Final Determination of Sales at Less Than Fair Value: Furfuryl Alcohol From South Africa

DEPARTMENT OF COMMERCE

[A-791-802]

Final Determination of Sales at Less Than Fair Value: Furfuryl

Alcohol From South Africa

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

[[Page 22551]] EFFECTIVE DATE: May 8, 1995.

FOR FURTHER INFORMATION CONTACT: John Brinkmann or Donna Berg, Office

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

of Commerce, 14th Street and Constitution Avenue, N.W., Washington,

D.C. 20230; telephone (202) 482-5288 or 482-0114, respectively.

Final Determination

We determine that furfuryl alcohol from South Africa is being sold

in the United States at less than fair value (LTFV), as provided in

section 735 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 preliminary determination of sales at LTFV on December 9,

1994, (59 FR 65012, December 16, 1994), the following events have

occurred:

On January 25, 1995, ISL submitted its response to Section D of the

Department's questionnaire which requests information on the COP and

constructed value (CV). The Department issued a supplemental cost

questionnaire on January 30, 1995. ISL submitted its response to this

supplemental questionnaire on February 8, 1995. QO Chemicals, Inc. (the

petitioner) submitted comments concerning the respondent's Section D

responses on February 14, 1995.

On January 17, 1995, the respondent submitted relevant audited

financial statements for 1994. On January 20, 1995, ISL and Harborchem

submitted revisions to its U.S. sales data.

The Department issued its verification outline to the respondent on

January 24, 1995. Verifications of the respondent's sales and cost

questionnaire responses were conducted during the months of January,

February, and March 1995. The Department issued reports concerning

these verifications in March 1995.

The respondent and the petitioner submitted case briefs on March

30, 1994, and rebuttal briefs on April 4, 1995. At the request of both

the respondent and the petitioner, we held a public hearing on April 6,

1995.

Scope of Investigation

The product covered by this investigation is furfuryl alcohol

(C4H3OCH2OH). Furfuryl alcohol is a primary alcohol, and

is colorless or pale yellow in appearance. It is used in the

manufacture of resins and as a wetting agent and solvent for coating

resins, nitrocellulose, cellulose acetate, and other soluble dyes.

The product subject to this investigation is classifiable under

subheading 2932.13.00 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 proceeding is dispositive.

Period of Investigation

The period of investigation (POI) is December 1, 1993, through May

31, 1994.

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute and to the

Department's regulations are in reference to the provisions as they

existed on December 31, 1994.

Such or Similar Comparisons

For purposes of the final determination, we have determined that

furfuryl alcohol constitutes a single ``such or similar'' category of

merchandise. Further, because the respondent had sales in the home

market of merchandise identical to that sold to the United States,

similar comparisons were not necessary.

Fair Value Comparisons

To determine whether sales of furfuryl alcohol from South Africa 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. In accordance with 19 CFR 353.58, we made

comparisons at the same level of trade, where possible.

United States Price

We have found that ISL and its exclusive selling agent, Harborchem,

are related parties pursuant to section 771(13)(A) of the Act (see

Comment 1 and the concurrence memorandum, dated May 1, 1995, on file in

Room B-099 of the Main Commerce Department building), and that all of

ISL's U.S. sales to the first unrelated purchaser took place after

importation into the United States. Therefore, we based USP on

exporter's sales price (ESP), in accordance with section 772(c) of the

Act.

We calculated ESP based on FOB U.S. storage facility or delivered

prices to unrelated customers in the United States. We made deductions,

where appropriate, for the following movement charges in accordance

with section 772(e) of the Act: foreign loading on ship, foreign inland

freight, ocean freight, marine insurance, tank car rental, U.S. inland

freight, U.S. inland insurance, U.S. brokerage and handling, and U.S.

duty. We also made deductions, where appropriate, for credit expenses,

indirect selling expenses incurred in South Africa, and indirect

selling expenses incurred in the United States, including quality

control testing, inventory carrying expenses, warehousing expenses, and

U.S. storage insurance. We also increased U.S. price, as appropriate,

to account for additional freight revenue (see Comment 8).

In accordance with our standard practice, and pursuant to the

decision of the U.S. Court of International Trade in Federal-Mogul

Corp. v. United States, 834 F. Supp. 1391 (CIT 1993), our calculations

include an adjustment to U.S. price for the consumption tax levied on

comparison sales in South Africa. See Preliminary Antidumping Duty

Determination: Color Negative Photographic Paper and Chemical

Components from Japan, 59 FR 16177, 16179 (April 6, 1994), for an

explanation of this methodology.

