Industrial Phosphoric Acid From Belgium; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

[A-423-602]

Industrial Phosphoric Acid From Belgium; 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.

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

[[Page 20228]]

SUMMARY: On November 15, 1995, the Department of Commerce (the

Department) published the preliminary results of review of the

antidumping duty order on industrial phosphoric acid (IPA) from Belgium

(52 FR 31439; August 20, 1987). The review covers one manufacturer,

Societe Chimique Prayon-Rupel (Prayon), and exports of the subject

merchandise to the United States during the period August 1, 1993,

through July 31, 1994.

We gave interested parties an opportunity to comment on the

preliminary results of review. Based on our analysis of the comments

received, we have changed our analysis for the final results from that

presented in the preliminary results of review.

EFFECTIVE DATE: May 6, 1996.

FOR FURTHER INFORMATION CONTACT: David Genovese or Joseph Hanley,

Office of Antidumping Compliance, Import Administration, International

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

Constitution Avenue NW., Washington, D.C. 20230, telephone: (202) 482-

5254.

SUPPLEMENTARY INFORMATION:

Background

On August 31, 1994, Prayon requested an administrative review of

the antidumping duty order on IPA from Belgium. The Department

initiated the review on September 16, 1994 (59 FR 47609), covering the

period August 1, 1993, through July 31, 1994. On November 15, 1995, the

Department published the preliminary results of review (60 FR 57398).

The Department has now completed this review in accordance with section

751 of the Tariff Act of 1930, as amended (the Act). Unless otherwise

indicated, all citations to the statute and to the Department's

regulations are references to the provisions as they existed on

December 31, 1994.

Scope of the Review

The products covered by this review include shipments of IPA from

Belgium. This merchandise is currently classifiable under the

Harmonized Tariff Schedule (HTS) item number 2809.20. The HTS item

numbers are provided for convenience and U.S. Customs purposes. The

written description remains dispositive.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results of review. We received comments from Prayon and

from FMC Corporation and Monsanto Company, two domestic producers of

industrial phosphoric acid.

Comment 1

Prayon argues that for purchase price (PP) sales, when there are

commissions in the U.S. market but not in the home market, it is the

Department's practice to make a circumstance-of-sale (COS) adjustment

by first adding U.S. commissions to the weighted-average foreign market

value (FMV). Prayon asserts that FMV is then reduced (offset) by the

lesser of the home market indirect selling expenses or U.S.

commissions. Prayon argues that in the preliminary results of review,

the Department deducted U.S. commissions from the United States price

rather than add those commissions to the FMV. Prayon asserts that in

its final determination, the Department should add U.S. commission to

the weighted-average FMV and then reduce FMV by Prayon's home market

indirect selling expenses capped by U.S. commissions.

Department's Position

We agree with Prayon. As Prayon states, in PP situations, when

there are commissions in the U.S. market but not in the home market, it

is the Department's practice to add U.S. commissions to FMV and then

subtract from FMV home market indirect selling expenses capped by U.S.

commission expense. See, e.g., Certain Internal-Combustion Industrial

Forklift Trucks from Japan; Final Results of Antidumping Duty

Administrative Review, 59 FR 1,374 (January 10, 1994). Accordingly, for

these final results, we did not subtract U.S. commissions from U.S.

price. Rather, we added U.S. commissions to FMV and then subtracted

from FMV home market indirect selling expenses capped by U.S.

commission expense.

Comment 2

Prayon argues that in calculating the FMV offset for U.S.

commissions, the Department should have included inventory carrying

costs in its pool of home market indirect selling expenses since such

costs are indirect selling expenses.

Department's Position

We agree with Prayon. For these final results, we have included

inventory carrying costs in the pool of home market indirect selling

expenses when calculating the FMV offset for U.S. commissions.

Comment 3

Petitioners argue that by accepting Prayon's reported credit

expense, the Department has based the date of payment on the date that

Prayon received a transfer of funds from its wholly-owned subsidiary,

Prayon Services et Finance S.A. (Prayon Services). Petitioners contend

that this approach treats a transfer of funds between a parent company

and its wholly-owned subsidiary as the equivalent of an independent

payment for the merchandise in question.

Petitioners assert that in accepting the discounted transaction

between Prayon and Prayon Services, the Department appears to rely on

Prayon's allegation that the Belgian tax law required Prayon Services

to use a market-based discount rate. Petitioners assert that the issue

of whether Prayon Services' discount rate is acceptable under Belgian

tax law is irrelevant. Rather, the central issue is when payment is

received on the sale of the merchandise in question. Petitioner argues

that a transfer of funds between a wholly-owned subsidiary and its

parent is simply not, as a matter of economic reality, a payment in the

context of the sale of this merchandise.

