[Federal Register Volume 66, Number 208 (Friday, October 26, 2001)]
[Notices]
[Pages 54214-54218]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-26941]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-437-804, A-471-806]


Notice of Initiation of Antidumping Duty Investigations: 
Sulfanilic Acid From Hungary and Portugal

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

ACTION: Initiation of antidumping duty investigations.

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SUMMARY: The Department of Commerce is initiating antidumping duty 
investigations to determine whether producers or exporters of 
sulfanilic acid from Hungary and Portugal are selling sulfanilic acid 
to the United States at less than fair value.

EFFECTIVE DATE: October 26, 2001.

FOR FURTHER INFORMATION CONTACT: Jarrod Goldfeder at (202) 482-0189 or 
John Brinkmann at (202) 482-4126, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230.

Initiation of Investigations

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 (``URAA''). In addition, unless 
otherwise indicated, all citations to the Department of Commerce's 
(``the Department's'') regulations are references to the provisions 
codified at 19 CFR part 351 (April 2001).

The Petitions

    On September 28, 2001, the Department received petitions filed in 
proper form by Nation Ford Chemical Company (``the petitioner''). The 
Department received supplemental

[[Page 54215]]

information to the petitions on October 9 and 12, 2001.
    In accordance with section 732(b)(1) of the Act, the petitioner 
alleges that imports of sulfanilic acid from Hungary and Portugal are, 
or are likely to be, sold in the United States at less than fair value 
within the meaning of section 731 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 these petitions on 
behalf of the domestic industry because it is an interested party as 
defined in section 771(9)(C) of the Act and it has demonstrated 
sufficient industry support with respect to each of the antidumping 
investigations that it is requesting the Department to initiate. See 
infra, ``Determination of Industry Support for the Petition.''

Scope of Investigations

    Imports covered by these investigations 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 these 
investigations 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 
determinations.

Determination of Industry Support for the Petitions

    Section 732(b)(1) of the Act requires that a petition be filed on 
behalf of the domestic industry. Section 732(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 petitions contain adequate 
evidence of industry support; therefore, polling is unnecessary. See 
Initiation Checklist for each country at Industry Support. Information 
on the record demonstrates that the producer who supports the petitions 
account for more than 50 percent of the production of the domestic like 
product. Additionally, no interested party pursuant to section 
771(9)(A), (C), (D), (E) or (F) of the Act has expressed opposition on 
the record to the petition. Accordingly, the Department determines that 
these petitions are filed on behalf of the domestic industry within the 
meaning of section 732(b)(1) of the Act.

Initiation Standard for Cost Investigations

    Pursuant to section 773(b) of the Act, the petitioner provided 
information demonstrating reasonable grounds to

[[Page 54216]]

believe or suspect that sales in the comparison markets for Hungary and 
Portugal were made at prices below the cost of production (``COP'') 
and, accordingly, requested that the Department conduct country-wide 
sales-below-COP investigations in connection with these investigations. 
The Statement of Administrative Action (``SAA''), submitted to the 
Congress in connection with the interpretation and application of the 
URAA, states that an allegation of sales below COP need not be specific 
to individual exporters or producers. See H.R. Doc. No. 103-316, 103d 
Cong., 2d Sess. 833 (1994). The SAA, at 833, states that ``Commerce 
will consider allegations of below-cost sales in the aggregate for a 
foreign country, just as Commerce currently considers allegations of 
sales at less than fair value on a country-wide basis for purposes of 
initiating an antidumping investigation.''
    Further, the SAA provides that new section 773(b)(2)(A) of the Act 
retains the requirement that the Department have ``reasonable grounds 
to believe or suspect'' that below-cost sales have occurred before 
initiating such an investigation. Reasonable grounds exist when an 
interested party provides specific factual information on costs and 
prices, observed or constructed, indicating that sales in the 
comparison market in question are at below-cost prices. Id. We have 
analyzed the country-specific allegations as described below.

