[Federal Register Volume 66, Number 70 (Wednesday, April 11, 2001)]
[Notices]
[Pages 18749-18752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-8936]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-412-803]


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

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

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

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EFFECTIVE DATE: April 11, 2001.
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 requests by 
the respondent Imperial Chemical Industries PLC and its affiliates 
Nobel Enterprises, a business unit of Nobel's Explosives Company, Ltd. 
(Nobel's) and ICI Americas Inc. (ICIA), (collectively ICI). This review 
covers sales of this merchandise made by one manufacturer/exporter of 
the subject merchandise, ICI, to the United States during the period 
July 1, 1999, through June 30, 2000.
    We have preliminarily determined the dumping margin for ICI to be 
3.52%. 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.
    We invite interested parties to comment on these preliminary 
results. Parties who submit arguments are

[[Page 18750]]

requested to submit with the argument (1) a statement of the issue and 
(2) a brief summary of the argument.

FOR FURTHER INFORMATION CONTACT: John Conniff or Michele Mire, AD/CVD 
Enforcement, Office 4, Group II, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
1009 or (202) 482-4711, respectively.
    The Applicable Statute and Regulations: Unless otherwise indicated, 
all citations to the Tariff Act of 1930, as amended (the Act), are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Act by the Uruguay Round Agreements 
Act (URAA). In addition, unless otherwise indicated, all citations to 
the Department's regulations are to the regulations at 19 CFR Part 351 
(2000).

SUPPLEMENTARY INFORMATION:

Background

    The Department published in the Federal Register the antidumping 
duty order on INC from the United Kingdom on July 10, 1990 (55 FR 
28270). On July 20, 2000, we published in the Federal Register (65 FR 
45083), a notice of ``Opportunity to Request an Administrative Review'' 
of this order covering the period July 1, 1999, through June 30, 2000, 
hereafter referred to as the POR.
    In accordance with 19 CFR 351.213(b), the respondent requested that 
we conduct an administrative review for the aforementioned period. The 
Department is now conducting this administrative review pursuant to 
section 751 of the Act.

Scope of 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, and 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) 
subheading 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.

Product Comparisons

    To determine whether sales of INC from the United Kingdom to the 
United States were made at less than NV, we compared the CEP to the NV, 
as described in the Constructed Export Price and Normal Value sections 
of this notice. When making product 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 identical or 
similar merchandise in the home market to compare to U.S. sales, we 
compared U.S. sales to the constructed value (CV) of the product sold 
in the home market during the comparison period.

Constructed Export Price

    For the price to the United States, we used CEP, as defined in 
sections 772(b),(c) and (d) 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 occurring 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.

Normal Value

    In order to determine whether there was a sufficient volume of 
sales in the home market to serve as a viable basis for calculating NV, 
we compared the respondent's volume of home market sales of the foreign 
like product to the volume of its U.S. sales of the subject 
merchandise. Pursuant to sections 773(a)(1)(B) and (C) of the Act, 
because ICI's aggregate volume of home market sales of the foreign like 
product was greater than five percent of its aggregate volume of U.S. 
sales for the subject merchandise, we determined that sales in the home 
market provide a viable basis for calculating NV.

Cost of Production (COP) Analysis

    We initiated a below cost investigation on January 26, 2001, in 
response to a below cost allegation from the petitioner filed on 
November 27, 2000. The petitioner's COP allegation was company-
specific, employed a reasonable methodology, made use of ICI's data on 
the record, provided evidence of below cost sales, and covered 
merchandise which is representative of the broader range of INC 
products sold by ICI in the United Kingdom. Therefore, we determined 
that petitioner's COP allegation provided a reasonable basis to 
initiate a COP investigation. See January 26, 2001 memorandum Analysis 
of Petitioner's Allegation of Sales Below the Cost of Production for 
Imperial Chemical Industries PLC and its affiliates from the Team to 
Thomas Futtner.

Calculation of COP

    In accordance with section 773(b)(3) of the Act, we calculated the 
weighted-average COP, by model, based on the sum of the cost of 
materials and fabrication employed in producing the foreign like 
product, plus amounts for home market selling, general and 
administrative (SG&A) expenses and packing costs in accordance with 
section 773(b)(3) of the Act. We used the home market sales data and 
COP information provided by ICI in its questionnaire responses.

1. Test of Home Market Prices

    After calculating a weighted-average COP, we tested whether home 
market sales of INC were made at prices below COP within an extended 
period of time in substantial quantities, and whether such prices 
permitted recovery of all costs within a reasonable period of time. We 
compared model-specific COP's to the reported home market prices less 
any applicable movement charges, discounts, and indirect selling 
expenses.

