Preliminary Results of Antidumping Duty Administrative Review of Solid Urea From the Former German Democratic Republic

DEPARTMENT OF COMMERCE

International Trade Administration

[A-429-601]

Preliminary Results of Antidumping Duty Administrative Review of

Solid Urea From the Former German Democratic Republic

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of preliminary results of antidumping duty

administrative review.

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SUMMARY: In response to requests from interested parties, the

Department of Commerce is conducting an administrative review of the

antidumping duty order on solid urea

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from the former German Democratic Republic. The review covers exports

of subject merchandise to the United States during the period July 1,

1995 through June 30, 1996, and one firm SKW Stickstoffwerke Piesteritz

GmbH (SKWP). The results of this review indicate the existence of no

dumping margins for the period.

We invite interested parties to comment on these preliminary

results. Parties who submit arguments in this proceeding are requested

to submit with the argument (1) a statement of the issue and (2) a

brief summary of the argument.

EFFECTIVE DATE: July 8, 1997.

FOR FURTHER INFORMATION CONTACT: Nithya Nagarajan or Steven Presing,

Office VII, Import Administration, International Trade Administration,

U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W.,

Washington, DC 20230; telephone (202) 482-3793.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

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 indicated, all

citations to the Department 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 July 8, 1996, the Department of Commerce (the Department)

published in the Federal Register (61 FR 35712) a notice of

``Opportunity to Request Administrative Review'' for the July 1, 1995

through June 30, 1996, period of review (POR) of the antidumping duty

order on solid urea from the former German Democratic Republic (GDR).

In accordance with 19 CFR 353.22, petitioners requested a review for

the aforementioned period. On August 15, 1996, the Department published

a notice of initiation of antidumping review (61 FR 42416, 42417). The

Department is now conducting a review of this respondent pursuant to

section 751 of the Act.

Scope of Review

Imports covered by this review are those of solid urea. At the time

of the publication of the antidumping duty order, such merchandise was

classifiable under item 480.30 of the Tariff Schedules of the United

States Annotated (TSUSA). This merchandise is currently classified

under the Harmonized Tariff Schedule of the United States (HTS) item

number 3102.10.00. These TSUSA and HTS item numbers are provided for

convenience and Customs purposes only. The Department's written

description of the scope remains dispositive for purposes of the order.

Product Comparisons

In accordance with section 771(16) of the Act, we considered all

products produced and sold by the respondent in the home market during

the POR (and covered by the Scope of the Review) to be foreign like

products for purposes of product comparisons to U.S. sales.

Fair Value Comparisons

To determine whether sales of solid urea by respondent to the

United States were made at less than fair value, we compared the EP to

the NV, as described in the ``Export Price'' and ``Normal Value''

sections of this notice. In accordance with section 777A(d)(2), we

calculated monthly weighted-average prices for NV and compared these to

individual U.S. transactions, during the same month at the same level

of trade.

Export Price

We used EP, in accordance with subsections 772(a) and (c) of the

Act, where the subject merchandise was sold directly or indirectly to

the first unaffiliated purchaser in the United States prior to

importation.

We made adjustments as follows:

We calculated EP based on delivered prices to unaffiliated

customers in the United States. Where appropriate, we made adjustments

from the starting price for early payment discounts, foreign inland

freight, foreign brokerage and handling, international freight, U.S.

inland freight, U.S. brokerage and handling, and U.S. Customs duties.

We also adjusted the starting price for billing adjustments to the

invoice price.

Normal Value

In order to determine whether there was a sufficient volume of

sales in the home market to serve as a viable basis for calculating NV,

we compared respondent's volume of home market sales of the foreign

like product to the volume of U.S. sales of the subject merchandise in

accordance with section 773(a)(1)(C) of the Act. Since respondent's

aggregate volume of home market sales of the foreign like product was

greater than five percent of its aggregate volume of U.S. sales for the

subject merchandise, we determined that the home market was viable.

Therefore, we have based NV on home market sales.

Where appropriate, we adjusted for discounts, inland freight, and

inland insurance, and made circumstances of sale adjustments for credit

expenses and warranty expenses. We also adjusted the starting price for

billing adjustments to the invoice price. In addition, we deducted home

market packing costs and added U.S. packing costs.

