Industrial Phosphoric Acid From Israel; Final Results of Antidumping Duty Changed Circumstances Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-508-604]

Industrial Phosphoric Acid From Israel; Final Results of

Antidumping Duty Changed Circumstances Review

AGENCY: International Trade Administration/Import Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty changed

circumstances review.

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SUMMARY: On November 5, 1993, the Department of Commerce published the

preliminary results of its changed circumstances review concerning its

examination of whether Rotem Fertilizers, Ltd. (Rotem) is the successor

to Negev Phosphates, Ltd. (Negev). The review covers one manufacturer/

exporter of this merchandise to the United States, Negev, and its

merger with Rotem. We have now completed this review and determine

that, for purposes of applying the antidumping duty law, Rotem is the

successor to Negev and, as such, is subject to the revocation which

applied to Negev.

EFFECTIVE DATE: February 14, 1994.

FOR FURTHER INFORMATION CONTACT: Gayle Longest or Kelly Parkhill,

Office of Countervailing Compliance, International Trade

Administration, U.S. Department of Commerce, Washington, DC 20230;

telephone: (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

On November 5, 1993, the Department of Commerce (the Department)

published in the Federal Register the preliminary results of its

antidumping duty changed circumstances review on industrial phosphoric

acid from Israel (58 FR 59010). We have now completed this changed

circumstances review in accordance with section 751 of the Tariff Act

of 1930, as amended (the Act).

Scope of Review

Imports covered by this review are shipments of industrial

phosphoric acid (IPA). This product is currently classifiable under

item number 2809.20.00 of the Harmonized Tariff Schedule (HTS). The

written description remains dispositive.

The review covers one manufacturer/exporter of this merchandise to

the United States, Negev, and its merger with Rotem.

Successorship

In December 1991, Rotem and Negev, two companies within the Israeli

Chemicals, Ltd. (ICL) group, merged to become one corporate entity,

Rotem. Subsequent to the merger, Negev was revoked from the antidumping

duty order. (See Final Results of Antidumping Duty Administrative

Review and Revocation In Part of the Antidumping Duty Order (57 FR

10008; March 23, 1992).) Before the merger, Rotem was not a producer of

the subject merchandise and was never reviewed under this order.

Negev notified the Department in a March 30, 1992 letter that the

company had merged with Rotem. The merger, which was finalized December

31, 1991, was effective retroactively to January 1, 1991. During

verification, the Department examined Rotem's sales and found no

evidence of industrial phosphoric acid sales prior to the merger. In

the March 30, 1992 letter, Negev also identified Rotem as its successor

and requested that the Department issue a determination applying

Negev's revocation to Rotem. Rotem began to ship the subject

merchandise to the United States on January 1, 1992. Its shipments have

entered under the ``all other'' rate applicable to companies that had

never been reviewed under the order.

The Department has determined that Rotem is the successor to Negev

for purposes of applying the antidumping duty law. For a complete

discussion of the basis for this decision see Industrial Phosphoric

Acid From Israel; Preliminary Results of Antidumping Duty Changed

Circumstances Review, November 5, 1993, (58 FR 59010).

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results. We received comments from the petitioners, FMC

Corporation and Monsanto, and from Rotem, the manufacturer/exporter

covered by this review.

Comment 1: Petitioners argue that the legal test for determining

successorship with respect to an antidumping duty order is that ``the

Department will consider the acquiring company to be a successor if its

resulting operation is essentially similar to that of its

predecessor.'' Brass Sheet and Strip from Canada: Preliminary Results

of Antidumping Duty Administrative Review, (57 FR 5128, 5129; February

12, 1992). Petitioners maintain that after the merger, Rotem's

operation was not essentially similar to either that of Rotem or the

former Negev because, after the merger, Rotem became a fully integrated

producer of both fertilizer and industrial grade acid, as well as a

producer of rock phosphate. Thus, the newly merged operations of Rotem

constitute a company with a more integrated and expanded phosphoric

acid production.

Petitioners also claim that in the preliminary results of the

changed circumstances review, the Department failed to consider Rotem

as a new business entity because the Department was only looking at

industrial phosphoric acid. Petitioners argue that the proper legal

standard for determining successorship is whether the ``resulting

operation'' of the acquiring company is essentially similar to its

predecessor.'' See Brass Sheet and Strip preliminary results.

Therefore, the merged Rotem should be examined with respect to its

overall operations, not just its operations with respect to the subject

merchandise. Petitioners argue that since Rotem's operations are not

the same as they were prior to the merger with respect to all types of

merchandise, Rotem should not be treated as a successor to Negev.

