further, the record shows that the 
agreement between Husky and the other company has not changed. 
Moreover, the Department verified Husky's allocation of the 
depreciation expense in the 1991-92 review. The lack of a verification 
of Husky in the current segment of the proceeding is not sufficient 
reason for the Department to revisit an allocation methodology which 
the Department has previously determined to be appropriate, especially 
where the record indicates that there have been no changes to the 
applicable agreement between Husky and the other company.
    Petitioners' statement that Husky has not ``even'' asserted that it 
incurs all of the depreciation incurred for the other company's 
production volume is misleading, as the Department never required Husky 
to state what proportion of depreciation it incurs for the other 
company's production volume. Petitioners also comment that it 
requested, prior to the preliminary results of this review, that the 
Department ask Husky whether the other company incurred depreciation 
for its volume. However, there is no indication on the record of the 
1991/92 review that the Department based its decision to include the 
other company's sulphur production quantity in the calculation of per-
unit depreciation expense, without adjusting for some depreciation 
incurred by the other company, on the fact that petitioners

[[Page 37963]]

had failed to ask for such information prior to the preliminary 
results. In fact, the timing of petitioners' comments regarding 
depreciation for this plant was not at issue in the 1991/92 review.
    Finally, we agree with petitioners that it would be distortive to 
include the other company's volume in the calculation of the per-unit 
costs unless all of the depreciation incurred in connection with the 
other company's volume was incurred by Husky. By the same token, it 
would also be distortive to exclude the other company's production 
volume when Husky incurs all of the depreciation. Based upon the fact 
that Husky followed the same allocation methodology from the previous 
review, which was specifically verified, and based on the fact that 
there have been no changes to the agreement between Husky and the other 
company, we are satisfied that Husky has properly allocated 
depreciation for this plant in the current review.
Comment 10
    Petitioners allege that Husky underreported depreciation for 
sulphur handling assets at one facility. Petitioners maintain that 
under generally accepted cost accounting principles, depreciation of 
fixed assets is based on acquisition cost, not book value (as Husky has 
done). Petitioners claim that the Department cannot base depreciation 
on book value rather than acquisition cost when Husky failed to explain 
and support its use of book value as required by the Department. To do 
so, petitioners argue, would allow Husky to arbitrarily choose any 
depreciation method that results in the least amount of depreciation 
for the subject merchandise.
    Petitioners also note that Husky reported no depreciation for the 
original assets of this facility that Husky acquired. However, 
petitioners maintain that Husky could not have fully depreciated these 
original assets by 1993 because it stated that it has not recorded 
depreciation for this facility in any year. Petitioners also claim that 
record evidence indicates that the original assets cannot be fully 
depreciated based on petitioners' understanding of the original 
purchase date of these assets and the useful life used by Husky for 
depreciation purposes. Furthermore, petitioners claim that it has been 
the Department's practice (and is supported by the Statement of 
Administrative Action) to include depreciation of assets used to 
produce the subject merchandise in the COP/CV even where the respondent 
did not record depreciation for those assets in the normal course of 
business during their useful lives.
    Petitioners state that, due to the alleged deficiencies in Husky's 
reported depreciation at one facility, the Department should obtain the 
information necessary to calculate depreciation of the original assets 
of this facility based on acquisition cost. If the Department does not 
obtain this information, petitioners state that it should rely on 
adverse facts available to determine the depreciation for the sulphur 
handling assets at this facility.
    Husky argues that the only asset value associated with this 
facility was related to upgrading the forming assets. Additionally, 
Husky claims that the asset summary for this facility, which is on the 
record of this review, disproves petitioners' claim that Husky could 
not have fully depreciated the assets by 1993. Finally, Husky argues 
that it is not Departmental policy to impute an additional depreciation 
expense when a respondent has fully depreciated relevant assets. On the 
contrary, according to Husky, the Department's statutory mandate is to 
calculate actual costs of production.
    Department's Position: We agree with respondents. Petitioners have 
asserted that contrary to Husky's claim, the assets at this plant could 
not have been fully depreciated by 1993. Petitioners have based this 
claim on an inference they have made with regard to the circumstances 
surrounding Husky's obligation to purchase liquid sulphur output from a 
certain gas plant at this facility. However, we note that there is no 
indication from the record that this obligation coincided with Husky's 
acquisition of the facility itself. Furthermore, the record information 
regarding Husky's recorded depreciation supports Husky's claim that 
these assets were fully depreciated by 1993. See Exhibit 42 of Husky's 
December 6, 1996 submission. Therefore, petitioners' argument that this 
asset could not be fully depreciated by 1993 is unpersuasive.
    With regard to the basis of depreciating those assets related to 
upgrading the forming assets, we note that Husky has calculated 
depreciation based on actual asset values, which tie to Husky's audited 
financial statements. See Exhibit 42 of the December 6, 1996 response. 
In fact, there is no indication that these values, as appearing on the 
fixed asset summaries for 1993, 1994, and 1995, represent anything 
other than the actual costs to Husky for the additions.
    For the above reasons, we do not agree with petitioners regarding 
the need to obtain any further information regarding depreciation at 
this facility, nor do we believe that Husky's reporting methodology 
warrants the application of facts available to determine the 
depreciation for the sulphur handling assets at this facility.
Comment 11
    Petitioners contend that Husky failed to follow the Department's 
method for calculating plant-specific COMs and then weight-averaging 
those COMs. The method employed by Husky, petitioners assert, 
improperly shifts costs to the volume of sulphur poured to block, 
thereby excluding those costs from the COP/CV of sulphur. Additionally, 
petitioners maintain that Husky has improperly shifted block storage 
costs (which are to be treated as a common cost of producing liquid and 
formed sulphur, according to petitioners' interpretation of the 
Department's methodology) to block sulphur, and that by doing so, it 
has excluded those block storage costs from the COP/CV of sulphur.
    Husky contends that petitioners' claim that Husky did not allocate 
any costs to block sulphur is ``patently incorrect.'' At one plant, 
Husky claims that it allocated the costs of the block unit over the 
block unit throughput, then allocated the costs of sulphur handling 
over sulphur handling throughput, to determine the cost for the block 
sulphur product, the liquid sulphur input, and formed sulphur. To 
weight-average all these facilities, Husky maintains that it included 
the volume of the block sulphur and the volume of the liquid sulphur 
input as liquid production.
    Husky argues that petitioners would have the Department exclude the 
block production from the allocation of sulphur handling and block 
costs, but then include the block volume in weight-averaging these 
plant costs with the costs of the other facilities to derive the 
reported, single weighted-average cost. Husky asserts that sulphur 
cannot be production for one purpose but not for another.
    As for the other facilities, Husky claims that its calculations are 
somewhat different by necessity. For example, at one facility, the 
block costs are not separately broken down, preventing Husky from 
allocating block over block volume alone. At another facility, the 
block costs were allegedly ``so low'' that Husky chose not to calculate 
a separate block product cost. Husky suggests that had it calculated a 
separate block cost, the final per unit block cost would have been the 
same.
    Department's Position: In the 1992/93 and 1993/94 final results of 
reviews

