Notice of Final Determination of Sales at Less Than Fair Value: Aramid Fiber Formed of Poly-Phenylene Terephthalamide From the Netherlands

DEPARTMENT OF COMMERCE

International Trade Administration

[A-421-805]

Notice of Final Determination of Sales at Less Than Fair Value:

Aramid Fiber Formed of Poly-Phenylene Terephthalamide From the

Netherlands

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: May 6,1994.

FOR FURTHER INFORMATION CONTACT: Jennifer Katt or Michael Ready, Office

of Antidumping Investigations, Import Administration, International

Trade Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, NW.; Washington, DC 20230; telephone: (202) 482-

0498 or (202) 482-2613, respectively.

FINAL DETERMINATION: We determine that imports of aramid fiber formed

of poly-phenylene terephthalamide (PPD-T aramid fiber) from the

Netherlands are being, or are likely to be, sold in the United States

at less than fair value (LTFV), as provided in section 735 of the

Tariff Act of 1930, as amended (the Act). The estimated weighted-

average margins are shown in the ``Continuation of Suspension of

Liquidation'' section of this notice.

Case History

Since our preliminary determination on December 9, 1993 (58 FR

65699, December 16, 1993), the following events have occurred:

On December 16, 1993, we received a request from the sole

respondent in this investigation, Aramide Maatschappij V.O.F. (Arami)

and Akzo Fibers, Inc. (the U.S. selling agent) (collectively Akzo) to

postpone the final determination in this investigation until 135 days

after the date of publication of the preliminary determination. On

December 22, 1993, we did so and postponed this final determination

until May 2, 1994 (58 FR 69329, December 30, 1993).

On February 23, 1994, petitioner (E.I. Du Pont de Nemours &

Company) requested that references to tire cord fabric be deleted from

the scope of the investigation. On April 21, 1994, petitioner revised

its previous request, asking that tire cord fabric be expressly

excluded from the scope of this investigation. (See ``Scope of the

Investigation'' section of this notice, below.) Akzo submitted

supplemental responses to sections B (third-country sales), C (United

States sales) and D (cost of production/constructed value) of the

questionnaire, revisions and corrections to its sales responses, and/or

revised computer tapes in December 1993, as well as February, March and

April of 1994.

We conducted verification of Akzo's sales and cost questionnaire

responses in the Netherlands and the United States in February and

March of 1994, respectively.

Akzo and petitioner submitted case and rebuttal briefs on March 28

and 31, 1994, respectively. At Akzo's request, a public hearing was

held on April 1, 1994.

Scope of the Investigation

The products covered by this investigation are all forms of poly

para-phenylene terephthalamide aramid fiber from the Netherlands. These

consist of PPD-T aramid in the form of filament yarn (including single

and corded), staple fiber, pulp (wet or dry), spun-laced and spun-based

nonwovens, chopped fiber and floc. Tire cord fabric is excluded from

the class or kind of merchandise under investigation. PPD-T aramid

fiber is classifiable under subheadings 5402.10.3020, 5402.10.3040,

5402.32.3000, 5503.10.0000, 5601.30.0000 and 5902.10.0000 of the

Harmonized Tariff Schedule of the United States (HTSUS). Although the

HTSUS numbers are provided for convenience and customs purposes, our

written description of the scope of this investigation is dispositive.

Changes to the Scope of the Investigation

Prior to our preliminary determination, petitioner requested that

we clarify that ``tire cord fabric'' constructed of PPD-T aramid fiber

is included within the scope of this investigation. After considering

comments from both parties, we preliminarily determined that this

product is included within the scope of this investigation (58 FR

65699, December 16, 1993). We also invited comments from interested

parties on this issue. Subsequent to the preliminary determination,

petitioner requested that tire cord fabric be expressly excluded from

the scope of this investigation. Also, Akzo submitted arguments

opposing the inclusion of tire cord fabric. We have therefore excluded

tire cord fabric from the class or kind of merchandise covered by this

investigation.

Petitioner also requested that the term ``nonwovens'', as used in

the description of the scope of the investigation, be clarified to

include only spun-based and spun-laced nonwovens composed of PPD-T

aramid fiber. We have made this clarification.

Finally, at the request of the U.S. International Trade Commission,

we have replaced the words ``this includes'' with the words ``these

consist of'' to further clarify the products covered by this

investigation.