Levels of Trade (LOT)

In accordance with section 773(a)(1)(B)(i) of the Act and the

Statement of Administrative Action accompanying the URAA, to the extent

practicable, the Department will calculate NV based on sales at the

same LOT as the U.S. sale. When the Department is unable to find

sale(s) in the comparison market at the same LOT as the U.S. sale(s),

the Department may compare sales in the United States to foreign market

sales at a different LOT. Final Determination of Sales at Less-Than-

Fair-Value of Certain Pasta from Italy, 61 FR 30330-31 (1996). The LOT

of NV is that of the starting price sales in the home market.

For EP, the relevant transaction for LOT is the sale from the

exporter to the importer. In order to determine whether foreign market

sales are at a different LOT than U.S. sales, the Department examines

whether the foreign market sales have been made at different stages in

the marketing process, or the equivalent, than the U.S. sales. The

marketing process in both markets begins with goods being sold by the

producer and extends to the sale to the final user, regardless of

whether the final user is an individual consumer or an industrial user.

The chain of distribution between the producer and the final user may

have many or few links, and the respondent's sales occur somewhere

along this chain. In the United States this is generally to an

importer, whether independent or affiliated. We review and compare the

distribution systems in the foreign market and the United States,

including selling functions, class of customer, and the extent and

level of selling expenses for each claimed LOT. Customer categories or

descriptions (such as trading company or end-user) are useful in

identifying different LOTs, but are insufficient to establish that

there is a difference in the LOT without substantiation. An analysis of

the chain of distribution and of the selling functions substantiates or

invalidates claimed levels of trade. If the claimed levels are

different, the selling functions performed in selling to each level

should also be different. Conversely, if

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levels of trade are nominally the same, the selling functions performed

should also be the same. Different levels of trade necessarily involve

differences in selling functions, but differences in selling functions

(even substantial ones) are not alone sufficient to establish a

difference in the LOT. Different levels of trade are characterized by

purchasers at different places in the chain of distribution and sellers

performing qualitatively or quantitatively different functions in

selling to them.

When sales in the U.S. and foreign market cannot be compared at the

same LOT, an adjustment to NV may be appropriate. Section 773(a)(7)(A)

provides that, after making all appropriate adjustments to EP or

constructed export price (CEP) and NV, the Department will adjust NV to

account for differences in these prices that are demonstrated to be

attributable to differences in the LOT of the comparison sales in the

foreign market.

As noted in the Department's verification report, SKWP sold urea to

an unrelated trading company in the United States and to end-users,

distributors, and retailers in the home market. However, in applying

the principles, stated above, to the facts in this case, we sought to

compare the distribution systems used by SKWP for its U.S. and home

market sales, including selling functions, class of customer, and the

extent and level of selling expenses for each LOT. In reviewing the

selling functions performed by SKWP for both the U.S. and home market

sales transactions, we considered all types of selling activities, both

claimed and unclaimed, that had been performed. As noted above, it is

the Department's preference to examine selling functions on both a

qualitative and quantitative basis. While SKWP has not claimed sales to

different levels of trade in the home market and the U.S. market, the

company provided information on the nature of the various selling

functions performed for the sales transactions in both the U.S. and

home markets.

Our analysis of the record evidence regarding the distribution

systems in the foreign market and the United States (including selling

functions, class of customer, and the extent and level of selling

expenses for each claimed LOT) does not reveal sufficient differences

to justify a LOT adjustment. While SKWP claims to sell to different

classes of customers in its home market, our analysis of the chain of

distribution and selling functions associated with these sales did not

confirm the existence of two or more stages of marketing in the home

market. Moreover, at verification, we confirmed that the selling

functions associated with SKWP's home market sales were not materially

different from the selling functions performed in connection with its

U.S. sale.

Arm's-Length Sales

Sales to affiliated customers in the home market not made at arm's

length were excluded from our analysis. To test whether these sales

were made at arm's length, we compared the starting prices of sales to

affiliated and unaffiliated customers, net of all movement charges,

direct selling expenses, discounts and packing. Where the price to the

affiliated party was on average 99.5 percent or more of the price to

the unaffiliated party, we determined that the sales made to the

affiliated party were at arm's length.

Cost of Production Analysis

Petitioners alleged on December 11, 1996, that SKWP sold solid urea

in the home market at prices below the cost of production (COP). Based

on these allegations, the Department determined, for the reasons stated

in its initiation memo dated January 3, 1997, that it had reasonable

grounds to believe or suspect that SKWP had sold the subject

merchandise in the home market at prices below the COP. Therefore,

pursuant to section 773(b)(1) of the Act, we initiated a COP

investigation in order to determine whether SKWP made home market sales

during the POR at prices below its COP.