[[Page 37964]]

notice, the Department determined that, ``consistent with the 
Department's decision in the 1991/92 review * * * block costs are 
appropriate to include as part of the cost of producing sulphur.'' We 
also stated that ``because sulphur poured to block must be remelted and 
then processed through either liquid or forming facilities before it 
can be sold, block sulphur is not considered finished production.'' 
Furthermore, based on this determination, we concluded that it would be 
improper to allocate any sulphur costs to sulphur poured to block. See 
Comments 5 and 6 of 1992/93 and 1993/94 Final Results. Thus, for this 
review, we have recalculated Husky's COM for liquid sulphur to include 
block storage costs, but to exclude block volume. See Memorandum to the 
File: Analysis Memorandum for Husky Oil, Ltd. for the Final Results of 
the Antidumping Administrative Review of Elemental Sulphur from Canada 
(1994/95) page 4 and Attachment 2 (May 7, 1997).
Comment 12
    Petitioners note that Husky failed to include in COP/CV the cost of 
sulphur royalties paid to private parties.
    Husky acknowledges that it excluded the freehold royalty expense 
from its cost calculation. Husky claims, however, that the per ton cost 
is so insignificant that no adjustment to the reported cost for liquid 
sulphur is necessary.
    Department's Position: We agree with petitioners that Husky failed 
to include in COP/CV the cost of sulphur royalties paid to private 
parties. Section 776(a)(1) of the Act stipulates that if the 
``necessary information is not available on the record * * * the 
administering authority and the Commission shall, subject to section 
782(d), use the facts otherwise available in reaching the applicable 
determination under this title.'' Absent any record information on the 
method in which sulphur royalties are paid to private parties, we have 
assumed as facts available that sulphur royalties paid to private 
parties are a cost common to the production of liquid and formed 
sulphur, and have allocated these costs based on the facility's direct 
cost units. See Memorandum to the File: Analysis Memorandum for Husky 
Oil, Ltd. for the Final Results of the Antidumping Administrative 
Review of Elemental Sulphur from Canada (1994/95), page 4 and 
attachment 4 (May 7, 1997).
Comment 13
    Petitioners claim that the Department should include at least a 
portion of sulphur recovery costs in its calculation of the COM and CV 
of Husky's sulphur. The Department should do so, according to 
petitioners, for several reasons.
    First, petitioners state that the statute at 19 U.S.C. section 
1677b(e)(1)(A) requires that the cost of ``fabrication or other 
processing of any kind'' be included in CV. Second, petitioners 
maintain that generally accepted cost accounting principles require all 
post-split-off costs to be included in the cost of producing by-
products. Third, petitioners argue that the Department's practice in 
cases in which by-products are the subject merchandise requires that 
all after-separation costs be included in CV. Fourth, citing Silicon 
Metal from Argentina, petitioners contend that the Department's 
practice in cases in which by-products are not the subject merchandise 
requires that all after-separation costs be assigned to the by-product. 
Fifth, petitioners point to the Department's cost initiation memoranda 
in the 1992/93 and 1993/94 reviews, noting that they included the cost 
of the ``sulphur plant'' (sulphur recovery unit) and ``plant supporting 
facilities'' (sulphur handling) in its calculation of the cost of 
producing sulphur. Sixth, petitioners argue that record evidence shows 
that the sales value of sulphur and natural gas on a per metric ton 
basis were roughly equivalent from the mid-1980s through the early 
1990s. Finally, petitioners argue that record evidence shows that 
sulphur revenues were, and continue to be, important considerations in 
decisions to develop and operate major sour gas facilities.
    Department's Position: We disagree with petitioners. Consistent 
with our established practice for this product, we have determined that 
costs incurred subsequent to the sulphur recovery unit are 
appropriately allocated to sulphur production. With regard to the 
reasons put forward by petitioners to reconsider its methodology in 
calculating costs for sulphur, we note that the first three of these 
bases for consideration of the appropriate sulphur cost methodology 
were raised and addressed in the 1991/92 administrative review of this 
case. See Comments 2 and 3 of the 1991/92 Final Results notice at 8240-
44. The Department's position on these points remains the same. 
Therefore, we will restrict comment to the latter four points.
    Petitioners have cited Silicon Metal from Argentina, a case in 
which the by-product is not the subject merchandise, as a case in which 
the Department required that all after-separation costs be assigned to 
the by-product. In fact, in Silicon Metal from Argentina, the 
Department stated that its practice is to credit the cost of production 
of the primary product for revenues received as a result of the sale of 
any by-product. See Silicon Metal from Argentina; Final Results of 
Antidumping Duty Administrative Review, 58 FR 65336, 65340 (December 
14, 1993). There is no discussion of the appropriate stage in the 
production process at which to divide costs between the primary product 
and the by-product. In any event, the Department made clear its 
position in the 1991/92 review that the case of elemental sulphur is 
unique, ``in that even though the physical split-off point is prior to 
the sulphur recovery unit, Husky does not have the option of disposing 
of all H2S. * * * {i}n order to refine natural gas, Husky must incur 
costs in the sulphur recovery unit.'' See 1991/92 Final Results at 
8244. In contrast, there is no indication of any legal requirement that 
either charcoal or quartz fines (by-products in the production of 
silicon metal) be further processed in order to produce and market 
silicon metal.
    With regard to the Department's cost initiation memoranda in the 
1992/93 and 1993/94 reviews, these were issued prior to the final 
results notice in the 1991/92 review, which determined the appropriate 
cost methodology for the sulphur under review. In addition, the 
Department's policy with regard to the criteria needed to initiate a 
cost investigation states only that ``a reasonable methodology'' be 
employed. In light of the fact that the appropriate cost methodology 
was not finalized until the publication of the 1991/92 final results of 
review, the Department's decision to act upon a cost allegation that 
included sulphur plant costs (which did not explicitly reference 
sulphur recovery unit costs) is in no way determinative of the 
appropriate cost methodology. Indeed, in their cost allegation for this 
review, petitioners apparently recognize that the cost methodology used 
to meet the Department's cost initiation standard does not determine 
the final cost treatment for a review. Specifically, petitioners stated 
their belief that the costs it calculated for Husky were understated in 
several respects. See Allegations of Sales-Below-Cost by Husky and 
Mobil, pp. 3-5 (May 31, 1996).
    While petitioners have also cited ``record evidence that the sales 
value of sulphur and natural gas on a per-MT basis were roughly 
equivalent from the mid-1980s through the early 1990s,'' there is no 
discussion in petitioners' case brief as to why this is relevant to the 
Department's determination that only post-sulphur-recovery costs be

