[Federal Register Volume 64, Number 151 (Friday, August 6, 1999)]
[Notices]
[Pages 42908-42911]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20345]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-412-803]


Industrial Nitrocellulose From the United Kingdom; Preliminary 
Results of Antidumping Duty Administrative Review

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

action: Notice of preliminary results of antidumping duty 
administrative review.

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summary: The Department of Commerce (the Department) is conducting an 
administrative review of the antidumping duty order on industrial 
nitrocellulose (INC) from the United Kingdom in response to a request 
by the petitioner, Hercules Incorporated. This review covers one 
manufacturer/exporter of the subject merchandise to the United States 
during the period of July 1, 1997 through June 30, 1998. Based on our 
analysis, the Department has preliminarily determined that a dumping 
margin exists for the manufacturer/exporter during the period of review 
(POR). If these preliminary results are adopted in our final results of 
administrative review, we will instruct the United States Customs 
Service (Customs) to assess antidumping duties as appropriate. 
Interested parties are invited to comment on these preliminary results. 
Parties who submit comments in this proceeding are requested to submit 
with each comment (1) a statement of the issue, and (2) a brief summary 
of the comment.

Effective date: August 6, 1999.


[[Page 42909]]


for further information contact: Thomas F. Futtner or Ron Trentham, AD/
CVD Enforcement, Group II, Office 4, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 
482-3814 and (202) 482-6320, respectively.

Applicable Statute and Regulations

    Unless otherwise stated, all citations to the Tariff Act of 1930, 
as amended (``the Act''), are references to the provisions as of 
January 1, 1995, the effective date of the amendments made to the Act 
by the Uruguay Round Agreements Act (``URAA''). In addition, unless 
otherwise indicated, all citations to the Department's regulations 
refer to the regulations codified in 19 CFR Part 351 (April 1998).

supplementary information:

Background

    On July 10, 1990, the Department published in the Federal Register 
(55 FR 28270) the antidumping duty order on INC from the United 
Kingdom. On July 1, 1998, the Department published a notice of 
``Opportunity to Request an Administrative Review'' of this antidumping 
duty order for the period of July 1, 1997 through June 30, 1998 (63 FR 
35909).
    In accordance with 19 CFR 351.221, the petitioner requested that 
the Department conduct an administrative review of sales of subject 
merchandise made by respondent, Imperial Chemical Industries PLC (ICI). 
We published a notice of initiation of this antidumping duty 
administrative review on August 27, 1998. See initiation of Antidumping 
and Countervailing Duty Administrative Reviews and Requests for 
Revocation in Part, 63 FR 45796, August 27, 1998.
    Under Section 751(a) of the Act, the Department may extend the 
deadline for completion of an administrative review if it determines 
that it is not practicable to complete the review within the 
established time limit. On April 6, 1999, the Department published in 
the Federal Register a notice extending the time for the preliminary 
results from April 2, 1999, until July 31, 1999. See Industrial 
Nitrocellulose From the United Kingdom: Notice of Extension of 
Preliminary Results of Antidumping Duty Administrative Review, 64 FR 
16707, April 6, 1999.

Scope of the Review

    Imports covered by this review are shipments of INC from the United 
Kingdom. INC is a dry, white, amorphous, synthetic chemical with a 
nitrogen content between 10.8 and 12.2 percent, which is produced from 
the reaction of cellulose with nitric acid. INC is used as a film-
former in coatings, lacquers, furniture finishes, and printing inks. 
The scope of this order does not include explosive grade 
nitrocellulose, which has a nitrogen content of greater than 12.2 
percent. INC is currently classified under Harmonized Tariff System 
(HTS) item number 3912.20.00. While the HTS item number is provided for 
convenience and Customs purposes, the written description remains 
dispositive as to the scope of the product coverage.

Fair Value Comparisons

    To determine whether sales of INC from the United Kingdom to the 
United States were made at less than fair value (LTFV), we compared the 
constructed export price (CEP) to the normal value (NV), as described 
in the ``Constructed Export Price'' and ``Normal Value'' sections of 
this notice, below. When making produce comparisons in accordance with 
section 771(16) of the Act, we considered all products as covered by 
the ``Scope of Review'' section of this notice, above, that were sold 
by the respondent in the home market in the ordinary course of trade 
during the POR for purposes of determining appropriate product 
comparisons to U.S. sales. Where there were no sales of the identical 
or the most similar merchandise made in the home market that were 
suitable for comparison, we compared U.S. sales to sales of the next 
most similar foreign like product, based on the characteristics listed 
in Section B and C of our antidumping questionnaire.