Cost of Production

As indicated in the preliminary determination, the Department

initiated an investigation of sales below the COP in the home market on

December 9, 1994. In order to determine whether home market sales

prices were below COP within the meaning of section 773(b) of the Act,

we calculated COP based on the sum of the respondent's cost of

materials, fabrication, general, and packing expenses, in accordance

with 19 CFR 353.51(c). We made the following adjustments to

respondent's reported COP data:

1. We recalculated the cost of furfuryl, the primary material input

into FA, used in the production of furfuryl alcohol during the POI

based on ISL's normal first-in first out inventory valuation method;

2. We removed selling, general and administrative costs from the

cost of sales figure used in the denominator of the submitted general

and administrative rate calculation;

3. We increased ISL's reported furfuryl steam overhead expenses by

the amount actual steam costs exceeded budgeted costs; and

4. We disallowed ISL's reduction of furfuryl production costs for a

certain proprietary item.

After computing COP, we added the sales-specific VAT to the COP figure.

We compared product-specific COP to reported prices that were net of

movement charges, direct and indirect selling expenses, and inclusive

of VAT. In accordance with section 773(b) of the [[Page 22552]] Act, we

followed our standard methodology to determine whether the home market

sales of each product were made at prices below their COP in

substantial quantities over an extended period of time, and whether

such sales were made at prices that would permit recovery of all costs

within a reasonable period of time in the normal course of trade.

To satisfy the requirement of section 773(b)(1) that below-cost

sales be disregarded only if made in substantial quantities, we apply

the following methodology. Where we find that over 90 percent of a

respondent's sales were at prices above the COP, we do not disregard

any below-cost sales because we determine that a respondent's below-

cost sales are not made in substantial quantities. If between ten and

90 percent of a respondent's sales were at prices above the COP, we

disregard only the below-cost sales if made over an extended period of

time. Where we find that more than 90 percent of a respondent's sales

were at prices below the COP and were sold over an extended period of

time, we disregard all sales and calculate FMV based on CV, in

accordance with section 773(b) of the Act.

In accordance with section 773(b)(1) of the Act, in order to

determine whether below-cost sales had been made over an extended

period of time, we compare the number of months in which below-cost

sales occurred to the number of months in the POI in which the product

was sold. If a product is sold in three or more months of the POI, we

do not exclude below-cost sales unless there are below-cost sales in at

least three months during the POI. When we find that sales occur in one

or two months, the number of months in which the sales occur

constitutes the extended period of time; i.e., where sales are made in

only two months, the extended period of time is two months, where sales

are made in only one month, the extended period of time is one month.

(See Final Determination of Sales at Less Than Fair Value: Certain

Carbon Steel Butt-Weld Pipe Fittings from the United Kingdom (60 FR

10558, 10560, February 27, 1995)).

In this case, we found that none of the respondent's sales of

furfuryl alcohol were at prices below the COP. As a result, we did not

need to test whether below-cost sales had been made over an extended

period of time. Therefore, we included all home market sales in

calculating a weighted-average FMV.

Foreign Market Value

As stated in the preliminary determination, we found that the home

market was viable for sales of FA, in accordance with 19 CFR 353.48(a).

We calculated FMV based on FOB storage facility or delivered prices

to unrelated customers. We treated both pre-sale home market movement

expenses and pre-sale home market warehousing expenses as indirect

expenses because these expenses could not be tied directly to specific

sales. We also treated ISL's home market rebate as an indirect, rather

than direct, expense because ISL did not adequately tie the rebate to

specific home market sales (see Comment 4). We deducted these indirect

selling expenses along with inventory carrying costs, capped by the sum

of U.S. indirect selling expenses, in accordance with 19 CFR

353.56(b)(1) and (2).

FMV was reduced by home market packing costs and increased by U.S.

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

deducted post-sale home market inland freight from FMV under the

circumstance-of-sale provision of 19 CFR 353.56(a). The Department also

made other circumstance-of-sale adjustments for home market direct

selling expenses, which included imputed credit expenses, as

recalculated by the Department, in accordance with 19 CFR 353.56(a)(2).

The Department recalculated home market credit expenses based on gross

prices exclusive of imputed valued added tax expenses.

We adjusted for the consumption tax in accordance with our practice

(see ``United States Price'' section of this notice).

