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.

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SUMMARY: On May 24, 1996, 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, 1994, through July 31, 1995.

We gave interested parties an opportunity to comment on the

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

received, we have not changed our analysis for the final results from

that presented in the preliminary results of review.

EFFECTIVE DATE: October 2, 1996.

FOR FURTHER INFORMATION CONTACT: David Genovese or Joseph Hanley,

Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue, NW.,

Washington, DC 20230, telephone: (202) 482-5254.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

Unless otherwise indicated, all citations to the statute are

references to the provisions effective January 1, 1995, the effective

date of the amendments made to the Tariff Act of 1930 (the Act) by the

Uruguay Round Agreements Act (URAA). In addition, unless otherwise

indicated, all citations to the Department's regulations are to the

current regulations, as amended by the interim regulations published in

the Federal Register on May 11, 1995 (60 FR 25130).

Background

On August 25, 1995, FMC Corporation and Monsanto Company requested

an administrative review of the antidumping duty order on IPA from

Belgium with regard to Prayon. The Department initiated the review on

September 15, 1995 (60 FR 47930), covering the period August 1, 1994,

through July 31, 1995. On May 24, 1996, the Department published the

preliminary results of review (61 FR 26160). The Department has now

completed this review in accordance with section 751 of the Tariff Act

of 1930, as amended (the Act).

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

number is 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 FMC

Corporation and Monsanto Company, two domestic producers of industrial

phosphoric acid.

Comment 1

Prayon argues that the Department does not have the legal authority

to exclude from the home market sales listing Prayon's sales to

Europhos, an affiliate which does not resell the IPA.

Prayon argues that section 773(a)(1)(B)(i) of the Act defines

normal value (NV) as the price at which the foreign like product is

first sold for consumption in the exporting country, in the usual

commercial quantities and in the ordinary course of trade. Prayon notes

that section 771(15) of the Act specifies types of sales considered

outside the ordinary course of trade (e.g., sales made below the COP).

Prayon further notes that section 773(a)(5) of the Act deals with sales

through affiliates (i.e., sales through affiliates can be disregarded

and the price of the sale by the affiliated party may be used to

determine NV). However, Prayon argues that, the Act makes no provision

for excluding from the calculation of NV sales made to an affiliated

party that are not for resale, but for consumption by that party.

Prayon further argues that the Department does not have the

authority under section 353.45 of its regulations (``Transactions

between related persons'') to disregard home market sales to affiliated

parties for consumption by those parties. Prayon argues that section

353.45(b) merely reiterates the provisions of 773(a)(5) and that

section 353.45(a) rests on the authority of 773(a)(5) and therefore

only applies where there are sales made through affiliated parties, not

to affiliated parties.

Prayon concludes that in the absence of any legal authority to

exclude such sales, sales to Europhos must be considered in calculating

NV.

Petitioner argues that it is a fundamental tenet that ``(t)the

antidumping law attempts to construct value on the basis of arm's

length transactions.'' Smith-Corona Group v. United States, 713 F.2d

1568, 1572 (Fed. Cir. 1983)(Smith-Corona). Thus, asserts Petitioner,

the Department has routinely exercised the power to exclude sales

between affiliated parties from its dumping margin calculations.

Moreover, argues Petitioner, this power has, on a number of occasions,

been reviewed and sanctioned by the courts.

Department's Position

We disagree with Prayon. Prayon's sales to Europhos have not been

shown to be at arm's-length prices (i.e., the weighted-average sales

price to Europhos was less than 99.5 percent of the weighted-average

sales price to unaffiliated parties); therefore, the Department must

exclude them. See Usinor Sacilor v. United States, 872 F. Supp. 1000,

1004 (CIT 1994) (hereinafter Usinor).

While section 771 of the Act does specify certain types of sales

which are considered outside the ordinary course of trade, this list is

not exhaustive and

[[Page 51425]]

is meant only to provide examples. See section 771(15) (A) and (B).

