Federal Register, Volume 66 Issue 208 (Friday, October 26, 2001)

[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

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.

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

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.

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