Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Antidumping Duty Investigation of Color Negative Photographic Paper and Chemical Components Thereof From Japan

DEPARTMENT OF COMMERCE

[A-588-832]

Preliminary Determination of Sales at Less Than Fair Value and

Postponement of Final Determination: Antidumping Duty Investigation of

Color Negative Photographic Paper and Chemical Components Thereof From

Japan

Agency: Import Administration, International Trade Administration,

Commerce.

EFFECTIVE DATE: April 6, 1994.

FOR FURTHER INFORMATION CONTACT: Bill Crow, Office of Antidumping

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

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

telephone (202) 482-0116.

Preliminary Determination

We preliminarily determine that color negative photographic paper

and chemical components thereof (CNPP) from Japan are being, or are

likely to be, sold in the United States at less than fair value, as

provided in section 733 of the Tariff Act of 1930, as amended (the

Act). The estimated margins are shown in the ``Suspension of

Liquidation'' section of this notice.

Case History

Since the initiation of this investigation on September 20, 1993

(58 FR 50331, September 27, 1993), the following events have occurred.

On October 15, 1993, the International Trade Commission (ITC)

issued an affirmative preliminary injury determination.

On November 15, 1993, the Department presented an antidumping duty

questionnaire for CNPP to Fuji Photo Film, Company, Ltd., hereinafter

referred to as ``Fuji'' or ``respondent'' (see February 28, 1994,

memorandum to the file). Respondent submitted sales questionnaire

responses in December 1993 and January 1994. The Department issued

supplemental sales questionnaires in February 1994. Respondent

submitted the responses to these supplemental questionnaires in

February and March 1994.

On December 14, 1993, respondent submitted a statement in support

of the Department postponing the preliminary determination in this

investigation. On December 23, 1993, petitioner requested that the

Department postpone the preliminary determination until March 29, 1994,

pursuant to 19 CFR 353.15(c) (1993). The Department granted this

request on January 6, 1994 (59 FR 1927, January 13, 1994).

On March 2, 1994, petitioner submitted an allegation that critical

circumstances exist with respect to imports of CNPP from Japan. On

March 4, 1994, the Department sent respondent a critical circumstances

questionnaire. Respondent submitted responses to the Department's

critical circumstances questionnaire on March 18, 1994.

On March 8, 1994, in accordance with 19 CFR 353.20(b), respondent

requested that, in the event of an affirmative preliminary

determination, the Department postpone the final determination.

Scope of Investigation

For purposes of this investigation, color negative photographic

paper is all sensitized, unexposed silver-halide color negative

photographic paper, whether in master rolls, smaller rolls or sheets.

Chemical components include sensitized (whether chemically or

spectrally) and unsensitized emulsions, couplers, and coupler

dispersions used in making color negative photographic paper.

Unsensitized silver-halide emulsions consist of silver-halide

microcrystals dispersed in a gelatin and water matrix after preparation

and washing to remove soluble salts. Unsensitized emulsions are

naturally sensitive to blue and ultraviolet light, but cannot

efficiently convert light to form a color image without further

processing. Sensitized emulsions have been treated to increase their

sensitivity across the entire spectrum and/or treated by the addition

of spectral sensitizing dyes to make the emulsions selectively

sensitive to specific wavelengths of light. A coupler is a colorless,

water-insoluble chemical capable of reacting with a silver-halide

development product to form a dye. A coupler dispersion consists of a

coupler dispersed in a water-gel solution, and may contain organic

solvents, chemicals to stabilize the coupler and other substances.

Specifically excluded from this investigation are all paper and

chemical products not used in the silver halide process which are used

in other imaging technologies. Products outside the scope include toner

and developer chemicals used in electrostatic or indirect imaging

processes (e.g., xerography), products used in laser printing, and

instant photography products.

Also excluded from the scope of the investigation is paper that is

designed exclusively for use in graphic arts proofing equipment and

does not exceed 160 microns in thickness, and emulsions classified

under subheading 3707.10.0000 of the Harmonized Tariff Schedule of the

United States (HTSUS) that are used in the manufacture of monochrome

graphic arts film or paper that are not used in the production of color

negative photographic paper.

The color negative photographic paper subject to this investigation

is currently classifiable under HTSUS subheadings 3703.10.3030 and

3703.20.3030. Emulsions are currently classifiable under HTSUS

subheadings 3707.10.0000 and 3707.90.3000. Couplers and coupler

dispersions are currently classifiable under HTSUS subheadings

3707.90.3000, 3707.90.6000, 2933.19.3000, 2933.90.2500 and

2934.90.2000. Although the HTSUS subheadings are provided for

convenience and customs purposes, our written description of the scope

of this investigation is dispositive.

