Industrial Nitrocellulose from the United Kingdom; Final Results of Antidumping Administrative Review

DEPARTMENT OF COMMERCE

[A-412-803]

Industrial Nitrocellulose from the United Kingdom; Final Results

of Antidumping Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Final Results of Antidumping Duty Administrative

Review.

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SUMMARY: On May 12, 1994, the Department of Commerce (the Department)

published the preliminary results of its administrative review of the

antidumping duty order on industrial nitrocellulose from the United

Kingdom. The period of review is July 1, 1992 through June 30, 1993.

We gave interested parties an opportunity to comment on our

preliminary results. Based on our analysis of the comments received, we

have changed the results from those in our preliminary results of

review.

EFFECTIVE DATE: December 28, 1994.

FOR FURTHER INFORMATION CONTACT: Rebecca Trainor or Maureen Flannery of

the Office of Antidumping Compliance, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W., Washington D.C. 20230; telephone

(202) 482-4733.

SUPPLEMENTARY INFORMATION:

Background

On May 12, 1994, the Department published in the Federal Register

(59 FR 24684) the preliminary results of this administrative review of

the antidumping duty order on industrial nitrocellulose from the United

Kingdom (55 FR 28270, July 10, 1990). The preliminary results indicated

the existence of dumping margins for the respondent in this review.

Imperial Chemicals Industries PLC (ICI), the sole manufacturer and

exporter in this review, and petitioner, The Aqualon Company, submitted

case and rebuttal briefs. The Department has now completed this

administrative review in accordance with section 751 of the Tariff Act

of 1930, as amended (the Act). The changes in our calculations based on

these comments are addressed below.

Scope of Review

This review covers shipments of industrial nitrocellulose (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.

The review period is July 1, 1992 through June 30, 1993. This

review covers sales of INC from the United Kingdom by one company, ICI.

Analysis of the Comments Received

We invited interested parties to comment on the preliminary

results. We received case and rebuttal briefs from ICI, the U.K.

manufacturer, and the petitioner, The Aqualon Company.

Comment 1:

ICI claims that officials from the Department misinterpreted a

comment made by counsel for ICI at the U.S. sales verification. In an

April 30, 1994 memorandum to the file, the Department indicated that

counsel stated that, given the amount of work that would be required in

answering the further processing questionnaire and for other reasons,

the entity in the United States that further processed nitrocellulose

would probably not want to put forth the effort to answer the

questionnaire. ICI contends that, even though the further-processing

entity had no incentive to do so, it made a concerted effort to

communicate and work with the Department, and to provide the Department

with as much information as possible, ``within its limited

capability.'' ICI further states that the point counsel was attempting

to make at verification was that ICI itself could not supply any

further-manufacturing information.

Department's Position:

We have determined that use of BIA for ICI's sales that involve

further manufacturing is appropriate. ICI did not respond to the

further-processing questionnaire, and we have concluded that ICI could

have provided the requested information. Our decision to resort to BIA

is based on this lack of response, not on any alleged statement by

counsel to ICI.

On January 27, 1994, we requested that ICI respond to the

Department's further-processing questionnaire with respect to sales to

a company that further processed nitrocellulose into ink. In a letter

dated February 15, 1994, ICI indicated that it would not respond to the

further-processing questionnaire, claiming that it was impossible to

provide the requested information. At verification, we discussed the

further-processing questionnaire with an official from the company that

further processed ICI nitrocellulose. This official had indicated in

previous submissions, and at the verification as well, that it was

impossible to determine the amounts of nitrocellulose contained in a

particular product.

In reviewing the materials that the official presented at the

verification, we were only able to determine that it would be

difficult, not impossible, to trace the product formulae back to

determine whether, and how much, nitrocellulose is contained in a given

product. The official also noted that product data were maintained on

different computer systems that were not linked, thus creating a

problem in retrieving the information requested by the Department. No

explanation was given of why that information could not be downloaded

from the individual systems and then uploaded together onto a single

system. ICI's reasons for not responding to the further-processing

questionnaire apparently concern the time that would have been required

to provide the requested information, rather than the impossibility of

providing a response. As stated in the preliminary results, we

concluded that it would not have been impossible for ICI to answer the

further-processing questionnaire.

Comment 2:

ICI argues that the Department's use of non-cooperative best

information available (BIA) for sales it made to a company that further

processed nitrocellulose is unjustified and unsupported by fact or law.

ICI cites Allied-Signal Aerospace Co. v. United States, 996 F.2d. 1185

(Fed. Cir. 1993), to support its argument that, in order to apply the

first tier of BIA, the Department must conclude that the respondent

refused to cooperate with the Department or otherwise significantly

impeded the review. See also 19 U.S.C. Sec. 1677e; 19 C.F.R.

