Furfuryl Alcohol From the Republic of South Africa; Preliminary Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-791-802]

Furfuryl Alcohol From the Republic of South Africa; Preliminary

Results of Antidumping Duty Administrative Review

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 by the respondent, Illovo Sugar Ltd.

(ISL), and the petitioner, QO Chemicals Inc., the Department of

Commerce (the Department) is conducting an administrative review of the

antidumping duty order on furfuryl alcohol from the Republic of South

Africa (South Africa). The review covers one manufacturer/exporter of

the subject merchandise to the United States. The period of review

(POR) is December 16, 1994, through May 31, 1996.

We have preliminarily found that sales have been made below normal

value (NV). If these preliminary results are adopted in our final

results of administrative review, we will instruct U.S. Customs to

assess antidumping duties equal to the difference between the

constructed export price (CEP) and the normal value (NV). Interested

parties are invited to comment on these preliminary results. Parties

who submit case briefs in this proceeding should provide a summary of

the arguments not to exceed five pages and a table of statutes,

regulations, and cases cited.

EFFECTIVE DATE: July 8, 1997.

FOR FURTHER INFORMATION CONTACT: Michelle Frederick or Scott Oudkirk,

Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue,

Washington, D.C. 20230; telephone: (202) 482-0186 or 482-2336,

respectively.

SUPPLEMENTARY INFORMATION:

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the Tariff Act of

1930, as amended (the Act), are references to the provisions effective

January 1, 1995, the effective date of the amendments made to the Act

by the Uruguay Round Agreement Act (URAA). In addition, unless

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

to the provisions codified at 19 CFR part 353, as of April 1, 1996.

Background

On June 21, 1995, the Department published in the Federal Register

(60 FR 32302) the antidumping duty order on furfuryl alcohol from South

Africa. On June 6, 1996, the Department published a notice of

``Opportunity to Request an Administrative Review'' (61 FR 28840) of

this antidumping duty order for the period December 16, 1994, through

May 31, 1996. On June 10, 1996, ISL requested that the Department

conduct an administrative review of its sales of subject merchandise

during the POR. On June 28, 1996, Petitioner also requested an

administrative review of ISL's POR sales. We issued a questionnaire to

ISL on July 23, 1996, followed by supplemental questionnaires on March

14, 1997, and May 9, 1997. We published a notice of postponement of the

deadline for the preliminary results on January 24, 1997 (62 FR 3660)

due to complex legal and methodological issues.

Scope of Review

The merchandise covered by this order 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 order 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.

Constructed Export Price

For sales to the United States, we used CEP as defined in section

772(b) of the Act, because we determined that ISL is affiliated with

its exclusive U.S. agent, Harborchem, and because the subject

merchandise was sold to unaffiliated U.S. purchasers after the date of

importation. Our finding that ISL and Harborchem are affiliated is

consistent with our finding in the Less Than Fair Value (LTFV)

Investigation. See Final Determination of Sales at Less Than Fair

Value: Furfuryl Alcohol from

[[Page 36489]]

the Republic of South Africa, 60 FR 22550, 22552 (May 8, 1995). The

facts that led to this finding in the Investigation have not changed.

Moreover, contrary to comments submitted by Petitioner, we do not

interpret the definition of ``Affiliated Persons'' (section 771(33) of

the Act) to preclude a finding of affiliation through agency.

We calculated CEP based on f.o.b. and c.i.f. prices to unaffiliated

purchasers in the United States. We made deductions, where applicable,

for foreign inland movement expenses, including foreign warehousing and

warehousing insurance, domestic brokerage and handling, ocean freight,

marine insurance, and U.S. brokerage and handling in accordance with

section 772(c)(2)(A) of the Act.

We deducted direct selling expenses and indirect selling expenses

associated with commercial activity in the United States in accordance

with section 772(d)(1) of the Act. We deducted a percentage for profit

attributable to direct, indirect, and imputed selling expenses incurred

in the United States in accordance with section 772(d)(3) of the Act.

For a further discussion of the calculation of this profit amount, see

the Analysis Memorandum to the File dated June 30, 1997.

ISL requested that we disregard certain U.S. sales from our

analysis that it claims, based on a first-in, first-out accounting

methodology, entered prior to the suspension of liquidation. We

preliminarily determine that the description provided by ISL of the

methodology used to tie pre-order entries to post-order sales, as

described at pages 80-81 of ISL's April 10, 1997, response, does not

sufficiently link POR sales to specific pre-suspension entries. We

therefore have not excluded these sales. See Final Results of

Antidumping Duty Administrative Review: Industrial Belts and Components

and Parts Thereof, Whether Cured or Uncured, From Italy, 57 FR 8295

(March 9, 1992).

No other adjustments to CEP were claimed or allowed.

