High-Tenacity Rayon Filament Yarn From Germany; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-428-810]

High-Tenacity Rayon Filament Yarn From Germany; Final Results of

Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

review.

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

SUMMARY: On June 22, 1994, the Department of Commerce published the

preliminary results of review of the antidumping duty order on rayon

filament yarn from Germany. The review covers the subsidiaries of one

producer/importer, Akzo Faser N.V. Its subsidiaries are Akzo Fibers,

Inc., in the United States, and Akzo Faser A.G., in Germany.

We gave interested parties an opportunity to comment on the

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

and the correction of clerical errors, we have changed the final

results from those presented in the preliminary results of review.

EFFECTIVE DATE: March 28, 1995.

FOR FURTHER INFORMATION CONTACT: Matthew Blaskovich or Zev Primor,

Office of Antidumping Compliance, Import Administration, International

Trade Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-

5831/4114.

SUPPLEMENTARY INFORMATION:

Background

On June 29, 1993, Akzo Faser N.V. and its subsidiaries (Akzo)

requested that the Department of Commerce (the Department) conduct an

administrative review of the antidumping duty order on high-tenacity

rayon filament yarn from Germany. We initiated the review, which covers

the period February 20, 1992 through May 31, 1993, on July 21, 1993 (58

FR 39007). On June 22, 1994, the Department published the preliminary

results of the administrative review (59 FR 32181). The Department has

now completed the administrative review in accordance with section 751

of the Tariff Act of 1930, as amended (the Act).

Scope of the Review

The product covered by this administrative review is high-tenacity

rayon filament yarn from Germany. High-tenacity rayon filament yarn is

a multifilament single yarn of viscose rayon with a twist of five turns

or more per meter, having a denier of 1100 or greater, and a tenacity

greater than 35 centinewtons per tex. During the review period, such

merchandise was classifiable under Harmonized Tariff Schedule (HTS)

item number 5403.10.30.40. The HTS item number is provided for

convenience and Customs purposes. The written description remains

dispositive as to the scope of the product coverage.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results. We received comments from North American Rayon

Corporation (the petitioner) and the respondent on July 22, 1994. We

received rebuttal comments from the petitioner and the respondent on

July 29, 1994. At the request of the respondent, we held a public

hearing on August 5, 1994.

[[Page 15898]]

General Comments

Comment 1

Petitioner argues that significant issues within this review could

have been resolved during a verification, and challenges the accuracy

of the dumping margin because of the lack of verification. Petitioner

contends that key issues addressed in the following comments, such as

Research and Development expenses (R&D), General and Administrative

(G&A) expenses, and restructuring costs, could have been reconciled

through verification. Petitioner argues that the Department should not

assume that information relating to these issues is accurate simply

because it was verified during the investigation, as the issues and

calculations change between investigations and reviews.

Akzo states that the absence of verification does not undermine the

integrity of its responses, and that verification was not required in

this review. Referring to the statute and regulations, Akzo claims that

verification is required only if it was not performed in either of the

two immediately preceding reviews and it was requested by an interested

party within 120 days from publication of the notice of initiation of

the review. Akzo contends that neither element was satisfied in this

review. Moreover, Akzo asserts that it submitted all of its responses

with appropriate certifications of accuracy and completeness as

required by statute and regulation. Akzo cities Calcium Aluminate

Cement, Cement Clinker and Flux from France (59 FR 14,136, 14,140,

March 25, 1994), as an example of the Department's verification

practices.

Department's Position

The Department agrees with respondent that, in accordance with

section 776(b)(3) of the Tariff Act, in conducting an administrative

review, the Department will verify all information relied upon in

making a determination (1) if verification is timely requested and no

verification was made during the two immediately preceding reviews, or

(2) if good cause exists for verification. This administrative review

is the first review of the antidumping duty order in this case, and

verification was not timely requested. The Department has undertaken

verification for good cause only in exceptional circumstances. In

conducting this review, the Department determined that there was not

good cause for a verification. Section 776(b)(3) of the Tariff Act, and

the Department's regulations do not require verification under these

circumstances. See Tapered Roller Bearings, Finished and Unfinished,

and Parts Thereof, From Japan; Final Results of Antidumping Duty

Administrative Review (57 FR 4953, February 11, 1992), and Calcium

Aluminate Cement, Cement Clinker and Flux from France (59 FR 14136,

March 25, 1994).