Sec. 353.37.

ICI claims that it substantially cooperated with the Department to

the extent possible given the further-processing entity's limited

resources and given that the information submitted with regard to the

further-processing entity demonstrates that no dumping resulted from

sales of the further-processed product.

ICI contends that the non-cooperative BIA rate should be distinct

from the cooperative rate. The cooperative rate, ICI argues, should be

based on verified information on the record. ICI suggests that, as

cooperative BIA, the Department should use the average dumping rate of

all reported sales from ICI to the further-processing entity during the

period when the two companies were related, or at the very least, a

margin not exceeding the average margin for sales made to unrelated

customers during the period of review.

Petitioner argues that the record supports the Department's

conclusion that ICI made a calculated business decision not to

cooperate with the Department on this issue. Petitioner is unconvinced

by ICI's argument regarding the difficulty of tracking ICI

nitrocellulose to the final product produced by the further processor.

Petitioner suggests that a reasonable basis such as a first-in, first-

out methodology could have been utilized to provide the Department with

the requested information. Petitioner argues that, were the Department

to accept ICI's argument, a huge loophole would result in almost every

case involving further manufacturing. Applying BIA in such situations

is necessary in order for the Department to maintain the credibility

and usefulness of its further-processing questionnaire.

Petitioner asserts that the Department used an improper BIA rate

for the further processed sales. Petitioner argues that, because ICI

willfully refused to comply with the Department's request for

information on further processing, the Department should follow past

practice and use the highest non-aberrant calculated margin for any

other sale of merchandise of the same class or kind made by the same

respondent. See Notice of Final Determination of Sales at Less than

Fair Value: Certain Hot-Rolled Carbon Steel Flat Products, etc. 58 FR

37062 (July 9, 1993). Petitioner contends that there is no a priori

reason why there should be separate BIA policies for investigations and

for administrative reviews.

ICI objects to petitioner's characterization that it ``willfully

refuse[d]'' to comply with the Department's request. ICI also contends

that the further-processing entity expended significant efforts in

order to cooperate fully with the Department in providing documents and

explaining the company's operations at verification.

Department's Position:

We disagree with ICI and have continued to apply uncooperative BIA.

The Department uses partial BIA, when, as in this case, a company's

responses are deficient in limited respects. The decision to use

partial rather than total BIA, therefore, is dependent upon the size of

the deficiency and the degree to which the deficiency affects the

balance of the response. See, e.g., Antifriction Bearings (Other Than

Tapered Roller Bearings) and Parts Thereof From France; et. al.; Final

Results of Antidumping Administrative Reviews, 57 FR 28360, 28379 (June

24, 1992). See also Allied Signal, supra. Because ICI chose not to

respond to the further-processing questionnaire, we used as BIA for

further-processed sales the highest rate ever calculated for ICI.

We applied partial BIA to ICI for its failure to respond to the

further-processing questionnaire. We applied BIA, which by its nature

is meant to be adverse, in accordance with our general practice. ICI's

failure to respond does not warrant an exception to this practice, or

the application of a neutral margin to these sales, as ICI suggests.

We disagree with petitioner's assertion that the Department should

use the highest non-aberrant calculated margin for any other sale.

While the Department follows the same general BIA policy for

investigations and administrative reviews, differences in actual BIA

rates applied occur because the same information is not available in an

investigation as is available for a review. The BIA we selected is in

accordance with the BIA policy for antidumping reviews. See

Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts

Thereof From France; et. al.; Final Results of Antidumping Duty

Administrative Reviews, 57 FR 28360, 28379 (June 24, 1992).

Comment 3:

ICI claims that the Department should not have applied BIA to all

further processed sales made during the period of review but, rather,

should have limited the BIA only to sales made up to May 31, 1993,

since, after that date, the further-processing company became an

unrelated company.

Department's Position:

We disagree. The respondent was unable to demonstrate that, after

May 31, 1993, the further-processing entity had become a separate

company. As noted on page 18 of the verification report, that company's

parent continues to have a large degree of interaction with ICI.

Moreover, during June 1993, the parent of the further processor and ICI

shared the same board chairman. See the January 18, 1994, response to

supplemental questionnaire, pages 1 to 5. For these reasons, which are

outlined in more detail in the August 23, 1994, proprietary memorandum

from case analyst to the file, we treated all of ICI's sales to the

further processor during the period of review as related-party sales.