Export Price (``EP'') and Normal Value (``NV'')

    The following are descriptions of the allegations of sales at less 
than fair value upon which the Department based its decision to 
initiate these investigations. A more detailed description of these 
allegations is provided in the Initiation Checklist for each country. 
Should the need arise to use any of this information as facts available 
under section 776 of the Act in our preliminary or final 
determinations, we may re-examine the information and revise the margin 
calculations, as appropriate.

Hungary

EP

    The petitioner claims that one producer, Nitrokemia 2000 Co. 
(``Nitrokemia''), accounts for all of the sulfanilic acid production in 
Hungary and, accordingly, all of the sulfanilic acid products exported 
to the United States from Hungary. The petitioner provided pricing and 
cost information for this producer. According to the petitioner, 
Nitrokemia sells sulfanilic acid directly to unaffiliated U.S. 
customers. For Nitrokemia, the petitioner based EP on the average U.S. 
Customs values classifiable under 2921.42.2200 of the HTS, as reported 
in the ITC's Dataweb (http://dataweb.usitc.gov), for the period of July 
1, 2000 through June 30, 2001. The petitioner did not make any 
deductions to this FOB port of exportation price of sulfanilic acid. 
See Hungary Initiation Checklist.

NV

    According to the petitioner, Nitrokemia has no home market for 
sulfanilic acid and, therefore, it was unable to obtain price 
information for sales in the home market. The Department confirmed with 
the U.S. Commercial Service in Budapest, Hungary (``Commercial Service 
Budapest'') that there were no other producers of sulfanilic acid in 
Hungary, nor were there any known Hungarian industries which utilized 
commercial quantities of sulfanilic acid. See Hungary Initiation 
Checklist. Therefore, the petitioner turned to third-country sales for 
purposes of calculating NV. For a third-country market, the petitioner 
selected Germany because, based on the Hungarian export statistics, 
Germany is the largest export market for Nitrokemia. After examining 
this evidence, we found the petitioner's selection of Germany as the 
comparison market to be reasonable because it met the criteria for 
viable third-country sales pursuant to section 773(a)(1)(B)(ii) of the 
Act.
    The petitioner used Hungarian export statistics to determine third-
country prices in Germany. These export statistics pertained to a 
basket category, aniline derivatives, in which sulfanilic acid is 
included. The petitioner presented evidence that Nitrokemia is the only 
producer of aniline derivatives in Hungary and that this basket 
category provides the best approximation of Nitrokemia's sulfanilic 
acid exports. We confirmed with the Commercial Service Budapest that 
sulfanilic acid falls under the Hungarian basket category of HS 
#2921.42, aniline salts and derivatives, and that the volume and value 
of exports in the Hungarian export statistics are maintained on a DAF 
(``delivered to frontier'') basis. Furthermore, from the description of 
this Hungarian basket category and discussions with the Commercial 
Service Budapest, we found that these products are comparable to the 
products exported to the United States which served as the basis for 
EP. The petitioner did not make any deductions to the comparison market 
price.

Price-to-CV Comparisons

    The petitioner provided information demonstrating reasonable 
grounds to believe or suspect that sales of sulfanilic acid in the 
comparison market (Germany) were made at prices below the fully 
absorbed COP, within the meaning of section 773(b) of the Act, and 
requested that the Department conduct a country-wide sales-below-cost 
investigation in this country. See section 773(b)(2)(A) of the Act.
    Pursuant to section 773(b)(3) of the Act, COP consists of the cost 
of manufacturing (``COM''), selling, general, and administrative 
expenses, including financial expenses (``SG&A''), and packing. The 
petitioner calculated COM based on the petitioner's own factors of 
production to estimate the cost in Hungary. The petitioner valued raw 
materials (i.e., natural gas, electricity, activated carbon, aniline, 
sulfuric acid, caustic soda, and hydrochloric acid) using Hungarian 
values obtained from a market research report prepared by the 
Commercial Service Budapest. The petitioner relied upon Nitrokemia's 
2000 annual report to estimate labor cost as well as SG&A and financial 
expenses. The petitioner relied upon its own factory overhead 
percentage, claiming that Nitrokemia's annual report did not provide 
sufficient detail for this purpose.
    Based upon the comparison of the prices of the foreign like product 
in the comparison market to the calculated COP of the product, we find 
reasonable grounds to believe or suspect that sales of the foreign like 
product were made below the COP within the meaning of section 
773(b)(2)(A)(i) of the Act. Accordingly, in the event that we determine 
that Germany is the appropriate market upon which to base NV, we will 
conduct a COP investigation.
    Because the comparison-market price was below the COP, pursuant to 
sections 773(a)(4), 773(b), and 773(e) of the Act, the petitioner based 
NV for sales in the comparison market on CV. The petitioner calculated 
CV using the same COM, SG&A and financial expenses used to compute 
comparison market costs. Consistent with section 773(e)(2) of the Act, 
the petitioner included in CV an amount for profit. For profit, the 
petitioner relied upon its own financial experience inasmuch as 
Nitrokemia reported a negative profit for 2000. The petitioner did not 
make any other adjustments to CV for comparisons to EP.
    Based upon the comparison of CV to EP, as adjusted by the 
Department (see Hungary Initiation Checklist), the