Comment 2

Petitioner argues that Akzo did not provide cost data maintained in

the normal course of business; rather, petitioner contends that Akzo

generated this data solely for purposes of this review. Petitioner

maintains that, with respect to fixed costs, Akzo claimed that

differences between actual and standard costs were not maintained in

the normal course of business. It is the petitioner's viewpoint that

Akzo does maintain records of actual costs for its fixed costs, but has

not provided this information. Also, petitioner claims that Akzo did

not provide the information necessary for the Department to calculate

an actual per-unit cost on a product-specific or plant basis.

Petitioner asserts that Akzo instead provided the Department with a

plant-wide ``variance'' used to calculate cost of manufacture.

Respondent states that it reported actual costs by calculating the

product-specific per-unit costs through the application of plant-wide

variances, according to questionnaire instructions and Departmental

practice. Therefore, respondent argues that the costs, as reported, are

correct and valid.

Department's Position

We agree with Akzo, in that there is no evidence that Akzo's costs

were incorrectly reported. Akzo stated in its questionnaire response

that it based its costs on the standard cost system used in its normal

course of business. As Akzo explained in its rebuttal brief and

questionnaire submission, it based its costs on the standard costs

system, and deviated from this basis only when necessary to comply with

certain calculations as required by the Department's questionnaire. The

plant-wide variance was calculated as the difference between total

standard costs and total actual costs of production. The Department has

accepted the use of plant-wide variances in similar cases. See Tapered

Roller Bearings, Finished and Unfinished, and Parts Thereof, From

Japan; Final Results of Antidumping Duty Administrative Review (57 FR

4956, February 11, 1992).

General and Administrative Expenses

Comment 3

Petitioner argues that the extraordinary costs incurred by Akzo

Faser N.V. due to plant closure are not fully reflected in the cost of

manufacture. Petitioner believes that the Department handled these

expenses correctly when it reallocated all of the industrial rayon-

specific shutdown expenses to the product under review. The petitioner

contends that Akzo has two facilities in Germany which produce the

subject merchandise, and that one of them was in the process of closing

during the period of review (POR). Petitioner adds that such a dramatic

change in operations results in higher product-specific costs.

Petitioner also contends that the methodology used by the respondent

virtually eliminates these costs by allocating them over all of the

production of Akzo Faser N.V.

Akzo states that it included the extraordinary loss associated with

the plant closure in its reported G&A expenses, using the methodology

it used in the less than fair value (LTFV) investigation. See High

Tenacity Rayon Filament Yarn from Germany (57 FR 21773, May 22, 1992).

Akzo argues that it is inappropriate to allocate all of the expenses of

a plant closure solely to industrial rayon yarn when such expenses

relate to the operations of the entire corporation. Akzo also contends

that an expense can be applied solely to rayon yarn operations only if

it is not extraordinary and, as a plant closure has not occurred in

years, this expense qualified as ``extraordinary.'' Akzo cites

Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts

Thereof from the Federal Republic of Germany (54 FR 18992, 1976, May 5,

1989), as an example of the Department's practice regarding

extraordinary expenses.

Department's Position

We disagree with Akzo's characterization of the plant closing costs

as extraordinary losses and with the company's contention that

extraordinary losses cannot be charged specifically to the subject

merchandise. The fact that plant closings are infrequent in occurrence

does not necessarily make the costs associated with such events

extraordinary. Nor does it dictate how the Department will treat these

costs for purposes of computing COP and CV.

Nonetheless, after further examination of the record, it is not

evident that the plant closing losses reported by Akzo relate solely to

the company's rayon [[Page 15899]] yarn production. Consequently, the

Department regards these costs as general in nature rather than

specific to the subject merchandise. For the final results, the

Department has, therefore, accepted Akzo's plant closing cost

calculation which was based on an allocation across all products

manufactured by the company.

Comment 4

Akzo disagrees with the Department's re-allocation of its G&A

expenses in the preliminary results. Akzo argues that the Department

should not have disregarded Akzo's submitted G&A costs, which were

allocated to different groups based on specific allocation

methodologies.

