Elemental Sulphur From Canada; Final Results of Antidumping Duty Administrative Reviews

DEPARTMENT OF COMMERCE

International Trade Administration

[A-122-047]

Elemental Sulphur From Canada; Final Results of Antidumping Duty

Administrative Reviews

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

reviews.

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SUMMARY: On August 30, 1996, the Department of Commerce (the

Department) published in the Federal Register the preliminary results

of the administrative reviews of the antidumping duty finding on

elemental sulphur from Canada. The reviews cover the periods December

1, 1992 through November 30, 1993, and December 1, 1993 through

November 30, 1994. We gave interested parties an opportunity to comment

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

received we have changed the results from those presented in the

preliminary results of review.

EFFECTIVE DATE: July 15, 1997.

FOR FURTHER INFORMATION CONTACT: Donald Little or Maureen Flannery,

Antidumping/Countervailing Enforcement, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W., Washington, D.C. 20230;

telephone: (202) 482-4733.

SUPPLEMENTARY INFORMATION:

Background

On December 17, 1973, the Department of the Treasury published in

the Federal Register (38 FR 34655) the antidumping finding on elemental

sulphur from Canada. On November 26, 1993 and December 6, 1994, the

Department published in the Federal Register notices of opportunity to

request an administrative review of this antidumping finding for the

periods December 1, 1992 through November 30, 1993 (58 FR 62326), and

December 1, 1993 through November 30, 1994 (59 FR 62710), respectively.

With respect to the 1992/1993 administrative review, on December

30, 1993, Pennzoil Sulphur Company (Pennzoil), a domestic producer of

elemental sulphur, requested that we conduct an administrative review

of Alberta Energy Co., Ltd. (Alberta), Allied-Signal Inc. (Allied),

Brimstone Export (Brimstone), Burza Resources (Burza), Fanchem, Husky

Oil Ltd. (Husky), Mobil Oil Canada, Ltd. (Mobil), Norcen Energy

Resources (Norcen), Petrosul International (Petrosul), Saratoga

Processing Co., Ltd. (Saratoga), and Sulbow Minerals (Sulbow). On

December 21, 1993, Petrosul requested revocation of the finding in

part, with respect to itself. The review was initiated on January 18,

1994 (59 FR 2593).

With respect to the 1993/1994 administrative review, on December

29, 1994, Pennzoil requested that we conduct an administrative review

of Alberta, Husky, Mobil, Norcen, and Petrosul. On December 28, 1994,

Petrosul requested revocation of the finding, in part, with respect to

itself, and, on December 30, 1994, Mobil requested an administrative

review of its sales. The review was initiated on January 13, 1995 (60

FR 3193).

On August 30, 1996, the Department published in the Federal

Register the preliminary results of these reviews of the antidumping

finding on elemental sulphur from Canada (61 FR 45937). We held a

public hearing on December 11, 1996. The Department has now conducted

these reviews in accordance with section 751 of the Tariff Act of 1930,

as amended (the Act).

Scope of the Review

Imports covered by these reviews are shipments of elemental sulphur

from Canada. This merchandise is classifiable under Harmonized Tariff

Schedule (HTS) subheadings 2503.10.00, 2503.90.00, and 2802.00.00.

Although the HTS subheadings are provided for convenience and for U.S.

Customs purposes, the written description of the scope of this finding

remains dispositive.

The periods of review are December 1, 1992 through November 30,

1993, and December 1, 1993 through November 30, 1994. The 1992/1993

review covers eleven companies, and the 1993/1994 review covers five

companies.

Applicable Statute and Regulations

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. Pursuant to section 291(a)(2)(B) of the

Uruguay Round Agreements Act (URAA), the provisions of that Act apply

only to reviews requested on or after January 1, 1995. Thus, although

the 1993/1994 review was initiated after the effective date of the

amendments pursuant to the URAA, those provisions do not apply to this

review.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results. We received case and rebuttal briefs from Pennzoil

and Freeport-McMoRan Inc. (petitioners), Husky, and Mobil.