Constructed Export Price

    ICI initially reported U.S. sales as export price (EP) sales. 
However, in a previous segment of this proceeding, the Department 
determined that ICI's U.S. sales were CEP transactions. See Industrial 
Nitrocellulose From the United Kingdom; Notice of Final Results of 
Antidumping Duty Administrative Review, 64 FR 6609, February 10, 1999. 
In response to the Department's supplemental questionnaire of February 
17, 1999, ICI reported all of its U.S. sales as CEP transactions.
    In calculating price to the United States price for ICI, the 
Department used CEP, as defined in section 772(b) of the Act because 
all sales to the first unaffiliated purchaser in the United States took 
place after importation. We calculated CEP based on packed, factory 
prices to unaffiliated customers in the United States. We made 
deductions from the starting price, where appropriate, for rebates, 
international freight, marine insurance, U.S. brokerage and handling, 
U.S. inland freight, U.S. duties, and direct and indirect selling 
expenses to the extent that they were associated with economic activity 
in the United States. These included credit expenses and commissions as 
applicable, in accordance with sections 772(c)(2) and 772(d)(1) of the 
Act. Finally, we made an adjustment for CEP profit in accordance with 
sections 772(d)(3) and 772(f) of the Act.
    For INC that was imported by a U.S. affiliate of ICI and then 
further processed into lacquer, sealer, and primer products before 
being sold to unaffiliated parties in the United States, we determined 
that the special rule for merchandise with value added after 
importation under section 772(e) of the Act applied. Where appropriate, 
in accordance with Section 772(d)(2) of the Act, the Department also 
deducts from CEP the cost of any further manufacture or assembly in the 
United States, except where the special rule provided in Section 772(e) 
of the Act is applied. Section 772(e) of the Act provides that, where 
the subject merchandise is imported by an affiliated person and the 
value added in the United States by the affiliated person is likely to 
exceed substantially the value of the subject merchandise, we shall 
determine the CEP for such merchandise using the price of identical or 
other subject merchandise sold in the United States if there is a 
sufficient quantity of sales to provide a reasonable basis for 
comparison. If there is not a sufficient quantity of such sales or if 
we determine that using the price of identical or other subject 
merchandise is not appropriate, we may use any other reasonable basis 
to determine the CEP.
    To determine whether the value added is likely to exceed 
substantially the value of the subject merchandise, we estimated the 
value added, pursuant to Sec. 351.401(c)(2) of the Department's 
regulations, based on the difference between the averages of the prices 
charged to the first unaffiliated purchaser for the merchandise as sold 
in the United States and the averages of the prices paid for the 
subject merchandise by the affiliated person. Based on this analysis, 
we determined that the estimated value added in the United States by 
ICI's U.S. affiliate accounted for at least 65 percent of the price 
charged to the first unaffiliated customer for the merchandise as sold 
in the United States. Therefore, in accordance with Sec. 351.402(c)(2), 
we determined that the value added is likely to exceed substantially 
the value of the subject merchandise. We also

[[Page 42910]]

determined that there was a sufficient quantity of sales of identical 
merchandise available in the U.S. market to provide a reasonable basis 
for comparison and that the use of such sales is appropriate in 
accordance with 772(e). Accordingly, for purposes of determining 
dumping margins for these sales, we have used the weighted-average 
dumping margins calculated on sales of identical merchandise sold to 
unaffiliated persons in the United States. See Sec. 351.402(c)(3). 
Discussion of the information which the Department used in making these 
determinations is not possible due to its proprietary nature. For a 
complete discussion, see Memorandum on Whether to Determine the 
Constructed Export Price for Certain Further-Manufactured Sales Sold by 
Imperial Chemical Industries PLC (ICI) in the United States During the 
Period of Review Under Section 772(e) of the Act dated July 31, 1999.

