Preliminary Negative Countervailing Duty Determination: Phthalic Anhydride from Venezuela

DEPARTMENT OF COMMERCE

[C-307-810]

Preliminary Negative Countervailing Duty Determination: Phthalic

Anhydride from Venezuela

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: January 27, 1994.

FOR FURTHER INFORMATION CONTACT: Kristin M. Heim or Cynthia Thirumalai,

Office of Countervailing Investigations, Import Administration, U.S.

Department of Commerce, room B099, 14th Street and Constitution Avenue,

NW., Washington, DC 20230; telephone (202) 482-3798 or 482-4087,

respectively.

PRELIMINARY DETERMINATION

Case History

Since the publication of the notice of initiation in the Federal

Register (58 FR 60845, November 18, 1993), the following events have

occurred.

On November 23, 1993, we issued a questionnaire to the Government

of Venezuela (``GOV'') in Washington, DC., concerning petitioners'

allegations. On January 5, 1994, we received responses from the GOV and

Oxidaciones Organicas, C.A. (Oxidor).

Scope of Investigations

For purposes of this investigation, phthalic anhydride (``PA'') is

an aromatic synthetic organic chemical usually produced from a primary

petrochemical called orthoxylene, although sometimes it is 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. The subject PA

is produced in two physical forms, molten and flaked.

The PA subject to this investigation is currently classified under

subheading 2917.35.00 of the Harmonized Tariff Schedule of the United

States (HTSUS). Although the HTSUS subheading is provided for

convenience and customs purposes, our written description of the scope

of this investigation is dispositive.

Injury Test

On August 31, 1990, Venezuela became a contracting party to the

General Agreement on Tariffs and Trade (GATT). Since qualification as a

``country under the Agreement'' under section 701(b)(3) requires a

finding that the GATT does not apply between the United States and the

country from which the subject merchandise is imported, Venezuela is no

longer eligible for treatment as a ``country under the Agreement''

within the meaning of section 701(b)(3). However, because Venezuela is

a GATT contracting party and the merchandise under investigation is

nondutiable, the ITC is required to determine whether, pursuant to

section 303(a)(2), imports of this merchandise from Venezuela

materially injure, or threaten material injury to, a U.S. industry. On

December 1, 1993, the ITC preliminarily determined that there is a

reasonable indication that an industry in the United States is

threatened with material injury by reason of imports of PA from

Venezuela.

Petitioners

Petitioners are Aristech Chemical Corporation, BASF Corporation,

Koppers Industries, Inc. and Stepan Company. Petitioners state that

they represent 75 percent of the domestic phthalic anhydride industry.

Respondents

The Government of Venezuela and Oxidor are respondents. While there

are two producers of PA in Venezuela, Oxidor accounted for over 85

percent of exports to the United States during the POI and, hence, was

selected as the sole respondent.

Analysis of Programs

For purposes of this preliminary determination, the period for

which we are measuring bounties or grants, the period of investigation

(``the POI''), is April 1, 1992 to March 30, 1993, which corresponds to

Oxidor's fiscal year.

Consistent with our practice in preliminary determinations, when a

response to an allegation denies the existence of a program, receipt of

benefits under a program, or eligibility of a company or industry under

a program, and the Department has no persuasive evidence showing that

the response is incorrect, we accept the response for purposes of the

preliminary determination. All such responses, however, are subject to

verification. If the response cannot be supported at verification, and

the program is otherwise countervailable, the program will be

considered a bounty or grant in the final determination.

Based upon our analysis of the petition and the responses to our

questionnaires, we preliminarily determine the following:

I. Program Preliminarily Determined Not To Be Countervailable

Preferential Pricing of Orthoxylene Feedstock

Petitioners alleged that the government-owned petrochemical

company, Petroquimica de Venezuela, C.A. (``Pequiven''), is selling

orthoxylene (an input product to PA) to Venezuelan producers of PA at

preferential prices.

In its response, the GOV stated that, within Venezuela, Pequiven

sells orthoxylene to only two customers, both of which produce PA.

Furthermore, it stated that the prices that Pequiven charges these

companies are tied to international prices for orthoxylene.

In order to determine whether the GOV, through the state-owned

company, Pequiven, provided orthoxylene to PA producers at preferential

prices, we followed the hierarchy for determining benchmark prices as

found in Sec. 355.44(f) of the Department's Proposed Regulations (54 FR

23381, May 31, 1989). The Department's preferred benchmark is the non-

specific price that the government charges to the same or other users

of the same good within the political jurisdiction. As noted above,

within Venezuela, Pequiven sells orthoxylene only to the two PA

producers. Both PA producers are charged the same price by Pequiven. As

a result, we do not have a non-specific price to use as a benchmark.