To avoid suspension of liquidation of non-subject chemicals, those

items entered under the HTSUS subheadings listed above, which are not

for use in the color negative photographic paper production process,

must be accompanied by an importer's declaration to the Customs Service

to that effect.

In order to be excluded from the suspension of liquidation ordered

in this notice, all sensitized (whether chemically or spectrally) and

unsensitized emulsions, couplers, and coupler dispersions entered into

the United States must be accompanied by an importer's declaration to

the Customs Service to the effect that they are not for use in the

color negative photographic paper production process and will not be

used in the color negative photographic paper production process.

On February 18, 1994, petitioner and respondent submitted comments

on whether the chemical components are in the same class or kind of

merchandise as color negative photographic paper. Petitioner argues

that the subject merchandise constitutes one class or kind of

merchandise, whereas respondent argues that the merchandise included in

the scope of investigation constitutes two classes or kinds of

merchandise. We determined that color negative photographic paper and

the chemical components constitute one class or kind of merchandise

(see March 24, 1994, decision memorandum from Richard W. Moreland to

Barbara R. Stafford). We based our determination on the criteria set

forth in Diversified Products v. United States, 572 F. Supp. 883 (1983)

and Kyowa Gas Chemical Industry Co., Ltd. v. United States, 582 F.

Supp. 887 (1984).

Period of Investigation

The period of investigation (POI) is March 1, 1993, through August

31, 1993.

Such or Similar Comparisons

In this investigation, we have only examined sales of color

negative photographic paper; we have not examined sales of chemical

components because respondent did not make such sales during the POI

(see October 22, 1993, memorandum from James Maeder to David Binder).

We have determined for purposes of the preliminary determination that

the color negative photographic paper covered by this investigation

comprise a single category of ``such or similar'' merchandise.

Respondent reported products that are identical according to the

Department's matching criteria, but have minor cost differences based

on the emulsions contained in each product. For purposes of the

preliminary determination, we are treating these products as identical

and are making no adjustments for differences in merchandise between

the products as claimed by respondent in accordance with 19 CFR 353.57.

This is because respondent failed to provide a narrative description

for its adjustments for differences in merchandise that explains the

exact nature, source, and size of each difference. We have instructed

the respondent to submit a thorough description of its adjustments for

differences in merchandise so that these adjustments can be considered

for use in the final determination (see February 23, 1994, decision

memorandum from Richard W. Moreland to Barbara R. Stafford).

Fair Value Comparisons

To determine whether sales of CNPP from Japan 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

We based USP on exporter's sales price (ESP), in accordance with

section 772(c) of the Act, because the subject merchandise was sold to

the first unrelated purchaser after importation into the United States.

On March 22, 1994, respondent submitted clarifications regarding

its response to section C of the Department's questionnaire regarding

U.S. sales. Respondent requested that the Department consider backup

calculations for reported ocean freight charges, and U.S. short-term

interest rates. In this submission, Fuji also provided clarification

concerning certain Fuji-Hunt (a U.S. entity related to Fuji) delivery

expenses and certain Fuji-Hunt indirect selling expenses. This

submission was received too late to be used for purposes of the

preliminary determination; however, we will consider this submission in

our final determination.

Based on information submitted by respondent, we reclassified a

certain movement expense as revenue, and added it to the U.S. gross

unit price. We added, where appropriate, freight revenue to the U.S.

gross price, before adjusting for freight costs.

We made deductions, where appropriate, for discounts and rebates,

and the following movement charges: foreign brokerage, foreign inland

freight, ocean freight, marine insurance, U.S. brokerage and handling,

U.S. broker's commission, U.S. duty, and several U.S. inland freight

charges including inland freight insurance. For certain inland freight

charges applicable to sales made through Fuji-Hunt, as minor charge-

specific best information available (BIA), the Department increased the

reported charges to account for missing values. Additionally, we

deducted commissions and direct selling expenses which include

advertising, credit expenses, and a combination of promotional expenses

which constitute other direct selling expenses. We recalculated U.S.

imputed credit using the reported dates of shipment and payment because

the amounts reported by the respondent did not consistently reflect the

method described in the questionnaire response. We then adjusted the

U.S. price for additional product preparation performed by certain

parties after exportation. The preparation performed by certain parties

was treated as a component of total packing costs which were deducted

from USP.

We also deducted indirect selling expenses which include those

indirect selling expenses that Fuji-USA (Fuji's principal related U.S.

entity) incurred in its general sales activities, those indirect

selling expenses that Fuji-Hunt incurred in its sales and marketing

activities, foreign and U.S. pre-sale warehousing expenses, inventory

carrying costs, premiums for product liability insurance, and indirect

selling expenses incurred in Japan.

