[Federal Register Volume 67, Number 155 (Monday, August 12, 2002)]
[Notices]
[Pages 52447-52450]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-20389]


-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

International Trade Administration

[A-412-803]


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

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

ACTION: Notice of Preliminary Results of Antidumping Duty 
Administrative Review.

-----------------------------------------------------------------------

EFFECTIVE DATE: August 12, 2002.
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 (U.K.) in response to a 
request by Imperial Chemical Industries PLC and its affiliates (ICI). 
This review covers sales of subject merchandise made by one 
manufacturer/exporter, ICI, to the United States during the period July 
1, 2000, through June 30, 2001.
    We have preliminarily determined that sales of subject merchandise 
have been made below normal value (NV). 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 requested to submit with the 
argument (1) a statement of the issue, and (2) a brief summary of the 
argument.

FOR FURTHER INFORMATION CONTACT: Howard Smith 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, N.W., Washington, D.C. 20230; telephone: (202) 
482-5193 or (202) 482-4711, respectively.

SUPPLEMENTARY INFORMATION:

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 (2001).

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 2, 2001, we published in the Federal Register (66 FR 
34910), a notice of ``Opportunity to Request Administrative Review'' of 
this order covering the period July 1, 2000, through June 30, 2001, 
here after, referred to as the POR.
    In accordance with 19 CFR 351.213(b), on July 31, 2001, ICI 
requested that we conduct an administrative review of its sales and 
shipments of subject merchandise to the United States for the 
aforementioned period. The Department is now conducting this 
administrative review pursuant to section 751 of the Act.
    On August 20, 2001, we published in the Federal Register a notice 
of initiation of administrative review (66 FR 43570, 43572). On March 
12, 2002, we published in the Federal Register a notice of extension of 
time limit for the preliminary results (66 FR 11095). We issued the 
antidumping duty and supplemental questionnaires to respondent during 
the months of September 2001, and January and May 2002.\1\ We received 
ICI's responses to these questionnaires in the months of November 2001, 
and February and May 2002, respectively.
---------------------------------------------------------------------------

    \1\ Section A of the questionnaire requests general information 
concerning a company's corporate structure and business practices, 
the merchandise under investigation that it sells, and the manner in 
which it sells that merchandise in all of its markets. Section B 
requests a complete listing of all home market sales, or, if the 
home market is not viable, of sales in the most appropriate third-
country market (this section is not applicable to respondents in 
non-market economy (NME) cases). Section C requests a complete 
listing of U.S. sales. Section D requests information on the cost of 
production (COP) of the foreign like product and the constructed 
value (CV) of the merchandise under investigation. Section E 
requests information on further manufacturing.

---------------------------------------------------------------------------

[[Page 52448]]

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 
12.2percent.
    INC is currently classified under Harmonized Tariff Schedule of the 
United States (HTSUS) item number 3912.20.00. While the HTSUS 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 constructed 
export price (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 within the scope of the order that were sold by 
the respondent in the home market in the ordinary course of trade 
during the POR to be foreign like products for purposes of determining 
appropriate product comparisons to U.S. sales. We compared U.S. sales, 
on a model-specific basis, to sales made in the home market during the 
same month. When there were no home market sales of comparable 
merchandise occurring in the same month as the U.S. sale, we compared 
U.S. sales to monthly average home market sales one month prior, two 
months prior, three months prior to the month of the U.S. sale. If 
unsuccessful, we looked one month after and finally two months after 
the month of the U.S. sale. Where there were no sales of identical or 
similar merchandise in the home market within this time 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 
section 772(b) of the Act, because all sales to the first unaffiliated 
purchaser in the United States took place after importation. We 
calculated CEP based on packed, delivered prices to unaffiliated 
customers in the United States. In accordance with sections 772(c) and 
(d) of the Act, 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. Direct selling 
expenses include credit expenses and commissions, where applicable. ICI 
reported that it had no U.S. dollar denominated debt during the POR, 
and thus it calculated its U.S. credit expenses and inventory carrying 
costs based on an interest rate published by the British Bankers 
Association. Consistent with Department policy, we recalculated ICI's 
reported U.S. imputed credit expenses and inventory carrying costs 
using the Federal Reserve's weighted-average interest rate for 
commercial and industrial loans maturing between one month and one 
year. Finally, we made an adjustment for CEP profit in accordance with 
sections 772(d)(3) and 772(f) of the Act.