In the absence of a non-specific price, the Department normally

looks to the alternative benchmarks listed in Sec. 355.44(f)(2) of the

Proposed Regulations. The first alternative listed in the Proposed

Regulations is the price charged by the same seller for a similar or

related good adjusted for any cost differences. The petition identified

paraxylene and mixed-xylene as two similar products. While Pequiven

agrees that these two products, in addition to metaxylene, are similar

products to orthoxylene, it does not produce or sell those products.

Pequiven did not identify any other similar products. Therefore, we

were unable to use this approach to calculate a benchmark.

The second alternative listed in the Proposed Regulations is the

price charged within the jurisdiction by other sellers for an identical

good or service. As stated in Carbon Black from Mexico; Preliminary

Results of Countervailing Duty Administrative Review (51 FR 13269,

April 18, 1986), ``[t]hese other sellers may include private sellers

within the jurisdiction or foreign sellers selling into the

jurisdiction * * *'' Pequiven is the only domestic producer/seller of

orthoxylene in Venezuela. However, orthoxylene was imported into

Venezuela during the POI.

The GOV provided U.S. export statistics on shipments of orthoxylene

to Venezuela during the period 1992-1993. From these statistics, we

used the information on the one entry that occurred during the POI to

calculate a benchmark price since this price reflects ``a price charged

within the jurisdiction by other sellers for an identical good.'' This

import into Venezuela from the United States was reported on a FAS

basis. Therefore, we added an amount for ocean freight and insurance

from the United States to Venezuela. The amount for ocean freight and

insurance was obtained from an independent shipping company (see

memorandum from case analyst to the file, January 13, 1994).

We then compared the adjusted import price to the price Pequiven

charged for orthoxylene in the month that orthoxylene was exported from

the United States. Based on this comparison, we found that Pequiven's

price was greater than the price of imported orthoxylene.

For the purposes of this preliminary determination, we find the use

of a single import price to be a sufficient basis for our analysis. We

examined prices in the largest international markets for orthoxylene

and found minimal price fluctuations during the POI. In addition, the

import price approximated the prices in these markets.

Furthermore, as stated above, Pequiven ties its domestic prices to

international prices. Therefore, we would expect to find only

negligible differences between the price Pequiven charges domestically

and the price of imports into Venezuela. To test this assumption, we

averaged U.S. import prices for the three months in which we had data

(one within the POI and two within two months of the POI on either

side). We compared this average to the average price Pequiven charged

in the same three months and found that Pequiven's average price was

greater than the average price of the imports from the United States.

Therefore, we find that the GOV, through Pequiven, did not provide

orthoxylene to PA producers at preferential rates during the POI.

II. Programs Preliminarily Determined Not To Be Used

We preliminarily determine that producers or exporters in Venezuela

of the subject merchandise did not receive benefits during the POI for

exports of the subject merchandise to the United States under the

following programs:

A. FINEXPO Preferential Short-Term Export Loans

B. FINEXPO Preferential Long-Term Export Loans

C. Excessive Tariff Drawback

D. Preferential Tax Exemptions Under the 1966 Income Tax Law

Because we find that the GOV did not provide orthoxylene at

preferential rates and all other programs were not used, we

preliminarily determine that no benefits which constitute bounties or

grants within the meaning of the countervailing duty law are being

provided to manufacturers, producers, or exporters of PA from

Venezuela.

Verification

In accordance with section 776(b) of the Act, we will verify the

information used in making our final determination.

Public Comment

In accordance with 19 CFR 355.38, any interested party or U.S.

Government agency may submit case briefs or other written comments with

ten copies of the business proprietary version and five copies of the

nonproprietary version to the Assistant Secretary no later than March

25, 1994, and rebuttal briefs no later than March 30, 1994. In

accordance with 19 CFR 355.38(b), we will hold a public hearing, if

requested by an interested party, to give interested parties an

opportunity to comment on arguments raised in case or rebuttal briefs.

Tentatively, the hearing will be held on Monday, April 4, 1994, at 1

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 B099, 14th Street and Constitution

Avenue, NW., Washington, DC 20230, within ten days of the publication

of this notice in the Federal Register. Requests should contain: (1)

The party's name, address, and telephone number; (2) the number of

participants; (3) the reason for attending; and (4) a list of the

issues to be discussed. In accordance with 19 CFR 355.38(b), oral

presentations will be limited to issues raised in the briefs.

This determination is published pursuant to section 703(f) of the

Act (19 U.S.C. 1671b(f)).

Dated: January 18, 1994.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 94-1779 Filed 1-26-94; 8:45 am]

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