Level of Trade

    In accordance with section 773(a)(1)(B) of the Act, to the extent 
practicable, we determine NV based on sales in the comparison market at 
the same level of trade (LOT) as the EP or CEP transactions. The NV LOT 
is that of the starting-price sales in the comparison market or, when 
NV is based on constructed value (CV), that of the sales from which we 
derive selling, general and administrative (SG&A) expenses and profit. 
For EP, the U.S. LOT is also the level of the starting-price sale, 
which is usually from the exporter to the importer. For CEP, it is the 
level of the constructed sale from the exporter to the importer. See 
Notice of Final Determination of Sales at Less Than Fair Value: Certain 
Cut-to-Length Steel Plate from South Africa, 62 FR 61731 (November 19, 
1997) (Carbon Steel Plate).
    To evaluate the LOT, we examined information regarding the 
distribution systems in both the U.S. and U.K. markets, including the 
selling functions, classes of customer, and selling expenses for the 
respondent. Customer categories such as distributors, retailers, or 
end-users are commonly used by petitioners and respondents to describe 
different LOT's but, without substantiation, they are insufficient to 
establish that a claimed LOT is valid. An analysis of the chain of 
distribution and the selling functions substantiates or invalidates the 
claimed LOTs.
    Our analysis of the marketing process in both the home market and 
the United States begins with goods being sold by the producer and 
extends to the sale of the final user. The chain of distribution 
between the producer and the final user may have many or few links, and 
each respondent's sales occur somewhere along this chain. We review and 
compare the distribution systems in the home market and the United 
States, including selling functions, class of customer, and the extent 
and level of selling expenses for each claimed LOT.
    Unless we find that there are different selling functions for sales 
to the U.S. and home market sales, we will not determine that there are 
different LOTs. Different LOTs necessarily involve differences in 
selling functions, but differences in selling functions, even 
substantial ones, are not sufficient alone to establish a difference in 
the LOTs. Differences in LOTs are characterized by purchasers at 
different stages in the chain of distribution and sellers performing 
qualitatively different functions in selling to them. If the 
comparison-market sale is at a different LOT, and the difference 
affects price comparability, as manifested in a pattern of consistent 
price differences between the sales on which NV is based and 
comparison-market sales at the LOT of the export transaction, we make a 
LOT adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP 
sales, if the NV level is more remote from the factory than the CEP 
level and there is no basis for determining whether the difference in 
the levels between NV and CEP affects price comparability, we adjust NV 
under section 773(a)(7)(B) of the Act (the CEP offset provision).
    ICI did not claim a LOT adjustment. Nevertheless, we evaluated 
whether a LOT adjustment was necessary by examining the ICI's 
distribution system, including selling functions, classes of customers, 
and selling expenses. In reviewing ICI's home market distribution 
channels, we found that the POR sales of the merchandise under review 
in the comparison market were made at only one LOT. With respect to 
U.S. sales, after making deductions to the CEP sales pursuant to 
section 772(d) of the Act, we found the selling activities performed by 
ICI for the CEP sales to its affiliate were limited to order processing 
and arranging transportation. Therefore, we found that the selling 
functions performed at the CEP LOT were sufficiently different from the 
selling functions performed at the NV LOT (i.e., sales solicitation, 
price negotiation, customer visits, advertising, technical support, 
invoicing, and billing adjustment) to consider these to be different 
LOTs. We, therefore, evaluated whether the difference in LOT affected 
price comparability. The effect on price comparability must be 
demonstrated by a pattern of consistent price differences between sales 
at the two relevant LOTs in the comparison market. Because there was 
only one home market LOT, we were unable to determine whether there was 
a pattern of consistent price differences based on home market sales of 
subject merchandise.
    The Statement of Administrative Action (SAA) provides that, ``if 
information on the same products and company is not available, the LOT 
adjustment may also be based on sales of other products by the same 
company. In the absence of any sales, including those in recent time 
periods, to different LOTs by the exporter or producer under 
investigation, the Department may further consider the selling expenses 
of other producers in the foreign market for the same product or other 
products.'' See SAA at 830. In accordance with the SAA, we have 
considered alternative sources of information to make the necessary LOT 
adjustment, but we did not have information on the record that would 
allow us to examine or apply these alternative methods for calculating 
a LOT adjustment. Therefore, we do not have an appropriate basis to 
determine a LOT adjustment.
    Because we have found that all of the comparison sales in the home 
market were at a more advanced LOT than the sales to the United State, 
we were unable to qualify a LOT adjustment based on a pattern of 
consistent price differences, in accordance with section 773(a)(7)(B) 
of the Act. Therefore, we have preliminarily determined to grant a CEP 
offset to ICI. See Memorandum Regarding industrial Nitrocellulose from 
the United Kingdom-Level of Trade Analysis-Imperial Chemical 
Industries, PLC, August 2, 1999.

Normal Value

1. Home-Market Viability

    In order to determine whether there was a sufficient volume of 
sales of INC in the home market to serve as a viable basis for 
calculating normal value, we compared ICI's volume of home market sales 
of the foreign like product to the volume of U.S. sales of the subject 
merchandise, in accordance with section 773(a)(1)(B) of the Act. 
Because the aggregate volume of home market sales of the foreign like 
product by ICI was greater than five percent of the respective 
aggregate volume of U.S. sales of the subject merchandise, we 
determined that the home market provides a viable basis for calculating 
NV for ICI's home market sales.

2. Arm's-Length Transactions

    Sales to an affiliated customer in the home market which were 
determined

[[Page 42911]]

not to be at arm's length were excluded from our analysis. To test 
whether these sales were made at arm's length, we compared the prices 
of sales of comparison products to affiliated and unaffiliated 
customers, net of all movement charges, direct selling expenses, 
discounts, and packing. Pursuant to section 351.403 of the Department's 
regulations, where prices to the affiliated party were on average less 
than 99.5 percent of the price to unaffiliated parties, we determined 
that the sales made to the affiliated party were not at arm's length. 
Therefore, we disregarded all sales to that home market customer. See 
19 CFR 351.403(c) and Preamble to the Department's regulations, 62 FR 
at 27355.