No deduction was made for the claimed quantity discount because ISL

failed to place adequate information on the record to demonstrate that

the discount met the criteria for quantity discounts set forth in 19

CFR 353.55(b) (see Comment 5). We did not exclude home market sales of

furfuryl alcohol packed in drums from the base of home market sales

used for comparison to U.S. sales, as requested by ISL, because ISL did

not demonstrate that these sales were outside the ordinary course of

trade (see Comment 7).

Currency Conversion

We have made currency conversions based on the official exchange

rates, as certified by the Federal Reserve Bank of New York, in effect

on the dates of the U.S. sales, pursuant to 19 CFR 353.60.

Verification

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

information used in making our final determination.

Interested Party Comments

Comment 1: Purchase Price versus Exporter's Sales Price

In the preliminary determination, the Department relied on ESP

methodology to calculate USP because we found that Harborchem was ISL's

agent and thus, a related party within the meaning of section

771(13)(A) of the Act.

The petitioner argues that the Department should revise its

methodology and base USP on purchase price because Harborchem failed to

meet the criteria for an agent under either the law of agency or the

Department's four-part test.

ISL asserts that reliance on ESP is appropriate in the final

determination, maintaining that the information on the record, which

the Department verified, confirms that ISL and Harborchem are related

parties.

DOC Position

We agree with the respondent. Based on the findings at

verification, the Department has determined that ISL and its exclusive

U.S. selling agent, Harborchem, constitute the ``exporter'' pursuant to

section 771(13)(A) of the Act (see concurrence memorandum, dated May 1,

1995), and that all of ISL's U.S. sales to the first unrelated

purchaser took place after importation into the United States.

Therefore, it is appropriate to base USP on exporter's sales prices, in

accordance with section 772(c) of the Act.

In evaluating related party claims based on agency, the Department

examines: (1) Whether the foreign manufacturer participates in the

marketing of the product to the U.S. customers; (2) whether the foreign

manufacturer participates in setting prices and in the negotiation of

other terms of sales to U.S. customers; (3) whether U.S. customers look

to the U.S. importer or the foreign manufacturer for product testing

and quality control; and (4) whether the foreign manufacturer interacts

directly with U.S. customers. See Electrolytic Manganese Dioxide from

Japan: Final Results of Antidumping Duty Administrative Review, 58 FR

28551, 28555 (May 14, 1993), and Final Determination of Sales at Not

Less Than Fair Value: Certain Forged Steel Crankshafts from Japan, 52

FR 36984, 36985 (October 2, 1987) (Crankshafts).

During verification, we were able to confirm that ISL and

Harborchem view their relationship as one of principal and agent and

communicate continually on matters related to U.S customer marketing

and sales of furfuryl alcohol. Based on our examination of

[[Page 22553]] correspondence files and interviews with company

personnel we also determined that ISL: (1) Participates directly with

Harborchem in marketing furfuryl alcohol to U.S. customers; (2)

participates directly in pricing and sales negotiations with U.S.

customers; (3) interacts directly, as well as through Harborchem, with

U.S. customers on product testing and quality control matters; and (4)

interacts with U.S. customers directly.

Therefore, because Harborchem meets the criteria established in

Crankshafts, we determine that Harborchem is ISL's agent for sales made

in the U.S. during the POI.

Comment 2: Related Party ``Commission'' Paid to Harborchem

Should the Department employ its ESP methodology in the final

determination, the petitioner urges the Department to adjust USP to

reflect the commission received by Harborchem. The adjustment is

necessary, argues the petitioner, because the Department's practice is

to deduct commissions paid to related parties from USP under the ESP

methodology. Specifically, section 772(e)(1) of the Act provides that

the exporter's sales price shall be reduced by the amount of

``commission for selling in the United States the particular

merchandise under consideration.'' See also 19 CFR 353.41(e)(1).

ISL maintains that its compensation arrangement with Harborchem

does not fit the traditional definition of commission for antidumping

calculations, and, as such, an adjustment to USP is not appropriate.

DOC Position

We disagree with the petitioner. The petitioner's characterization

of Departmental practice is misleading. Under the ESP methodology, the

foreign exporter and its related importer are effectively treated as

one unit. Thus, any compensation paid by ISL to its agent Harborchem,

whether or not specifically called a commission, is considered a

related party transfer and ignored for the purposes of the margin

calculation. Instead, the Department deducts the amount of the related

importer's (i.e., Harborchem's) U.S. indirect and direct selling

expenses pursuant to section 772(e)(2) of the Act. This methodology

avoids double-counting the same expenses (i.e., the commission which

includes an amount for the related importer's selling expenses, and

indirect selling expenses) and avoids deducting any profit of the

related importer as established in Timken Co. v. United States, 630 F.