Comment 1

Husky argues that the Department incorrectly assigned all of the

common costs for a particular Husky facility solely to liquid

production when the majority of the work and the costs in that facility

related to forming of sulphur for later sale. Husky argues that there

are three ``direct'' functional units within this facility--remelt

(remelting sulphur which has been poured to block), block (pouring

sulphur on the ground when it cannot be sold) and forming (forming

liquid sulphur into solid shapes). Husky asserts that the Department

determined again in these reviews that of those three units, only the

remelt and block units incur joint costs--i.e., costs applicable to the

production of liquid sulphur. Husky argues that the ``common'' costs

(e.g., cost associated with road maintenance) at the facility relate to

the entire complex. Husky contends that those common costs cover all

three direct functional units. Husky asserts that in its questionnaire

responses in the 1992/93 and 1993/94 reviews, Husky defined all of the

merchandise produced for this complex as formed sulphur. Husky contends

that it was therefore unnecessary to split the common costs among the

three direct functional units within the facility. Husky argues that if

all of the costs, both direct and

[[Page 37971]]

common, were being allocated to the same product, the common cost at

this facility did not need to be split by functional unit.

Husky argues that, in calculating the preliminary margin, the

Department split Husky's submitted costs for the facility between

liquid and formed sulphur. Husky contends that the Department correctly

designated the direct cost centers as either joint or formed costs

consistent with the structure of this facility and the same categories

of costs incurred in another Husky facility. However, Husky argues that

the Department erred by failing to allocate any common costs to formed

sulphur. Husky argues that the common costs are not allocable solely to

liquid, but are costs incurred to operate the three functional units.

Husky asserts that allocating all of the common costs to liquid sulphur

belies not only the fact that the majority of the common costs relate

solely to forming the sulphur but also the Department's method of

allocating the common costs at other Husky facilities. Husky argues

that the Department should revise its calculation to (a) split the

common costs among the direct units in this facility, and (b) allocate

to liquid sulphur only the costs associated with the joint functional

units.

Petitioners argue that Husky mischaracterizes the Department's

treatment of the common costs at this facility, and that the Department

properly treated the costs at this facility as costs common to the

production of liquid and formed sulphur. Petitioners assert that the

Department allocated the costs of this common cost center to liquid and

formed sulphur equally on a per unit basis. Petitioners contend that

the Department include the same per-unit amount of common costs in the

cost of manufacturing (COM) of liquid and formed sulphur because it

treated those as common costs incurred for both liquid and formed

sulphur production, consistent with the Department's treatment of such

costs in the 1991/92 review. Petitioners argue that the Department

should reject Husky's argument that the Department should allocate the

common costs to the other direct cost centers at this facility based on

the costs in those cost centers.

Petitioners argue that under Husky's allocation method the per-unit

COM for liquid sulphur would fall. Petitioners argue that this result

would be distortive because the record shows that the cost incurred for

handling and storing liquid sulphur are significant. Further,

Petitioners assert that Husky incurs most if not all of these common

costs regardless of whether this facility's sulphur is formed or sold

in liquid form. Thus, Petitioners argue, the per-unit COM of liquid and

formed sulphur should contain the same per-unit amount of these common

costs based on the total costs divided by the volume of sulphur that is

sold in either liquid or solid form.

Petitioners argue that, unlike the general facilities costs of the

sulphur handling at another Husky facility, the common costs in this

cost center are not merely indirect overhead costs incurred for the

other cost centers. In addition, Petitioners contend that the sulphur

handling at this other Husky facility has a larger number of separate

direct cost centers than at this facility. Petitioners argue that the

Department treated certain direct cost centers as common costs

allocated equivalently to liquid and formed sulphur on a per-unit

basis. Petitioners argue that the Husky facility that is the subject of

this comment had rail facilities and liquid off-loading capability, but

that Husky identified no separate cost centers for these operations at

this facility. Petitioners contend that some or all of the direct costs

associated with these facilities therefore must be recorded in the

common cost center. Petitioners argue that these common costs should be

properly treated as common costs included in the COM of liquid and

formed sulphur on an equivalent per-unit basis.