In response to petitioners' argument that Rotem has become an

integrated producer of phosphoric acid, respondent claims that Negev's

production of the subject merchandise was in fact fully integrated

before the merger. Although the merger further integrated the

production of fertilizer grade acid, no changes have occurred with

regard to the production of the subject merchandise.

Department's Position: We disagree with petitioners' assertion that

the proper legal standard for determining successorship is whether the

acquiring company is similar to its predecessor with respect to its

overall operations. In the preliminary results for Brass Sheet and

Strip, the Department found that ``concerning production and sales of

brass sheet and strip,'' the acquiring company was operating

essentially as the same business entity as its predecessor. See Brass

Sheet and Strip from Canada; Preliminary Results of Antidumping Duty

Administrative Review, (57 FR 5128, 5129; February 12, 1992). Moreover,

in the final results for Brass Sheet and Strip, the Department agreed

that since respondent's business operation was essentially the same as

that of its predecessor ``with regard to the production of brass sheet

and strip,'' the acquiring company was essentially the same operation

as its predecessor. See Brass Sheet and Strip from Canada; Final

Results of Antidumping Duty Administrative Review, (57 FR 20460, 20462;

May 13, 1992). Thus, in this review, the Department has applied the

same standard for determining successorship as the standard which was

applied in the preliminary and final results of Brass Sheet and Strip.

Insofar as no explicit legal standard for determining successorship

is provided by the statute or the Department's regulations, the

Department has discretion in deciding how to determine whether one

company is a successor to another for purposes of the antidumping duty

law. In Brass Sheet and Strip, the Department examined the described

factors in terms of the operations which produce the subject

merchandise. This has continued to be our approach in the instant

review. The operation producing the subject merchandise is the

appropriate level at which to focus our analysis because under the

antidumping duty laws, we are examining pricing practices with respect

to the subject merchandise. For example, in this case, the antidumping

duty order applies only to industrial phosphoric acid and reviews are

conducted only on sales of this merchandise. Thus it follows that an

inquiry into the validity of a claim of successorship to a respondent

company should focus on that company's sales and production of the

merchandise encompassed by the order.

Comment 2: Petitioners claim that when examining the four elements

for determining successorship: (1) Management, (2) production

facilities, (3) supplier relationships, and (4) customer base, Rotem's

operations are not a continuation of Negev's operations.

With regard to management, petitioners argue that with the

resulting changes in the board of directors and the production

management, there is a new and different management team in charge.

Petitioners claim that there has not been a continuation of the former

Negev management in the new Rotem.

Petitioners also claim that since Rotem acquired Negev's production

facilities, Rotem's total production facilities are much more extensive

than Negev's were. As a result of the merger, Rotem is a larger full-

service phosphate and related products producer and is not the same

company that Negev was before the merger.

Petitioners further maintain that supplier relationships have also

changed as a result of the merger. The former Negev obtained important

raw material inputs from Rotem, which was then a separate company.

Since the merger, raw material input for the production of the subject

merchandise is now supplied by captive internal production, which

petitioners argue constitutes a significant change in supplier

relationships.

As a result of the merger, petitioners also argue that Rotem now

has a much larger and more diverse customer base than Negev had.

Furthermore, prior to the merger, Rotem, as a fertilizer producer, had

no customers in the United States and made no sales to the United

States. Therefore, the merger opened up an entirely new market for

Rotem.

In contrast, the respondent maintains that the petitioners have

presented no arguments that had not already been taken into account in

the preliminary results. Therefore, the Department has no grounds for

reversing the preliminary determination.

With regard to changes in management, the respondent maintains that

personnel changes as the result of the merger are minimal. Furthermore,

respondent argues that sales staff for the subject merchandise remained

the same and most of management, including top management in the

company, retained their positions.

Respondent claims that when addressing changes in production

facilities, petitioners focus, as when addressing other factors to

determine successorship, on the production of non-subject merchandise.

Prior to the merger, Negev and Rotem formed a part of the same parent

company. These two companies were both located at the same plant site

and shared some infrastructure. Moreover, products that were

transferred from one company to another were transferred on special

intra-company terms. According to the respondent, these elements

demonstrate that there was no change in production facilities with

regard to the subject merchandise.

Respondent argues that petitioners' premise regarding supplier

relationships is completely erroneous. Respondent maintains that the

raw material inputs obtained by Negev from Rotem are not essential or

even necessary in the production of the subject merchandise.

Furthermore, when these raw materials were obtained from Rotem prior to

the merger, they were purchased under an intra-company pricing formula

determined by the parent company. Therefore, there has been no change

in suppliers.