Comment 4:

ICI contests the BIA the Department used for marine insurance,

claiming it was unreasonable and unjustified. ICI points out that sales

trace documents confirmed ICI's calculation of marine insurance and

notes the Court of International Trade's (CIT's) ruling that the ``use

of the best information available rule is not to be resorted to when

respondents have supplied adequate information.'' See Sigma Corp. et

al. v. United States, 841 F. Supp. 1255 (CIT 1993). ICI argues that,

since complete marine insurance data are on the record, the use of BIA,

based on the assumption that marine insurance was received from a

related party without evidence of arm's-length pricing, is

``unreasonable and unsupported by any evidence on the record.'' See

also Rhone-Poulenc Inc. v. United States, 899 F.2nd 1185, 1190 (Fed.

Cir. 1990).

Further, ICI points out that, since ICI ``self-insures marine

insurance,'' no insurance expense is incurred in the absence of claims.

Therefore, since there were no claims made during the period of review,

ICI claims that the Department would be justified in not making

deductions for this expense.

ICI claims that the Brazilian marine insurance rate used as BIA

represents different commercial realities than those faced by ICI such

as ``shipping distances, risks presented and other factors.'' ICI

points out that, for the Brazilian marine insurance, only a single

shipment was involved and that rates for such a minimal shipment would

not be comparable.

ICI contends that the most accurate form of BIA is the marine

insurance rate from the investigation because that rate represents

verified record information for the producer in the same case. ICI also

asks that the Department consider the use of the publicly available

insurance rates used for other antidumping cases involving shipment of

goods from the United Kingdom during a contemporaneous period. ICI

suggests that the marine insurance rates could be obtained from the

1992 to 1993 administrative review of forged-steel crankshafts from the

United Kingdom and the 1992 to 1993 administrative review of

antifriction bearings from the United Kingdom.

Department's Position:

We disagree with ICI. We did not learn until the verification that

ICI's reported marine insurance was provided by a related company. ICI

was unable to provide any supporting information to demonstrate that

the reported marine insurance was purchased at arm's length prices.

That no insurance claims were made during the period of review is

irrelevant. ICI incurred an expense for marine insurance on its sales

to the United States, and this expense must be deducted from U.S. price

in accordance with section 772(d)(2)(A) of the Act.

The respondent's suggestion that, as BIA, we use the marine

insurance rate from the investigation is inappropriate because that

rate was not demonstrated to be at arm's length. Regarding ICI's other

recommendation that we use the marine insurance rates for either

forged-steel crankshafts from the United Kingdom or antifriction

bearings from the United Kingdom, we note that these products are very

different from nitrocellulose. Nitrocellulose, being a chemical, is

likely to have a very different marine insurance rate than products

such as crankshafts or antifriction bearings. Accordingly, the

Brazilian rate used in the preliminary results is the most appropriate

since it pertains to the same product (nitrocellulose) and it is an

arm's length rate.

Comment 5:

ICI objects to the Department's use of BIA for packing costs for

the months July to November 1992. According to ICI, the Department

verified that, during the first half of the period of review, steel

drums used for packing were used once in the home market and then

reused in third-country markets. ICI claims that the Department not

only verified the average steel drum cost for the first half of the

period of review, but also verified other elements, such as labor and

other materials used in packing, and that these costs should be

included in the calculation of the BIA for packing costs incurred

during the first half of the period of review.

Petitioner agrees with the Department's conclusion in the

preliminary results that ICI did not establish the accuracy of its home

market packing cost for the July 1992 through November 1992 period and

that it could not demonstrate that the month of November, for which the

Department had verified information, was representative of the entire

5-month period. Petitioner contends that ICI's brief exposes an

additional reason why the Department should reject ICI's claimed

packing expense for the July to November 1992 period: ICI's methodology

assumes that the reuse rate is the same in the domestic market as in

foreign markets, even though sales quantities abroad differ from

domestic sales quantities. Petitioner also notes that the data for the

months before November 1992 are based on information that was not

documented at verification.

Department's Position:

We agree with petitioner that ICI was unable to demonstrate that

November 1992 was representative of the July to November 1992 period.

As discussed on pages 9 through 12 of the verification report, and in

an April 15, 1994, memorandum from the case analyst to the file, ICI

based its allocation of home market packing costs for the period July

through November 1992 solely on the month of November 1992, but

provided no information to demonstrate that November was a

representative month, and as such, an appropriate basis for formulating

an allocation of drum costs for the entire 5-month period. In addition

to not being able to verify the drum cost allocation, we were also

unable to verify the cost of the drums used during that 5-month period.

Therefore, the use of BIA for packing costs during the first half of

the period of review is appropriate.

We agree with ICI that we verified other elements of ICI's packing

cost, such as labor and other materials (materials other than drums).