Specifically, section 771(15) states that the Department considers

sales made below the COP and certain transactions used to determine COP

and CV, among others, to be outside the ordinary course of trade and

therefore excluded from the calculation of NV. Among other types of

transactions considered by the Department to be outside the ordinary

course of trade are sales to an affiliate that are determined not to be

at arm's-length prices.

Furthermore, section 353.45(a) clearly states that the Department

will consider a sale to an affiliate in determining NV ``only if

satisfied that the price is comparable to the price at which the

producer * * * sold such or similar merchandise to a person not related

to the seller.'' This approach has been upheld by the Court of

International Trade (CIT) and the Court of Appeals for the Federal

Circuit (Federal Circuit). See, e.g., Conners Steel Co. v. United

States, 527 F. Supp. 350, 354 (CIT 1981) (hereinafter Conners Steel)

(``it need only be stated that the law does not remove sales to a

related purchaser from consideration as part of home market sales.

Common sense, of course, would indicate that strictly by themselves

sales to a related purchaser would be a questionable guarantee of a

fair home market price. However, if they are made at the same price as

sales to independent purchasers, there is no reason why they cannot

form part of the total quantity of home market sales used as a

benchmark.''); and NEC Home Electronics, Ltd. v. United States, 54 F.3d

736, 739 (Fed. Cir. 1995) (hereinafter NEC) (``There is a perceived

danger that a foreign manufacturer will sell to related companies in

the home market at artificially low prices, thereby camouflaging true

[foreign market value] and achieving a lower antidumping duty margin *

* *. Thus, regulation provides that the ITA will use the home-market,

related-party sale in computing [NV] `only if satisfied that the price

is comparable to the price at which the [seller] sold such or similar

merchandise to a person not related to the seller.' 19 CFR

353.45(a)(1994).'')

Therefore, in accordance with the Department's regulations, the Act

and judicial precedent, the Department compared Prayon's weighted-

average sales price to Europhos to its weighted-average sales price to

unaffiliated parties in order to determine whether the sales to

Europhos should be used when calculating NV. Because the weighted-

average sales price to Europhos was less than 99.5 percent of the sales

price to unaffiliated parties, the Department has continued to exclude

sales to Europhos when calculating NV.

Comment 2

Prayon argues that even if the Department had the legal authority

to disregard sales to Europhos, in this case they should not have been

excluded because, contrary to the Department's determination in the

preliminary results of review, such sales were made at arm's-length.

Prayon, quoting British Steel PLC v. United States, Slip. Op. 96-88

(CIT 1996) at 71 (quoting NLRB v. Baptist Hosp., Inc., 442 U.S. 773,787

(1993)), argues that ``an agency presumption must be both consistent

with the intent of the statute and based on a rational connection

between the facts proven and the facts presumed.'' Prayon states that

the arm's-length test applied by the Department is not consistent with

the intent of the statute because the test distorts NV by excluding

many transactions between affiliates at prices below the weighted-

average price to unrelated parties but including all affiliated party

transactions at prices above the weighted-average price to unaffiliated

party sales. Prayon states that this practice does not permit a fair

comparison between export price and NV as required by the Statute.

Furthermore, Prayon argues that the arm's-length test is not based

on a rational connection between the facts considered (i.e., that the

weighted-average sales price to an affiliate is less than 99.5 percent

of the weighted-average sales price to unrelated parties) and the facts

presumed (i.e., that the prices to the affiliate were not the result of

arm's-length negotiations).

Moreover, Prayon argues that the Department cannot merely rely on a

sales price comparison as a conclusive basis for excluding affiliated

party sales from the NV sales base. See NEC. Prayon argues that in NEC,

the Federal Circuit held that the Department must conduct an inquiry

into other facts relevant to whether or not the sales concerned were at

arm's-length. Accordingly, asserts Prayon, the Department should take

into consideration the fact that (1) while Prayon holds a 50 percent

stake in Europhos it is much smaller in size than its joint venture

partner and is, therefore, unable to manipulate transactions with

Europhos; (2) it is not in Prayon's interest to lower the price to

Europhos in order to lower U.S. dumping margins since Prayon sells a

large volume of IPA to Europhos; and (3) since Prayon wishes to

maximize profits and Europhos wishes to minimize material costs, it

follows that Prayon's prices to Europhos are the result of hard, arm's-

length negotiations that took into consideration the large volume of

IPA sold to Europhos and the long-term nature of the purchase contract.

