Notice of Preliminary Determination of Sales at Less Than Fair Value: Phthalic Anhydride From Venezuela

DEPARTMENT OF COMMERCE

International Trade Administration

[A-307-809]

Notice of Preliminary Determination of Sales at Less Than Fair

Value: Phthalic Anhydride From Venezuela

May 20, 1994.

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: May 27, 1994.

FOR FURTHER INFORMATION CONTACT: Kimberly Hardin, Office of Antidumping

Investigations, Import Administration, U.S. Department of Commerce,

14th Street and Constitution Avenue, NW., Washington, DC 20230;

telephone (202) 482-0371.

PRELIMINARY DETERMINATION: We preliminarily determine that phthalic

anhydride (PA) from Venezuela is being, or is likely to be, sold in the

United States at less than fair value, as provided in section 733 of

the Tariff Act of 1930 (the Act), as amended. The estimated margins are

shown in the ``Suspension of Liquidation'' section of this notice.

Scope of Investigation

The product covered by this investigation is PA, an aromatic

synthetic organic chemical usually produced from a primary

petrochemical called orthoxylene, although it is sometimes produced

from naphthalene. PA is predominately used in the production of

plasticizers, unsaturated polyester resins, and alkyd resins, which in

turn are generally used to produce plastics and paints. This

investigation covers PA sold in either flaked or molten form.

PA is classifiable under subheading 2917.35.00 of the Harmonized

Tariff Schedule of the United States (HTSUS). The HTSUS subheading is

provided for convenience and customs purposes. Our written description

of the scope of this investigation is dispositive.

Period of Investigation (POI)

The period of investigation is May 1, 1993, to October 31, 1993.

Case History

Since the notice of initiation on November 12, 1993 (58 FR 60847,

November 18, 1993), the following events have occurred.

On November 12, 1993, we sent a cable to the U.S. consulate in

Caracas requesting a list of all known producers and exporters of the

subject merchandise and information about the producer/exporter named

in the petition.

On November 26, 1994, we presented an Antidumping Survey to

Oxidaciones Organicas, C.A. (Oxidor). Oxidor was named in the petition

as the primary producer/exporter of PA from Venezuela. On December 6,

1994, Oxidor submitted its response to the Department's Antidumping

Survey.

On December 1, 1993, the International Trade Commission (ITC)

issued an affirmative preliminary determination (USITC Publication

2709, December 1993).

On December 20, 1993, we issued an antidumping questionnaire to

Oxidor. We presented the questionnaire to Oxidor at its facility in

Caracas, Venezuela, on January 4, and 5, 1994.

On January 5, 1994, Oxidor requested a one-week extension of time

in which to respond to Section A, the general information section, of

the Department's antidumping questionnaire. On January 6, 1994, we

granted the extension. On January 18, 1994, we received Oxidor's

Section A questionnaire response.

On January 18, 1994, Oxidor requested a three-week extension of

time in which to respond to Sections B (sales in the home market or to

third countries) and C (sales to the United States) of the

questionnaire. On January 19, 1994, we granted Oxidor a partial

extension of two weeks for the responses to these sections of the

questionnaire.

On January 21, 1994, Oxidor submitted corrections to its Section A

questionnaire response.

On February 7, 1994, we received Oxidor's Sections B and C

questionnaire response. On February 8, 1994, Oxidor submitted one

corrected page to its Section C questionnaire response.

On February 14, 1994, petitioners requested an 11-day postponement

of the preliminary determination.

On February 15, 1994, we issued a deficiency letter to Oxidor

regarding its response to Sections A, B, and C of the questionnaire.

On February 22, 1994, Oxidor objected to petitioners' request for

an 11-day postponement of the preliminary determination. On February

23, 1994, petitioners requested a 50-day postponement of the

preliminary determination in order to permit full consideration of

whether Oxidor made home market sales at prices below the cost of

production (COP).

On February 25, 1994, Oxidor requested an extension of time in

which to respond to the Department's Section A, B, and C deficiency

letter. On February 25, 1994, we granted the extension.

On March 2, 1994, petitioners submitted an allegation of sales

below COP using company-specific data previously reported by Oxidor.

On March 10, 1994, we published, in the Federal Register, a notice

announcing the postponement of the preliminary determination until not

later than May 20, 1994, pursuant to petitioners' request.

On March 11, 1994, Oxidor submitted comments concerning

petitioners' request for a COP investigation. On March 14, 1994,

petitioners submitted a response to Oxidor's comments concerning the

COP allegation.

On March 15, 1994, we received Oxidor's Sections A, B, and C

deficiency response. On March 16, 1994, Oxidor submitted corrections to

its deficiency response.

On March 17, 1994, Oxidor submitted further comments concerning

petitioners' COP allegation. On March 28, 1994, petitioners responded

to Oxidor's March 17, 1994 submission. On April 5, 1994, we initiated a

COP investigation. On April 6, 1994, we issued a Section D

questionnaire to Oxidor. On May 4, 1994, Oxidor requested an extension

of time to respond to Section D of the questionnaire. On May 6, 1994,

we granted the extension. On May 10, 1994, Oxidor submitted its

response to Section D of the questionnaire.