[[Page 54217]]

petitioner calculated estimated dumping margins ranging from 43.52 to 
45.14 percent. See Hungary Initiation Checklist.

Portugal

EP

    The petitioner claims that one producer, Quimigal S.A. 
(``Quimigal''), accounts for all of the sulfanilic acid production in 
Portugal and, accordingly, all of the sulfanilic acid products exported 
to the United States from Portugal. The petitioner provided pricing and 
cost information for this producer. According to the petitioner, 
Quimigal sells its product through an unaffiliated reseller in the 
United Kingdom (``UK'') to unaffiliated U.S. customers. For Quimigal, 
the petitioner based EP on U.S. Customs values classifiable under 
2921.42.2200 of the HTS, as reported in the ITC's Dataweb (http://dataweb.usitc.gov) for the period of July 1, 2000 through June 30, 
2001. The petitioner adjusted this FOB port of exportation price by 
deducting an amount for gross profit realized on the transaction by the 
unaffiliated UK reseller. No further adjustments were made by the 
petitioner.
    While the petitioner provided some support for this adjustment, we 
have adopted the more conservative approach of using Portuguese export 
statistics to measure EP. This approach should avoid any inflation of 
the U.S. prices as reported in U.S. import statistics due to the 
reseller's markup, without attempting to quantify the markup. See 
Portugal Initiation Checklist for a complete discussion of the changes 
we made to the EP. These export statistics pertained to a basket 
category, aniline derivatives, in which sulfanilic acid is included. 
The petitioner presented evidence that Quimigal is the only producer of 
aniline derivatives in Portugal and that this basket category provides 
the best approximation of Quimigal's sulfanilic acid exports. The 
Portuguese export statistics were already in U.S. dollars, so there was 
no need to perform any conversions.

NV

    According to the petitioner, Quimigal has no home market for 
sulfanilic acid and, therefore, it was unable to obtain price 
information for sales in the home market. Therefore, the petitioner 
turned to third-country sales for purposes of calculating NV. For 
third-country markets, the petitioner selected Spain, the UK, and 
Pakistan. After examining the evidence, we find that the UK is the most 
reasonable comparison market because, based on the Portuguese export 
statistics, the UK is the largest export market for Quimigal and 
because it meets the criteria for viable third-country sales pursuant 
to section 773(a)(1)(B)(ii) of the Act. See Portugal Initiation 
Checklist.