Supp. 1327, 1343 (CIT 1986) (Timken).

These practices are fully described in the notice of the Final

Determination of Sales at Less Than Fair Value: Fresh Cut Roses from

Colombia and Ecuador 60 FR 7019, 7028 (February 6, 1995) (Roses), and

are consistent with the Department's past practice on this issue (see

e.g., Antifriction Bearings (Other than Tapered Roller Bearings) and

Parts Thereof, 56 FR 39729 (July 26, 1993); LMI--La Metalli

Industriale, S.p.A. v. United States, 912 F.2d 455, 459 (Fed. Cir.

1990); Certain Fresh Cut Flowers from Colombia; Final Results of

Administrative Review, 55 FR 20491 (May 17, 1990); and Porcelain-on-

Steel Cooking Ware from Mexico, 51 FR 36438 (October 10, 1986)).

Comment 3: Misreported Ocean Freight, Marine Insurance, and U.S. Duty

The petitioner contends that the respondent vastly underreported

its ocean freight and marine insurance costs to the Department. It

alleges that the underreporting is discernible from the official U.S.

Customs entry documents for ISL's U.S. shipments, which indicate a

difference between the CIF and FOB values greater than ISL's reported

freight and insurance costs. Furthermore, contends the petitioner, this

underreporting is also discernible from the responses which indicate

that ISL reported the ocean freight and insurance charges for only one

of the shipments corresponding to U.S. sales of furfuryl alcohol during

the POI. Based on these contentions, the petitioner argues that the

Department should reject the respondent's information and apply the

amount deduced from the official Customs documents for ocean freight

and marine insurance costs as the best information available.

According to the respondent, the Department should rely on the

actual ocean freight, marine insurance, and U.S. duty charges as

verified, not unverified estimates deduced from customs forms. The

respondent argues that if the Department believes an adjustment is

necessary, it should revise the amount of U.S. duty applicable to U.S.

sales during the POI. ISL suggests that the adjustment to U.S. duty

should equal the amount which would have been paid had the deductions

to calculate FOB price been correctly calculated and applied in the

customs entry documents.

DOC Position

Consistent with our treatment of minor changes to submitted data,

the Department has used verified data for ocean freight and marine

insurance (see Roses, 60 FR at 7035; and Final Determination of Sales

at Less Than Fair Value: New Minivans from Japan, 57 FR 21937, 21952

(May 26, 1992)). Inasmuch as the Department has the necessary

information to determine the actual ocean freight and insurance charges

applicable to U.S. sales during the POI, it is appropriate to apply

this information to the final margin calculations.

With respect to U.S. duty, we determined that it was appropriate to

recalculate the amount applicable to the respondent's U.S. sales during

the POI. This recalculation was necessary because we verified that the

entry documents for the respondent's U.S. shipments incorrectly

reflected the FOB value which was used to calculate U.S. duty and

therefore, the actual duty paid by ISL was understated.

Comment 4: Home Market Rebate

ISL claims the rebates granted to one customer during the POI are

related to POI sales and thus should be taken into account in the

Department's final margin calculations. ISL reports that it granted

rebates to a home market customer that manufactures and exports resins

using furfuryl alcohol purchased from ISL. According to ISL, this

rebate was granted based on the customer's providing documentation

concerning the actual amount of furfuryl alcohol used in the resins

exported from South Africa.

The petitioner alleges that ISL's claimed rebate should be rejected

because there is no information on the record that ties ISL's rebate to

specific sales in the POI.

DOC Position

We agree with the petitioner that ISL was unable to demonstrate

that the reported rebates were directly linked to POI sales. However,

it is the Department's practice in such instances to reclassify the

adjustment as an indirect selling expense (see e.g., Tapered Roller

Bearings, Four Inches or Less in Outside Diameter, and Components

Thereof, From Japan: Final Results of Antidumping Duty Administrative

Review, 57 FR 4976, 4982-83 (February 11, 1992)). Accordingly, we have

treated ISL's home market rebate as an indirect expense in the

calculations for the final determination.

Comment 5: Home Market Quantity Discount

The respondent contends that it has met the criterion established

by section 353.55(b)(1) of the Department's [[Page 22554]] regulations

to qualify for a quantity discount adjustment insofar as the quantity

discount was granted to one home market customer that accounts for over

20 percent of home market sales of the same magnitude during the POI.