Petitioners contend that Husky's assertions regarding the nature of

this facility's cost centers are unsupported by the record because

Husky failed to provide a description of each cost center at this

facility and to identify the costs included in each cost center, as

explicitly required by the supplemental cost questionnaire. Petitioners

argue that the Department should reject Husky's argument that the

Department should reallocate the common costs at this facility.

Department Position: We agree with Husky that the ``common'' costs

for a particular facility should be allocated to all of the direct cost

centers at that facility. For the preliminary results, common (general)

costs for all facilities were allocated to sulphur based on the direct

cost centers which relate to the functional units within the facility.

While certain cost centers were considered joint or ``common'' at one

Husky facility and allocated equivalently to liquid and formed sulphur

on a per-unit basis, these cost centers contained direct expenses which

were applicable to both liquid and formed sulphur. At the facility

subject to this comment, it is appropriate to treat the costs in this

``common'' cost center as indirect. The other reported sulphur cost

centers at this facility are direct; because this facility must incur

common (indirect) expenses, it is reasonable to conclude that those

indirect expenses are included in the ``common'' cost center.

Therefore, we have treated these costs as general expenses and

allocated them to all functional units of the facility based on the

direct cost centers.

Comment 2

Husky argues that the Department significantly overstated the

amount of depreciation applicable to the sulphur production at the

facility discussed above by categorizing the ``common'' costs for the

facility as direct costs. Husky asserts that, consistent with what it

expected to be the Department's final decision in the 1991/92 review,

in this review it provided a depreciation allocation based on direct

costs. Husky argues that the Department accepted the depreciation

figures submitted on a direct cost basis for Husky's other facilities;

however, for this facility the Department altered Husky's submitted

calculation, which Husky argues was entirely consistent with its

calculations at its other facilities, by reclassifying the common costs

for this facility from a common cost to a direct cost category.

Husky points out that it allocated depreciation on the basis of the

direct costs incurred at each facility. Husky argues that, like the

sulphur costs, the gas/oil costs factored into the allocation ratio

were limited to the direct costs charged to the leaseholds and,

accordingly, do not include the common costs associated with those

functional units. Therefore, Husky argues, by adding the common cost

for this facility to sulphur costs for purposes of the depreciation

allocation without adding the common costs for the gas facilities to

total costs, the Department significantly overstated the ratio and

allocated a disproportionate share of the depreciation expense to

sulphur.

Petitioners argue that, if the Department were to exclude the

common sulphur handling costs at this facility as Husky argues, the

percentages of depreciation allocated to the sulphur handling at this

facility would be drastically reduced from those used in the

preliminary results of these reviews. Petitioners argue that the

Department's operating cost method for allocating facility-wide

depreciation is based on the assumption that the relative operating

expenses incurred in a particular part of a plant is a measure of the

relative significance of the physical plant, and thus depreciation, for

that part of the plant.

[[Page 37972]]

Petitioners argue that, under the depreciation allocation

methodology adopted by the Department in the 1991/92 review, the

Department included all sulphur handling costs, including indirect

costs, in the calculation of relative amounts of plant-wide

depreciation allocated to gas processing assets and sulphur handling

assets. Petitioners assert that the Department should reject Husky's

argument that without adding the common costs for gas facilities to

total facilities costs for purposes of the depreciation allocation, the

Department significantly overstated the ratio of direct sulphur

expenses to direct facility-wide expenses and allocated a

disproportionate share of depreciation expenses to sulphur. Petitioners

contend that Husky failed to report liquid sulphur storage costs

incurred at the gas processing facility after the point of sulphur

recovery, and that a portion of the general facilities costs at that

facility are therefore attributable to liquid sulphur storage.