Further Manufacturing

    For INC that was imported by a U.S. affiliate of ICI and then 
further processed into lacquer and sealer products before being sold to 
unaffiliated parties in the United States, we determined that the 
special rule for merchandise with value added after importation under 
section 772(e) of the Act applies. Where appropriate, in accordance 
with section 772(d)(2) of the Act, the Department calculates the CEP by 
deducting from U.S. price the cost of any further manufacture or 
assembly in the United States, except where the special rule provided 
in section 772(e) of the Act is applied. Section 772(e) of the Act 
provides that, where the subject merchandise is imported by an 
affiliated person and the value added in the United States by the 
affiliated person is likely to exceed substantially the value of the 
subject merchandise, we shall determine the CEP for such merchandise 
using the price of identical or other subject merchandise sold in the 
United States if there is a sufficient quantity of sales to provide a 
reasonable basis for comparison. If there is not a sufficient quantity 
of such sales or if we determine that using the price of identical or 
other subject merchandise is not appropriate, we may use any other 
reasonable basis to determine the CEP. To determine whether the value 
added is likely to exceed substantially the value of the subject 
merchandise, we estimated the value added, pursuant to section 
351.402(c)(2) of the Department's regulations, based on the difference 
between the averages of the prices charged to the first unaffiliated 
purchaser for the merchandise as sold in the United States and the 
averages of the prices paid for the subject merchandise by the 
affiliated person. Based on this analysis, we determined that the 
estimated value added in the United States by ICI's U.S. affiliate 
accounted for at least 65 percent of the price charged to the first 
unaffiliated customer for the merchandise as sold in the United States. 
Therefore, in accordance with 19 CFR 351.402(c)(2), we determined that 
the value added is likely to exceed substantially the value of the 
subject merchandise. We also determined that there was a sufficient 
quantity of sales of other subject merchandise available in the U.S. 
market to provide a reasonable basis for comparison and that the use of 
such sales is appropriate in accordance with section 772(e) of the Act. 
Accordingly, for purposes of determining dumping margins for this sale, 
we have used the weighted-average dumping margins calculated on sales 
of subject merchandise sold to unaffiliated persons in the United 
States. See 19 CFR 351.402(c)(3). For a complete discussion of the 
information used by the Department in making this determination, which 
is proprietary, see Memorandum on Whether It Is Appropriate to Use the 
Special Rule for Certain Further-Manufactured Merchandise Sold by 
Imperial Chemical Industries PLC (ICI) in the United States During the 
Period of Review Under Section 772(e) of the Act dated July 31, 2002, 
on file in the Central Records Unit (CRU), Room B-099 of the main 
Department building.

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 is greater than five percent of its aggregate volume of U.S. 
sales of the subject merchandise, we determined that sales in the home 
market provide a viable basis for calculating NV.
    ICI reported that all home market sales during the POR were to 
unaffiliated parties. Therefore, we did not conduct the arm's length 
test. We calculated NV based on packed, delivered prices to 
unaffiliated

[[Page 52449]]

purchasers in the home market. In accordance with section 773(a)(6) of 
the Act, we adjusted the starting price by deducting home market 
packing costs and adding U.S. packing costs. Where applicable, we 
deducted inland freight and inland insurance from the starting price. 
In addition, we made a circumstance of sale adjustment for direct 
selling expenses, in accordance with section 773(a)(6)(C)(iii) of the 
Act. Furthermore, 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 between the 
variable costs of manufacturing the foreign like product and the 
subject merchandise.
    Finally, we reduced NV by the CEP offset. This offset equals the 
amount of the indirect selling expenses incurred on sales in the home 
market limited by the amount of the indirect selling expenses deducted 
from CEP pursuant to section 772(d) of the Act. See the Level of 
Tradesection of this notice.