Akzo states that the Department's re-allocation of G&A expenses

across all operations was not in accordance with Departmental

practices, and that the ratios, as submitted by Akzo, are in accord

with Departmental practice and case precedent. Akzo states that,

because of the organizational structure and the integrated nature of

its operations across national borders, the reported ratios are clearly

more accurate than any overall average ratios for Akzo Faser. Akzo also

states that the G&A expense ratios it reported are in accord with the

audited financial statements of Akzo N.V., and have been reconciled to

the audited financial statements.

Akzo argues further that the expenses accumulated at each

organization unit do not relate to operations outside that unit.

According to Akzo, the Department's allocation methodology attributes

to Akzo Faser itself G&A expenses incurred solely by Akzo Fibers B.V.

(an affiliate of Akzo Faser not involved in the review). Akzo also

argues that if the Department follows its position in Certain Hot

Rolled Carbon Steel Flat Products, Certain Cold Rolled Carbon Steel

Flat Products, and Certain Corrosion-Resistant Carbon Steel Flat

Products from Japan (58 FR 37154, July 9, 1993), it should reject

Akzo's methodology only if the facts specific to the situation indicate

that the divisional G&A expenses are not accurate.

Petitioner argues that the Department's recalculation of the G&A

expenses is the most accurate and transparent method, and is in accord

with Akzo's financial statement and the Department's standard

practices. Petitioner argues further that there are discrepancies

between Akzo's three-tiered G&A expense levels and Akzo's financial

statements. Petitioner asserts that the best methodology of measuring

G&A expenses is using Akzo's financial statements and not the tier

methodology that Akzo used for the response.

Department's Position

We agree with the petitioner. Akso submitted company-specific G&A

expenses based on a three-tiered calculation methodology consisting of

the company's business, divisional, and corporate levels. Akzo's G&A

calculation, however, did not reconcile to Akzo Faser AG's audited

financial statements. Nor did the Akzo's submitted G&A expense include

amounts for certain miscellaneous items that were treated as G&A in the

company's annual report. Because of these inconsistencies, for the

final results, the Department computed Akzo's G&A expenses using the

company's unconsolidated audited financial statements and including an

amount representing an allocated share of G&A incurred by companies

related to Akzo and involved in the production of the subject

merchandise. The Department calculated per unit G&A expenses for the

subject merchandise based on a factor derived as the ratio of Akzo's

total G&A to the company's cost of sales. This method is consistent

with our past practice. See Certain Hot Rolled Carbon Steel Flat

Products, Certain Cold rolled Carbon Steel Flat Products, and Certain

Corrosion-Resistant Carbon Steel Flat Products from Japan; Final

Determination of Sales at Less Than Fair Value (58 FR 37154, July 9,

1993), and Frozen Concentrated Orange Juice From Brazil; Final

Determination of Sales at Less Than Fair Value (52 FR 8329, March 17,

1987).

Research and Development

Comment 5

Akzo disagrees with the Department's allocation of its R&D expenses

over all of its product lines, and asserts that a product-specific

breakdown of R&D expenses would be more accurate and in accordance with

prior Department decisions. Akzo allocates R&D expenses on a product-

specific or product-line basis, according to the nature of the research

being performed. Akzo explains that the vast majority of R&D expenses

listed in Akzo Faser AG's annual report are specifically related to

products other than industrial rayon, and thus are not general in

nature and do not relate to all operations. Akzo contends that it acted

properly and in accordance with precedent by not allocating these R&D

costs to subject merchandise. Akzo cites Certain Hot Rolled Carbon

Steel Flat Products, Certain Cold Rolled Carbon Steel Flat Products,

Certain Corrosion-Resistant Carbon Steel Flat Products, and Certain

Cut-to-Length Carbon Steel Flats From France (58 FR 37125, July 9,

1993), and Antifriction Bearings (Other than Tapered Roller Bearings

and Parts Thereof from France, Germany, Italy, Japan, Romania,

Singapore, Sweden, Thailand, and United Kingdom (58 FR 39729, July 26,

1992).

Petitioner argues that the Department's recalculation of R&D

expenses in the preliminary results of review was the most accurate and

transparent, and is in accord with Akzo's financial statement and the

Department's standard practices.