Petitioners argue that including these liquid storage costs and the

associated general facilities costs in the calculation of depreciation

would increase the depreciation attributable to the sulphur handling

assets at this facility. Petitioners also argue that the absence of gas

processing general facilities costs from the calculation of

depreciation is due to Husky's failure to report those costs.

Petitioners argue that this failure should not result in the exclusion

of these common sulphur handling costs from the calculation of

depreciation. Petitioners argue that excluding the common costs for

this facility from the depreciation calculation rewards Husky for its

failure to allocate depreciation by the methodology adopted by the

Department in the 1991/92 review. Petitioners contend that Husky's

characterization of the common costs of this facility as indirect costs

is unsupported by the record, as Husky identified those costs as direct

in its supplemental questionnaire responses. Petitioners argue that

Husky failed to provide a description for each cost center or

functional unit, and to identify the costs included in each.

Petitioners contend that, in light of Husky's failure to provide this

information, there is absolutely no basis for any adjustment of the

Department's allocation of depreciation based on Husky's unsupported

assertions.

Department Position: We agree with Husky. Consistent with the

Department's practice in these reviews, Husky allocated depreciation

based on direct costs charged to each functional unit at each facility.

Husky treated these expenses as indirect in the cost calculation

submitted to the Department. Absent any evidence on the record

indicating that these expenses are direct, we believe it is reasonable

to treat these common expenses as indirect. Accordingly, we did not

include these expenses in the allocation of depreciation. We agree that

including common costs for sulphur while excluding common costs for gas

results in the allocation of a disproportionate share of depreciation

expenses to sulphur. Therefore, we have not included the ``common''

cost center for this facility in the calculation of depreciation for

these reviews.

Comment 3

Husky argues that the Department inadvertently included the block

costs from one facility in the calculation of the costs of another

Husky facility for the 1993/94 review. Husky argues that there is no

basis to have done so. Husky argues that the Department must therefore

deduct these expenses in the final results.

Petitioners argue that the Department determined in the preliminary

results that ``[s]ince [this facility] poured sulphur to block during

this review period, and did not report block storage costs, we have

added to the COM for [this facility] the block storage costs and

depreciation expense calculated for the [other facility].'' Petitioners

argue that the record establishes that the Department's determination

was entirely proper. Petitioners assert that block storage was not

listed among the direct cost centers identified for the particular

facility. Petitioners argue that the Department should not assume that

a particular reported cost relates to pouring sulphur to block given

Husky's failure to describe these costs as required by the Department's

cost deficiency questionnaire. Petitioners argue that, accordingly, the

Department should continue to include the block storage costs from the

other facility in the cost calculation for this facility.

Department Position: We disagree with Husky. The record shows that

the facility in question incurred block storage costs. As noted by

petitioners, we stated in the preliminary analysis memo that because

block storage costs were not reported for the one facility, we used the

block storage cost and depreciation allocated to block storage

calculated for another Husky facility as best information available

(BIA) and added it to the COM for the one facility for which Husky did

not report block storage costs.

Comment 4

Husky argues that the Department's resort to BIA for a particular

facility has no basis in fact or law. Husky contends that it explained

in the 1991/92 review and subsequent reviews that, unlike its

production at other facilities, sulphur formed at this facility was not

actually produced by Husky. Husky argues that the sulphur at this

facility is purchased from another company's gas production. Husky

asserts that, in the 1991/92 review, it supplied the Department with

all of its data from this facility and the Department refused to

consider that data. Husky argues that the Department's decision to

disregard its 1991/92 determination and impose BIA on Husky in these

reviews was based in large part on the Department's mischaracterization

of its prior decision to exclude that facility's costs. Husky contends

that what the Department fails to mention in trying to distinguish

1991/92 from the reviews at issue here is that Husky did not base its

reported costs at that facility in the 1991/92 review solely on its

purchase price. Husky argues that it also provided the Department with

lease statistics which Husky argues the Department was uninterested in

using to account for that facility's costs. Husky argues that as it

prepared questionnaire responses for the subsequent reviews, it had no

reason to believe that the Department's position would change with

regard to this facility, particularly when the facts did not.