With regard to customer base, respondent claims that the customer

base for the subject merchandise did not change. Respondent argues that

petitioners are focusing on sales of non-subject merchandise, as

illustrated by their example of sales to new customer groups such as

the farming community. According to the respondents, the farming

community does not have a need for the subject merchandise, industrial

phosphoric acid.

Department's Position: We do not agree with petitioners assertion

that Rotem's operations are not essentially similar to Negev's

operations prior to the merger in terms of: (1) Management, (2)

production facilities, (3) supplier relationships, and (4) customer

base, with regard to sales and production of the subject merchandise.

With regard to executive personnel, Negev and Rotem's board of

directors consists of seven and five members, respectively. The

president and three members of the board of directors, including the

chairman of the board, are the same for both Negev and Rotem.

Therefore, Rotem's five member board of directors includes three

members that were also on Negev's board.

An examination of production management shows that production

management was consolidated after the merger. Before the merger, there

were two site managers and two operations managers, one set for Negev

operations and the other for Rotem operations. Now there is one site

manager and one operations manager for Rotem's industrial phosphoric

acid and fertilizer acid facilities. After the merger, Negev's former

vice-president became a Rotem executive vice-president. The Negev plant

manager prior to the merger left the company, and Rotem's plant manager

became the plant manager for both the Rotem and Negev plant facilities.

Negev's former industrial phosphoric acid site manager remained with

Rotem for about six months after the merger and was then replaced by

Rotem's operations manager whose responsibilities became the management

of both industrial phosphoric acid and fertilizer acid facilities. See

Verification of the Questionnaire Response-- Antidumping Duty Order on

Industrial Phosphoric Acid from Israel-- Changed Circumstances Review;

October 6, 1993.

The Department has considered these changes in Rotem's management

and finds that the differences are minimal. The changes in Rotem's

personnel are well within the normal range of personnel changes that

one would expect over time within the same operation. For example, in

the final results of Brass Sheet and Strip, the Department found one

company to be the successor of another despite the fact that the

successor company had replaced the two top managers at the acquired

plant. See Brass Sheet and Strip Final Results of Antidumping Duty

Administrative Review, (57 FR 20462; May 13, 1992).

With regard to production facilities, we agree with respondents

that petitioners improperly focus on the production of non-subject

merchandise to support their claim that Rotem's total production is

more extensive and diverse. Rotem did not alter production or the

production facilities of the subject merchandise at the time of the

merger. Moreover, the subject merchandise continued to be manufactured

in the former company's plant facilities. Furthermore, eleven months

after the merger, the Department verified that Rotem had not altered

production or production facilities for the subject merchandise

subsequent to the merger.

When reviewing supplier relationships, petitioners argue that as a

result of the merger, Rotem now has a captive source of supply for

certain raw material inputs necessary for production of the subject

merchandise. During verification, the Department carefully examined

supplier relationships for all raw material inputs in the production of

the subject merchandise and found that the source of supplies for these

inputs did not change after the merger. As respondents point out,

before the merger Negev purchased raw material inputs from Rotem at

intra-company prices and, after the merger, Rotem continued to supply

these inputs.

Finally, in their discussion of changes in customer base,

petitioners submit that as a result of the merger, Rotem has a larger

and more diverse customer base. As in their evaluation of other

factors, petitioners focus on the inclusion of Rotem's customers for

non-subject merchandise. As stated in our response to comment one, the

appropriate focus of our analysis is the subject merchandise. We agree

with the respondents that the customer base for Rotem's sales of the

subject merchandise did not change after the merger.

Finally, as requested, Rotem has submitted an agreement as set

forth at Sec. 353.25(a)(2)(iii) to be reinstated in the order should

the Secretary conclude under Sec. 353.22(f) that the company,

subsequent to revocation, sold industrial phosphoric acid at less than

foreign market value.

In conclusion, after reviewing all comments, the Department

determines that Rotem is the successor to Negev.

Final Results of Review

After reviewing the comments received, we determine that Rotem is

successor to Negev and, accordingly, is not subject to the antidumping

duty order. We will instruct customs to liquidate all entries of this

merchandise produced by Rotem, exported to the United States and

entered, or withdrawn from warehouse, for consumption, on or after

January 1, 1991. In addition, the Department will instruct the Customs

Service to terminate suspension of liquidation on entries from Rotem

and to liquidate, without regard to antidumping duties, merchandise

exported by Rotem on or after January 1, 1991.

This changed circumstances review and notice are in accordance with

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

353.22(f).

Dated: February 8, 1994.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 94-3393 Filed 2-11-94; 8:45 am]

BILLING CODE 3510-DS-P