Department's Position

The Department agrees with Akzo. The R&D expenses submitted by Akzo

were allocated on a product-specific or product line basis, according

to the nature of the research being performed. The methodology used to

allocate the R&D is that used in Akzo's normal course of business and

reconciles to the financial statements. Further, the Department has

accepted the submitted methodology in similar cases. See Certain Hot

Rolled Carbon Steel Flat Products, Certain Cold Rolled Carbon Steel

Flat Products, Certain Corrosion-Resistant Carbon Steel Flat Products,

and Certain Cut-to-Length Carbon Steel Plate from France (58 FR 37125,

July 9, 1993), and Antifriction Bearings (Other than Tapered Roller

Bearings) and Parts Thereof from France, Germany, Italy, Japan,

Romania, Singapore, Sweden, Thailand, and United Kingdom (58 FR 19729,

July 26, 1992).

Foreign Market Value Adjustments

Comment 6

Petitioner disagrees with the Department's decision in the

preliminary results to allow an adjustment to FMV for a third-party

payment. Petitioner contends that this payment is based on the sale of

a further-manufactured product, rather than the subject merchandise,

unprocessed yarn, which Akzo sells to a converter. In the petitioner's

viewpoint, the payment appears to have no impact on the price of the

unprocessed yarn.

According to Akzo, it sells rayon in the home market to a

converter, who alters the rayon yarn for a specific use and then sells

the rayon to a third party. Akzo provides a rebate directly to this

third party. Akzo argues that, in the preliminary results, the

Department treated the third-party payments in a manner consistent with

the final determination of sales at LTFV in the original investigation.

Akzo asserts that there can be no other purpose for the third-party

payment except to encourage certain third parties to use the

[[Page 15900]] respondent's merchandise. Therefore, Akzo contends that

the third-party payment represents a price decrease for the third

party, and that the payment does have an impact on the price of the

yarn when sold to the first unrelated party.

Department's Position

We agree with respondent. Based upon the record evidence for this

review, the Department has concluded that these expenses should be

considered direct expenses to be deducted from the FMV.

When making adjustments attributable to differences in

circumstances of sale, it is incumbent upon the Department to ensure

that such adjustments account only for those expenses that have a

direct impact upon any existing U.S. and home market price

differentials. Section 773(a)(4) of the Tariff Act states that an

adjustment shall be made only ``if it is established to the

satisfaction of the administering authority that the amount of any

difference between United States price and foreign market value'' is

due to differences in circumstances of sale.

Since Akzo's third party payments qualify as variable and

reasonably attributable to the subject merchandise, Akzo met the

Department's criteria for identifying whether an expense can have a

direct impact upon price. Therefore, Akzo's payments can qualify as a

circumstance of sale adjustment.

In the LTFV verification report, the Department, indicated that:

Akzo makes payments to tire manufacturers based upon their

purchases of Akzo-sourced yarn from converter-customers of Akzo's.

The converters provided additional finishing to the Akzo yarn.

Given that those expenses fluctuate depending on a tire company's

purchases from a converter and correspondingly, such expenses would not

have been incurred were it not for certain sales of the subject

merchandise, those payments are then considered variable. Furthermore,

the Department is in agreement with Akzo's assertion that the third

party payments are primarily made as an inducement to purchase

responsent's merchandise. In this regard, these expenses are

promotional in nature and thereby have a direct relationship to Akzo's

sales to the converter.

As the respondent established its claim to the adjustments with

record evidence, the Department will adjust FMV for this expense in the

final results.

Differences in Merchandise

Comment 7

Petitioner argues that, if the third party payment for the

converted rayon yarn (as discussed above in Comment 6) is allowable,

then a difference-in-merchandise calculation should be conducted in

order to compare the converted rayon yarn (and not the unprocessed

rayon yarn) to similar U.S. sales.

Akzo argues that a difference-in-merchandise calculation is not

warranted, as the merchandise, when sold to the first unrelated party,

is subject merchandise; Akzo maintains that it is only after sale to

the first unrelated party that the merchandise undergoes further

manufacturing.