2. Affiliated-Party Transactions and Arm's-Length Test

    During the POR, ICI sold INC to one affiliated customer; therefore, 
we conducted an arm's-length test. To test whether these sales were 
made at arm's-length prices, we compared on a model-specific basis the 
starting prices of sales to affiliated and unaffiliated customers net 
of all discounts and rebates, movement charges, direct selling 
expenses, commissions, and home market packing. Where, for the tested 
models of subject merchandise, prices to the affiliated party were on 
average 99.5 percent or more of the price to the unaffiliated parties, 
we determined that sales made to the affiliated party were

[[Page 18751]]

at arm's-length. See 19 CFR 351.403(c) and 62 FR at 27355, Preamble--
Department's Final Antidumping Regulations (May 19, 1997). The sales to 
ICI's affiliated customer did not pass the arm's-length test and thus 
we did not use them in our calculation of NV.

3. Results of COP Test

    Pursuant to section 773(b)(2)(C), where less than 20 percent of 
ICI's sales of a given model were at prices less than COP, we did not 
disregard any below-cost sales of that product because we determined 
that the below-cost sales were not made in ``substantial quantities.'' 
In accordance with section 773(b)(2)(B) and (D) where 20 percent or 
more of home market sales of a given product during the POR were at 
prices less than the COP, we found that such sales were made in 
substantial quantities within an extended period of time. Because the 
sales prices would not permit recovery of all costs within a reasonable 
period of time, we disregarded those below-cost sales and used the 
remaining sales to determine NV in accordance with section 773(b)(1). 
For those models of INC for which there were no home market sales 
available for matching purposes, we compared CEP to CV.

Comparisons to NV Based on Price

    We calculated NV based on packed, ex-factory or delivered prices to 
unaffiliated purchasers in the home market. We made adjustments for 
discounts. Where applicable, we deducted home market packing costs and 
added U.S. packing costs. In accordance with section 773(a)(6) of the 
Act, where applicable, we made deductions from the starting price for 
inland freight and inland insurance. In addition, we made a 
circumstance of sale adjustment for imputed credit expenses, in 
accordance with section 773(a)(6)(C)(iii) of the Act. Prices were 
reported net of value added taxes (VAT) and, therefore, no deduction 
for VAT was necessary. We made adjustments, where appropriate, for 
physical differences in merchandise in accordance with section 
773(a)(6)(C)(ii) of the Act. We based this adjustment on the difference 
in the variable costs of manufacturing for the foreign like product and 
the subject merchandise.
    We derived the CEP offset amount from the amount of the indirect 
selling expenses incurred on sales in the home market. See Level of 
Trade section of this notice. We limited the home market indirect 
selling expense deduction by the amount of the indirect selling 
expenses deducted from CEP, pursuant to section 772(d) of the Act.

Constructed Value

    In accordance with section 773(e) of the Act, we calculated CV 
based on the sum of ICI's cost of materials and fabrication employed in 
producing the subject merchandise, selling, SG&A and profit incurred 
and realized in connection with the production and sale of the foreign 
like product, and U.S. packing costs. In accordance with section 
773(e)(2)(A), we based SG&A and profit on the amounts incurred and 
realized by ICI in connection with the production and sale of the 
foreign like product in the ordinary course of trade, for consumption 
in the foreign country.
    We used the costs of materials, fabrication, and SG&A as reported 
in the CV portion of ICI's questionnaire response. We used the U.S. 
packing costs as reported in the U.S. sales portion of ICI's 
questionnaire response. We based selling expenses and profit on the 
information reported in the home market sales portion of ICI's 
questionnaire response. See Certain Pasta from Italy; Notice of 
Preliminary Determination of Sales at Less Than Fair Value and 
Postponement of Final Determination, 61 FR 1344, 1349 (January 19, 
1996). For selling expenses, we used the average of the home market 
selling expenses weighted by the respective quantities sold. For actual 
profit, we first calculated the difference between the home market 
sales value and home market COP for all home market sales in the 
ordinary course of trade, and divided the sum of these differences by 
the total home market COP for these sales. We then multiplied this 
percentage by the COP for each U.S. model to derive the profit amount. 
Finally, the CEP offset was derived in the same manner described in the 
Normal Value section of this notice.