Cost of Production (COP) Analysis

    In the 1999 - 2000 administrative review of INC from the United 
Kingdom, the most recently completed segment of this proceeding, the 
Department disregarded ICI's home market sales that were found to have 
failed the cost test. See Industrial Nitrocellulose from the United 
Kingdom: Final Results of Antidumping Duty Administrative Review, 66 FR 
40978 (August 6, 2001). Accordingly, the Department, pursuant to 
section 773(b)(2)(A)(ii) of the Act, initiated a COP investigation of 
ICI for purposes of this administrative review. We conducted the COP 
analysis as described below.

Cost of Production

    In accordance with section 773(b)(3) of the Act, we calculated the 
weighted-average COP, by model, by adding to the cost of materials and 
fabrication employed in producing the foreign like product, amounts for 
home market selling, general and administrative (SG&A) expenses and 
packing costs. We based these costs on the home market sales data and 
COP information provided by ICI in its questionnaire responses. ICI 
calculated its reported interest expense ratio using interest expenses 
incurred by its affiliate, Nobel's Explosives Company, Ltd. (Nobel's). 
Consistent with Department policy, and as requested in the Department's 
antidumping duty questionnaire, we recalculated ICI's reported net 
interest expense ratio based on the interest expenses reported on the 
parent's consolidated audited fiscal year financial statements.

1.Test of Home Market Prices

    After calculating a weighted-average COP in accordance with section 
773(b)(1) of the Act, we tested whether home market sales of INC were 
made at prices below the 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 figures to the reported home market sales prices less any 
applicable movement charges, discounts, direct and indirect selling 
expenses, and packing costs.

2.Results of COP Test

    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of ICI's sales of a given model were at prices less than the 
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) of the 
Act where 20 percent or more of the 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. In such cases, because we compared prices to POR-
average costs, we also determined that the sales prices would not 
permit recovery of all costs within a reasonable period of time. 
Therefore, we disregarded those below-cost sales and used the remaining 
sales to determine NV in accordance with section 773(b)(1) of the Act. 
For those models of INC for which there were no home market sales 
available for matching purposes, we compared CEP to CV.

Constructed Value

    In accordance with section 773(e)(2)(A) of the Act, we calculated 
CV by adding to ICI's cost of materials and fabrication employed in 
producing the subject merchandise, U.S. packing costs, SG&A expenses 
and profit incurred and realized in connection with the production and 
sale of the foreign like product in the ordinary course of trade, for 
consumption in the foreign country.
    In calculating CV, we used the cost of materials and fabrication, 
and the SG&A expenses reported in the CV portion of ICI's questionnaire 
response. In addition, we used the U.S. packing costs reported in the 
U.S. sales portion of ICI's questionnaire response. For profit, we 
first calculated the difference between the total home market net sales 
value and total home market COP for all home market sales in the 
ordinary course of trade, and divided the sum of this difference 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.

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 
(in this case the home 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 CV, that of the sales 
from which we derive SG&A expenses and profit. When U.S. price is based 
on CEP transactions, the LOT is the level of the constructed sale from 
the exporter to the importer.\2\ 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).
---------------------------------------------------------------------------

    \2\ 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) of the Act 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) of the Act, prior to performing the LOT analysis, as 
articulated by the Department's regulations atSec.  351.412.
---------------------------------------------------------------------------

    To evaluate whether different LOTs exist in the U.S. and home 
markets, we examine information regarding the chain of distribution 
between the producer and the customers in both markets, including 
information on stages in the marketing process, selling functions, 
classes of customer, and the level of selling expenses incurred for 
each type of sale. 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.
    Unless we find that there are different selling functions for sales 
to the United States and home market, 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 
LOTs. Differences in LOTs are characterized by purchasers at different 
marketing stages in the chain of distribution and sellers performing 
qualitatively or quantitatively different functions in selling to those 
purchasers. If the home market sale is at a different LOT than the U.S. 
sale, and the difference affects price comparability, as manifested in 
a pattern of consistent price differences between the sales on which NV 
is based and home market sales at the LOT of the U.S. sale, we make a 
LOT adjustment

