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

DEPARTMENT OF COMMERCE

[A-412-803]

Industrial Nitrocellulose From the United Kingdom; Preliminary

Results of Antidumping Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of preliminary results of Antidumping Duty

Administrative Review: Industrial Nitrocellulose from the United

Kingdom.

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

SUMMARY: In response to a request by one manufacturer/exporter, the

Department of Commerce is conducting an administrative review of the

antidumping duty order on industrial nitrocellulose from the United

Kingdom. The review covers one manufacturer/exporter of the subject

merchandise to the United States during the period July 1, 1992 through

June 30, 1993. The review indicates the existence of dumping margins

during the period.

As a result of this review, we have preliminarily determined to

assess antidumping duties equal to the differences between United

States price and foreign market value. Interested parties are invited

to comment on these preliminary results.

EFFECTIVE DATE: May 12, 1994.

FOR FURTHER INFORMATION CONTACT: Rebecca Trainor, Breck Richardson or

Maureen Flannery, Office of Antidumping Compliance, Import

Administration, International Trade Administration, U.S. Department of

Commerce, 14th Street and Constitution Avenue, NW., Washington, DC

20230; telephone: (202) 482-4733.

SUPPLEMENTARY INFORMATION:

Background

On July 7, 1993, the Department of Commerce (the Department)

published in the Federal Register (58 FR 36391) a notice of

``Opportunity to Request an Administrative Review'' of the antidumping

duty order on industrial nitrocellulose (INC) from the United Kingdom.

On July 29, 1993, the respondent, Imperial Chemical Industries PLC

(ICI), requested to be reviewed in accordance with section 751(a) of

the Tariff Act of 1930, as amended (the Tariff Act), and Sec. 353.22(a)

of the Department's regulations (19 CFR 353.22(a)). We published the

notice of initiation of the antidumping duty administrative review on

August 24, 1993 (58 FR 44653), covering the period July 1, 1992 through

June 30, 1993. We have now conducted the review in accordance with

section 751 of the Tariff Act.

Scope of the Review

This review covers 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, which is produced from the reaction of

cellulose with nitric acid. It is used as a film-former in coatings,

lacquers, furniture finishes, and printing inks. INC is currently

classifiable under Harmonized Tariff Schedule (HTS) item number

3912.20.00. The HTS subheadings are provided for convenience and U.S.

Customs Service purposes. The written description remains dispositive.

The scope of the antidumping order does not include explosive grade

nitrocellulose, which has a nitrogen content of greater than 12.2

percent.

This review covers sales by ICI of INC from the United Kingdom

entered into the United States during the period July 1, 1992 through

June 30, 1993.

Verification

We verified the questionnaire responses of ICI's affiliate, Nobel's

Explosives Company Ltd. (Nobel's) from February 7, 1994 to February 11,

1994, at Nobel's manufacturing facility in Stevenston, Scotland. We

verified the responses of ICI's U.S. affiliate, ICI Americas Inc.

(ICIA) from February 21, 1994 to February 25, 1994 at ICIA's offices in

Valley Forge, Pennsylvania.

United States Price

The Department used purchase price (PP), as defined in section 772

of the Tariff Act, in calculating U.S. price (USP) when the merchandise

was purchased, or agreed to be purchased, prior to the date of

importation, from the producer of the merchandise through a related

sales agent in the United States by unrelated U.S. purchasers. We

determined that PP was the most appropriate determinant of USP for

these sales based on the following factors:

(1) The merchandise was shipped directly from the manufacturer to

the unrelated buyer without being introduced into the inventory of the

respondent's related U.S. selling agent;

(2) This was the customary commercial channel for sales of this

merchandise between the parties involved; and

(3) The respondent's related sales agent acted mainly as a

processor of sales-related documentation and communication links with

the unrelated U.S. customer.

Where all the above elements are met, we regard the routine selling

functions of the exporter as merely having been relocated

geographically from the country of exportation to the United States,

where the sales agent performs them. Whether these functions take place

in the United States or abroad does not change the substance of the

functions themselves. See Outokumpu Copper Rolled Products v. United

States, 829 F.Supp. 1371, 1378 (CIT 1993).

We calculated purchase price based on packed delivered prices. We

made deductions for ocean freight, marine insurance, brokerage and

handling, and U.S. Customs duties and fees, in accordance with section

772(d)(2) of the Tariff Act. We adjusted ICI's reported U.S. interest

rate to correct a minor error in the interest calculation found at

verification.

We used the best information available (BIA) for marine insurance.