Department's Position

We agree with Akzo in that a difference-in-merchandise calculation

would be necessary, in this case, only when the product sold to the

first unrelated purchaser in the home market differs physically from

the product sold in the United States. (See 19 CFR 353.57.) However, as

the Department determined that the third party payment expense was

directly attributable to the subject merchandise and applicable as a

deduction to the FMV, a difference-in-merchandise calculation is

unnecessary.

Ministerial Errors

Comment 8

The respondent asserts that the Department made a clerical error

with respect to the extraordinary expenses of Akzo N.V., in that the

Department calculated a ratio of extraordinary expenses, denominated in

guilders, to the cost of sales, which is denominated in Deutschemarks.

Further, the respondent asserts that the Department should capture

these costs at the corporate level using the methodology submitted in

the response, and not at the company level as the Department did for

the preliminary results. The respondent states these costs relate to

the operations of the entire corporation and not solely to industrial

yarn.

While petitioner does not specifically address this clerical error,

petitioner does state that it supports the Department's position of

allocating the plant closure expenses directly to the product under

review. Petitioner further states that the Department has not fully

applied the actual cost of restructuring Akzo's yarn production

facilities to Akzo's actual costs, and that the calculations for G&A

expenses presented by Akzo were not useable.

Department's Position

We agree with Akzo that we calculated the ratio in two different

currencies. However, as discussed in our response to Comment 3, we have

disregarded this ratio for these final results, and have instead used

Akzo's submitted plant closure costs and extraordinary losses.

Therefore, although we agree with respondent, this issue is moot.

We also agree with Akzo that its extraordinary expenses should be

captured at the corporate level because, as discussed in our response

to Comment 3, there is no evidence on the record to indicate that the

extraordinary losses, as reported, relate solely to rayon yarn.

Therefore, we adjusted for the expenses at a corporate level, and not

at a product-specific level. As Akzo submitted its expenses at a

corporate level, no adjustment to its reported plant closure and

extraordinary losses was deemed necessary.

Comment 9

The respondent asserts that the Department made a clerical error

with respect to the foreign unit price in dollars (FUPDOL)

calculations, in that the Department treated U.S. packing costs as a

Deutschemark per pound expense, rather than a Deutschemark per kilogram

expense, and that the Department should divide the reported packing

costs by the pounds-to-kilograms conversion rate to arrive at the

correct unit amount.

Petitioner does not contest this clerical error.

Department's Position

We agree that the calculation should be corrected to reflect the

metric measurement, and have changed the calculation accordingly.

Final Results of Review

Based on our analysis of comments received and the correction of

ministerial errors, we have determined that a final margin of 0.56

percent exists for Akzo for the period February 20, 1992, through May

31, 1993.

The Department will instruct the U.S. Customs Service to assess

antidumping duties on all appropriate entries. Individual differences

between United States price (USP) and FMV may vary from the percentage

stated above. The Department will issue appraisement instructions

directly to the U.S. Customs Service.

Furthermore, the following deposit requirements will be effective

for all shipments of the subject merchandise, entered or withdrawn from

warehouse, for consumption on or after the [[Page 15901]] publication

date of these final results of administrative review, as provided by

section 751(a)(1) of the Act: (1) The cash deposit rate for Akzo will

be 0.56 percent; (2) for merchandise exported by manufacturers or

exporters not covered in this review but covered in the original less-

than-fair-value (LTFV) investigation, the cash deposit rate will

continue to be the rate published in the most recent final

determination for which the manufacturer or exporter received a

company-specific rate; (3) if the exporter is not a firm covered in

this review, or the original investigation, but the manufacturer is,

the cash deposit rate will be that established for the manufacturer of

the merchandise in the original investigation; and (4) the ``all

others'' rate will be 24.58 percent, established in the LTFV

investigation, and in accordance with the Department's practice. See

Floral Trade Council v. United States, 822 F. Supp. 766 (2993), and

Federal Mogul Corp., 822 F. Supp. (1993).

These deposit requirements shall remain in effect until publication

of the final results of the next administrative review.

This notice services 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 orders (APOs) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 353.34(d). Timely written notification of

return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with

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 19 CFR 353.22.

Dated: March 16, 1995.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 95-7609 Filed 3-27-95; 8:45 am]

BILLING CODE 3510-DS-M