Class or Kind

Prior to our preliminary determination, Akzo argued that this

investigation should involve at least three classes or kinds of

merchandise: Yarn, staple fiber and pulp. After considering extensive

comments from both parties, we preliminarily determined that the

products covered by this investigation constitute a single class or

kind of merchandise, and three such or similar categories. (See

Preliminary Concurrence Memorandum, dated December 9, 1993, on file in

room B-099 of the main building of the Department of Commerce). In our

preliminary determination, we invited additional comments from

interested parties on this issue. However, no additional evidence

supporting a finding of three classes or kinds has been submitted. In

addition, no comments in opposition to our preliminary determination

have been filed. We therefore continue to find that the products

covered by this investigation constitute a single class or kind of

merchandise.

Period of Investigation

The period of investigation (POI) is January 1, 1993, through June

30, 1993.

Such or Similar Comparisons

We made fair value comparisons using the following such or similar

categories: (1) Yarn; (2) staple fiber; and (3) pulp. Where we were not

able to compare U.S. sales to sales of identical merchandise, we made

similar merchandise comparisons on the basis of the criteria defined in

Appendix V to the antidumping duty questionnaire, on file in room B-099

of the main building of the Department of Commerce. In accordance with

19 CFR 353.58, we made comparisons at the same level of trade, where

possible.

Fair Value Comparisons

To determine whether Akzo's sales to the United States of PPD-T

aramid fiber were made at less than fair value, we compared the United

States price (USP) to the foreign market value (FMV), as specified in

the ``United States Price'' and ``Foreign Market Value'' sections of

this notice.

United States Price

We calculated USP according to the methodology described in our

preliminary determination, with the following exceptions:

1. We included certain sales in our calculation of USP which Akzo

contends were pursuant to a long-term contract negotiated prior to the

POI. (For a further discussion of these sales, see comment 1 below.)

2. We increased U.S. indirect selling expenses by the amount of G&A

expenses allocated to the aramid fibers business unit of Akzo Fibers

Inc. by its parent company, Akzo America Inc. (see comment 6 below).

3. We recalculated inventory carrying costs incurred in the

Netherlands on U.S. sales to reflect the short-term borrowing rate of

Arami, (i.e., the actual producer and seller of subject merchandise),

(see comment 8 below).

4. We used the date of the start of the Dutch sales verification

for all missing payment dates.

Foreign Market Value

As stated in our preliminary determination, we determined that the

home market was not viable for any of the three such or similar

categories. We selected Germany as the third country market for sales

of yarn and staple fiber, and Japan as the third country market for

sales of pulp. We calculated FMV as noted in the ``Price-to-Price'' and

``Price to Constructed Value (CV)'' sections of this notice.

Cost of Production

Petitioner alleged that Akzo's third country sales were made at

prices below the cost of production (COP). On the basis of petitioners'

allegations, we gathered and verified data on production costs.

We compared Akzo's third country prices to the COP as explained in

our preliminary determination.

In order to determine whether third country prices were above the

COP, we calculated the COP based on the sum of Arami's (i.e., the

actual producer and seller of subject merchandise) submitted costs of

materials, fabrication, general expenses, and packing, except in the

following instances where the costs were not appropriately quantified

or valued:

1. We recalculated interest expense based solely on Arami's

financial statements (see DOC position for comment 12);

2. We included certain non-operating expenses in general and

administrative (G&A) expenses (see DOC position for comment 17); and

3. We disallowed Arami's claimed reduction in fixed overhead for

certain intercompany charges (see DOC position for comments 14 and 15).

Accordingly, we increased its submitted cost of manufacturing.

Price-to-Price Comparisons

For those products for which we had an adequate number of sales at

prices equal to or greater than the COP, we based FMV on third country

prices. We calculated FMV using the methodology described in our notice

of preliminary determination, with the following exceptions:

1. We recalculated inventory carrying costs incurred in the

Netherlands on German and Japanese sales and German credit expenses to

reflect the short-term borrowing rate of Arami (see comment 7 below).

2. We used the average credit days of all transactions with a

reported shipment and payment date for sales missing both a shipment

and payment date. We have inserted the date of the start of the Dutch

sales verification for those sales with missing payment dates only.

3. We corrected a clerical error in the calculation of third

country indirect selling expenses.