These costs were already included in our calculation of the BIA for the

July to November 1992 packing costs for the preliminary results.

However, we failed to include return freight and refurbishing costs,

which we have included for these final results.

Comment 6:

Petitioner claims that the reuse of drums for home market and

third-country packing was not verified. As a result, the entire packing

cost should be denied or, as an alternative, petitioner suggests using

its average drum reuse rate of 6 to 7 times, rather than using the

packing material costs for the latter part of the period of review and

dividing that amount by two, as was done in the preliminary results.

ICI cites the verification report in contesting the petitioner's

contention that drum usage was not verified. In particular, ICI

indicates a passage which states that ``ICI lifted the November 1992

usage rates from an inventory ledger maintained in the United Kingdom''

and that ``November 1992 information was taken from a page in the

inventory ledger that we had already reviewed and verified in the

United Kingdom with regard to another element of the verification.''

ICI points out that the Department did not question ICI's calculation

methodology, only whether November 1992 was a representative month.

Department's Position:

During the verification, we reviewed ICI's drum purchasing records

for the July to November 1992 period and observed purchasing patterns

for three types of drums used in the home market. All three drum models

are discussed in a June 6, 1992, document included in Verification

Exhibit 3. One of those drum models was the lighter drum used during

the latter portion of the period of review. Of the other two drum

models, the document states that one would ``continue to be used within

the U.K. until considered unfit for use, then scrapped and will not be

reordered * * *'' while the other would be used ``once in the U.K. and

* * * then sent for [e]xport.'' In observing the drum purchasing

records, we noted that purchases were made only of the latter drum

model that would be used ``once in the U.K. and * * * then sent for

[e]xport'' and of the lighter drum used during the December 1992 to

June 1993 period. (See page 12 of the March 24, 1994, ``Report on the

Verification of Imperial Chemical Industries PLC and ICI Americas'' and

home market verification Exhibit 3.) Thus, we were able to confirm that

all drums used in the home market during the July to November 1992

period were used only once in the home market and then sent for export.

Accordingly, we have not denied the entire packing cost, nor have we

used petitioner's average drum reuse rate.

Comment 7:

ICI claims that the Department's use of the company's reported U.S.

short-term borrowing rate as BIA for home market credit and inventory

carrying costs is unreasonable. ICI notes that there are two components

to home market credit calculations: (1) payment terms for each

transaction (the number of days credit outstanding, measured from the

date of shipment to the date of payment); and (2) the short-term

borrowing rate. ICI claims that the Department verified actual payment

terms for all pre-selected and ``surprise'' home market transactions.

Regarding the reported short-term borrowing rate, ICI notes that it

presented a rate from a bank at which it could have borrowed during the

period of review and, to demonstrate the reasonableness of that rate,

submitted a calculation of an actual short-term borrowing rate based on

data for a related company.

ICI claims that the use in the preliminary results of the three-

month LIBOR for short-term borrowing in the United Kingdom is improper

because it is a rate for short-term borrowings of U.S. dollars, and

unavailable to ICI in the United Kingdom. Respondent suggests that, if

BIA is used, the Department should use the prime rate submitted by ICI.

Petitioner states that ICI's lack of short-term borrowing is an

indicator of the strength of the company and, therefore, questions how

ICI could possibly have home market credit costs that approximate the

private sector average.

Department's Position:

We agree with respondent that the three-month LIBOR for short-term

borrowings in U.S. dollars is not the most appropriate interest rate to

apply as BIA for home market short-term credit costs, since ICI would

have borrowed in pounds sterling, not dollars, to finance its sales in

the United Kingdom. See La Metalli Industriale, S.p.A. v. United

States, 912 F 2d 455, 460 (Fed. Cir. 1990). We have found the average

interest rate for three-month interbank loans in pounds sterling for

the review period to be comparable to the average prime rate ICI

submitted. See memorandum from the case analyst to the file, dated 8/

24/94. Therefore, for these final results we have used the average

prime rate submitted by ICI to calculate home market credit costs.

Comment 8:

ICI contends that the Department incorrectly matched U.S. sales

with foreign market values (FMVs) at different levels of trade without

first exhausting contemporaneous FMVs at the same level of trade.

Petitioner agrees with the respondent that the matching sequence is

incorrect with regard to matching by levels of trade. However,

petitioner notes that there is an additional problem at one stage in

the program where a file is created that groups all possible U.S. sales

by product and month, while ignoring level of trade.

Department's Position:

We agree with ICI and petitioner. For the final results, we have

exhausted contemporaneous FMVs at the same level of trade before

seeking FMV matches at different levels of trade. We have also

corrected the problem caused by grouping all possible U.S. sales by

month while ignoring level of trade.