Prayon claims that sales prices to Europhos were negotiated on an

arm's-length basis, and that therefore the Department should include

those sales in the home market sales base for the purposes of

calculating NV in the final determination.

Petitioner argues that the Department's regulations permit sales

between affiliated parties only if they are at arm's-length; and, that

the Department's arm's-length test has been upheld by the Courts.

Moreover, Petitioner asserts that the Department's use of sales price

as a conclusive basis to judge the arm's-length nature of a transaction

between affiliates has also been upheld by the Courts.

Department's Position

We disagree with Prayon. First, the Department's practice of

excluding sales to affiliates that are less than 99.5 percent of the

weighted-average sales price to unrelated parties does not violate the

intent of the statute, which is to provide a fair comparison between

the export price and NV. Rather, by ensuring that home market sales to

affiliates are excluded if the price of such sales are not similar to

the sale prices to unrelated parties, the Department's test promotes a

fair comparison between the export price and NV.

Prayon's interpretation of the facts proven and the facts presumed

is inaccurate. The fact presumed is that sales to an affiliate are a

questionable guarantee of a fair home market price. The fact proven is

that the weighted-average sales price to Europhos is well below the

weighted-average sales price to unrelated parties and, therefore, not

representative of a fair home market price. See Conners Steel, cited

above.

In addition, contrary to Prayon's assertions, the Department's

regulations make clear that we will use the price on a sale between

affiliated parties in calculating dumping margins ``only if 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.'' See section 353.45(a) of the Department's regulations. In

short, the burden of satisfying the Department that the sales are at

arm's-length is on Prayon.

It is not self-evident that the profit motive cited by Prayon will

always

[[Page 51426]]

cause affiliated companies to use arm's-length transfer prices.

Furthermore, since Prayon's sales price to Europhos were below the

standard arm's-length price, the question of whether the transfer price

was controlled by Prayon or Europhos is not useful to determine whether

sales were made on an arm's-length basis. In addition, while the

pricing arrangement between Prayon and Europhos may predominantly

benefit either party or both parties, it does not indicate that

transactions were made on an arm's-length basis.

Moreover, the Department's use of the price comparability test

(i.e., treating sales to affiliates as being at arm's-length only if

the weighted average price to the affiliate is at least 99.5 percent of

the price to an unrelated party) has been upheld by the CIT. See Usinor

Sacilor, 872 F. Supp. at 1004.

Additionally, the CIT has upheld the Department's practice of using

price rather than other factors as the basis for determining the arm's-

length nature of a transaction. See NTN Bearing Corp. of America v.

United States, 905 F. Supp. 1083 (CIT 1995) (hereinafter NTN). In NTN,

the CIT stated that it ``disagrees with [respondent] that Commerce's

arms-length test is flawed because Commerce did not take into account

certain factors proposed by [the respondent].'' See NTN at 1099.

Moreover, in the NEC case cited by Prayon, the CIT did not state

that the Department must always consider factors other than price

comparisons in determining the arm's-length nature of a transaction

between affiliates. Rather, the CIT remanded the case to the Department

to address NEC's argument that compliance with the Japanese commodity

tax law ensured that the transaction was at arm's-length. (NEC, 54 F.3d

at 743, 744 (taking no position on the merits of NEC's argument but

holding that the ITA's conclusion that NEC had not provided data

indicating sales were at arm's length was not supported by substantial

evidence because it did not address NEC's claim)). In the review

underlying NEC, the Department did not make a statistical comparison

between home market prices to related parties and those to unrelated

parties because, in the home market, NEC sold only to related parties.