In accordance with section 773(b)(3) of the Act, we calculated an

average monthly COP based on the sum of the costs of materials and

fabrication employed in producing the foreign like product plus

selling, general and administrative (SG&A) expenses and all costs and

expenses incidental to placing the foreign like product in condition

ready for shipment. In our COP analysis, we used the home market sales

and COP information provided by the respondent in its questionnaire

responses.

After calculating an average monthly COP, we tested whether home

market sales of solid urea were made at prices below COP within an

extended period of time in substantial quantities and whether such

prices permit recovery of all costs within a reasonable period of time.

We compared model-specific average COP to the reported home market

prices less any applicable movement charges, discounts, and rebates. In

determining whether to disregard home market sales made at prices below

the average COP, we examined (1) whether, within an extended period of

time, such sales were made in substantial quantities, and (2) whether

such sales were made at prices which permitted the recovery of all

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

After conducting our analysis, the Department determined that less

than one percent of all home market sales were sold below cost,

therefore, pursuant to section 773(b)(2)(C) of the Act, where less than

20 percent of the respondent's sales of a given product were at prices

less than COP, we did not disregard any below-cost sales of the product

because the below-cost sales were not made in substantial quantities.

Currency Conversion

The Department's preferred source for daily exchange rates is the

Federal Reserve Bank. For purposes of the preliminary results, we made

currency conversions based on the official exchange rates in effect on

the date of the U.S. sale as certified by the Federal Reserve Bank of

New York pursuant to section 773A(a) of the Act.

Section 773A(a) directs the Department to use a daily exchange rate

in order to convert foreign currencies into U.S. dollars, ignoring any

``fluctuations.'' We determine that a fluctuation exists when the daily

exchange rate differs from a benchmark rate by 2.25 percent or more.

The benchmark rate is defined as the rolling average of the rates for

the past 40 business days as reported by the Federal Reserve Bank of

New York. When we determined that a fluctuation existed, we substituted

the benchmark rate for the daily rate. For a complete discussion of the

Department's exchange rate methodology, see ``Change in Policy

Regarding Currency Conversions'' (61 FR 9434, March 8, 1996).

Preliminary Results of Review

As a result of our review, we preliminarily determine the dumping

margin for SKWP for the period July 1, 1995 through June 30, 1996 to be

0.00 percent.

Parties to the proceeding may request disclosure within five days

of the date of publication of this notice. Any interested party may

request a hearing within 10 days of publication. Any hearing, if

requested, will be held 44 days after the date of publication or the

first business day thereafter. Case briefs and/or other written

comments from interested parties may be submitted not later than 30

days after the date of publication. Rebuttal briefs and rebuttals to

written comments, limited to issues raised in those comments, may be

filed not later than 37 days after the date of publication of this

notice. The Department will issue its final results of

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this administrative review, including its analysis of issues raised in

any written comments or at a hearing, not later than 120 days after the

date of publication of this notice.

Upon completion of this review, the Department shall determine, and

the Customs Service shall assess, antidumping duties on all appropriate

entries. The Department will issue appropriate appraisement

instructions directly to the Customs Service upon completion of this

review.

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 the

final results of review, as provided by section 751(a)(1) of the Tariff

Act: (1) The cash deposit rate for the reviewed company will be the

rate determined in the final results of review; (2) for previously

reviewed or investigated companies not mentioned above, the cash

deposit rate will continue to be the company-specific rate published

for the most recent period; (3) if the exporter is not a firm covered

in this review, a prior review, or the original LTFV investigation, but

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

for the most recent period for the manufacturer of the merchandise; and

(4) the cash deposit rate for all other manufacturers or exporters will

be 44.80 percent, as explained below.

On May 25, 1993, the CIT in Floral Trade Council v. United States,

822 F. Supp. 766 (CIT 1993), and Federal-Mogul v. United States, 839 F.

Supp. 864 (CIT 1993), determined that once an ``all others'' rate is

established for a company, it can only be changed through an

administrative review. Therefore, the ``all others'' rate for this

order will be 44.80 percent, which was the ``all others'' rate

established in the final notice of the LTFV investigation by the

Department (52 FR 19549, 19552). 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 preliminary 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 administrative review and notice are in accordance with the

Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.

Dated June 25, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-17726 Filed 7-7-97; 8:45 am]

BILLING CODE 3510-DS-P