Fair Value Comparisons

To determine whether sales of PA from Venezuela to the United

States 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

For sales by Oxidor directly from Venezuela to the United States,

we based USP on purchase price, in accordance with section 772(b) of

the Act, because the subject merchandise was sold to unrelated

purchasers in the United States prior to importation and because

exporter's sales price methodology was not otherwise indicated.

We calculated purchase price based on packed prices to unrelated

customers. In accordance with section 772(d)(2)(A) of the Act, we made

deductions, where appropriate, for foreign inland freight, foreign

inland insurance, foreign brokerage and handling (which Oxidor reported

as commission expenses), ocean freight and other miscellaneous handling

fees.

We made an adjustment to USP for the tax paid on the comparison

sales in Venezuela. In this investigation, there is one tax, the

Impuesto al Valor Agregado (IVA), which is a value-added tax (VAT),

levied on sales of the subject merchandise in the home market,

beginning on October 1, 1993. Sales invoiced prior to October 1, 1993,

are not subject to the IVA. The IVA is a fixed percentage rate tax of

ten percent of the gross unit price. We have only performed the tax

calculations on U.S. sales invoiced on or after October 1, 1993,

compared to home market sales invoiced on or after October 1, 1993.

(See ``Concurrence Memorandum: Preliminary Determination in the

Antidumping Duty Investigation of Phthalic Anhydride from Venezuela,''

dated May 17, 1994, on file in room B-099 of the main Commerce

Department Building, 14th and Constitution, NW., Washington, DC 20230.)

On October 7, 1993, the Court of International Trade (CIT), in

Federal-Mogul Corp. and The Torrington Co. v. United States, Slip Op.

93-194 (CIT, October 7, 1993), rejected the Department's methodology

for calculating an addition to USP under section 772(d)(1)(C) of the

Act to account for taxes that the exporting country would have assessed

on the merchandise had it been sold in the home market. The CIT held

that the addition to USP under section 772(d)(1)(C) of the Act should

be the result of applying the foreign market tax rate to 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. Federal-Mogul, Slip Op. 93-194 at 12.

The Department has changed its methodology in accordance with the

Federal-Mogul decision, and has applied this new methodology in making

the preliminary determination in this investigation. We have added to

USP the product of the foreign market tax rate and 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. We

have also deducted from the USP and the FMV those portions of the

foreign market tax and the USP tax adjustment attributable to expenses

included in the foreign market and United States bases of the tax if

those expenses are later deducted to calculate FMV and USP. These

adjustments to the foreign market tax and the USP tax adjustment are

necessary to prevent the methodology for calculating the USP tax

adjustment from creating antidumping duty margins where no margins

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

This margin creation effect is due to the fact that the basis for

calculating both the amount of tax included in the price of the foreign

market merchandise and the amount of the USP tax adjustment include

many expenses that are later deducted when calculating USP and FMV.

After these deductions are made, the tax included in FMV and the USP

tax adjustment still reflect the inclusion of these expenses in the

bases. Thus, a margin may be created that is not dependent upon a

difference between USP and FMV, but is the result of the price of the

United States merchandise containing greater expenses than the price of

the foreign market merchandise. This adjustment to avoid the margin

creation effect is in accordance with the United States Court of

Appeals' holding that the application of the USP tax adjustment under

section 772(d)(1)(C) of the Act should not create an antidumping duty

margin if pre-tax FMV does not exceed USP. Zenith Electronics Corp. v.

United States, 988 F.2d 1573, 1581 (Fed. Cir. 1993). In addition, the

CIT has specifically held that an adjustment should be made to mitigate

the impact of expenses that are deducted from FMV and USP upon the USP

tax adjustment and the amount of tax included in FMV. Daewoo

Electronics Co., Ltd. v. United States, 760 F. Supp. 200, 208 (CIT,

1991). However, the mechanics of the Department's adjustments to the

USP tax adjustment and the foreign market tax amount as described above

are not identical to those suggested in Daewoo.

Foreign Market Value

In order to determine whether there were sufficient sales of PA in

the home market to serve as a viable basis for calculating FMV, we

compared the volume of home market sales of PA to the volume of third

country sales of PA in accordance with section 773(a)(1)(B) of the Act.

Based on this comparison, we determine that Oxidor had a viable home

market with respect to sales of PA during the POI.

Petitioners alleged that Oxidor was selling in the home market at

prices below COP. Based on petitioners' allegation, we initiated a COP

investigation, and requested data on Oxidor's production costs.

Oxidor's cost data was not submitted in time to be considered for the

preliminary determination. However, Oxidor's submitted cost data will

be examined at verification and will be analyzed for purposes of our

final determination.