[[Page 37965]]

included in sulphur's COM. Petitioners provide no justification for 
comparing sales values of sulphur and natural gas on a per metric ton 
basis. Furthermore, the time period referenced ostensibly does not 
relate to the period of review.
    With regard to petitioners' assertion that ``record evidence 
indicates that sulphur revenues were, and continue to be, important 
considerations in the decision to develop and operate major sour gas 
facilities,'' we do not agree with petitioners that the evidence cited 
by them supports the inclusion of sulphur recovery costs in the COM of 
sulphur. First, in the 1991/92 review, the Department recognized that 
Husky's exploration ceased when it was found that the gas stream's H2S 
concentration was too high, making commercial development of the field 
impractical. This was stated by the Department in support of Husky's 
claim that it does not seek out sour gas for sulphur production 
opportunities. See Memorandum to Susan G. Esserman: Team Recommendation 
Related to the Cost Accounting Treatment of Elemental Sulphur from 
Canada, pp. 1-2 (June 29, 1995).
    Second, the information put on the record of this review by 
petitioners is unpersuasive for several reasons. First, petitioners 
have referred to Husky's financial statements and brochures as 
indications that its plants were not only built for the purpose of 
processing natural gas. In fact, the statements to which petitioners 
have referred are also consistent with those made by a company desiring 
to offset its gas production costs by maximizing its sales of produced 
sulphur. The desire of a company to maximize overall profits by selling 
as much of its by-product as possible does not, however, change the 
fact that the by-product is not a primary goal of production. Second, 
petitioners' reference to Shell Oil Canada's document discussing a sour 
gas project at Caroline is indicative only of Shell Oil Canada's 
considerations, in 1988, for development at Caroline. Shell Oil 
Canada's motives, however, are irrelevant to the review of Husky.
    Third, petitioners' assertion regarding Husky's motivations for 
investing remains speculative, as the Department also found in the 
1991/92 review. See 1991/92 Final Results at 8242.
    Therefore, given the low percentage for which sulphur revenues 
account on a corporate-wide basis for this review, as compared to 
Husky's oil and gas revenues (see Husky's November 13, 1996 letter to 
the Department, page 2) and the lack of record evidence that Husky has 
built its plants for purposes beyond that of processing natural gas, we 
do not find that the evidence supports petitioners' assertion that the 
Department should include the costs of sulphur recovery in calculating 
COM.
Comment 14
    Petitioners assert that the Department must include profit in CV 
based on the profit realized on sales made in the ordinary course of 
trade.
    Husky asserts that petitioners' discussion of profit is irrelevant, 
given that the preliminary results were calculated by comparing 
weighted-average home market prices with U.S. prices.
    Department's Position: We agree with respondent. Petitioners' 
assertion is moot, given that we have performed the margin calculation 
based solely on price-to-price comparisons.