Petitioner further contends that for these final results, the

Department, when calculating credit expense, should measure the time

period in which credit is extended in a particular transaction from the

date of shipment of the merchandise to the date payment is received

from the purchaser of such merchandise.

Prayon argues that the amount by which accounts receivables are

discounted in factoring transactions is an appropriate measure of

credit cost since the discount accepted by Prayon is Prayon's cost of

financing.1 Prayon asserts that there is no merit in Petitioners'

argument that credit costs must always be calculated as the cost of

financing the resulting accounts receivable from the date of shipment

of the merchandise until payment is received from the purchaser of such

merchandise. Moreover, asserts Prayon, where a factoring transaction

has taken place and payment is received from a third party,

Petitioners' calculation of

[[Page 20229]]

credit cost does not measure the seller's cost of financing the sale,

and consequently its use would be inappropriate.

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

\1\ Prayon's accounts receivable are discounted through a

factoring transaction with Prayon Services, a wholly-owned

subsidiary established in compliance with Belgian law. ``Factoring

is a type of financial service whereby a firm {in this case Prayon}

sells or transfers title to its accounts receivable to a factoring

company {i.e., the factor, Prayon Services}, which then acts as

principal, not as an agent. The receivables are sold without

recourse, meaning that the factor {Prayon Services} cannot turn to

the seller in the event accounts prove uncollectible.'' Barron's

Financial Guides, Dictionary of Finance and Investment Terms, Third

Edition, 1991, at page 136. Prayon engages in discount factoring

meaning that it sells its accounts receivables at a discount from

face value and obtains immediate payment from Prayon services.

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

Furthermore, Prayon asserts that the anticipated date of payment of

the receivable is taken into account in determining the amount of the

discount. Accordingly, the actual date on which Prayon Services

ultimately receives payment from the purchaser has no effect on

Prayon's return. Prayon argues that the Department has expressly

recognized this in an analogous circumstance where a seller is given a

promissory note in exchange for merchandise and, prior to the

stipulated payment date, sells the note at a discount to a financial

institution. Prayon cites Lightweight Polyester Filament Fabrics from

the Republic of Korea, 48 FR 49,679 (1983), in which the Department

stated that:

By imputing an interest expense from the date of delivery to the

date of payment, the expense incurred for granting credit is

recognized. Further, when a note received for payment of a sale is

discounted prior to its maturity, this amount represents the credit

cost and we recognize this.

Prayon asserts that it is clear that, where the seller of

merchandise concerned engages in a bona fide sale of a purchaser's debt

to a factor or other financing entity, the seller's credit cost for the

merchandise sales transaction is the discount taken by the purchaser of

the receivable.

With regard to Prayon's relationship to Prayon Services, Prayon

argues that the amount of discount taken in the sale of the accounts

receivable can be used since the record shows that transactions between

the two companies were conducted on an arm's-length basis. Prayon

states that it sold all of its receivables at a discount to Prayon

Services, which is an official coordination center certified under

Belgian law. Prayon, citing to its supplemental questionnaire response

of April 27, 1995 (at page 12), states that under Belgian law:

The statutory requirement is that the factoring of accounts by

the coordination center be conducted on arm's-length terms. As part

of the certification process and on an ongoing basis, Prayon must

demonstrate that the rates negotiated between Prayon and Prayon

Services et Finance do not exceed those charged between independent

parties and are in fact comparable to those charged by independent

banks and other financial institutions.

Prayon argues that the antidumping law does not contemplate, and it

is not the Department's practice, that all related party transactions

are to be disregarded regardless of their terms and circumstances. As

an example, Prayon cites to the antidumping regulations' related party

provision (19 C.F.R. Sec. 353.45(a)) which states that the Department

will calculate foreign market value based on a sale by a producer or

reseller to a related party if the Department is satisfied that ``the

price is comparable to the price at which the producer or reseller sold

such or similar merchandise to a person not related to the seller.''

Prayon also cites to 19 U.S.C. Sec. 1677b(e)(2) which provides that the

Department may disregard related party transactions in determining any

element of value in constructed value calculations, if ``the amount

representing that element does not fairly reflect the amount usually

reflected in sales in the market under consideration of merchandise

under consideration.''

Prayon, citing to Certain Cold-Rolled Carbon Steel Flat Products

from Germany, 60 FR 65,264 (December 19, 1995) (hereinafter Steel Flat

Products from Germany), states that the Department squarely held that

it would use related party transactions in calculating the credit cost

adjustment where ``information on the record indicates that the

intracompany loans in question were made at what could be considered

market rates.'' Similarly, in Fresh Kiwifruit from New Zealand, 57 FR

13,695 (April 17, 1992), the Department rejected an effort by a

respondent to disregard a related-party loan on the ground that ``there

was no evidence that the interest rate on the related party loan did

not reflect market interest rates.''