For purposes of the preliminary determination, we are accepting

respondent's treatment of Fuji-USA's commissions paid to an unrelated

party and Fuji-Hunt's commissions as direct selling expenses and

commissions paid to Fuji-USA's employees as indirect selling expenses

pending the receipt of additional information to be used for the final

determination. We treated all advertising costs as direct selling

expenses because respondent reported that all advertising is directed

at their customers' customers.

We made an adjustment to U.S. price for the consumption tax paid on

the comparison sales in Japan. In Federal-Mogul Corporation and The

Torrington Company v. United States, Slip Op. 93-194 (CIT, October 7,

1993), the Court of International Trade (CIT) prohibited us from

applying a purely tax-neutral margin calculation methodology.

Accordingly, we made our tax methodology conform to the instructions of

the CIT, and adjusted U.S. price for taxes by multiplying the home

market tax rate by the price of the U.S. merchandise at the point in

the chain of commerce of the U.S. merchandise that is analogous to the

point in the home market chain of commerce at which the foreign

government applies the home market consumption tax.

In this investigation, the tax levied on the subject merchandise in

the home market is three percent. We calculated the appropriate tax

adjustment to be three percent of the price of the U.S. merchandise net

of discounts reflected on the invoice at the time of sale (which, in

this case, is the point in the chain of commerce of the U.S.

merchandise that is analogous to the point in the home market chain of

commerce at which the foreign government applies the home market

consumption tax). We then added this amount to the U.S. price. We also

calculated the amount of the tax adjustment that was due solely to the

inclusion of expenses in the original tax base that are later deducted

from the price to calculate USP (i.e., three percent of the sum of any

adjustments, expenses and charges that were deducted from the price of

the U.S. merchandise). We deducted this amount after all other

additions and deductions had been made. By making this additional tax

adjustment, we avoid a distortion that would cause the creation of a

dumping margin even when pre-tax dumping is zero.

The Department instructed respondent to report by April, 1, 1994, a

revised sales listing for sales of further manufactured merchandise.

Since respondent will submit this sales information too late to be

included in our preliminary analysis, and because respondent's first

submission was too deficient to use for purposes of this preliminary

determination, we have not included further manufacturing sales in our

analysis (see March 24, 1994, decision memorandum from Richard W.

Moreland to Barbara R. Stafford).

Foreign Market Value

We compared the volume of home market sales of subject merchandise

to the volume of third country sales to determine whether there was a

sufficient volume of sales in the home market to serve as a viable

basis for calculating FMV. We found that the home market was viable for

sales of CNPP.

The Department excluded from its analysis certain sales of control

paper, hobby paper, crystal paper, and softech paper, because these

sales were made outside of the ordinary course of trade due to the

nature of the products and were made in insignificant quantities. We

omitted error entries and inventory adjustment entries because these

entries are not sales of CNPP, and because respondent did not directly

tie these entries to the relevant sales in the CNPP database.

Additionally, we dropped cancellation transactions from the sales

database, as respondent has stated that it cannot identify the original

transaction to which a specific cancellation entry applies. We also

excluded certain low-priced sales of CNPP because, despite a specific

request to do so, respondent did not adequately explain the nature of,

or circumstances surrounding, these low-priced sales.

We used the Department's current related party test, which

considers differences in the level of trade, to determine whether sales

to related customers were made on an arm's-length basis. For purposes

of the preliminary determination, we considered a party as related to

respondent whenever respondent had substantial ownership in, or

contractual agreements constituting business control over, the party.

See Appendix II to the Final Determination of Sales at Less Than Fair

Value: Certain Cold-Rolled Carbon Steel Flat Products from Argentina

(58 FR 37077, July 9, 1993) for more information on the Department's

related party test. We did not include in our analysis any sales to

related customers that we determined were not at arm's length.

We calculated FMV based on delivered prices, inclusive of packing.

We made deductions for inland freight, rebates and discounts, and

direct selling expenses, including promotional and advertising

expenses, credit expenses, warranty and guaranty expenses, and interest

for guarantee deposits, where applicable. For those rebate programs

where respondent did not identify in the database which customer

actually received the rebate, we made no adjustment. We disallowed any

rebate not established before the filing of the petition. For one

expense claimed as a rebate, we determined that the expense, although

viewed as a direct selling expense for CNPP, was overstated through a

misallocation of the costs; consequently we did not make any adjustment

for this expense, but will consider doing so subsequent to verification

and further explanation. With regard to one promotional program

reported as a direct selling expense, we did not make an adjustment to

FMV because respondent failed to report the expense properly.

We treated all advertising costs as direct selling expenses because

respondent reported that all advertising is directed at the customers'

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

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

respondent's reported total packing costs in Japan for certain

transactions for certain packing forms omitted a particular packing

processing charge, we added, as minor charge-specific BIA, the reported

average charge.