Price-to-Price Comparisons

    In accordance with section 773(a)(1)(B)(i) of the Act, we based NV 
on the price at which the foreign like product was first sold for 
consumption in the exporting country in the usual commercial quantities 
and in the ordinary course of trade and, to the extent practicable, at 
the same LOT as the CEP sale. In accordance with section 773(a)(6) of 
the Act, where applicable, we made adjustments to home market prices 
for discounts and movement expenses (inland freight). Under section 
773(a)(6)(C)(iii) of the Act, the Department adjusts for differences in 
circumstances of sales (COS) between the home market and CEP 
transactions in the United States. We reduced home market prices by an 
amount for home market credit pursuant to section 351.410(c) of the 
Department's regulations. We also made adjustments for indirect selling 
expenses incurred in the comparison market or U.S. sales where 
commissions were granted on sales in one market but not in the other 
(the commission offset), pursuant to section 351.410(e). In addition, 
based on our determination as the ICI's LOT (see ``Level of Trade'' 
section of this notice), we made a CEP offset adjustment pursuant to 
section 773(a)(7)(B) of the Act. See Carbon Steel Plate, 62 FR at 
61732. To adjust for differences in packing between the two markets, we 
deducted HM packing costs and added U.S. packing costs under section 
773(a)(6) of the Act. In addition, we made adjustments, where 
appropriate, for differences in costs attributable to physical 
differences of the merchandise (DIFMER) pursuant to section 
773(a)(6)(C)(ii) of the Act.

Preliminary Results of Review

    As a result of this review, we preliminarily determine that the 
following weighted-average dumping margin exists for the period 
covering July 1, 1997 through June 30, 1998:

------------------------------------------------------------------------
                                                                Margin
                   Manufacturer/exporter                      (percent)
------------------------------------------------------------------------
Imperioal Chemical Industries PLC..........................        19.87
------------------------------------------------------------------------

    Pursuant to 19 CFR 351.224(b), the Department will disclose to 
parties to the proceeding any calculations performed in connection with 
these preliminary results within 5 days of the date of publication of 
this notice. Any interested party participating in the proceeding may 
request a hearing within 30 days of the date of publication of this 
notice. A hearing, if requested, will be held two days after the date 
the rebuttal briefs are filed or the first business day thereafter. 
Parties who submit arguments in this proceeding are requested to submit 
with each argument: (1) a statement of the issue and (2) a brief 
summary of the argument. Interested parties may submit case briefs 
within 30 days of the date of publication of this notice. Rebuttal 
briefs, which are limited to issues raised in the case briefs, may be 
filed not later than seven days after the case briefs are filed.
    The Department will publish a notice of the final results of this 
administrative review, which will include the results of its analysis 
of the issues raised in any written comments or at the hearing, within 
120 days from the publication of these preliminary results.
    Upon issuance of the final results of this review, the Department 
shall determine, and Customs shall assess, antidumping duties on all 
appropriate entries. The Department will issue appraisement 
instructions directly to Customs. We have calculated importer-specific 
ad valorem duty assessment rates for the subject merchandise based on 
the ratio of the total amount of importer-specific antidumping duties 
calculated for the examined sales to the total entered value of the 
sales used to calculate those duties. These rates will be assessed 
uniformly on all entries made by particular importers during the POR.
    Furthermore, the following cash deposit requirements will be 
effective upon completion of the final results of this administrative 
review for all shipments of INC from the United Kingdom entered, or 
withdrawn from warehouse, for consumption on or after the publication 
date of the final results of this administrative review, as provided by 
section 751(a)(1) of the Act: (1) The cash deposit rate for the 
reviewed company will be the rate established in the final results of 
this administrative review; (2) for exporters not covered in this 
review, but covered in the original LTFV investigation or a previous 
review, the cash deposit rate will continue to be the company-specific 
rate published in the most recent period; (3) if the exporter is not a 
firm covered in this review, a previous review, or the original LTFV 
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) if neither the exporter nor the manufacturer 
is a firm covered in this or any previous reviews or the LTFV 
investigation, the cash deposit rate will be 11.13 percent, the ``all-
others'' rate established in the LTFV investigation. See 55 FR 21058, 
May 22, 1990. These deposit requirements, when imposed, shall remain in 
effect until publication of the final results of the next 
administrative review.
    This notice serves as a preliminary reminder to importers of their 
responsibility under 19 CFR 351.402(f) of the Department's regulations 
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 administrative review and this notice are in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act.

    Dated: August 2, 1999.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-20345 Filed 8-5-99; 8:45 am]
BILLING CODE 3510-DS-M