Mobil

Comment 15
    Petitioners support the Department's assignation of a margin to 
Mobil based on total adverse facts available, as Mobil's responses are, 
according to petitioners, so deficient that the Department lacks the 
basic cost data necessary to calculate the COP and CV of Mobil's 
sulphur.
    First, petitioners assert that Mobil improperly based its 
initially-reported COM on data for only one self-selected facility 
which accounted for approximately 5% of Mobil's sulphur production 
during the POR, and were only estimates which were not proven to bear 
any relation to Mobil's actual costs as recorded in Mobil's cost 
accounting system.
    Second, petitioners claim that Mobil's supplemental questionnaire 
response failed to follow the Department's methodology to calculate COP 
and CV for sulphur, used an improper allocation basis in using the 
barrel of oil equivalent (BOE), failed to separately identify sulphur 
costs in the reported figures, and made significant improper offsets to 
the costs.
    Finally, petitioners claim that Mobil substantially revised its 
reported costs at verification. In and of itself, petitioners maintain, 
this warrants the application of total facts available to establish 
Mobil's margin.
    Mobil contends that Mobil's supplemental cost submission addressed 
the Department's concerns regarding its reporting methodology in its 
first cost submission. Furthermore, Mobil claims that its first cost 
reporting methodology indeed bears a relation to the company's actual, 
recorded costs. Mobil also claims that it did not fail to report major 
costs that are sulphur production costs, and indeed, under the BOE 
methodology, all costs subsequent to the sulphur split-off point have 
been reported.
    Mobil claims that the use of the BOE as the basis of its cost 
allocation does not justify adverse facts available treatment. Mobil 
claims that: it did not conceal its use of one BOE figure for internal 
purposes while the Government of Alberta used a higher figure; it never 
claimed that sulphur was used for heating purposes; and it did not 
receive explicit instructions from the Department not to use the BOE 
methodology. Mobil also notes that petitioners have argued against the 
BOE methodology without proposing an alternative.
    Finally, Mobil explains that its cost revisions at the outset of 
verification pertain to a change in accounting systems during the POR. 
Mobil asserts that the Department did not object to this change in its 
preliminary results.
    Department's Position: Mobil takes issue with the Department's 
statement in the preliminary results notice with regard to Mobil's 
first cost submission. Specifically, the Department stated that Mobil 
``could not prove that this estimate bore any relation to Mobil's 
actual costs as recorded in Mobil's cost accounting system.'' See 
Preliminary Results at 969. In the notice, this statement is included 
as partial explanation for Mobil's utilization of an entirely different 
methodology in its cost response to the Department's September 3, 1996 
supplemental questionnaire. Mobil did not take issue with the 
Department's characterization of its initial cost response at that 
time. In its supplemental questionnaire, the Department asked Mobil to 
``provide a detailed, clear explanation as to why you have reported 
estimated costs {accounting for only 5% of production}, rather than 
basing your reported costs on actual costs incurred for all of your 
facilities.'' See Supplemental Cost Questionnaire at page 2 (September 
3, 1996). In response, Mobil stated that it does not maintain cost 
accounting records at a level of detail that allows identification of 
the cost of handling sulphur, and thus it had instead provided a 
``reasonable estimate of this cost, based on the number of employees 
required, the time required, and the hourly labor cost, together with 
the cost of steam generation, power, and administrative expenses.'' See 
Supplemental Cost Response at page 2. Therefore, while it is true that 
certain individual elements of Mobil's first estimate of costs were 
traceable to accounting records, the sulphur cost estimate obviously 
could not have borne

[[Page 37966]]