At verification we discovered that ICI had failed to report that it

obtains marine insurance from a related company. Further, company

officials did not demonstrate that marine insurance rates were at arm's

length. In the absence of a second company involved in either this

review or the less-than-fair-value (LTFV) investigation from which, as

BIA, marine insurance rates might be selected, we calculated a

percentage of unit price based on publicly-available data as reported

in the administrative review of INC from Brazil. See Industrial

Nitrocellulose from Brazil: Preliminary Results of Antidumping Duty

Administrative Review, (58 FR 27537) May 10, 1993.

We made an addition to USP for value-added taxes (VAT) in

accordance with section 772(d)(1)(C) of the Tariff Act. In making our

adjustment for VAT, we followed the instructions of the United States

Court of International Trade (CIT) in Federal Mogul Corp. and the

Torrington Co. v. United States, 834 F.Supp. 1391 (CIT 1993). The

Department added to USP the result of multiplying the foreign market

tax rate by the price of the United States merchandise at the same

point in the chain of commerce that the foreign market tax was applied

to foreign market sales.

The Department also adjusted the tax amount calculated for USP and

the amount of tax included in foreign market value (FMV). We deducted

the portions of the foreign market tax and the USP tax that are the

result of expenses that are included in the foreign market price used

to calculate foreign market tax and in the USP used to calculate the

USP tax. Because these expenses are later deducted to calculate FMV and

USP, these adjustments are necessary to prevent our new methodology for

calculating the USP tax from creating dumping margins where no margins

would exist if no taxes were levied upon foreign market sales.

We disagree with ICI's claim that certain sales, that were sold to

a related party and further processed in the United States before sale

to the first unrelated party, were PP sales.

We used BIA for these exporter's sales price (ESP) sales, because

ICI failed to answer the Department's further manufacturing

questionnaire for these sales and to provide prices to the first

unrelated purchaser. ICI stated that it was either impossible or

extremely difficult to answer the questionnaire, and, instead, provided

a small amount of financial and manufacturing information for the

related company responsible for the ESP sales.

At verification, we explored with ICI the reasons it provided for

not responding to the further manufacturing questionnaire. We were told

that providing the specific further processing information requested by

the Department would take an excessive amount of time. We reviewed

documentation that demonstrated that the production of the further

processed product involves a series of steps. At each intermediary

step, chemicals and compounds are combined to produce new compounds

that will be mixed with other compounds in the next step. As a result,

to determine the amount of INC used in the final product, and to

determine which products use INC, would require a complicated trace

back through multiple intermediary steps. (See Report on Verification

of Imperial Chemical Industries PLC and ICI Americas Inc., March 24,

1994, 26-27.) However, our verification established that ICI had the

documentation needed to fulfill the Department's request for further

processing information. ICI's claim appears to be based solely on the

time and resources that would be required to provide the requested

information. We, therefore, conclude that it would not have been

impossible for ICI to have answered the further manufacturing

questionnaire, and that doing so would have been no less burdensome for

ICI than for respondents in other cases who are asked to answer further

manufacturing questionnaires. (See Final Results of Antidumping Duty

Administrative Reviews and Revocation in Part of an Antidumping Duty

Order; Antifriction Bearings (Other Than Tapered Roller Bearings) and

Parts Thereof From France, Germany, Italy, Japan, Romania, Singapore,

Sweden, Thailand and the United Kingdom, (59 FR 39729) July 26, 1993.)

Since ICI could have, but did not, provide the data, we have used

non-cooperative BIA for these sales. There were no other firms involved

in the LTFV investigation or in this first review. We have therefore

used ICI's rate from the final determination in the LTFV investigation

as BIA for these particular sales.

Foreign Market Value

In accordance with section 773(a)(1)(A) of the Tariff Act, we

calculated FMV based on home market sales. We did not include sales to

related parties in calculating FMV. Under 19 CFR 353.45, the Department

may disregard transactions between related parties if the price does

not fairly reflect the usual price at which sales are made to unrelated

parties. We performed an analysis of related party prices and found

that they were not at arm's length. (See Memorandum to the File, April

15, 1994.)

As in the LTFV investigation, product comparisons were made on the

basis of the following criteria: nitrogen percentage, viscosity rating,

wetting agent type, cellulose source, physical form, and wetting agent

percentage. (See Final Determination of Sales at Less Than Fair Value:

Industrial Nitrocellulose from the United Kingdom, 55 FR 21055 (May 22,

1990). Where there were no sales of identical merchandise in the home

market with which to compare merchandise sold in the United States,

sales of the most similar merchandise were compared on the basis of the

characteristics described above. In those instances, we made

adjustments for differences in the physical characteristics of the

merchandise in accordance with section 773(a)(4)(C) of the Tariff Act.

We calculated FMV based on packed and either delivered or ex-works

prices to unrelated customers in the United Kingdom. We made deductions

for home market packing, inland freight, and rebates, and added U.S.

packing costs in accordance with section 773(a)(1) of the Tariff Act.