Price to CV Comparisons

For those products without an adequate number of sales at prices

above the COP, we based FMV on CV. We calculated CV based on the sum of

the cost of materials, fabrication, general expenses, and U.S. packing

cost. In accordance with section 773(e)(1)(B) (i) and (ii) of the Act

we: (1) Included the greater of Arami's reported general expenses or

the statutory minimum of ten percent of the cost of manufacture (COM),

as appropriate and; (2) for profit, we used the higher of the statutory

minimum of eight percent of the sum of COM and general expenses or the

actual profit incurred as calculated on a market specific basis (see

Comment 18). As a result, for the German market we used actual profit

and for the Japanese market we used the statutory minimum of eight

percent. We calculated CV based on the methodology described in the

calculation of COP above, with the following exceptions:

1. In the financing calculation, we included additional interest

expense based on market value (See Comment 13).

2. We corrected a clerical error in the calculation of third

country profit.

In instances where we compared Akzo's U.S. prices to CV, we made

deductions, where appropriate, for the weighted-average third country

direct selling expenses. We also deducted the weighted-average third

country indirect selling expenses. We limited this adjustment by the

amount of indirect selling expenses incurred on U.S. sales, in

accordance with 19 CFR 353.56(b)(2).

Final Determination of Critical Circumstances

Petitioner alleged that ``critical circumstances'' exist with

respect to imports of PPD-T aramid fiber from the Netherlands. Pursuant

to section 733(e)(1) of the Act and 19 CFR 353.16, we have analyzed the

allegations using the Department's standard methodology as discussed in

our preliminary determination, except that for purposes of determining

whether there have been massive imports we compared imports in five-

month periods rather than four-month periods (see DOC position for

comment 4). Accordingly, we find that critical circumstances do not

exist.

Currency Conversion

We made currency conversions based on the official exchange rates

in effect on the dates of the U.S. sales as certified by the Federal

Reserve Bank of New York.

Verification

As provided in section 776(b) of the Act, we verified information

provided by Akzo by using standard verification procedures, including

the examination of relevant sales and financial records, and selection

of original source documentation containing relevant information.

Interested Party Comments

Certain comments cannot be discussed in this notice due to their

business proprietary nature. The comments which have been excluded do

not lend themselves to public summarization, and therefore have been

discussed in the business proprietary version of the Final Concurrence

Memorandum dated May 2, 1994 (Final Concurrence Memorandum), on file in

room B-099 of the main building of the Department of Commerce.

Comment 1: Petitioner argues that the Department of Commerce (the

Department) should include in its calculation of U.S. price Akzo's

shipments during the POI made pursuant to a long-term agreement

negotiated prior to the POI. Petitioner contends that the particular

terms and circumstances of Akzo's agreement with this customer do not

create a binding commitment on the part of either the buyer or seller

and therefore do not create an enforceable sales contract.

Akzo argues that these shipments were pursuant to a long-term

contract established prior to the POI and therefore are properly

excluded from the U.S. database. Akzo further argues that certain terms

and circumstances of the agreement should not prevent it from being

considered a contract with a date of sale prior to the POI because the

two parties acted upon and adhered to the contract. Finally, respondent

points out that the Department confirmed at verification that all sales

to this customer during the period of the contract were at the contract

price.

DOC Position: In order for this agreement to be considered a long-

term contract established prior to the POI, the agreement must fix both

the price and quantity. At verification we examined all invoices to the

customer for sales pursuant to the agreement during its effective

period. Although we found that all sales were made at the specified

price, we also found that the quantity purchased was substantially less

than the amount specified in the contract.

Therefore, we conclude that the quantity was not fixed by the terms

of the agreement because the quantities actually purchased over the

period of the agreement were unrelated to those specified by the

agreement. For this reason, we determine that the date of the agreement

does not constitute the date of sale. Accordingly, we have used the

date of shipment as the date of sale and have included all shipments to

this customer during the POI in our calculation of U.S. price.

Comment 2: Petitioner argues that the Department should include in

its calculation of U.S. price Akzo's shipments during the POI pursuant

to a supply agreement which was signed prior to the POI but modified

during the POI. Petitioner asserts that the modification to the

agreement, in effect, created a new agreement with a date of sale

within the POI.

Akzo argues that the contract modification did not alter the

essential terms of the contract. Therefore, according to Akzo, all POI

shipments pursuant to this agreement have a date of sale prior to the

POI and thus are properly excluded from the U.S. sales database.

DOC Position: We agree with Akzo. We verified that the essential

terms of the contract, the price and quantity, were not altered as a

result of the modification. Therefore, we consider Akzo's agreement

with this customer to be a long-term contract with a date of sale prior

to the POI. Consequently, the shipments in question were properly not

reported.

Comment 3: Petitioner argues that Akzo's shipments made pursuant to

supply contracts with two customers during the POI should be reported

as U.S. sales, if not already reported.