Comment 9:

Petitioner argues that, for all post-June 1, 1993, sales, the

respondent has failed to report the selling price of the sale to the

first unrelated customer. Petitioner notes that ICI claimed that a

company that was related to ICI until a May 31, 1993, ``demerger''

acted as a sales agent in the United States on behalf of ICI.

Petitioner claims that that company could not have been ICI's

agent, because ``[a]n agent does not purchase the goods from the

foreign manufacturer, take title and act as importer of record,'' as

that company did. Rather, the demerged company was the first unrelated

buyer after June 1, 1993. Therefore, ICI should have reported its June

1993 sales to that company.

ICI contests petitioner's argument that the demerged company was

the first unrelated purchaser of ICI nitrocellulose, arguing that the

Department verified that this was not the case. Further, ICI claims

that because the Department also verified the quantity and value of ICI

America's U.S. sales for the period of review, ICI was able to

demonstrate that the selling price charged to the ultimate customer was

the price recorded in ICI America's financial statements.

Department's Position:

We disagree with petitioner. As noted above in our response to

comment 3, we do not consider the ``demerged'' company to have been a

separate, unrelated company during any portion of the period of review.

Furthermore, we verified the activities of that company with respect to

ICI sales and determined that it was not the purchaser as claimed by

petitioner. In verifying sales traces, we were able to confirm that

shipments were made directly to the ultimate customer and did not pass

through the inventory of the ``demerged'' company. Therefore, we

concluded that company acted as a related agent throughout the period

of review and, for all post-June 1, 1993 sales, have continued to use

the sales from ICI to the first unrelated customer in our analysis.

Comment 10:

Petitioner contests the inclusion in ICI's case brief of certain

data, claiming that those data contain new factual information.

Petitioner contends that ICI has included this information in its brief

in an effort to make up for deficiencies highlighted in the preliminary

results.

Department's Position:

We agree with petitioner for the most part. We asked the respondent

to resubmit its case and rebuttal briefs, excluding the new factual

information, and that the petitioner, likewise, remove from its

rebuttal brief references to that information. See letter from OADC

Division II Director to Michael Hertzberg and Maria Tan Pedersen, dated

July 15, 1994; letter from OADC Division II Director to Edward M.

Lebow, dated July 15, 1994; and the memorandum from case analyst to the

file dated August 25, 1994.

Comment 11:

ICI claims that the Department calculated the commission offset

contrary to the methodology stated in the analysis memorandum.

Department's Position:

We agree with the respondent and have corrected this inadvertent

error for the final results.

Comment 12:

ICI claims that a computer error occurred with respect to the

inventory carrying cost field.

Department's Position:

We disagree with the respondent. Correct amounts were calculated

for inventory carrying cost.

Comment 13:

Petitioner notes clerical errors in the program: 1) U.S. packing

was not converted to U.S. dollars; and 2) U.S. brokerage was not

deducted from U.S. price.

Department's Position:

We agree with the petitioner and have made these corrections for

the final results.

Final Results of the Review

As a result of our comparison of the U.S. price to FMV, we

determine that the following dumping margin exists:

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

Margin

Manufacturer/exporter Time period (percent)

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

Imperial Chemicals Industries PLC............ 7/1/92-6/30/93 5.08

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

Parties to the proceeding may request disclosure within 5 days of

the date of publication of this notice.

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between U.S. price and FMV may vary from the percentage

stated above. The Department will issue appraisement instructions

directly to the Customs Service.

Furthermore, the following deposit requirements will be effective

upon publication of this notice of final results of 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 by section 751(a)(1) of the Act: (1) The cash deposit rate for

the reviewed company will be that 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 or a previous review or the

less-than-fair-value (LTFV) investigation, but the manufacturer is, the

cash deposit rate will be the rate established in the LTFV

investigation for the manufacturer of the merchandise; and (4) the cash

deposit rate for all other manufacturers or exporters will be the ``all

others'' rate of 11.13 percent established in the final notice of the

LTFV investigation.

This notice also serves as a 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 the subsequent

assessment of double antidumping duties.

This notice also serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 C.F.R. 353.34(d) or 355.34(d). Timely written

notification of return/destruction of APO materials or conversion to

judicial protective order is hereby requested. Failure to comply with

the regulations and the terms of an APO is a sanctionable violation.

This administrative review and notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and section 353.22

of the Department's regulations.

Dated: December 16, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 94-31797 Filed 12-27-94; 8:45 am]

BILLING CODE 3510-DS-P