Normal Value

We determined that the quantity of foreign like product ISL sold in

the exporting country was sufficient to permit a proper comparison with

the sales of the subject merchandise to the United States, pursuant to

section 773(a) of the Act. ISL had sales in its home market that were

greater than five percent of the U.S. market. Further, based on the

information on the record, we did not find the existence, as alleged by

Petitioner, of a fictitious home market or of a particular market

situation within the meaning of sections 773(a)(2) or 773(a)(1)(C)(iii)

of the Act, respectively. See Memorandum from Michelle Frederick and

Scott Oudkirk to Acting Deputy Assistant Secretary: Petitioner's

contention that the Department should not determine normal value using

home market sales due to a fictitious home market or a particular

market situation, June 30, 1997. Therefore, in accordance with section

773(a)(1)(B)(i) of the Act, we based NV on the price at which the

foreign like product was first sold for consumption in South Africa.

Pursuant to section 777A(d)(2) of the Act, we compared the CEPs of

individual transactions to the monthly weighted-average price of sales

of the foreign like product. We compared CEP sales to sales in the home

market of identical merchandise. We used the purchase order date as the

home market date of sale because, except in an extremely limited number

of sales primarily involving events beyond the parties' control (e.g.,

railway strikes), that was the date on which the essential terms, price

and quantity, were set. See 19 CFR 351.401(i) of the Department's

revised regulations (62 FR 27296, 27411 (May 19, 1997)) for a concise

description of our practice regarding date of sale.

We based NV on the price at which the foreign like product is first

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

quantities, in the ordinary course of trade and at the same level of

trade (LOT) as the CEP, in accordance with section 773(a)(1)(B)(i) of

the Act. We made adjustments, where appropriate, for rebates. We

adjusted for home market packing and movement expenses in accordance

with section 773(a)(6)(B) (i) and (ii) of the Act. Pursuant to section

773(a)(6)(C)(iii) of the Act, we made a circumstance-of-sale (COS)

adjustment to NV by deducting home market credit expenses. Prices were

reported net of value-added taxes (VAT) and, therefore, no adjustment

for VAT was necessary.

ISL stated that it granted quantity discounts based on its home

market price list and requested that we either apply the quantity

discount granted on home market sales above eight metric tons to all

undiscounted home market sales below eight metric tons or,

alternatively, that we match home market sales to U.S. sales based on

the quantity bands as shown on the price list. We have not adopted

either suggestion because we have determined that ISL did not adhere

sufficiently to its home market price list, which is the basis for the

discount, during the POR. See the Analysis Memorandum to the File,

dated June 30, 1997, for our analysis regarding ISL's adherence to its

price list.

No other adjustments to NV were claimed or allowed.

Level of Trade (LOT)/CEP Offset

As set forth in section 773(a)(1)(B)(i) of the Act and in the

Statement of Administrative Action (SAA) accompanying the URAA at 829-

831, to the extent practicable, the Department will calculate NV based

on sales at the same LOT as the U.S. sales. When the Department is

unable to find sales of the foreign like product in the comparison

market at the same LOT as the U.S. sale, the Department may compare the

U.S. sale to sales at a different LOT in the comparison market.

When CEP is applicable, as is the situation in this case, section

773(a)(7)(B) of the Act establishes that a CEP ``offset'' may be made

when two conditions exist: (1) NV is established at a LOT which

constitutes a more advanced stage of distribution than the LOT of the

CEP; and (2) the data available do not provide an appropriate basis for

a level-of-trade adjustment.

Our practice is to determine that sales are made at different

levels of trade if they are made at different marketing stages (or

their equivalent). Substantial differences in selling activities are a

necessary, but not sufficient, condition for determining that there is

a difference in the stage of marketing. See Notice of Final Results:

Antidumping Duty Administrative Review of Antifriction Bearings from

France et al., 62 FR 2081, 2105 (January 15, 1997). See also 19 CFR

351.412 of the Department's revised regulations (62 FR 27296, 27414-

27415 (May 19, 1997)) for a concise description of this practice.

In implementing these principles in this review, we obtained

information about the marketing stage involved in the reported home

market and U.S. sales, including a description of the selling

activities performed by ISL for each channel of distribution. ISL

claimed that the LOT of the CEP was different than the LOT of its home

market sales. ISL claimed one LOT and one channel of distribution with

regard to its sales to its U.S. affiliate, Harborchem. For its home

market, ISL claimed only one channel of distribution, from ISL to end

users, which it claimed to be at a more advanced stage of distribution

than the LOT of the CEP (i.e., the sales from ISL to Harborchem) based

on the selling functions performed for the particular markets.

In order to determine whether the selling activities involved in

the CEP

[[Page 36490]]

and the home market sales differed substantially, we reviewed the

selling activities associated with the CEP and those associated with

home market sales. For CEP sales, we considered only the selling

activities reflected in the price after the deduction of expenses and

profit under section 772(d) of the Act.