ISL submits that no other home market customer receives the discount

because no other home market customer regularly places orders of the

same size as the customer in question.

According to the petitioner, the respondent's claim is defective

because the quantity discount at issue was available to only one

customer and not, as the Department requires, to any prospective

purchasers. Furthermore, the petitioner argues that ISL failed to

establish the necessary linkage between the discount in question and

the volume of individual sales, as required by 19 CFR 353.55(b)(1). For

these reasons, the petitioner argues that the Department should reject

this claimed adjustment.

DOC Position

We agree with the petitioner. The Department requires that (1)

quantity discounts are available to any prospective purchaser; (2) and

that the discount is based on the quantity of the sale in question.

This policy was articulated in Circular Welded Non-Alloy Steel Pipe

from Mexico: Final Determination, 57 FR 42953, 42955, (September 17,

1992) and Color Television Receivers from the Republic of Korea, 55 FR

26225 (June 27, 1990). ISL was unable to establish that the discount

was available to any prospective home market customer. ISL also was

unable to sufficiently support its claim that the discount is linked to

the volume of individual sales. Therefore, we have determined, pursuant

to section 353.55(b) of the Department's regulations, that the

information on the record does not justify granting ISL's claimed

adjustment for quantity discounts.

Comment 6: Home Market Export Incentive Payments

ISL reports that it receives export incentive payments from the

South African government for all of its exports of FA. ISL argues that

the amount earned from the subsidy payments during the POI should be

added to the gross unit price of each U.S. sale for the purpose of

calculating dumping margins.

The petitioner argues that the Department abandoned its former

practice of making circumstance of sale adjustments to account for

payments from export programs. The Department's current practice is to

make no adjustments to either FMV or to USP for payments received

pursuant to export subsidy programs. Moreover, the petitioner contends

that the Department has concluded that it does not have the statutory

authority to adjust USP for the payments received from an export

subsidy program. See Oil Country Tubular Goods from Israel: Final

Determination of Sales At Less Than Fair Value, 52 FR 1511 (January 14,

1987) (OCTG).

DOC Position

We agree with the petitioner and reject the respondent's request

for this adjustment to USP. Section 772(d)(1) of the Act permits the

Department to increase U.S. price for purposes of fair value

comparisons only under four specific circumstances: by the amount of

the packing, if not included in the U.S. price; by the amount of import

duties imposed and rebated upon export; by the amount of any taxes

imposed on the merchandise that are rebated upon export; and by the

amount of countervailing duties levied to offset an export subsidy. The

Department does not make adjustments to the USP for export subsidy

payments because payments of this type are not enumerated within

section 772(d)(1) of the Act (see OCTG, 52 FR 1513).

There is no CVD investigation or order on the subject merchandise,

thus, as required by section 772(d)(1)(D), we cannot adjust USP for an

export subsidy.

Comment 7: Exclusion of Sales of Furfuryl Alcohol in Drums

ISL requests that the Department exclude its home market sales of

furfuryl alcohol in drums in the pool of home market sales used for

comparison to U.S. sales. ISL argues that exclusion of the drummed

furfuryl alcohol sales is appropriate because they are not

representative of home market sales in terms of price and quantity and

because of the small amount of total sales involved.

The petitioner argues that the Department should uphold its

decision in the preliminary determination to reject ISL's request. The

petitioner maintains that there are two primary reasons for rejecting

ISL's request. First, the petitioner argues that furfuryl alcohol is

physically identical, whether sold on a drummed or semi-bulk basis. And

second, the petitioner contends that ISL's sales listing indicates the

drummed sales are comparable to ISL's bulk transactions.

DOC Position

We agree with the petitioner. There is no physical difference

between furfuryl alcohol that is sold in drums and that sold on a semi-

bulk basis. Furthermore, the quantities of these drum sales are

comparable to many of ISL's sales on a semi-bulk basis. Accordingly,

the Department has included these sales in the pool of home market

sales used for comparison to U.S. sales.

Comment 8: U.S. Freight Charges

The respondent requests that the Department include the adjustment

for U.S. freight cost reimbursement claimed by Harborchem. Although the

Department disallowed the adjustment in the preliminary determination

based on the lack of adequate information, ISL indicates that the

Department specifically reviewed data on customer reimbursement of

these freight expenses at verification. Inasmuch as the reported data

verified, ISL requests that the Department include an adjustment to USP

in the final margin calculations.

DOC Position

We agree with the respondent. The Department fully verified the

respondent's information concerning the freight cost reimbursement.