Furthermore, Husky argues that, had the Department asked

specifically for this facility's costs in these reviews, Husky would

have provided whatever data was available, exactly as it had done in

1991/92. Husky asserts that the Department's request that Husky account

for the costs of 90% of its production is not the same as a request for

this particular facility's costs. Husky contends that the record in

this case delineates clearly Husky's internal distinction between

sulphur that is produced from Husky's own oil and gas and purchased

sulphur. Husky argues that it is undisputed that purchased sulphur is

not considered production by Husky in the normal course of business.

Husky argues, ``[b]efore [Commerce] may find any non-compliance on the

part of the parties to the proceeding, there must be a clear and

adequate communication requesting the information.'' Usinor Sacilor,

Sollac, and GTS v. United States, 872 F.Supp. 100, 1010 (CIT 1994).

Husky argues that as a matter of law, therefore, the Department's

failure to distinguish its rejection of Husky's data from this

[[Page 37973]]

particular facility in the prior review or, under the circumstances, to

make its request for the identical data more precise, limits the

Department's discretion to penalize Husky with BIA, cooperative or

otherwise. Accordingly, Husky argues that, as in 1991/92, this facility

should be excluded from the analysis.

Husky argues that even if the Department's request for this

facility's costs had been clear, allocating the highest costs to this

facility is not reasonable. Husky asserts that the Department's

statutory mandate with respect to calculating costs and constructed

value is to base those calculations on the actual costs incurred. Husky

contends that this edict does not wane merely because a respondent

fails to spell out every nuance of its costs. Husky argues that even if

the Department resorts to cooperative BIA, the Department is not

relieved of the obligation to make an inference reflective of the

respondent's actual costs (i.e., a neutral inference). Husky argues

that assuming the Department did make a clear request for this

facility's data in these reviews, the Department was by no means

compelled to penalize Husky by allocating to this facility the highest

costs of any of Husky's facilities. Husky argues that the Department

should determine the weighted-average cost of Husky's other reported

facilities and allocate that per-unit cost over the volume of sulphur

which flows through this particular facility. Husky asserts that the

Department would, at the very least, calculate a weighted-average cost

reflective of the apparent differences in Husky's various facilities

and Husky's actual costs.

Petitioners argue that, regardless of what occurred in the 1991/92

review, the Department clearly required Husky in this review to report

costs at all facilities accounting for 90% of Husky's sulphur

production. Petitioners contend that, as the Department found, Husky's

submitted sulphur production volume data show that it was necessary to

report this facility's cost to satisfy that requirement. Petitioners

argue that this facility's sulphur is Husky production under any normal

definition of production. Petitioners assert that Husky owns and

operates the facility's sulphur handling facilities, and thus incurred

sulphur production costs under the Department's methodology. Moreover,

Petitioners argue, in the cost deficiency questionnaire, the Department

specifically requested that Husky provide the 1994 operating statements

for this facility. Petitioners assert that by requesting the operating

statement for this facility, the Department not only clearly indicated

that it considered costs at this facility necessary in this review, but

that it required Husky to report those costs because this facility's

operating statement contains sulphur handling costs.

Petitioners dispute Husky's claim that even if the Department's

request for this facility's costs was not clear, assigning the highest

COM calculated for any other Husky plant to this facility is not

reasonable and the Department should instead base the cost at this

facility on the weighted-average cost of the other Husky facilities.