In this review, we preliminarily determine that the selling

functions performed by ISL for the home market did not differ

substantially from those performed by ISL for CEP sales, and that ISL's

home market LOT therefore does not constitute a more advanced stage of

distribution than the LOT of the CEP. ISL's assertion that the selling

functions it performs for its home market LOT differ from the selling

functions it performs for the LOT of the CEP rests on claims that: (1)

ISL's visits to the U.S. agent to help market the merchandise to U.S.

customers are fundamentally different from marketing calls in the home

market; (2) ISL does not perform ``multiple delivery inventory

tracking'' for its U.S. agent but does so for home market customers;

(3) ISL's prices to the U.S. agent are based on expected sales to

unaffiliated customers whereas prices to home market customers are

based on price lists; and (4) ISL provides quality control reports to

the U.S. agent, while it provides technical services to home market

customers in the form of reports and technical advice in the use of

furfuryl alcohol. We do not deem the above four claims to constitute

substantially different selling activities that meet the necessary

condition for determining that there is a difference in the stage of

marketing.

In view of the fact that we preliminarily determine that ISL's

sales to the home market were at a LOT that does not constitute a more

advanced stage of distribution than the LOT of the CEP, we did not make

a CEP ``offset'' pursuant to section 773(a)(7)(B) of the Act.

Reimbursement of Antidumping Duties

19 CFR 353.26 requires the deduction from U.S. price (now the

export price or constructed export price) of antidumping duties that a

producer or reseller pays directly on behalf of the importer or

reimburses to the importer. This regulation applies when the importer

is an affiliated party and when the importer is unaffiliated. See Final

Results of Antidumping Duty Administrative Review: Color Television

Receivers from the Republic of Korea, 61 FR 4408, 4410-11 (Feb. 6,

1996). That interpretation is consistent with both the plain language

of the regulation and the regulatory history. See, e.g., 19 CFR 353.41

(defining United States price as the purchase price or the exporter's

sales price). See also 19 CFR 351.402(f) of the Department's revised

regulations (62 FR 27296, 27411 (May 19, 1997)) for a concise

description of our practice of applying the reimbursement regulation to

both affiliated and unaffiliated parties. Further, the reimbursement

provision can apply to a first review even though assessment has not

yet occurred. See Final Results of Administrative Review: Certain Cold-

Rolled Carbon Steel Flat Products from the Netherlands, 61 FR 48465,

48470 (September 13, 1996).

Applying these principles to this proceeding, we preliminarily

determine that ISL has reimbursed Harborchem for antidumping duties in

this review period. Accordingly, in determining the duties to be

assessed for this period, we have made a downward adjustment to CEP to

reflect the reimbursement. Due to the proprietary nature of the

information relating to this issue, we have discussed our findings in

more detail in the proprietary Analysis Memorandum to the File, dated

June 30, 1997.

Preliminary Results of Review

As a result of this review, we preliminarily determine that the

following margin exists for the period December 16, 1994, through May

31, 1996:

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

Margin

Manufacturer/exporter (percent)

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Illovo Sugar Ltd........................................... 2.34

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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 ten days of publication. Any hearing, if

requested, will be held 44 days after the publication of this notice,

or the first workday thereafter. Interested parties may submit case

briefs within 30 days of the date of publication of this notice.

Parties who submit arguments in this proceeding are requested to submit

with each argument: (1) A statement of the issues, and (2) a brief

summary of the arguments. Rebuttal briefs, which must be limited to

issues raised in the case briefs, may be filed not later than 37 days

after the date of publication. The Department will issue a notice of

the final results of this administrative review, which will include the

results of its analysis of issues raised in any such briefs, within 120

days from the publication of these preliminary results.

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. The Department

will issue appraisement instructions directly to the Customs Service.

The final results of this review shall be the basis for the assessment

of antidumping duties on entries of merchandise covered by the

determination and for future deposits of estimated duties. For duty

assessment purposes, we calculated an assessment rate by aggregating

the dumping margins calculated for all U.S. sales and dividing this

amount by the total entered value subject merchandise sold. This rate

will be used for the assessment of antidumping duties on the relevant

entries of subject merchandise during the POR. Furthermore, the

following deposit requirements will be effective upon completion of the

final results of this administrative review for all shipments of

furfuryl alcohol from the Republic of South Africa entered, or

withdrawn from warehouse, for consumption on or after the publication

date of the final results of this administrative review, as provided by

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

the rate established in the final results of administrative review; (2)

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

the rate established for the most recent period for the manufacturer of

the merchandise; and (3) if neither the exporter nor the manufacturer

is a firm covered in this or any previous reviews, the cash deposit

rate will be 11.55 percent, the ``all others'' rate established in the

LTFV investigation (60 FR 32302, June 21, 1995).

This notice serves as a preliminary reminder to importers of their

responsibility 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

sections 751(a)(1) and 751(d) of the Act (19 U.S.C. 1675(a)(1)), 19 CFR

353.22, and 19 CFR 353.25.

Dated: June 30, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-17776 Filed 7-7-97; 8:45 am]

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