When a commission was paid on a PP sale but not on the home market

sale, we added the amount of the commission to the FMV and then

deducted from FMV the lesser of either total home market indirect

selling expenses or the U.S. commission amount, in accordance with 19

CFR 353.56(b)(1).

As a result of verification, we adjusted home market indirect

selling expenses, packing, and credit costs which had been incorrectly

or inappropriately quantified. Although we were able to verify ICI's

home market packing expenses for the period December 1, 1992-June 30,

1993, we were unable to verify ICI's claimed home market packing costs

for the July 1, 1992-November 30, 1992 portion of the period of review

(POR). (See Report on Verification of Imperial Chemical Industries PLC

and ICI Americas Inc., March 24, 1994, 9-12, and Memorandum from Case

Analyst to the File, April 15, 1994.) We used BIA for all home market

packing expenses for sales made between July 1, 1992 and November 30,

1992. Because respondents claimed that drums were reused once during

this five-month period, as BIA we have used the verified packing costs

for the latter part of the POR (adjusted as described below) and

divided that amount by two, to account for the reuse of packing drums

during the first half of the POR.

During the verification of ICI, the Department discovered that the

costs of at least some of the drums purchased in May 1993 were

overstated. A number of purchases of steel drums were made during that

month. At one point during the month, the price of the drums increased.

Rather than determining an average price, ICI selected the higher price

as representative for the entire month of May. From the information

provided at verification, we could not determine how many drums were

purchased at the lower price and how many were purchased at the higher

price.

Therefore, as BIA for all May 1993 home market sales, we have used

the lower price for packing cost.

In comparing home market sales to PP sales, we made a circumstance-

of-sale adjustment for differences in credit terms by deducting home

market credit expenses and adding U.S. credit expenses, in accordance

with 19 CFR 353.56(a)(2). We have used BIA for the home market interest

rate for the purposes of calculating credit and inventory carrying

expenses. ICI does not incur short-term credit costs associated with

INC in either the U.S. or the home market. ICI was unable to

satisfactorily support at verification its reported claim of what its

home market credit costs would have been if short-term debt had existed

during the POR. In the U.S. market, ICI established that, if short-term

debt existed, it would have been financed using a particular United

Kingdom-based interest rate. For the purposes of calculating home

market credit and inventory carrying costs, we have therefore used the

same United Kingdom-based interest rate as used for U.S. credit.

Currency Conversion

We made currency conversions based on the official exchange rates

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

Reserve Bank.

Preliminary Results of Review

As a result of our review, we preliminarily determine that the

following margin exists for the period July 1, 1992 through June 30,

1993:

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

Margin

Manufacturer/exporter (percent)

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

Imperial Chemical Industries PLC............................ 5.79

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

Parties to the proceeding may request disclosure within 5 days of

the date of publication of this notice. Any interested party may

request a hearing within 10 days of publication. Any hearing, if

requested, will be held 44 days after the date of publication of this

notice, or the first workday thereafter. Interested parties may submit

case briefs within 30 days of the date of publication of this notice.

Rebuttal briefs, which must be limited to issues raised in the case

briefs, may be filed not later than 37 days after the date of

publication. See 19 CFR 353.38. The Department will publish a notice of

final results of this administrative review, which will include the

results of its analysis of issues raised in any such comments.

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between USP and FMV may vary from the percentages stated

above. The Department will issue appraisement instructions on each

exporter directly to the Customs Service.

Furthermore, the following deposit requirements will be effective

upon publication of the final results of this administrative review for

all shipments of INC from the United Kingdom entered, or withdrawn from

warehouse, for consumption on or after the publication date, as

provided for by section 751(a)(1) of the Tariff Act: (1) The cash

deposit rates for the reviewed companies will be those established in

the final results of this administrative review; (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 or the LTFV investigation, but the manufacturer is, the cash

deposit rate will be the rate established for the most recent period

for the manufacturer of the merchandise; and (4) the cash deposit rate

for all other manufacturers or exporters will be the ``all others''

rate established in the final notice of the LTFV investigation of this

case, in accordance with the CIT's decisions in Floral Trade Council v.

United States, 822 F.Supp. 766 (CIT 1993), and Federal Mogul

Corporation and the Torrington Company v. United States, 839 F.Supp.

864 (CIT 1993). The all others rate is 11.13 percent. These deposit

requirements, when imposed, shall remain in effect until publication of

the final results of the next administrative review.

This notice serves as a preliminary reminder to importers of their

responsibility under 19 CFR 353.26 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 subsequent assessment

of double antidumping duties.

This administrative review and notice are in accordance with

section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR

353.22.

Dated: May 5, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 94-11587 Filed 5-11-94; 8:45 am]

BILLING CODE 3510-DS-P