[Federal Register Volume 66, Number 208 (Friday, October 26, 2001)]
[Notices]
[Pages 54229-54232]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-26940]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-437-805]


Notice of Initiation of Countervailing Duty Investigation: 
Sulfanilic Acid From Hungary

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

ACTION: Initiation of countervailing duty investigation.

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SUMMARY: The Department of Commerce is initiating a countervailing duty 
investigation to determine whether manufacturers, producers, or 
exporters of sulfanilic acid from Hungary receive countervailable 
subsidies.

EFFECTIVE DATE: October 26, 2001.

FOR FURTHER INFORMATION CONTACT: Melani Miller, AD/CVD Enforcement, 
Group I, Office 1, Import Administration, International Trade 
Administration, U.S. Department of Commerce, Room 3099, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-
0116.

SUPPLEMENTARY INFORMATION:

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (``the Act'') by 
the Uruguay Round Agreements Act. In addition, unless otherwise 
indicated, all citations to the Department of Commerce's (``the 
Department'') regulations are references to the provisions codified at 
19 CFR part 351 (April 2001).

The Petition

    On September 28, 2001, the Department received a petition filed in 
proper form by Nation Ford Chemical Company (``the petitioner''). The 
Department received supplemental information to the petition on October 
9 and 12, 2001.
    In accordance with section 702(b)(1) of the Act, the petitioner 
alleges that manufacturers, producers, or exporters of sulfanilic acid, 
the subject merchandise, from Hungary receive countervailable subsidies 
within the meaning of section 701 of the Act, and that such imports are 
materially injuring, or threatening material injury to, an industry in 
the United States.
    The Department finds that the petitioner filed this petition on 
behalf of the domestic industry because it is an interested party as 
defined in section

[[Page 54230]]

771(9)(C) of the Act and has demonstrated sufficient industry support. 
See Determination of Industry Support for the Petition section, below.

Scope of Investigation

    Imports covered by this investigation are all grades of sulfanilic 
acid, which include technical (or crude) sulfanilic acid, refined (or 
purified) sulfanilic acid and sodium salt of sulfanilic acid.
    Sulfanilic acid is a synthetic organic chemical produced from the 
direct sulfonation of aniline and sulfuric acid. Sulfanilic acid is 
used as a raw material in the production of optical brighteners, food 
colors, specialty dyes and concrete additives. The principal 
differences between the grades are the undesirable quantities of 
residual aniline and alkali insoluble materials present in the 
sulfanilic acid. All grades are available as dry, free flowing powders.
    Technical sulfanilic acid, classifiable under the subheading 
2921.42.22 of Harmonized Tariff Schedule (``HTS''), contains 96 percent 
minimum sulfanilic acid, 1.0 percent maximum aniline, and 1.0 percent 
maximum alkali insoluble materials. Refined sulfanilic acid, also 
classifiable under 2921.42.22 of the HTS, contains 98 percent minimum 
sulfanilic acid, 0.5 percent maximum aniline and 0.25 percent maximum 
alkali insoluble materials.
    Sodium salt (sodium sulfanilate), classifiable under HTS subheading 
2921.42.90, is a powder, granular or crystalline material which 
contains 75 percent minimum equivalent sulfanilic acid, 0.5 percent 
maximum aniline based on the equivalent sulfanilic acid content, and 
0.25 percent maximum alkali insoluble materials based on the equivalent 
sulfanilic acid content.
    Although the HTS subheadings are provided for convenience and 
customs purposes, the written description of the scope of this 
investigation is dispositive.
    This scope is identical to the scope of the antidumping duty order 
on Sulfanilic Acid from the People's Republic of China. See Antidumping 
Duty Order: Sulfanilic Acid from the People's Republic of China, 57 FR 
37524 (August 19, 1992) (as currently reflected in Sulfanilic Acid from 
the People's Republic of China; Preliminary Results and Preliminary 
Partial Rescission of Antidumping Duty Administrative Review, 66 FR 
47003 (September 10, 2001)). Nevertheless, during our review of the 
petition, we discussed the scope with the petitioner to ensure that it 
accurately reflects the product for which the domestic industry is 
seeking relief. Moreover, as discussed in the preamble to the 
Department's regulations (see Antidumping Duties; Countervailing 
Duties; Final Rule, 62 FR 27296, 27323 (May 19, 1997)), we are setting 
aside a period for parties to raise issues regarding product coverage. 
The Department encourages all parties to submit such comments within 20 
days of publication of this notice. Comments should be addressed to 
Import Administration's Central Records Unit (``CRU'') at Room 1870, 
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230. The period of scope consultations is intended to 
provide the Department with ample opportunity to consider all comments 
and consult with parties prior to the issuance of our preliminary 
determination.