In this review, in contrast, the Department addressed Prayon's Belgian

law argument based on a comparison of prices on the record that shows,

despite the Belgian law, that prices to Prayon's related party are not

comparable to those of unrelated parties. Accordingly, the Department's

practice continues to be compared to the price to affiliates with the

price to unrelated parties in order to determine whether sales to

affiliates are made at arm's-length.

Based on the foregoing, we have, in these final results, continued

to exclude sales to Prayon's affiliate, Europhos, since the weighted-

average price of such sales was less than 99.5 percent of the weighted-

average price to unrelated parties.

Comment 3

Prayon argues that the Department is not justified in disregarding

the discount taken by the affiliated coordination center to which

Prayon sells its receivables, and that this discount should be

considered Prayon's actual home market credit expense. Prayon states

that the discount taken is required by Belgian law to reflect

prevailing market interest rates. Therefore, Prayon asserts that there

is no basis for disregarding the discount and substituting an

artificial imputed credit expense.

Moreover, Prayon argues that if the Department uses an imputed

credit expense, that expense should be recalculated using corrected

interest rates. Prayon argues that the interest rates it provided to

the Department were Belgian interbank rates (BIBOR), which by their

nature are lower than the rates that would apply to commercial loans to

non-bank parties. Additionally, Prayon claims that for short term

borrowings, a lender would add a premium onto the BIBOR rate.

Petitioner argues that the Department's reliance on the imputed

credit expense rather than the discount offered by Prayon's affiliated

party is reasonable and fully consistent with prior practice.

Petitioner asserts that Prayon has offered no justifiable reason why

the Department should change its approach. Moreover, Petitioner argues

that Prayon has had ample opportunity to submit information to the

Department on its home market sales and credit expenses, and the

Department should not, as suggested by Prayon, reopen the record to

request additional information from Prayon.

Department's Position

We disagree with Prayon. The facts of this case are identical to

the facts in the 1993/94 review. In the final determination for that

review we stated that, ``the Department is not satisfied that the

discount rate ``charged'' by Prayon Services, when factoring Prayon's

accounts receivables, is representative of market rates.'' We noted

that ``(i)n 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.''

We concluded that:

(D)ue 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 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. [footnote excluded]

Industrial Phosphoric Acid from Belgium; Final Results of Antidumping

Duty Administrative Review, 61 FR 20227, 20229-20230 (May 6, 1996).

Accordingly, for these final results, the Department, when

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

has relied upon the imputed credit expense incurred by Prayon as

determined by the following formula: ((Pay date-Shipment date)/

365)*short-term home market interest rates.

We also disagree with Prayon that the Department should reopen the

record to ensure that the correct interest rates are used. In response

to a request for information on the home market short-term interest

rates used to calculate imputed inventory carrying costs in the home

market, Prayon supplied the Department with the monthly average

[[Page 51427]]

short-term rates offered by Credit Lyonnais Belgium for loans in

Belgian francs. See Prayon's submission of April 26, 1996. The

Department used these rates to calculate the imputed credit expense

incurred by Prayon for the preliminary results of review, and sees no

reason not to use these rates in the final results of review.

Moreover, the Department's regulations permit factual information

to be submitted for consideration in the final results of review up to

the date of publication of the preliminary results of review or 180

days after the date of publication of the notice of initiation of the

review, whichever comes first. See section 353.31(a)(1)(ii) of the

Department's regulations. Both of these deadlines have passed (the

preliminary results of review were published on May 24, 1996, and this

review was initiated on September 15, 1995). Furthermore, it is the

Department's stated practice to not consider in final results of review

information untimely submitted. See section 353.31(a)(3).

Final Results of Review

Based on our analysis of the comments received, we have determined,

as we did in the preliminary results, that a margin of 11.36 percent

exists for Prayon for the period August 1, 1994 through July 31, 1995.

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

11.36 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: September 26, 1996.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-25241 Filed 10-1-96; 8:45 am]

BILLING CODE 3510-DS-P