We made the following deductions from FMV in accordance with 19 CFR

353.56. We calculated home market credit expenses using the reported

dates of shipment and payment. Where no payment had been received we

used the average credit period for home market sales.

We deducted from FMV the weighted-average home market indirect

selling expenses, including inventory carrying costs, warehousing

expenses, product liability premiums, technical service expenses, and

two promotional minilab programs, up to the amount of indirect selling

expenses incurred on U.S. sales. We reclassified these two promotional

programs as indirect selling expenses. While respondent had reported

these as direct selling expenses, we have preliminarily determined that

respondent has not directly tied them to specific sales of CNPP. We

also reclassified technical expenses as indirect selling expenses

because respondent's documentation illustrates that these expenses

relate to general long-term assistance, rather than customer- or sales-

specific expenses. We offset commissions paid to unrelated parties in

the United States by the amount of indirect selling expenses incurred

in the home market by respondent, capped by the sum of U.S. commissions

and indirect selling expenses incurred, both in Japan and the United

States, for U.S. sales.

For purposes of the preliminary determination, we have treated all

movement expenses as direct selling expenses. Therefore, in accordance

with the 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), we made a circumstance-of-sale adjustment for home market

movement expenses. We recalculated indirect selling expenses incurred

in the home market by reallocating certain rebates and promotional

programs as indirect selling expenses rather than as charges or direct

selling expenses, respectively, because we found that respondent

misclassified these expenses. We classified product liability expenses

as indirect selling expenses because respondent's explanations

demonstrate that its liability policy is general in nature and not tied

to specific sales.

We included in FMV the amount of the consumption tax collected in

the Japanese home market. We also calculated the amount of the tax that

was due solely to the inclusion of expenses in the original tax base

that are later deducted from home market price to calculate FMV (i.e.,

three percent of the sum of any adjustments, expenses, charges, and

offsets that were deducted from the home market price). We deducted

this amount from the FMV after all other additions and deductions were

made. By making this additional tax adjustment, we avoid a distortion

that would cause the creation of a dumping margin even when pre-tax

dumping is zero. In addition, we calculated a re-adjustment of the

amount of tax to take into account the amount of packing expenses added

to FMV (i.e., three percent of the packing expenses).

Currency Conversion

We made currency conversions based on the official exchange rates

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

Reserve Bank.

Verification

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

information used in making our final determination.

Critical Circumstances

On March 2, 1994, petitioner alleged that ``critical

circumstances'' exist with respect to imports of CNPP and chemical

components thereof from Japan. We preliminarily find that critical

circumstances do not exist with respect to imports of CNPP from Japan,

in accordance with section 733(e)(1) of the Act. To determine whether

or not there have been massive imports of CNPP (one of the criteria in

a critical circumstances analysis) we compared the export volume for

the six months subsequent to the filing of the petition to that for the

six months prior to the filing of the petition. We found that exports

of this merchandise from respondent during the period subsequent to

receipt of the petition had decreased. Unless we find that imports of

the subject merchandise were massive, we do not need to determine

whether there is a history of dumping in the United States or elsewhere

or whether there is knowledge that the exporter was selling the

merchandise at less than its fair value.

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 CNPP from

Japan, 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 posting of a

bond equal to the estimated preliminary dumping margin, as shown below.

The suspension of liquidation will remain in effect until further

notice.

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

Margin

Producer/manufacturer/exporter percentage

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

Fuji Photo Film Co. Ltd.................................... 360.95

All Others................................................. 360.95

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

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 these imports are materially injuring, or threaten material

injury to, the U.S. industry before the later of 120 days after the

date of this preliminary determination or 45 days after our final

determination.

Postponement of Final Determination

On March 8, 1994, in accordance with 19 CFR 353.20(b), the sole

respondent requested that, in the event of an affirmative

determination, the Department postpone the final determination. We find

no compelling reason to deny the request. Accordingly, we are

postponing the date of the final determination until not later than 135

days after the date of publication of this notice.

Public Comment

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

comments in at least ten copies may be submitted by any interested

party to the Assistant Secretary for Import Administration no later

than June 30, 1994, and rebuttal briefs no later than July 8, 1994. We

request that parties in this case provide an executive summary of no

more than 2 pages in conjunction with case briefs on the major issues

to be addressed. Further, briefs should contain a table of authorities.

Citations to Commerce determinations and court decisions should include

the page number where cited information appears. In preparing the

briefs, please begin each issue on a separate page. 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

15, 1994, at 10 a.m. at the U.S. Department of Commerce, room 3708,

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

should confirm 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. Requests should

contain:

(1) The party's name, address, 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 presentations will be limited to the 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: March 29, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 94-8262 Filed 4-5-94; 8:45 am]

BILLING CODE 3510-DS-P