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 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.\1\ 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).
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    \1\ The Court of International Trade has held that the 
Department's practice of determining levels of trade for CEP 
transactions after CEP deductions is an impermissible interpretation 
of section 772(d) of the Act. See Borden, Inc. v. United States, 4 
F.Supp.2d 1221 (1998) (Borden); and Micron Technology, Inc. v. 
United States, 40 F.Supp.2d 481 (1999) (Micron). The U.S. Court of 
Appeals for the Federal Circuit, however, has reversed the Court of 
International Trade's holdings in both Micron and Borden on the 
level of trade issue. The Federal Circuit held that the statute 
unambiguously requires Commerce to deduct the selling expenses set 
forth in section 772(d) from the CEP starting price prior to 
performing its LOT analysis. See Micron Technology, Inc. v. United 
States, Court Nos. 00-1058,-1060 (Fed. Cir. March 7, 2001); see also 
Borden, Inc. v. United States, Court Nos. 99-1575,-1576 (Fed. Cir. 
March 12, 2001) (unpublished opinion). Consequently, the Department 
will continue to adjust the CEP, pursuant to section 772(d), prior 
to performing the LOT analysis, as articulated by the Department's 
regulations at Sec. 351.412.
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    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 LOTs, 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 to 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 or quantitatively 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

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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). See Carbon Steel Plate, 62 FR at 61732, 61733.
    ICI did not claim a LOT adjustment. Nevertheless, we evaluated 
whether a LOT adjustment was necessary by examining 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 were made at 
only one LOT in the home market. 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 for the NV LOT (i.e., sales solicitation, price negotiation, 
customer visits, advertising, technical support, invoicing, and billing 
adjustment) were different and more advanced than the selling functions 
performed for the US LOT. We, therefore, evaluated whether we could 
determine if 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, 
and, therefore, were unable to quantify 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, dated March 15, 2001.

Currency Conversion

    For purposes of the preliminary results, we made currency 
conversions in accordance with section 773A of the Act, based on the 
exchange rates in effect on the dates of the U.S. sales as certified by 
the Federal Reserve Bank of New York. See Change in Policy Regarding 
Currency Conversions, 61 FR 9434 (March 8, 1996).

Preliminary Results of the Review

    As a result of this review, we preliminarily determine that the 
following weighted-average dumping margin exists:

------------------------------------------------------------------------
                                                               Weighted
                    Exporter/Manufacturer                       average
                                                                margin
------------------------------------------------------------------------
Imperial Chemical Industries PLC............................       3.52%
------------------------------------------------------------------------

    We will disclose the calculations used in our analysis to parties 
to this proceeding within five days of the publication date of this 
notice. See 19 CFR 351.224(b). Any interested party may request a 
hearing within 30 days of the date of publication of this notice. See 
19 CFR 351.310(c). Any hearing, if requested, will be held 44 days 
after the date of publication, or the first workday thereafter. 
Interested parties may submit case briefs within 30 days of the date of 
publication of this notice. Parties who submit case briefs in this 
proceeding should provide a summary of the arguments not to exceed five 
pages and a table of statutes, regulations, and cases cited. Rebuttal 
briefs, limited to issues raised in the case briefs, may be filed not 
later than 37 days after the date of publication. Further, we would 
appreciate it if parties submitting written comments would provide the 
Department with an additional copy of the public version of any such 
comments on diskette. The Department will publish a notice of the final 
results of this administrative review, which will include the results 
of its analysis of issues raised in any such written comments or at the 
hearing, within 120 days from the publication of these preliminary 
results.

Assessment Rate

    Pursuant to 19 CFR 351.212(b), the Department shall determine, and 
the United States Customs Service shall assess, antidumping duties on 
all appropriate entries. In accordance with 19 CFR 351.212(b)(1), we 
have calculated an importer-specific assessment rate by aggregating the 
dumping margins calculated for all U.S. sales and dividing this amount 
by the estimated entered value (provided by respondent) of the same 
merchandise on an importer-specific basis. Upon completion of this 
review, where the importer-specific assessment rate is above de 
minimis, the Department will instruct the U.S. Customs Service to 
assess antidumping duties on all entries of subject merchandise by that 
importer during the POR.

Cash Deposit Requirements

    This notice serves as a preliminary reminder to importers of their 
responsibility under 19 CFR 351.402 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 determination is issued and published in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act. Effective January 20, 
2001, Bernard T. Carreau is fulfilling the duties of the Assistant 
Secretary for Import Administration.

    Dated: April 2, 2001.
Bernard T. Carreau,
Deputy Assistant Secretary, Import Administration.
[FR Doc. 01-8936 Filed 4-10-01; 8:45 am]
BILLING CODE 3510-DS-P