Accordingly, this information was included in the calculation of USP

for the final determination.

Comment 9: Untimely Data

The petitioner alleges that ISL submitted new factual information

in Exhibit 1 of its case brief concerning the COPs for furfuryl and FA.

According to the petitioner, the Department should strike this

information from the record.

DOC Position

We disagree with the petitioner. Careful examination of this

information revealed Exhibit 1 to be a reconfiguration of information

already on the record in this investigation. The majority of

information contained in Exhibit 1 was submitted by ISL in its original

and supplemental response to Section D of the questionnaire. Other data

was derived from exhibits to the cost verification (see cost

verification exhibits 4 and 13). Accordingly, this information is not

new factual information, and the Department has allowed this

information to remain on the record of this investigation.

Comment 10: Rescinding the COP Investigation

The respondent contends that the information on the record does not

support the Department's finding that there are reasonable grounds to

believe or suspect that sales below COP have been made. Rather, ISL

argues that the information used to support the COP

[[Page 22555]] investigation should properly be viewed as amounting to

statistical aberrations in the data reported. Therefore, ISL requests

that the Department rescind the COP investigation in this case.

According to the petitioner, the Department properly initiated the

COP investigation after it conducted a thorough examination of the

petitioner's allegation. Based on this examination, the Department

determined that there were reasonable grounds to believe or suspect

that sales were made at prices which were less than ISL's COP.

Accordingly, the petitioner argues that ISL's request should be

rejected.

DOC Position

We agree with the petitioner that the COP investigation should not

be rescinded. Based on our analysis of the petitioner's COP allegations

at the time they were made, we determined, in accordance with section

773(b) of the Act, that there was a reasonable basis to believe or

suspect that home market sales of ISL were made at less than the COP.

(For a description of the Department's analysis, see concurrence

memorandum, dated December 9, 1994). As a result, initiation of the COP

investigation was appropriate.

Comment 11: Use of Best Information Available (BIA)

The petitioner asserts that ISL has purposely impeded this

investigation by failing to provide all of the costs for furfuryl used

in furfuryl alcohol production during the POI. The petitioner contends

that the Department has repeatedly asked ISL to submit actual cost data

for all of the furfuryl used to produce furfuryl alcohol during the

POI. In response to these requests, however, the petitioner maintains

that ISL submitted two flawed furfuryl costing methodologies.

Accordingly, pursuant to section 776(c) of the Act, the petitioner

urges the Department to use noncooperative BIA to determine ISL's

antidumping duty margin.

According to ISL, the petitioner's claim that ISL has significantly

impeded the investigation by failing to provide sufficient furfuryl

cost information is totally without merit. ISL maintains that it has

complied with all of the Department's requests regarding the actual

cost of furfuryl consumed during the POI. ISL submitted furfuryl cost

data covering an eighteen-month period, including the six months of the

POI. Moreover, ISL notes that it has submitted furfuryl costs using

three different methodologies.

DOC Position

We have not found that ISL has impeded this investigation. Rather,

ISL has cooperated in every aspect of this investigation. Therefore, we

have determined that it is appropriate to use ISL's information in our

margin calculation.

Comment 12: Furfuryl Costs

The petitioner argues that all three of ISL's submitted furfuryl

costing methodologies fail to accurately reflect the cost of furfuryl

used in production during the POI. The petitioner therefore contends

that the Department should reject these methodologies and resort to BIA

as the basis for computing ISL's antidumping margin.

ISL maintains that each of the methodologies used in the

questionnaire responses to calculate furfuryl production costs are

reasonable and should be accepted by the Department. However, ISL

contends that its fiscal year furfuryl cost calculation is most

appropriate because it represents all costs normally incurred during a

full seasonal cycle.

DOC Position

We agree with the petitioner that none of the three methodologies

ISL has proposed properly values the cost of furfuryl consumed in the

furfuryl alcohol process during the POI. ISL's first methodology

included the cost of furfuryl produced after the POI, June through

September 1994. ISL's second methodology reflected furfuryl production

costs for only part of the furfuryl consumed during the POI. Lastly,

the furfuryl costs computed by the company under the third methodology

were based on a weighted-average cost rather than on ISL's normal

first-in first-out (FIFO) inventory valuation method. However, the

information on the record is sufficient to allow the Department to

recalculate the furfuryl cost.