Consultations

    Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department 
invited representatives of the Government of Hungary (``GOH'') for 
consultations with respect to the petition filed in this proceeding. 
The Department held consultations with the GOH on October 9, 2001. The 
points raised in the consultations are described in the Memorandum to 
the File, ``CVD Consultations with Officials from the Government of 
Hungary,'' dated October 9, 2001, which is on file in the Department's 
CRU, Room B-099 of the main Department of Commerce building.

Determination of Industry Support for the Petition

    Section 702(b)(1) of the Act requires that a petition be filed on 
behalf of the domestic industry. Section 702(c)(4)(A) of the Act 
provides that a petition meets this requirement if the domestic 
producers or workers who support the petition account for: (1) At least 
25 percent of the total production of the domestic like product; and 
(2) more than 50 percent of the production of the domestic like product 
produced by that portion of the industry expressing support for, or 
opposition to, the petition.
    Section 771(4)(A) of the Act defines the ``industry'' as the 
producers of a domestic like product. Thus, to determine whether the 
petition has the requisite industry support, the Act directs the 
Department to look to producers and workers who account for production 
of the domestic like product. The International Trade Commission 
(``ITC''), which is responsible for determining whether ``the domestic 
industry'' has been injured, must also determine what constitutes a 
domestic like product in order to define the industry. While both the 
Department and the ITC must apply the same statutory definition 
regarding the domestic like product (section 771(10) of the Act), they 
do so for different purposes and pursuant to separate and distinct 
authority. In addition, the Department's determination is subject to 
limitations of time and information. Although this may result in 
different definitions of the domestic like product, such differences do 
not render the decision of either agency contrary to the law. See 
Algoma Steel Corp. Ltd., v. United States, 688 F. Supp. 639, 642-44 
(CIT 1988); High Information Content Flat Panel Displays and Display 
Glass Therefore from Japan: Final Determination; Rescission of 
Investigation and Partial Dismissal of Petition, 56 FR 32376, 32380-81 
(July 16, 1991).
    Section 771(10) of the Act defines the domestic like product as ``a 
product that is like, or in the absence of like, most similar in 
characteristics and uses with, the article subject to an investigation 
under this title.'' Thus, the reference point from which the domestic 
like product analysis begins is ``the article subject to an 
investigation,'' i.e., the class or kind of merchandise to be 
investigated, which normally will be the scope as defined in the 
petition.
    The domestic like product referred to in the petition is the single 
domestic like product defined in the Scope of Investigation section 
above. The Department has no basis on the record to find this 
definition of the domestic like product to be inaccurate. The 
Department, therefore, has adopted this domestic like product 
definition.
    The Department has determined that the petition contains adequate 
evidence of industry support; therefore, polling is unnecessary. See 
Industry Support section from the October 18, 2001 Initiation 
Checklist, which is on file in the Department's CRU. Information on the 
record demonstrates that the producer who supports the petition 
accounts for more than 50 percent of the production of the domestic 
like product. Additionally, no interested party pursuant to section 
771(b)(A), (C), (D), (E) or (F) of the Act has expressed opposition on 
the record to the petition. Accordingly, the Department determines that 
this petition is filed on behalf of the domestic industry within the 
meaning of section 702(b)(1) of the Act.

Injury Test

    Because Hungary is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, section 701(a)(2) applies to this 
investigation. Accordingly, the ITC must determine whether imports of 
the

[[Page 54231]]

subject merchandise from Hungary materially injure, or threaten 
material injury to, a U.S. industry.