Akzo contends that these sales have been reported.

DOC Position: The sales in question were reported.

Comment 4: Petitioner argues that the Department should find that

imports of subject merchandise were massive over a relatively short

period of time and that consequently, critical circumstances exist in

this investigation under 735 (a)(3)(B) of the Act. In its analysis,

petitioner compared shipments to the United States with a base period

prior to the filing of the petition of May-July, 1993, with shipments

to the United States in the post-petition comparison period of August-

October, 1993. Using this comparison, petitioner found that imports had

increased during the comparison period by more than 15 percent, the

Department's benchmark.

Akzo argued that imports were not massive, and that the

petitioner's methodology was not consistent with the practice of the

Department.

DOC Position: We agree with Akzo. In this case, the petition was

filed on July 2, 1993. It is the Department's standard policy, in cases

where the petition is filed during the first half of the month, to

include the month of filing in the post-petition comparison period, not

the base period, as petitioner suggests (See, e.g., Certain Portable

Electronic Typewriters from Singapore, 58 FR 43337 (1993)).

Additionally, although 19 CFR 353.16(g) requires that we examine at

least three months, it is the Department's practice to examine the

longest period for which information is available up until the

preliminary determination (See, e.g., Certain Cut-to-Length Carbon

Steel Plate from the United Kingdom, 58 FR 37216 (1993)). When the five

month period subsequent to and including the month that the petition

was filed is compared to the previous five months, we find that imports

were not at levels we consider massive.

Comment 5: Petitioner argues that certain sales of scrap (which

were excluded from our analysis in the preliminary determination

because the quantity involved was insignificant) should be included in

the calculation of U.S. price for the following reasons: (1) The fact

that the quantities are small is irrelevant; (2) other sales of the

merchandise in question are included in the cost of production

calculations; and (3) according to product specifications in Akzo's

invoices, the merchandise in question is clearly a form of PPD-T aramid

fiber which is subject to investigation.

Akzo argues that the Department properly excluded sales of scrap

from its preliminary determination because the quantities sold in the

United States were small and there were no similar sales of scrap in

the comparison third country markets. Additionally, Akzo asserts that

exclusion of scrap sales is consistent with the treatment of non-prime

material in the recent carbon flat steel cases, where the Department

disregarded sales of second quality merchandise in the U.S. market

where there were no similar sales in the home market and they

constituted an insignificant portion (less than five percent) of the

respondent's total U.S. sales, (Final Determination of Sales at Less

Than Fair Value: Certain Hot-Rolled and Certain Cold-Rolled Steel from

the Netherlands, 58 FR 37199, 37201 (July 9, 1993)).

Akzo further argues that petitioner's reliance on the product

designations on the invoices is misplaced because scrap is generated as

part of the beaming (i.e., repacking) process in the United States.

DOC Position: We agree with Akzo. The volume of scrap sales is

insignificant and there are no comparable third country sales.

Therefore, we have continued to exclude these sales from our

calculations. In addition, at verification we verified that most of the

scrap is tailings generated by the U.S. repacking operation and that,

invoice descriptions notwithstanding, the product is sold as waste and

the customer has no recourse to quality claims.

Comment 6: Petitioner argues that we should not exclude certain

(G&A) expenses incurred by Akzo America, Inc. in the calculation of

indirect selling expenses for purposes of the ESP deduction from U.S.

price. Petitioner further argues that it is long-standing Department

practice to consider G&A expenses incurred by the U.S. selling arms of

a foreign producer to be indirect ``selling expenses'' for purposes of

this deduction.

Akzo argues that it has captured all expenses of the selling

affiliate, Akzo Fibers, in its calculation of indirect selling

expenses. In addition, Akzo asserts that it has captured all selling-

related expenses which were allocated to the aramid fiber business unit

of Akzo Fibers by Akzo America. Akzo contends that all remaining G&A

expenses carried on the books of Akzo America are not associated with

the selling function at Akzo Fibers and therefore are properly not

included in the calculation of U.S. indirect selling expenses.

DOC Position: We agree with petitioner. Akzo America is the parent

company that provides administrative, accounting and finance services

for all of Akzo's North American subsidiaries. In addition, there is no

evidence that it provides any services for Akzo N.V. (its parent

company in the Netherlands) other than to facilitate the activities of

the subsidiaries in the United States. Therefore, all expenses incurred

by Akzo America, including those classified on its books as G&A, are

indirectly related to the selling activities of the subsidiaries.