In accordance with 19 CFR 353.58, we compared U.S. sales to home

market sales made at the same level of trade, where possible.

We calculated FMV based on packed ex-factory prices charged to

related and unrelated customers in the home market. For purposes of the

preliminary determination, we included arm's-length sales to related

customers, pursuant to 19 CFR 353.45.

In light of the Court of Appeals of the Federal Circuit's (CAFC)

decision in Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland

Cement v. United States, Slip Op. 93-1239 (Fed. Cir., January 5, 1994),

the Department no longer can deduct home market movement charges from

FMV pursuant to its inherent power to fill in gaps in the antidumping

statute. We instead will adjust for those expenses under the

circumstance-of-sale provision of 19 CFR 353.56 and the exporter's

sales price offset provision of 19 CFR 353.56(b) (1) and (2), as

appropriate.

Accordingly, in the present case, we deducted post-sale home market

movement charges from FMV under the circumstance-of-sale provision of

19 CFR 353.56. This adjustment included home market inland freight and

inland insurance. Pursuant to 19 CFR 353.56(a)(2), we made

circumstance-of-sale adjustments, were appropriate, for differences in

credit expenses and warehousing expenses.

We deducted home market packing costs and added U.S. packing costs,

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

As discussed above, the IVA was only levied on sales in the home

market invoiced on or after October 1, 1993. Therefore, we calculated

two FMVs, one covering the period May-September, 1993, and one covering

October, 1993, of the POI, to account for the application of the IVA

tax only on sales invoiced on or after October 1, 1993. See

``Concurrence Memorandum'' for further details. We also calculated the

amount of the tax that was due solely to the inclusion of price

deductions in the original tax base (i.e., the sum of any amounts that

were deducted from the tax base). This amount was deducted from the FMV

after all other additions and deductions had been made. By making the

additional tax adjustments, we avoid a distortion that would create a

dumping margin even when pre-tax dumping is zero.

Currency Conversion

Because certified exchange rates from the Federal Reserve were

unavailable, we made currency conversions based on the official monthly

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

the International Monetary Fund. Oxidor has requested that we use a

currency conversion methodology different from the Department's normal

practice given the sustained increase in the bolivar/U.S. dollar

exchange rate during the POI. We have disallowed Oxidor's alternate

currency conversion methodologies as Oxidor has not met the

requirements of currency conversion using the ``Special Rule'' in 19

CFR 353.60(b). See ``Concurrence Memorandum'' for further details.

Verification

As provided in section 776(b) of the Act, we will verify the

information used in making our final determination.

Suspension of Liquidation

In accordance with section 733(d)(1) of the Act, we are directing

the Customs Service to suspend liquidation of all entries of phthalic

anhydride from Venezuela, as defined in the ``Scope of Investigation''

section of this notice, that are entered, or withdrawn from warehouse,

for consumption on or after the date of publication of this notice in

the Federal Register. The Customs Service shall require a cash deposit

or the posting of a bond equal to the estimated preliminary dumping

margins, as shown below. The suspension of liquidation will remain in

effect until further notice. The weighted-average dumping margins are

as follows:

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

Margin

Manufacturer/producer/exporter percent

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

Oxidor C.A.................................................... 3.03

All Others.................................................... 3.03

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

ITC Notification

In accordance with section 733(f) of the Act, we have notified the

ITC of our determination. If our final determination is affirmative,

the ITC will determine whether imports of the subject merchandise are

materially injuring, or threaten material injury to, the U.S. industry,

before the later of 120 days after the date of the preliminary

determination or 45 days after our final determination.

Public Comment

In accordance with 19 CFR 353.38, case briefs or other written

comments in at least ten copies must be submitted to the Assistant

Secretary for Import Administration no later than July 8, 1994, and

rebuttal briefs no later than July 13, 1994. In accordance with 19 CFR

353.38(b), we will hold a public hearing, if requested, to give

interested parties an opportunity to comment on arguments raised in

case or rebuttal briefs. Tentatively, the hearing will be held on July

18, 1994, at 1:30 p.m. at the U.S. Department of Commerce, room 3708,

14th Street and Constitution Avenue, NW., Washington, DC 20230. Parties

should confirm by telephone the time, date, and place of the hearing 48

hours before the scheduled time.

Interested parties who wish to request a hearing must submit a

written request to the Assistant Secretary for Import Administration,

U.S. Department of Commerce, room B-099, within ten days of the

publication of this notice in the Federal Register. Request should

contain: (1) The party's name, address, and telephone number; (2) the

number of participants; and (3) a list of the issues to be discussed.

In accordance with 19 CFR 353.38(b), oral presentation will be limited

to issues raised in the briefs.

This determination is published pursuant to section 733(f) of the

Act (19 U.S.C. 1673b(f)) and 19 CFR 353.15(a)(4).

Dated: May 20, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 94-13093 Filed 5-26-94; 8:45 am]

BILLING CODE 3510-DS-P