Allegations and Evidence of Material Injury and Causation

    The petition alleges that the U.S. industry producing the domestic 
like product is being materially injured, or is threatened with 
material injury, by reason of the imports of the subject merchandise. 
The petitioner contends that the industry's injured condition is 
evident in the declining trends in employment, domestic prices, 
production, and net sales volume and value. The allegations of injury 
and causation are supported by relevant evidence including U.S. Customs 
import data, lost sales, and pricing information. We have assessed the 
allegations and supporting evidence regarding material injury and 
causation, and have determined that these allegations are properly 
supported by accurate and adequate evidence, and meet the statutory 
requirements for initiation (see Initiation Checklist).

Allegations of Subsidies

    Section 702(b) of the Act requires the Department to initiate a 
countervailing duty proceeding whenever an interested party files a 
petition on behalf of an industry, that (1) alleges the elements 
necessary for an imposition of a duty under section 701(a), and (2) is 
accompanied by information reasonably available to the petitioner 
supporting the allegations.

Initiation of Countervailing Duty Investigation

    The Department has examined the countervailing duty petition on 
sulfanilic acid from Hungary and found that it complies with the 
requirements of section 702(b) of the Act. Therefore, in accordance 
with section 702(b) of the Act, we are initiating a countervailing duty 
investigation to determine whether manufacturers, producers, or 
exporters of sulfanilic acid from Hungary receive countervailable 
subsidies.

A. Change in Ownership

    The petitioner alleges that, in November 1997, Nitrokemia, a 
government-owned entity, was split into two parts: Nitrokemia 2000, 
which received certain of the former Nitrokemia's assets including the 
sulfanilic acid production facilities, and Nitrokemia Rt., which 
received the remainder of the former Nitrokemia's assets and the former 
Nitrokemia's environmental liabilities. According to its web site, 
Nitrokemia 2000 continued to be a fully-owned subsidiary of the former 
Nitrokemia (now Nitrokemia Rt.) until May 1998, at which point it 
became an independent stock company owned by the State Privatization 
Company. Subsequently, in November 2000, Nitrokemia 2000 was 
privatized.
    The petitioner alleges that the current Nitrokemia 2000 is the same 
``person'' as it was prior to its privatization. Thus, consistent with 
the Department's recent Final Results of Redetermination Pursuant to 
Court Remand in Acciai Speciali Terni S.p.A. v. United States., et al., 
(Ct. No. 99-06-00364) (December 19, 2000), the past countervailable 
subsidies received by pre-privatized Nitrokemia 2000 would continue to 
be countervailable after the change in ownership. We will examine this 
issue in the course of the investigation to determine whether any non-
recurring subsidies provided to Nitrokemia 2000 prior to its 
privatization should be attributed to Nitrokemia 2000 in our period of 
investigation.

B. Creditworthiness

    The petitioner alleges that the former Nitrokemia, Nitrokemia Rt., 
and Nitrokemia 2000 were uncreditworthy from 1997 through 2000. To 
support its allegation, the petitioner states that the financial 
statements for all three companies show that they have all been 
unprofitable since 1997, and that these companies could not possibly 
borrow money without government guarantees. The petitioner further 
claims that no company with such substantial environmental liabilities 
(see Programs section, below, as well as the Initiation Checklist) 
would be able to successfully borrow funds from any commercial 
institution. As additional support, the petitioner provided a current 
Dun and Bradstreet report for Nitrokemia 2000, as well as a financial 
analysis derived from Nitrokemia 2000's financial statement for 2000.
    With respect to the petitioner's uncreditworthiness allegations for 
1999 and 2000, as noted below in the Programs section, we are not 
initiating an investigation of any alleged subsidies bestowed in those 
years. Thus, we are not initiating a creditworthiness investigation for 
1999 and 2000. If, however, in the course of this investigation we 
discover that any non-recurring subsidies, loans, or loan guarantees 
were bestowed during 1999 and 2000, we will consider any new 
uncreditworthiness allegations made at that time.
    With respect to 1997 and 1998, which is the time period during 
which the former Nitrokemia was split and the contingent environmental 
liabilities were assigned to Nitrokemia Rt. (see Programs section, 
below, as well as the Initiation Checklist), the petitioner must 
establish a reasonable basis to believe or suspect that a company was 
uncreditworthy in each of these years in order for the Department to 
investigate the company's creditworthiness. Pursuant to section 
351.505(a)(4)(i) of the Department's regulations, the Department will 
generally consider a firm to be uncreditworthy if, based on information 
available at the time of the government-provided loan, the firm could 
not have obtained long-term loans from conventional commercial sources.
    In this instance, the only evidence provided by the petitioner 
relating to these years was the companies' financial statements which 
showed losses. While a loss in a particular year may provide some 
information about a company's financial position, the Department looks 
not only to present indicators but also to past indicators of financial 
health (see section 351.505(a)(4)(i)(B) of the Department's 
regulations) and to present and past indicators of the firm's ability 
to meet its costs and fixed financial obligations (see section 
351.505(a)(4)(i)(C) of the Department's regulations). In both the 
petition and the petitioner's response to the Department's supplemental 
petition question with respect to the uncreditworthiness allegations, 
the petitioner did not provide financial ratios to support its 
creditworthiness argument for 1997 and 1998. Moreover, although the 
petitioner provided the financial statement for old Nitrokemia for 1997 
from which 1997 financial ratios could be derived, the petitioner did 
not provide any information or financial statements that could be used 
to derive financial ratios for any of the preceding years. Thus, 
because the petitioner did not provide sufficient relevant evidence to 
support a reasonable basis to believe or suspect that these companies 
were uncreditworthy in 1997 and 1998, we are also not initiating a 
creditworthiness investigation for these years.