Consequently, we have included in the calculation of U.S. indirect

selling expenses the amount of Akzo America's G&A expenses which have

been allocated to the aramid fibers business unit of Akzo Fibers.

Comment 7: Petitioner argues that certain other G&A expenses listed

on the June 1993 financial statement of Akzo America have not been

allocated to any of the North American subsidiaries and that the

representative portion attributable to the aramid fiber business unit

should be included in the calculation of indirect selling expenses for

purposes of the ESP deduction from U.S. price.

Akzo argues that these G&A costs are the same G&A expenses which

are the subject of Comment 6 above.

DOC Position: We agree with petitioner that the G&A expenses of

Akzo America should be included in the calculation of indirect selling

expenses for purposes of the ESP deduction from U.S. price (see comment

6). However, we agree with Akzo that these G&A costs are the same G&A

expenses which are the subject of Comment 6 (see memorandum to the

file, dated April 22, 1994). Therefore, no additional increase to U.S.

indirect selling expenses is necessary.

Comment 8: Petitioner argues that in calculating the Dutch portion

of U.S. inventory carrying costs, the Department should use the short-

term borrowing rate of Arami (i.e., the actual producer and seller of

the subject merchandise), rather than the rate of Akzo N.V., the parent

company. Petitioner asserts that Arami's borrowing rate is appropriate

because Arami is the company which actually financed the inventory and

is a separate corporate entity from Akzo N.V.

Akzo argues that Akzo N.V.'s short-term borrowing rate should be

used in calculating the Dutch portion of the inventory carrying cost

for the same reasons it argues that Akzo N.V. and Arami should be

consolidated for determining a financial expense ratio for CV and COP.

(See the discussion below at Comment 11). Respondent also argues, in

the event that the Department decides not to collapse the two companies

and uses Arami's short-term borrowing rate in calculating U.S.

inventory carrying cost, that the Department should also use Arami's

short-term borrowing rate in the calculation of inventory carrying

costs incurred in the Netherlands on sales made in Japan and Germany

and in the calculation of German credit.

DOC Position: As noted in our response to Comment 11 below, we have

determined that it is not appropriate to collapse Arami and Akzo N.V.

Therefore, we agree with petitioner and have used the short-term

borrowing rate of Arami in calculating the inventory carrying costs

incurred in the Netherlands on U.S., German and Japanese sales. We have

also applied Arami's rate in the calculation of German credit expense,

as suggested by Akzo.

Comment 9: Petitioner argues that Akzo's U.S. customs duty

calculation may be incorrect because there are discrepancies between

the list of customs entries for subject merchandise entering Akzo's

warehouses in the United States during the POI and the list of all

shipments to the United States provided by Akzo in connection with the

critical circumstances allegation.

Akzo argues that petitioner has erroneously assumed that the

entries included in the two lists should correspond exactly. In fact,

respondent argues, the list of shipments includes additional entries

that did not enter Akzo's warehouse but were transferred directly to

U.S. customers, entries made after the POI, and invoices that were

cancelled.

DOC Position: We agree with Akzo. The two lists will not correspond

exactly. One list represents the volume of subject merchandise entering

Akzo's U.S. warehouses during the POI, while the other represents the

volume of subject merchandise shipped from the Netherlands during the

POI. In addition, at verification we determined that the list of

entries used for Akzo's U.S. duty calculation was complete and

accurate.

Comment 10: Akzo argues that the Department made clerical errors in

its calculation of the ESP offset and difference in merchandise

adjustment in its preliminary determination.

DOC Position: We agree with respondent. We have corrected these

errors in our final determination. Also, see our response to Comment

18.

Comment 11: Petitioner argues that Arami and Akzo N.V. should not

be consolidated for COP or CV calculations. Petitioner states that

while they were clearly related, Akzo N.V. held only a 50 percent

equity interest in Arami and their operations were never consolidated

for financial reporting or any other purposes. According to both Dutch

and U.S. generally accepted accounting principles (GAAP), consolidation

is required when one company holds more than a 50 percent equity

interest in another company. Petitioner asserts that the reorganization

of the Arami joint venture should not be factored into the Department's

cost analysis because this development occurred after the POI.

Petitioner claims that if the Department departed from its practice of

investigating costs and prices during the POI, it would constitute an

arbitrary departure from established practice as well as an invitation

for post-POI cost and price manipulation by foreign producers.