We have recalculated the cost of furfuryl used to produce furfuryl

alcohol during the POI based on ISL's normal FIFO inventory valuation

method. The Department normally follows the respondent's inventory

valuation method unless it fails to reasonably reflect the costs

associated with producing the merchandise. There is no information on

the record to indicate that ISL's FIFO method distorts per-unit

furfuryl costs.

Comment 13: Accounting Adjustment

The petitioner argues that ISL's submission methodology for a

particular proprietary adjustment distorts the COP. The respondent

argues that its submission methodology provides a reasonable basis for

the calculation of the effect of this item on the COP.

DOC Position

Because of the business proprietary nature of this item, we have

addressed the parties comments and analyzed the issue in detail in the

proprietary concurrence memorandum dated May 1, 1995. But, our

determination was not to allow respondent's submitted methodology but

rather to rely on respondent's normal accounting practice with respect

to this adjustment.

Comment 14: Bagasse

The petitioner asserts that ISL failed to properly account for the

value of its bagasse used to produce furfuryl and that the value should

be included in ISL's COP. The petitioner notes that during the POI, ISL

sold bagasse generated from one of its sugar mills to an unrelated

paper producer located near the mill. It argues that the Department

should utilize this sales value in assigning a cost to bagasse consumed

during the POI.

The respondent maintains that its submission methodology of

assigning no cost to bagasse usage is reasonable and consistent with

its financial and cost accounting systems. The respondent contends that

its methodology considers the value of bagasse based on its energy

content. Additionally, respondent argues that there is no market for

bagasse from its Sezela mill where the company produced the subject

merchandise. Furthermore, respondent notes that the sale of bagasse

from one of ISL's other mills was possible only because of the close

proximity of this mill to the purchaser's manufacturing plant.

DOC Position

ISL's furfuryl and furfuryl alcohol plant is located adjacent to

its sugar cane processing plant. Bagasse is generated from the

processing of sugar cane. Bagasse generated at the sugar mill is

transferred to the furfural plant. In the first stage of the furfural

process, ISL extracts a chemical from bagasse called pentosan. After

the furfural plant performs the extraction, the remaining bagasse

residue is transferred to the boiler as an energy source. The bagasse

loses a minimal amount of its energy content from the extraction

process. ISL has one boiler which generates high pressure steam for

both its sugar mill and furfural process. ISL uses coal, bagasse and

bagasse residue to fuel this boiler.

In its normal accounting system, ISL assigns no costs to the

bagasse used to [[Page 22556]] extract pentosan and as a fuel source

for the boiler. All coal costs incurred for the boiler are charged to

furfural production.

During verification, we noted that the energy content of the coal

charged to the furfural process exceeded the sum of the energy content

of steam used in the furfural process plus the net energy loss from

bagasse used in furfural production. Consequently, we found that ISL's

actual reported coal costs charged to furfural exceeded the value of

the bagasse and steam used in the furfural production process. We

therefore consider it reasonable for ISL to assign no cost to the

bagasse consumed in the furfural production process.

We believe that the circumstances surrounding ISL's bagasse sales

during the POI do not reflect the operations of the Sezela mill where

ISL produces the subject merchandise. The Sezela sugar mill has no

bagasse customers located within its vicinity, whereas the bagasse

customer of ISL's other mill is located next to that mill. Thus, unlike

the Sezela mill, sales between the other ISL sugar mill and the

unrelated company were economically feasible because transportation of

bagasse between seller and customer was reasonably available and

relatively inexpensive.

Comment 15: General and Administrative (G&A)

The petitioner maintains ISL's G&A calculation methodology is

flawed for numerous reasons and urges the Department to reject it.

Specifically, the petitioner maintains that ISL's G&A expense

calculation methodology failed to compute G&A on a company-wide basis

and included both G&A and selling expenses in the denominator.

ISL contends its reported G&A expense methodology is appropriate.

The G&A expenses were based on amounts recorded in separate general

ledger accounts for the chemical division G&A departments and were

properly allocated to the operations receiving the benefit. However,

respondent agrees that the denominator incorrectly included both G&A

and selling expenses.

DOC Position

To compute G&A expenses for COP, ISL calculated a company-wide G&A

rate for G&A expenses that related to the operations of the company as

a whole. In addition, ISL calculated separate G&A rates for its

chemical operations and the operations of its Sezela furfuryl alcohol

plant. These rates excluded G&A expenses relating to the company's

sugar operations (i.e., non-subject merchandise).