C. Programs

    We are including in our investigation the following program alleged 
in the petition to have provided a countervailable subsidy to producers 
and exporters of the subject merchandise in Hungary:
Forgiveness of Environmental Liabilities
    We are not including in our investigation at this time the 
following programs alleged to benefit producers and exporters of the 
subject merchandise in Hungary:

[[Page 54232]]

    1. Forgiveness of Short-Term Liabilities. The petitioner alleges 
that, because the combined short-term liabilities listed on the 1998 
financial statements from Nitrokemia Rt. and Nitrokemia 2000 are 
significantly smaller than the short-term liabilities listed on the 
former Nitrokemia's 1997 financial statements, the GOH forgave some of 
the former Nitrokemia's short-term liabilities when the company was 
split.
    The petitioner has not provided sufficient evidence that any short-
term debts were actually forgiven by the GOH. Although the combined 
short-term debts were less than the short-term debts from the former 
Nitrokemia's financial statements, the petitioner has provided no 
evidence that the short-term debt was not simply paid off or converted 
to long-term debt. Thus, lacking sufficient evidence of a financial 
contribution or a benefit from the GOH at this time, we are not 
including this program in our investigation.
    2. Provision of Natural Gas for Less Than Adequate Remuneration. 
The petitioner alleges that the GOH subsidizes the price of natural gas 
to the Hungarian industry because natural gas prices in Hungary are 
significantly lower than they are in the rest of the world. Without 
this alleged subsidy, the petitioner states that the cost of natural 
gas for Nitrokemia 2000's sulfanilic acid production would be one 
percent higher.
    The petitioner has provided no evidence to support its claim that 
the GOH provided natural gas for less than adequate remuneration to a 
specific enterprise or industry in Hungary. The petitioner admits that 
it was not able to locate any information that this alleged provision 
of low-priced natural gas was not generally available in Hungary. Thus, 
because no information was provided in support of the specificity 
claim, at this time we are not including this program in our 
investigation.

Distribution of Copies of the Petition

    In accordance with section 702(b)(4)(A)(i) of the Act, a copy of 
the public version of the petition has been provided to the GOH. We 
will attempt to provide a copy of the public version of the petition to 
each exporter named in the petition, as provided for under section 
351.203(c)(2) of the Department's regulations.

ITC Notification

    We have notified the ITC of our initiation, as required by section 
702(d) of the Act.

Preliminary Determination by the ITC

    The ITC will determine no later than November 13, 2001, whether 
there is a reasonable indication that imports of sulfanilic acid from 
Hungary are causing material injury, or threatening to cause material 
injury to, a U.S. industry. A negative ITC determination will result in 
the investigation being terminated; otherwise, the investigation will 
proceed according to statutory and regulatory time limits.
    This notice is issued and published pursuant to section 777(i) of 
the Act.

    Dated: October 18, 2001.
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 01-26940 Filed 10-25-01; 8:45 am]
BILLING CODE 3510-DS-P