any relation to Mobil's actual sulphur costs as recorded in Mobil's 
cost accounting system, based on Mobil's own description of an 
accounting system which purportedly did not allow identification of the 
costs of handling sulphur.
    Mobil's claim that it did not fail to report major costs that are 
sulphur production costs under the BOE methodology is irrelevant. Of 
course, when a company provides total plant costs, then by definition 
all costs (including, in this case, sulphur costs) would be included. 
This is not the issue. As we noted in the December 13, 1996 decision 
memorandum, Mobil did not provide information in the form and manner 
requested by the Department. See Decision Memorandum, page 4. The 
Department discovered at verification that sulphur cost centers existed 
during the period of review for five plants, directly contradicting 
Mobil's repeated assertions that it did not keep costs in sulphur-
specific cost centers. See, e.g., August 5, 1996 cost response at pages 
3-4 (``because it does not break out sulphur costs in its accounting 
system, Mobil does not have available in its normal accounting system 
separate information for sulphur handling costs''), page 20 
(``Consequently, no effort is made to create any costing mechanism for 
this material''), page 25 (``As such, Mobil assigns no costs to sulphur 
in its ordinary books and records''); September 25, 1996 supplemental 
cost response at page 9 (``As explained above, Mobil does not break out 
the costs associated with sulphur production and therefore cannot 
report the actual cost of each step of the sulphur production 
process'').
    With regard to Mobil's use of the BOE methodology, the Department's 
December 13, 1996 decision memorandum makes it clear that the 
Department applied facts available with adverse inference for three 
reasons: (1) Mobil withheld information requested by the Department, 
(2) Mobil did not provide information in the form and manner requested 
by the Department, and (3) Mobil's September 25, 1996 allocation 
methodology did not verify. See Decision Memorandum at page 4. Clearly, 
there is no indication from this statement that the inability of Mobil 
to support its use of the BOE methodology, by itself, caused the 
Department to apply adverse facts available. Nevertheless, the 
deficiencies surrounding the use of the BOE methodology are 
significant, both with regard to Mobil's statements regarding its 
internal use of the BOE figure as well as with the overall 
appropriateness of basing an allocation on the BOE.
    First, Mobil stated in its supplemental cost response that it 
``generally uses a  certain BOE per metric ton  value * * * for sulphur 
in its internal reports.'' See supplemental cost response at page 6 
(September 25, 1996). At verification, however, Mobil was unable to 
provide any documentation showing that Mobil used the figure during the 
POR, or that it generally ``uses'' this figure. In fact, Mobil stated 
at verification that this figure had ``probably'' not been used since 
the 1980s, when the company included sulphur reserves in its reserve 
surveys. See Cost Verification Report at page 9 (November 18, 1996). 
Thus, Mobil could not prove at verification that it had accurately 
represented its internal use of the BOE value.
    Second, Mobil has argued that the Department ``had not expressed 
dissatisfaction with this methodology in any of the previous reviews'' 
(see Case Brief at page 30), and that it had received ``no indication 
from the Department (in either this review or the previous three 
reviews) that it disagreed with that methodology.'' See Hearing 
Transcript, page 97 (March 6, 1997). However, the cost verification 
report for the 1991/92 review clearly states in its report summary that 
``this {BOE} methodology might not be an appropriate basis for the 
allocation of joint costs'' (page 2), and also specifically states 
that: ``it was noted by company officials that sulphur is not used as a 
heat source,'' (page 5); Mobil ``was unable during verification to show 
how the company settled on {the specific BOE} value'' (page 5); and 
``company officials reported that over the years a number of factors 
have been used in various management reports to value sulphur, and 
these values appear to be arbitrarily assigned'' (page 6). See 
Verification of Cost of Production and Constructed Value: Mobil Oil 
Canada, Ltd. (September 26, 1994). While the Department did not discuss 
the BOE methodology due to overriding problems with Mobil's response in 
the 1991/92 review, this does not effectively remove the cost 
verification report from the record, as Mobil seems to imply.
    Third, Mobil stated at the hearing (see Hearing Transcript at page 
109) that the Department did not send out a second cost supplemental 
questionnaire addressing Mobil's use of the BOE. We note that section 
782(d) of the Act stipulates that the Department is obligated to 
``promptly inform the person submitting the response of the nature of 
the deficiency'' in the event that a response to the initial request 
for information does not comply with the request. Additionally, the 
Department ``shall, to the extent practicable, provide that person with 
an opportunity to remedy or explain the deficiency in light of the time 
limits established for the completion of investigations or reviews 
under this title.'' However, section 782(d) also stipulates that if a 
respondent submits further information in response to the deficiency 
and the Department finds that this further response is not 
satisfactory, then the Department may disregard all or part of the 
original and subsequent responses.
    In this review, as the Department noted in the preliminary results 
notice, in response to the Department's September 3, 1996 request for 
supplemental information, Mobil submitted a response on September 25, 
1996 based on an entirely different methodology, in which total plant 
costs (including production of gas, oil, and sulphur) were reported and 
then allocated to the production of subject merchandise. See 
Preliminary Results at 980 (emphasis added). This new methodology was 
necessary due to the fact that, in its initial cost response, Mobil 
used an estimated cost of manufacture (``COM'') based on an engineering 
estimate of sulphur loading costs at one plant, representing 5% of 
Mobil's sulphur production. However, Mobil could not prove that this 
estimate bore any relation to Mobil's actual costs as recorded in 
Mobil's cost accounting system. Moreover, the estimate only applied to 
5% of Mobil's production of subject merchandise. See Preliminary 
Results at 980.
    Nevertheless, the Department determined that Mobil's revised 
methodology, as presented in the September 25, 1996 response, was also 
deficient. Specifically, we noted in our Decision Memorandum of 
December 13, 1996 (at page 2) that the ``allocation methodology * * * 
did not verify, because the production unit conversion factor applied 
by Mobil in its response: (1) Does not appear to be a factor 
consistently applied by Mobil for internal purposes; (2) is not the 
same value as the factor used by an outside unit (such as the Alberta 
Government), and (3) converts sulphur production on the basis of its 
heat content, even though sulphur has no heating value.''
    Therefore, Mobil's suggestion that the Department is obligated to 
send out further supplemental questionnaires when respondents have 
submitted unuseable and inadequate information in their initial and 
supplemental cost responses is contrary to section 782(d) of the 
statute.

[[Page 37967]]