Price-to-CV Comparisons

    According to the petitioner, the per-unit prices for the comparison 
market, calculated using Portuguese export statistics, are below 
Quimigal's estimated cost of production. Therefore, the petitioner 
requested that the Department conduct a country-wide sales-below-cost 
investigation in the comparison market. See section 773(b)(2)(A) of the 
Act.
    Pursuant to section 773(b)(3) of the Act, COP consists of the COM, 
SG&A expenses (which include financial expenses), and packing. Because 
Quimigal also produces aniline, a major input in the production of 
sulfanilic acid, the petitioner included estimated costs for Quimigal's 
aniline production in its overall calculation of COP.
    As an estimation of the cost of aniline production in Portugal, the 
petitioner calculated Quimigal's COM for aniline based on a Stanford 
Research Institute (``SRI'') report \1\ of the estimated cost of 
producing aniline in Germany. The petitioner valued raw materials using 
the same research report except in the case of benzene, where the 
petitioner used prices from the Weekly DeWitte Newsletter for Benzene 
and Derivatives, and in the case of nitric acid and hydrogen, where the 
petitioner used quotes taken from suppliers to a European producer of 
sulfanilic acid.
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    \1\ This report is part of SRI's Process Economics Program. It 
was provided to NFC on a confidential basis.
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    To calculate Quimigal's COM for sulfanilic acid, the petitioner 
used its own factors of production to estimate the cost in Portugal. 
The petitioner valued raw materials from various sources. Sulfuric acid 
and activated carbon were valued based on quotes and invoices obtained 
from the European producer. Labor, natural gas and electricity were 
valued based on Portuguese values obtained from market research 
performed by the U.S. Commercial Service in Lisbon, Portugal. The 
petitioner was unable to obtain Quimigal's financial statements for 
purposes of deriving factory overhead, SG&A, and interest expense. 
Consequently, the petitioner relied upon its own experience for SG&A 
and interest expense, while factory overhead was calculated using the 
SRI report, which we found resulted in a more conservative percentage 
than if the petitioner had relied upon its own experience.
    Based upon the comparison of the prices of the foreign like product 
in the comparison market to the calculated COP of the product, we find 
reasonable grounds to believe or suspect that sales of the foreign like 
product were made below the COP within the meaning of section 
773(b)(2)(A)(i) of the Act. Accordingly, in the event that we determine 
that the UK is the appropriate market upon which to base NV, we will 
conduct a COP investigation.
    Because the comparison-market prices were below the COP, pursuant 
to sections 773(a)(4), 773(b), and 773(e) of the Act, the petitioner 
based NV for sales in the comparison market on CV. The petitioner 
calculated CV using the same COM, SG&A and financial expenses it used 
to compute comparison market costs. Consistent with section 773(e)(2) 
of the Act, the petitioner included in CV an amount for profit. For 
profit, the petitioner relied upon its own financial experience for the 
year for 2000 because it was unable to obtain Quimigal's financial 
statements. The petitioner did not make any other adjustments to CV for 
comparisons to EP.
    Based upon the comparison of CV to EP, as adjusted by the 
Department, the estimated dumping margin is 91.82 percent.

Fair Value Comparisons

    Based on the data provided by the petitioner, there is reason to 
believe that imports of sulfanilic acid from Hungary and Portugal are 
being, or are likely to be, sold at less than fair value.

Allegations and Evidence of Material Injury and Causation

    The petitions allege 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, net sales volume and value, and inventory. 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 Hungary Initiation Checklist 
and Portugal Initiation Checklist).

[[Page 54218]]

Initiation of Antidumping Investigations

    Based upon our examination of the petitions on sulfanilic acid, we 
have found that they meet the requirements of section 732 of the Act. 
Therefore, we are initiating antidumping duty investigations to 
determine whether imports of sulfanilic acid from Hungary and Portugal 
are being, or are likely to be, sold in the United States at less than 
fair value. Unless this deadline is extended pursuant to section 
733(c)(1), we will make our preliminary determinations no later than 
140 days after the date of this initiation.

Distribution of Copies of the Petitions

    In accordance with section 732(b)(3)(A) of the Act, a copy of the 
public version of each respective petition has been provided to the 
representatives of the governments of Hungary and Portugal. We will 
attempt to provide a copy of the public version of each petition to 
each exporter named in the petitions, as provided for under section 
351.203(c)(2) of the Department's regulations.

ITC Notification

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

Preliminary Determinations 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 or Portugal are causing material injury, or threatening to 
cause material injury, to a U.S. industry. A negative ITC determination 
for any country will result in the investigation being terminated with 
respect to that country; otherwise, these investigations 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. 01-26941 Filed 10-25-01; 8:45 am]
BILLING CODE 3510-DS-P