Petitioner maintains that the Department's reason for collapsing

transactions between related parties which do not reflect ``arm's

length'' costs is to eliminate any substantial risk of price and cost

manipulation between those companies. Petitioner states that the legal

and operational structure of Arami was designed so that its operations

would not be consolidated under Dutch law. Additionally, petitioner

asserts that the actual cost of producing aramid fiber is more

accurately reflected by Arami's own books and records instead of its

records consolidated with the Akzo Group. Petitioner contends that the

companies in the cases cited by Arami do not relate to this case

because the companies met the requirements for consolidation and should

have been consolidated under GAAP (i.e., equity ownership was greater

than 50 percent).

Arami claims that Akzo N.V. exerted significant control over its

operation not only in 1993, but in all preceding years. Arami states

evidence of this close interrelationship is illustrated by its

financing transactions as well as evidence of organizational and

operational control. Arami argues that it is the Department's practice

to combine financing activities of companies where one company exerts

significant control over the other company. It also claims that this is

in keeping with the Department's position on fungibility of capital.

Arami has informed the Department that Akzo Fibers Aramide B.V., a

wholly-owned subsidiary of Akzo N.V., increased its equity interest in

Arami to 95 percent effective December 31, 1993. Arami concludes that,

based on the fungibility of capital, increased equity ownership and

significant control, the Department should consolidate Arami with Akzo

N.V. for cost of production and constructed value purposes. Arami

states that it was consolidated with Akzo N.V. for balance sheet

reporting purposes as of December 31, 1993, and would be fully

consolidated on both the income statement and balance sheet in the

fiscal year 1994.

Additionally, Arami claims that in previous cases, the Department

has combined the parent and subsidiary's costs even though

consolidation did not occur in the normal course of business. In citing

the Final Determination of Sales at Less Than Fair Value: Certain

Carbon Steel Butt-weld Pipe Fittings from Thailand (pipe fittings), 57

FR 21065 (1992), respondent quotes the Department as saying: ``* * * it

is the Department's policy to combine the financing activities of a

parent and subsidiary when the parent exercises control over the

subsidiary (i.e. meets the requirements for consolidation).''

Respondent also cites the Final Determination of Sales at Less Than

Fair Value: Ferrosilicon from Brazil (Ferrosilicon), 59 FR 732 (1994),

to further support its claim.

DOC Position: We agree with petitioner, and have not consolidated

Arami and Akzo N.V. for purposes of this antidumping investigation. The

corporate reorganization which was effective December 31, 1993, was not

considered by the Department because it occurred subsequent to the POI.

Each of the joint venture partners had equal control over decisions

involving Arami's operations until the new agreement was signed in

1994. Under Dutch GAAP, if a company does not have equity ownership of

greater than 50 percent, but still has control over another company, it

is required to consolidate. Since Arami was not consolidated with Akzo

prior to reorganization, we can reasonably conclude that Akzo did not

have sufficient control over Arami to warrant consolidation under Dutch

GAAP. Therefore, consolidation of Arami and the Akzo N.V. for

antidumping purposes based on a significant control argument is

unwarranted.

In the two cases cited by Arami, the GAAP of those countries

required consolidation when one company owned more than 50 percent of

another. In the Pipe Fittings case, the Japanese parent company, Awaji

Sangyo K.K. Company Ltd. (ASK) owned more than 50 percent of Awaji

Sangyo Co. Ltd., (AST) of Thailand. Although ASK and AST did not

prepare consolidated financial statements, the Department in its cost

verification report (April 4, 1992, pg.3) noted ``* * * the operations

should have been consolidated in accordance with generally accepted

accounting principles.'' In Ferrosilicon, the parent company owned

greater than 50 percent of Minasligas, its subsidiary under

investigation. Brazilian and U.S. GAAP require consolidation when the

equity interests exceed 50 percent. In each of those cases, control was

indicated by equity ownership and GAAP required consolidation. In

contrast to the above cases, Arami did not meet the requirements for

consolidation. For further analysis of this issue, see the Final

Concurrence Memorandum.

Comment 12: Since Arami was not consolidated with Akzo N.V. during

the POI, petitioner asserts interest expense should be calculated based

solely on Arami's 1992 audited financial statements. Petitioner argues

that the Department must disregard the reorganization finalized

subsequent to the POI which resulted in Arami being consolidated with

Akzo N.V. for balance sheet purposes. In addition, petitioner states

this consolidation did not affect the income statement encompassing the

POI.