    This review operates, as do all others under the governing statute, 
under strict time limits. Given the Department's record statements 
about the BOE and the Department's specific pre-verification directions 
to Mobil to be prepared to ``discuss and support the conversion 
factor(s) used for BOE (barrel of oil equivalent) in your allocation of 
costs to sulphur'' (see Cost Verification Outline, page 5 (October 11, 
1996), Mobil had ample notice that the Department would require Mobil 
to support the use of BOE in its allocation of costs.
    Finally, the discovery of unreported sulphur cost centers alone 
renders Mobil's cost response unreliable, as does the above-mentioned 
problems with the BOE methodology. Therefore, the issue of the 
significance of the changes presented at the outset of verification is 
moot.
Comment 16
    Mobil argues that its failure to disclose, prior to verification, 
that its accounting records contained limited information on sulphur 
costs does not justify application of adverse facts available. Mobil 
claims that its statement regarding the ability to track sulphur costs 
in its cost accounting system had been repeated from an earlier review 
(the 1991/92 review), while the individual preparing the response for 
this review was unaware that Mobil's cost accounting records had 
changed. Mobil believes this carelessness does not justify the 
treatment it received in the preliminary results for several reasons.
    First, Mobil claims that it voluntarily disclosed the ``omission'' 
to the Department during the verification, demonstrating its 
cooperation, and that it is unlikely that the verification team would 
have discovered, on its own, the existence of these cost centers. Mobil 
cites, inter alia, Stainless Steel Wire Rods from Brazil, in which the 
Department applied ``second-tier'' best information available (BIA), 
after terminating a verification due to the revelation at the outset of 
verification that a significant portion of home market sales had been 
omitted. See Final Determination of Sales at Less Than Fair Value: 
Stainless Steel Wire Rods from Brazil, 58 FR 68862, 68863 (December 29, 
1993). Mobil asserts that the Department applied a cooperative BIA rate 
in that case because the respondent had volunteered the missing 
information. Thus, Mobil believes that the application of adverse facts 
available in this case conflicts with the Department's own 
determination that the voluntary nature of a disclosure demonstrates 
that a respondent is cooperative. Mobil also distinguishes this case 
from Certain Cut-to-Length Carbon Steel Plate from Sweden, in which 
Mobil claims that respondents in that case, unlike this one, made no 
effort to provide the Department with notice that it would be unable to 
perform a cost reconciliation. See Preliminary Results of Antidumping 
Duty Administrative Review; Certain Cut-to-Length Carbon Steel Plate 
from Sweden, 61 FR 51898 (October 4, 1996). Mobil also believes that 
the facts in this case are different from all other cases since 1995 in 
which the Department has applied total adverse facts available. 
Specifically, Mobil claims that it ``passed'' verification, since a 
number of cost items were ``successfully'' verified.
    Second, Mobil claims that it was not to its advantage to hide the 
sulphur costs, since the average costs for the plants with sulphur-
specific costs is allegedly lower than the average cost calculated 
using the BOE methodology. Mobil also maintains that it harmed itself 
by its ``omission'' and therefore cannot properly be considered 
uncooperative. Specifically, Mobil asserts that the data from the 
sulphur cost centers results in a lower average cost for the five 
plants in question than the average reported under the BOE methodology.
    According to Mobil, the data for the plants with sulphur-specific 
costs contains sulphur production costs as well as handling costs, and 
therefore do not provide the information requested by the Department. 
Mobil claims that, for four of the five plants with sulphur cost 
centers, the data are not responsive to the Department's inquiry. Mobil 
claims that the titles of these cost centers make it clear that the 
information in the cost centers includes more than just sulphur 
handling costs, and that an examination of the individual accounts 
shows that they cannot be broken out between handling and processing.
    Petitioners support the Department's application of adverse facts 
available, stating that the evidence shows that Mobil did not cooperate 
with the Department to the best of its ability.
    Petitioners argue that Mobil's claim regarding the relative sulphur 
cost based on the data from the sulphur cost centers is without merit, 
as the information was not even verified by the Department.
    Petitioners also argue that it cannot be readily discerned from the 
titles of the cost centers that they include more than sulphur handling 
costs.
    Department's Position: Mobil has characterized its failure to 
disclose the fact that it kept records at five plants during the POR 
which included sulphur cost centers as an omission. We note, however, 
that the issue in Stainless Steel Wire Rods from Brazil was the 
exclusion of a portion of home market sales. The omission of a portion 
of information is qualitatively different than the representation of 
the non-existence of that type of information. For example, had Mobil 
provided sulphur cost center information for three of the five plants 
which kept sulphur-specific cost centers, the reference to Stainless 
Steel Wire Rods from Brazil might be more relevant. However, the 
repeated assertions that no such centers were kept, in light of the 
discovery at verification, go beyond what we believe can be considered 
an omission, and clearly demonstrate that Mobil did not cooperate to 
the best of its ability in this review.
    Mobil has emphasized its ``voluntary'' revelation regarding the 
sulphur cost centers in arguing that the Department should not apply 
total adverse facts available. Mobil also argues that the Department 
would have been unlikely to discover the ``omission'' on its own. With 
regard to Mobil's ``voluntary'' disclosure, we note that Mobil in fact 
revealed that one facility kept sulphur cost centers during the POR. 
The other four were identified only upon further questioning from the 
Department. In fact, concerning the facility first identified by Mobil, 
Mobil stated that such a {sulphur cost} breakout was not available for 
its other facilities for the POR. See Cost Verification Report, pp. 7-
8.
    Furthermore, Mobil's assumption that the Department would have been 
unlikely to discover the omission on its own is unfounded. In the cost 
verification outline (at page 1), the Department specifically stated 
the following: ``We wish to draw your attention to the fact that, as 
your company has maintained that its cost accounting records, as kept 
in the ordinary course of business, do not provide for the submission 
of sulphur cost data in the form which the Department has requested, we 
will examine those documents which your company in fact keeps in the 
ordinary course of business to corroborate your claim.'' See Letter to 
Mobil Oil Canada: Sales and Cost Verification, October 11, 1996.
    Mobil argues that it would have been in its interest to utilize the 
costs in the sulphur cost centers because they would have yielded a 
lower average cost. Such a claim is without merit, however, for several 
reasons. First, this assertion is based on unverified data not seen by 
the

[[Page 37968]]