[[Page 52450]]

under section 773(a)(7)(A) of the Act. Finally, for CEP sales, if the 
NV LOT is more remote from the factory than the CEP LOT and there is no 
basis for determining whether the differences between the LOTs for NV 
and CEP affect 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 appropriate 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 same selling functions were performed for 
all sales of the foreign like product; and thus all home market sales 
were made at only one LOT. Moreover, ICI made all of its U.S. sales to 
unaffiliated U.S. customers through its affiliate, ICI Americas, Inc. 
(ICIA). With respect to U.S. sales, after making deductions to the CEP 
pursuant to section 772(d) of the Act, we found that the selling 
activities performed by ICI for all CEP sales to its affiliate were 
limited to demand forecasting, order processing, arranging 
transportation, and invoicing. Therefore, we found one LOT in the U.S. 
market and determined that the selling functions performed for the NV 
LOT (i.e., sales solicitation, price negotiation, customer visits, 
advertising, technical support, invoicing, rebate administration and 
billing adjustment) were different from the U.S. selling functions and 
constituted a more advanced LOT than the U.S. LOT. We, therefore, 
evaluated whether we could determine if the difference in these LOTs 
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 home market. Because there is only one 
home market LOT, we are unable to determine whether there is a pattern 
of consistent price differences based on home market sales of foreign 
like product, and, therefore, are unable to quantify a LOT adjustment. 
Therefore, in accordance with section 773(a)(7)(B) of the Act, we have 
preliminarily granted ICI a CEP offset. See Memorandum Re: Industrial 
Nitrocellulose from the United Kingdom Level of Trade Analysis Imperial 
Chemical Industries, PLCdated July 31, 2002, on file in the CRU.

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-Average
                Exporter/Manufacturer                        Margin
------------------------------------------------------------------------
Imperial Chemical Industries PLC.....................       3.64 percent
------------------------------------------------------------------------

    We will disclose the calculations used in our analysis to parties 
to this proceeding in accordance with 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). We will issue a memorandum 
detailing the dates of a hearing, if any, and deadlines for submission 
of written comments and rebuttal comments, limited to issues raised in 
such comments, after verification of ICI. Parties who submit comments 
are requested to submit with the comments (1) a statement of the issue, 
(2) a brief summary of the argument and (3) a table of authorities. 
Further, the Department requests that parties submitting written 
comments provide the Department with a diskette containing the public 
version of those comments. 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 
Customs 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 entered value of the 
same merchandise. Upon completion of this review, where the importer-
specific assessment rate is above de minimis, the Department will 
instruct Customs to assess antidumping duties on all entries of subject 
merchandise by that importer during the POR.

Cash Deposit Requirements

    The following cash deposit requirements will be effective for all 
shipments of the subject merchandise entered, or withdrawn from 
warehouse, for consumption on or after the publication date of the 
final results of this administrative review, as provided by section 
751(a)(1) of the Act: (1) the case deposit rate for the reviewed 
company will be that established in the final results of this review, 
except if the rate is less than 0.50 percent, and therefore, de minimis 
within the meaning of 19 CFR 351.106(c)(1), in which case the cash 
deposit rate will be zero; (2) for previously reviewed or investigated 
companies not listed above, the cash deposit rate will continue to be 
the company-specific rate published for the most recent period; (3) if 
the exporter is not a firm covered in this review, a prior review, or 
the original less-than-fair-value (LTFV) investigation, but the 
manufacturer is, the cash deposit rate will be the rate established for 
the most recent final results for the manufacturer of the merchandise; 
and (4) the cash deposit rate for all other manufacturers or exporters 
will continue to be 11.13 percent, the ``all-others'' rate established 
in the LTFV investigation (55 FR 21058, May 22,1990).

Notification to Importers

    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 administrative review and notice are issued and published in 
accordance with sections 751(a)(1) and 777(i)(1) of the Act.

    Dated: July 31, 2002.
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 02-20389 Filed 8-9-02; 8:45 am]
BILLING CODE 3510-DS-S