Arami argues that the combined 1992 financial statement data of

Arami and Akzo N.V. is the correct basis for computing interest expense

because Akzo N.V. exerts significant control over Arami's operations

and capital is fungible. Arami argues that the consolidation for

balance sheet purposes as of December 31, 1993, affects the entire

fiscal year 1993.

DOC Position: We disagree with respondent. A company's balance

sheet presents a snapshot of its assets and claims on those assets

(liabilities and equity) as of a specific point in time (i.e., 12/31/

93). An income statement reports a company's performance over a

specified period of time (i.e., 1/1/93-12/31/93). Arami's operating

results were not consolidated with the results of the Akzo N.V. Group

in 1993. Based on the Department's decision not to consolidate Arami

with Akzo N.V., we calculated interest expense for COP and CV based

solely on Arami's financial statements. For further analysis of this

issue, see the Final Concurrence Memorandum.

Comment 13: Petitioner asserts that interest on loans provided by a

related party should be included in the calculation of Arami's

financing costs for COP and CV purposes. Petitioner states that

according to the Court of Appeals for the Federal Circuit in IPSCO,

Inc. v. U.S., 965 F.2d 1056 (1992), cost of production is linked to

constructed value. Thus, the petitioner states that the constructed

value provision authorizing the Department to disregard related party

transactions which are not arms-length in nature can be applied to cost

of production calculations. Petitioner asserts that Arami's argument

for consolidation does not eliminate the costs associated with these

loans. Furthermore, the year end reorganization does not modify costs

incurred during the POI. Petitioner contends that consolidation did not

affect the income statement for the period January 1 through December

31, 1993.

Arami claims that as a result of the new joint venture agreement

signed in 1994, Arami's balance sheet was consolidated with that of

Akzo N.V., eliminating all related party loans. Therefore, the

Department cannot impute an interest cost to loans that do not exist as

of December 31, 1993. Arami claims its 1992 audited financial statement

data should be used in calculating interest expense, but adds that the

significant change in Arami's corporate structure must be considered.

Arami continues that if the Department determines consolidation is

unwarranted, and decides imputation of interest expense is necessary

for CV, it should not impute interest for COP. Arami argues that the

Department's long standing policy is to compute COP based on a

company's actual costs, thus, there is no basis on which to impute

interest for COP.

DOC Position: According to section 773(e)(2) of the Act, for CV, if

a transaction between related companies does not fairly reflect the

market value, the Department may determine that element of value using

the best evidence available. In this case, we found that the loans in

question were at below-market interest rates. Thus, we included the

interest incurred on the loans provided by Arami's related party in the

calculation of financing costs for CV purposes.

We determined that no related party financing adjustment is

necessary for COP purposes. In determining actual costs of production,

the Department normally adheres to the GAAP of the respondent's home

country. Under Dutch GAAP, economic activities are normally

consolidated for all companies that have direct or indirect ownership

greater than 50 percent. In accordance with ITA's standard practice,

the supplier's actual costs of production should be used to value

inputs acquired from companies that are directly or indirectly related

by more than 50 percent. Inputs acquired from companies that have

direct or indirect ownership of 50 percent or less, should normally be

valued using transfer prices (i.e., purchaser's actual cost).

Accordingly, for COP purposes, we used Arami's transfer prices.

For further analysis of these issues, see the Final Concurrence

Memorandum.

Comment 14: Petitioner states that certain charges were paid by

Arami for services rendered by related Akzo companies. Since certain of

these charges are used to approximate the price charged in an arm's

length transaction and were actual costs incurred, Petitioner states it

is appropriate to include these costs in the cost of manufacturing.

Arami claims certain of these charges are intracompany transactions

which do not represent true costs and will be discontinued in 1994,

therefore, these costs should be excluded from the cost of

manufacturing for both COP and CV purposes.

DOC Position: We disagree with respondent. These charges relate to

intercompany transactions between Arami and another company, which

represent actual costs incurred by Arami and recorded on its books

during the POI. Arami incorrectly categorized these costs as

intracompany transactions which relates to transactions between

divisions within a company. The fact that this charge may be

discontinued in 1994 does not mean the costs should be excluded for

1993. Accordingly, we included these charges in Arami's COP and CV

calculations.

Comment 15: Petitioner states that certain costs incurred by Akzo

N.V. prior to the POI and recorded in Arami's 1992 audited financial

statements in accordance with GAAP should be included in the COP.

Petitioner states that this expense should be either charged to U.S.

sales as a selling expense or to all sales as a general and

administrative expense.