Department until verification. The Department did not verify this data 
at verification because, as we noted in the preliminary results, it is 
a ``central tenet of Departmental practice that verification is not 
intended to be an opportunity for submitting new factual information.'' 
See Preliminary Results at 969-70. Second, to accept the data would 
have deprived the Department of the opportunity to properly analyze the 
information and receive clarifying and supplemental information on such 
data, which could affect the per unit costs. Finally, even assuming 
Mobil's calculations (as presented in Appendix F of its Case Brief) are 
correct and are based on accurate and appropriate figures, the data for 
two of the five facilities indicate a much higher cost of manufacturing 
than that reported by Mobil.
    Whether the data in these cost centers contain sulphur processing 
costs, or can be divided between processing and handling costs, 
likewise remains unverified. As petitioners have noted, the titles for 
these cost centers do not by themselves prove the existence of costs 
other than sulphur handling costs. Finally, even assuming, arguendo, 
that there may be sulphur processing costs included with the handling 
costs, this would still provide a more sulphur-specific cost pool from 
which to perform some type of allocation.
Comment 17
    Mobil argues that it had a ``good-faith belief'' that its responses 
were fully responsive to the Department's questionnaires.
    Petitioners respond that Mobil's assertion that it was cooperative 
reflects its claim that because sulphur is a waste product (a claim 
about which petitioners take issue), it cannot report sulphur costs in 
the form and manner required by the Department. According to 
petitioners, even more important is that the record shows that Mobil 
did not make an effort to obtain these data, even though Mobil has 
information available to it to comply with the Department's requests.
    Department's Position: Whether or not Mobil had a ``good-faith 
belief'' that its responses were fully responsive to the Department's 
questionnaires, Mobil has characterized its error as ``careless,'' that 
it could have been ``more diligent,'' and that it was inattentive in 
preparing the response. Additionally, as we noted in the preliminary 
results, Mobil stated at verification that it had not sought to 
ascertain whether the producing plants maintained sulphur cost centers. 
See Preliminary Results at 970.
    The Department has made no pronouncement regarding Mobil's 
intentions in this review. Indeed, our application of total adverse 
facts available in this case is not based in any manner on any belief 
in this company's intentions. As we stated in the preliminary results, 
we determined that, under section 776(a)(2)(A) of the Act, Mobil failed 
to provide the Department with the requested cost information, and that 
such failure constituted a withholding of information within the Act's 
meaning. We further determined, under section 782(e), that the 
submitted cost data was not useable. Finally, we determined, as 
provided by section 776(b), that an adverse inference was warranted 
because Mobil failed to cooperate by not acting to the best of its 
ability to comply with requests for information. See Preliminary 
Results at 970-71. We do not question Mobil's intentions in making any 
of the above determinations.
Comment 18
    Petitioners contend that the Department should assign a higher 
margin to Mobil as required by the Department's established practice.
    First, petitioners assert that the application of the 7.17% rate 
applied in the preliminary results would reward Mobil for its failure 
to cooperate with the Department. According to petitioners, the statute 
only requires the Department to corroborate secondary information to 
the extent practicable. Petitioners note that the SAA (at 870) states 
that the ``fact that corroboration may not be practicable in a given 
circumstance will not prevent the agencies from applying an adverse 
inference.''
    Second, petitioners argue that the 28.9% rate considered in the 
preliminary results can be corroborated, since the petitioners believe 
that the record shows that this rate was calculated in the LTFV 
investigation.
    Third, petitioners point to several other higher margins which 
petitioners maintain are calculated rates from the 1970s.
    Finally, petitioners state that the Department should apply the 
higher of the final rates calculated for Husky in the 1992/93 and 1993/
94 reviews if that rate exceeds the other rates identified by 
petitioners.
    Mobil argues that the Department has not abused its discretion in 
its application of the 7.17% rate as total adverse facts available. 
First, Mobil contends that the use of any costs on the record would 
lead to, at the most, a de minimis margin. Also, the application of any 
margin above de minimis prevents a respondent from becoming eligible 
for revocation. Therefore, any margin is punitive.
    Second, Mobil argues against the application of the 28.9% rate, 
maintaining that it is Departmental policy to choose as facts available 
a rate calculated by the Commerce Department, not the Treasury 
Department. Moreover, Mobil contends that the evidence put forward by 
petitioners does not even prove that this rate was calculated by the 
Treasury Department.
    Third, petitioners' suggested use of several other rates calculated 
for review periods in the 1970s is unsound, according to Mobil, because 
the record provides no details as to how those rates were calculated.
    Fourth, Mobil contends that the record shows it has cooperated with 
the Department, and thus should not receive a rate higher than 7.17%.
    Finally, Mobil argues that, in considering a rate to apply for the 
final results, the Department may not properly apply a rate that is 
itself based on best information available.
    Department's Position: As the Department noted in the preliminary 
results notice, we were unable to corroborate the rate of 28.9% based 
on the Department's official records of this proceeding. This rate was 
used as a ``first-tier'' best information available (BIA) rate in the 
1991/92 review. While we agree with petitioners that record evidence 
suggests that this rate stems from the original investigation, it is 
also true, as Mobil has noted, that there is no definitive evidence 
that this rate was calculated, and this of course precludes the 
existence of evidence detailing how it was calculated. Likewise, the 
proposed rates of 87.65% and 84.56% stem from review periods in the 
1970s and the record also lacks information regarding how these were 
calculated. As respondents have noted, the Department has limited 
itself in the selection of BIA rates from past reviews to reviews 
conducted by the Commerce Department, because the records pertaining to 
reviews conducted by the Treasury Department are less complete. See, 
e.g., Roller Chain, Other Than Bicycle, From Japan, 57 FR 3745 (January 
31, 1992); Pulton Chain Co. v. United States 17 CIT 1136 (CIT 1993).
    Petitioners' discussion of the 75.19% rate from the period 2/1/74 
to 11/30/80, in addition to suffering from the same limitations as 
those discussed above, is a rate from a preliminary results notice, and 
therefore cannot be considered corroborated since it does not reflect 
the Department's final calculations for that review period.