During verification, ISL demonstrated that it normally records

certain G&A expenses by product line for chemical operations (including

furfuryl and furfuryl alcohol) and sugar. The company showed that it

recorded these product-line expenses in specific G&A accounts

maintained in its general ledger. Since ISL demonstrated that some of

its G&A expenses relate exclusively to the company's non-subject sugar

operation, we consider respondent's submitted G&A expense methodology

reasonable.

We further note that because we are applying the G&A rate to cost

of manufacturing exclusive of selling, general and administrative

(SG&A) expenses, we recalculated ISL's G&A rate by excluding SG&A from

the cost of sales figure used as the denominator in the calculation.

Comment 16: Decentralization Incentive

ISL claims its decentralization incentive payments were approved by

and received from the South African government during fiscal year 1994.

Since the revenue was recorded in its audited financial statements, ISL

maintains that it appropriately included this amount in its submitted

G&A rate calculation.

The petitioner argues the Department should exclude ISL's

decentralization incentive revenue as the revenue relates to expenses

incurred before the POI. Additionally, the petitioner argues this

revenue is not linked to the sales made during the POI.

DOC Position

According to both South African and U.S. generally accepted

accounting principles (GAAP), companies do not normally recognize

revenue in the income statement unless they are relatively certain that

the amount will be collected. In ISL's case, even though the government

approved ISL's grant application in 1993, the company did not record

the revenue for financial statement purposes until the money was

received in 1994. We consider ISL's conservative treatment of not

recording the grant revenue for financial statement purposes until the

year of receipt a reasonable approach. Accordingly, we included the

grant revenue in ISL's G&A calculation.

Comment 17: Overhead Expense Allocation

ISL contends that the method used to allocate overhead costs for

submission purposes is the same as that applied in its normal

accounting records.

The petitioner contends ISL's overhead allocation method distorts

costs. According to the petitioner, ISL understated furfuryl costs by

allocating an excessive amount of overhead expenses to the furfuryl

alcohol process.

ISL maintains that, contrary to the petitioner's arguments, its

normal overhead allocation methodology is reasonable. Moreover, ISL

asserts that the method of allocation between furfuryl and furfuryl

alcohol does not significantly effect the overall furfuryl alcohol

costs.

DOC Position

The Department normally relies on the respondent's books and

records prepared in accordance with the home country GAAP unless these

accounting principles do not reasonably reflect the COP of the

merchandise. ISL's reported overhead costs were based on its normal

accounting books and records. We have found no evidence on the record

to indicate ISL's allocation of overhead costs between furfuryl and

furfuryl alcohol distorts the production costs. Accordingly, we

accepted ISL's submission methodology for allocating overhead costs.

Comment 18: Steam Costs

The petitioner asserts the Department should increase ISL's steam

costs by the amount suggested in the cost verification report. The

respondent agrees with this adjustment to steam costs.

DOC Position

We increased ISL's reported steam cost.

Continuation of Suspension of Liquidation

In accordance with section 735(d) of the Act, we are directing the

Customs Service to continue to suspend liquidation of all entries of

furfuryl alcohol from South Africa, as defined in the ``Scope of

Investigation'' section of this notice, that are entered, or withdrawn

from warehouse, for consumption on or after December 16, 1994, the date

of publication of our preliminary determination notice in the Federal

Register.

The Customs Service shall require a cash deposit or posting of a

bond on all entries equal to the estimated dumping margin, as shown

below. The suspension of liquidation will remain in effect until

further notice.

[[Page 22557]]

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

Margin

Producer/manufacturer/exporter percentage

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

Illovo Sugar Limited........................................ 15.48

All Others.................................................. 15.48

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

ITC Notification

In accordance with section 735(d) of the Act, we have notified the

ITC of our determination. The ITC will make its determination whether

these imports materially injure, or threaten injury to, a U.S. industry

within 45 days of the publication of this notice. If the ITC determines

that material injury or threat of material injury does not exist, the

proceeding will be terminated and all securities posted as a result of

the suspension of liquidation will be refunded or canceled.

However, if the ITC determines that such injury does exist, we will

issue an antidumping duty order directing the Customs Service officers

to assess an antidumping duty on furfuryl alcohol from South Africa,

that are entered, or withdrawn from warehouse, for consumption on or

after the date of suspension of liquidation, equal to the amount by

which the foreign market value of the merchandise exceeds the United

States price.

This determination is published pursuant to section 735(d) of the

Act (19 U.S.C. 1673(d)) and 19 CFR 353.20.

Dated: May 1, 1995.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 95-11261 Filed 5-5-95; 8:45 am]

BILLING CODE 3510-DS-P