Prayon concludes by stating that the record in this proceeding

affirmatively shows that the sales of Prayon's accounts receivable to

the coordination center are conducted on arm's-length terms and,

specifically, that the discount rates negotiated between the parties

are comparable to those charged by independent banks and other

financial institutions in Belgium. Accordingly, Prayon argues, the

Department's preliminary determination that the amount of discount

taken represents Prayon's actual cost of financing is appropriate and

consistent with the law and the Department's practice.

Department's Position

When determining credit expense in the home market, the Department

is concerned with the expense, real or imputed, incurred by a

respondent when it sells its merchandise on account. Accordingly, we

agree with Prayon that since factoring is a recognized method of

financing receivables, the discount from face value can be used to

establish credit expense if the factoring transactions are at arm's-

length (i.e., the discount is representative of market rates).

Moreover, if the payment between Prayon and Prayon Services (i.e.,

between a parent and its wholly-owned subsidiary) is determined to be

at arm's-length, it is the Department's policy to recognize this

payment as payment for the collection services in question rather than

as an intra-company transfer of funds. See, e.g., Steel Flat Products

from Germany cited by the respondent. However, upon a further

examination of the record in this review, the Department is not

satisfied that the discount rate ``charged'' by Prayon Services, when

factoring Prayon's accounts receivables, is representative of market

rates.

In its supplemental questionnaire response of April 27, 1995 (at

page 14-15), Prayon calculated a weighted-average credit expense for

its home market sales to each customer for each month during the POR

using two different methods, one which calculates Prayon's actual cost

of discounting the invoices to the coordination center and one which

calculates an imputed credit expense based on the date of payment by

the customer and the short-term interest rate for loans denominated in

Belgian francs. In almost all home market observations, the credit

expense calculated using the discount rate method is substantially

higher than the imputed credit expense (i.e., the market rate) Prayon

would have incurred had it not sold its accounts receivable to Prayon

Services.

Due to the substantial difference between the two methodologies,

the Department is not satisfied that the discount rate ``charged'' by

Prayon Service is representative of market rates. Moreover, since

Prayon sold all of its accounts receivable to Prayon Services, the

Department is unable to compare the discount rate charged by Prayon

Services with a discount rate charged by an unrelated party to insure

that the rate is comparable to market rates.

Additionally, we are not convinced that Prayon Service's legal

obligation under Belgian law is sufficient proof that Prayon Services

actually charged an arm's-length discount rate to Prayon. Prayon states

that Prayon Services was established under Belgian law, which provides

certain tax benefits for companies organized and operated according to

certain specified requirements. However, the requirement that the

factoring of accounts meet Belgian law requirements in order to capture

certain tax benefits may not be

[[Page 20230]]

a reliable benchmark for U.S. antidumping purposes. This is supported

by the Department's determination 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, 37158 (July 9, 1993) (``There is no requirement that U.S.

antidumping practice conform to Japanese antitrust laws or practices

which have entirely different purposes and standards'').

Therefore, because the standard established by Belgian law is not

sufficiently similar to that established by the Department, as

evidenced by the substantial difference between Prayon's discount rate

and the Department's date of payment method, we cannot rely on Prayon's

compliance with that law as evidence that the rate charged by Prayon

Services to Prayon is at arm's-length.2

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

\2\ Indeed, a review of the translated official certification

letter and royal decree recognizing Prayon Services (submitted as

Appendix 6 of Prayon's supplemental questionnaire of April 27, 1995)

indicates that there are allowable exceptions to the arm's-length

requirements.

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

Accordingly, for these final results, the Department, when

determining credit expense incurred by Prayon on its home market sales,

has relied upon Prayon's reported credit expense based upon the date of

payment by Prayon's customer to Prayon Services.

Final Results of Review

Based on our analysis of the comments received, and our changes to

the final computer program, we have determined, as we did in the

preliminary determination, that no antidumping margin exists for Prayon

for the period August 1, 1993 to July 31, 1994. 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 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 Prayon will be zero

percent; (2) for merchandise exported by manufacturers or exporters not

covered in this review but covered in a previous review or the original

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

continue to be the rate published in the most recent final results or

determination for which the manufacturer or exporter received a

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

this review, earlier reviews, or the original investigation, but the

manufacturer is, the cash deposit rate will be that established for the

manufacturer of the merchandise in these final results of review,

earlier reviews, or the original investigation, whichever is the most

recent; and (4) the ``all others'' rate, as established in the original

investigation, will be 14.67 percent.

These deposit requirements, when imposed, shall remain in effect

until publication of the final results of the next administrative

review.

This notice also serves as a final 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 the

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

This administrative review and notice are in accordance with

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

Dated: April 26, 1996.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 96-11117 Filed 5-3-96; 8:45 am]

BILLING CODE 3510-DS-P