[[Page 37969]]

    We agree with Mobil that, to the extent that any margin above de 
minimis precludes that respondent from becoming eligible for 
revocation, it may be disadvantageous to that respondent. However, it 
does not follow that the application of any above-de minimis rate is 
punitive, as an above-de minimis margin may still be lower than the 
margin assigned to the company in a previous review period.
    We have applied as total adverse facts available the highest 
calculated margin from a previous review. Because the final rate in the 
1992/93 rate for Husky is 40.38%, we have chosen this rate as Mobil's 
rate for the POR. This rate meets the criteria for corroboration 
established under section 776(c). Specifically, as noted in the 
preliminary results notice, ``to corroborate secondary information, the 
Department will, to the extent practicable, examine the reliability and 
relevance of the information used. However, unlike other types of 
information, such as input costs or selling expenses, there are no 
independent sources for calculated dumping margins. The only source for 
margins is administrative determinations. Thus, in an administrative 
review, if the Department chooses as total adverse facts available a 
calculated dumping margin from a prior segment of the proceeding, it is 
not necessary to question the reliability of the margin for that time 
period.'' See Preliminary Results, page 971.
Comment 19
    Mobil argues that, if the Department concludes that an adverse 
inference is warranted, it should limit this adverse inference to cost 
of production and not to Mobil's total response. Mobil states that 
there are several alternatives in assigning a cost to Mobil's liquid 
sulphur, including the use of Husky's costs. Mobil states that its 
inadvertent error did not prevent the Department from verifying the 
cost information. Thus, according to Mobil, the Department's statement 
that its policy of applying total adverse facts available under these 
circumstances is meant to prevent a respondent from manipulating margin 
calculations by permitting the Department to verify only that 
information which the respondent wishes to use in its margin 
calculations is not applicable.
    Petitioners assert that it is Departmental practice to reject a 
respondent's submitted information in toto where a respondent fails to 
provide reliable cost data.
    Department's Position: While Mobil states that its ``inadvertent 
error'' did not prevent the Department from verifying the cost 
information, we do not agree that we were in a position to verify the 
cost information uncovered at verification. As we stated in the 
preliminary results notice, the Department could not verify this 
information because it met none of the criteria set forth in the 
Department's verification outline regarding the submission of new 
information. See Preliminary Results at 970. As these criteria were 
presented to Mobil prior to verification, Mobil had reason to believe 
that the Department would not accept such information at verification. 
Therefore, we have no grounds to conclude that the Department's policy 
of applying total adverse facts available in order to prevent a 
respondent from manipulating margin calculations by permitting the 
Department to verify only that information which the respondent wishes 
to use in its margin calculations is inapplicable in this case.
    Furthermore, we agree with petitioners that it is Departmental 
practice to reject a respondent's submitted information in toto where a 
respondent fails to provide reliable cost data. For a full explanation 
of this policy, please refer to the preliminary results notice. See 
Preliminary Results at 970-71.
    Nevertheless, we note that none of the alternatives suggested by 
Mobil in this case would appropriately serve as adverse facts available 
because none of them is adverse. See Final Results of Antidumping Duty 
Administrative Review: Certain Cut-To-Length Carbon Steel from Sweden, 
62 FR 18396, 18402 (April 15, 1997).

Final Results of Reviews

    As a result of our review of the comments received, we have changed 
the results from those presented in preliminary results of review. 
Therefore, we determine that the following margins exist as a result of 
our review:

------------------------------------------------------------------------
                                                                Margin  
      Manufacturer/exporter               Time period          (percent)
------------------------------------------------------------------------
Husky Oil Ltd....................  12/1/94-11/30/95             \1\ 0.33
Mobil Oil Canada, Ltd............  12/1/94-11/30/95           \2\ 40.38 
------------------------------------------------------------------------
\1\ This is a de minimis rate.                                          
\2\ As described above, this total facts available rate is Husky's rate 
  from the 1992/93 review period.                                       

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. Individual 
differences between U.S. price and normal value may vary from the 
percentages stated above. The Department will issue appraisement 
instructions directly to the Customs Service. Furthermore, the 
following cash deposit requirements will be effective upon publication 
of these final results for all shipments of this merchandise, entered 
or withdrawn from warehouse for consumption on or after the publication 
date, as provided for by section 751(a)(1) of the Act: (1) the cash 
deposit rates for the reviewed companies will be the rates for those 
firms as stated above (except that if the rate for a particular product 
is de minimis i.e., less than 0.5 percent, a cash deposit rate of zero 
will be required for that company); (2) for previously investigated 
companies not listed above, the cash deposit rate will continue to be 
the company-specific rate published for the most recent period; (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 
the rate established for the most recent period for the manufacturer of 
the merchandise; and (4) the cash deposit rate for all other 
manufacturers will be the ``all others'' rate made effective by the 
final results of the 1993/94 administrative review of these orders (see 
1992/93 and 1993/94 Final Results). These deposit requirements shall 
remain in effect until publication of the final results of the next 
administrative reviews.
    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 serves as a 
reminder to parties subject to administrative protective orders (APOs)

[[Page 37970]]

of their responsibility concerning the disposition of proprietary 
information disclosed under APO in accordance with 19 CFR 353.34(d)(1). 
Timely written notification of the 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 
section 353.22 of the Department's regulations.

    Dated: July 7, 1997.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-18446 Filed 7-14-97; 8:45 am]
BILLING CODE 3510-DS-P