Akzo argues that these costs incurred by Akzo N.V. do not represent

true costs for Arami during the POI. The accrual on Arami's books for

this cost has not been paid to Akzo N.V. and the expense will no longer

be charged in 1994. Therefore, this intercompany transaction should be

excluded from the submitted cost of manufacturing.

DOC Position: Since this expense relates to the general production

activity of Arami, we included it in Arami's general and administrative

expense calculation for COP and CV purposes. This expense represents an

actual cost recorded on Arami's books during the POI and the fact that

the expense will no longer be charged in 1994 is not relevant.

Comment 16: Petitioner asserts that the Department should disallow

a certain adjustment to Arami's fixed overhead costs for grants because

it is not recorded in Arami's cost accounting system and the reduction

in costs attributed to this adjustment distorts Arami's true cost of

manufacturing. Petitioner notes that if the Department allows this

reduction, we should self-initiate a countervailing duty investigation.

Arami claims that it properly adjusted its fixed overhead costs by

a certain amount because this adjustment is recorded in Arami's

financial accounting system, and is included in its audited financial

statements. Arami notes that inclusion of this adjustment in no way

distorts Arami's costs, because it reflects amounts actually incurred.

Additionally, Akzo notes that because not all grants are

countervailable, the Department should resist petitioner's statements

requesting self-initiation of a countervailing duty investigation.

DOC Position: This adjustment reflects actual costs incurred by

Arami as recorded on its books in accordance with GAAP, and was

properly included in its submitted COP and CV. We believe subsidies are

more properly handled in the context of the countervailing duty law.

Petitioner is free to submit a countervailing duty petition. Should

such a petition be submitted and meet the requirements of the

countervailing duty regulations (19 CFR 355.12), the Department would

initiate such an investigation. However, no justification has been

presented here for a departure from the Department's general policy of

not self-initiating countervailing duty investigations.

Comment 17: Petitioner claims that several other non-operating

expense items should be included in G&A costs because each of these

expenses relate to the aramid fibers business. Petitioner asserts all

G&A expenses related to the subject merchandise should be included in

cost of production and constructed value.

Arami claims that no additional adjustment to G&A expense for non-

operating expenses is warranted. Arami asserts that two of the expenses

noted by petitioner are already included in the submitted G&A

calculation. Additionally, Arami contends that the related party

provision included in other non-operating expenses is an intracompany

payment and has no relevance in the context of this dumping

investigation.

DOC Position: We adjusted the G&A calculation to include the

related party payment and two other non-operating expense items noted

in the cost verification report which were associated with the general

operations of Arami. The related party payment is an actual cost

incurred by Arami and recorded on its books in accordance with GAAP.

Two of the other non-operating expenses mentioned by the petitioner are

already included in submitted G&A costs, thus no adjustment is

necessary.

Comment 18: Arami contends that for purposes of constructed value,

the Department should calculate a weighted-average profit figure for

pulp sales in Japan and yarn and staple sales in Germany.

DOC Position: We disagree with Arami. We believe that it is

appropriate to calculate all selling expenses and profit specific to

the market in which the products in question were sold rather than

average profit across two or more countries. Consequently, we

calculated one average profit for pulp sold in Japan and another for

yarn and staple sold in Germany.

However, we corrected a clerical error in the calculation of profit

noted by Arami which resulted in double counting.

Continuation of Suspension of Liquidation

We are directing the Customs Service to continue to suspend

liquidation of all entries of PPD-T aramid fiber from the Netherlands

that are entered, or withdrawn from warehouse, for consumption on or

after December 16, 1993, the date of publication of our preliminary

determination in the Federal Register. The Customs Service shall

require a cash deposit or posting of a bond equal to the estimated

amount by which the FMV of the merchandise subject to this

investigation exceeds the U.S. price, as shown below. This suspension

of liquidation will remain in effect until further notice. The

weighted-average dumping margins are as follows:

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

Weighted-

Producer/manufacturer exporter average

margin

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

Akzo....................................................... 55.84

All Others................................................. 55.84

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

ITC Notification

In accordance with section 735(d) of the Act, we have notified the

U.S. International Trade Commission of our determination.

Notification to Interested Parties

This notice also serves as the only reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the return or destruction of proprietary information

disclosed under APO in accordance with 19 CFR 353.34(d). Failure to

comply is a violation of the APO. This determination is published

pursuant to section 735(d) of the Act and 19 CFR 353.20(a)(4).

Dated: May 2, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 94-10993 Filed 5-5-94; 8:45 am]

BILLING CODE 3510-DS-P