Petitioners argue that the Department's established practice is to use

adverse BIA when a respondent fails to provide necessary and requested

information; otherwise, respondents would have no incentive to provide

information. Petitioners note that Husky cites the recent amendments to

the statute for the proposition that the Department's statutory mandate

with respect to calculating costs and constructed value is to base

those calculations on the actual costs incurred. Petitioners argue

that, in this case, Husky prevented the Department from calculating its

cost of production and constructed value based on the actual costs

Husky incurred by withholding its production costs at this facility.

Furthermore, Petitioners assert that, in the recent amendments to the

statute, Congress codified the Department's adverse BIA practice and

added a provision that specifically permits the Department to make

adverse inferences when a party fails to cooperate by withholding

requested information, as Husky did in this review. Therefore,

Petitioners argue, the Department should apply adverse BIA to determine

costs at this facility.

Department Position: We disagree with Husky. It was appropriate for

the Department to apply BIA to this particular facility because Husky

failed to report costs for the facility. As the petitioner noted, we

specifically asked for the operating statements for this facility in

the supplemental cost questionnaire. We also asked for costs for

facilities accounting for 90% of Husky's sulphur production. Although

Husky purchased the sulphur from another company's gas production, the

record shows that Husky owns and operates the sulphur handling

facilities. As the Department determined in the 1991/92 review, the

sulphur costs which should be reported are the sulphur handling costs

(i.e., those sulphur costs incurred after the sulphur recovery unit).

Husky incurs these costs for the sales of its sulphur from this

facility. Therefore, sulphur from this facility would be considered

Husky production and the costs should have been reported as Husky

reported the production volume from this facility. Because the costs

from this facility were not used in a previous administrative review

does not mean that Husky can unilaterally decide that such costs need

not be reported in another administrative review of the same case,

especially when Husky was requested specifically to report such costs.

We agree with petitioners that the COM applied to the production

from this facility should be adverse since Husky did not report the

required cost, but disagree that we should use the highest cost for

each component of the COM from the other Husky facilities to determine

the COM for this facility. Therefore, we have continued to apply the

highest COM from a facility which was reported to this facility's

production volume.

Comment 5

Husky argues that the costs of pouring liquid sulphur to block are

not logically allocated to sulphur production. Husky argues that, in

the preliminary decision in these reviews, the Department allocated

sulphur block costs at a particular Husky facility over the total of

the volume of sulphur poured to block and the volume of liquid and

formed sulphur produced. Husky argues that the Department did not

allocate sulphur handling costs over this same volume. Husky asserts

that the Department ignored the block volumes in allocating the sulphur

handling costs but then included block volumes in weight averaging the

COM. Husky contends sulphur poured to block cannot be sulphur

production for purposes of weighing costs if it is not production for

purposes of allocating those costs. Husky argues that sulphur block is

a cost associated with Husky's primary operations of oil and gas

production. Husky argues that it pours sulphur to block to produce

natural gas and/or oil. Husky argues that the costs incurred to pour

sulphur to block are indistinguishable from costs incurred to convert

corrosive hydrogen sulphide to elemental sulphur. Husky contends that,

while the Department has said that Husky's block costs should be

allocated to sulphur because Husky has the choice of either selling the

liquid sulphur, forming it for overseas sale, or pouring it to block,

Husky's only real choice is to sell the sulphur. Husky argues that if

it does not sell the sulphur it must either cease natural gas or oil

production or pour the resultant sulphur on the ground. Husky asserts

[[Page 37974]]

that the Department itself acknowledged in the prior review that

ceasing gas/oil production is not a realistic choice.

Further, Husky argues that the fact that it maintains no inventory

value for block sulphur and has not remelted significant volumes of

block in years undermines the inference that Husky pours sulphur to

block as a means of long-term storage. Husky contends that it pours to

block as a means of disposal, the only means currently available to

Canadian gas/oil producers. Husky argues that the Department's decision

to allocate block costs to sulphur is further complicated by the fact

that sulphur is not sold at many Canadian gas/oil facilities but

instead poured to block as an unavoidable consequence of gas/oil

production. Husky contends that sulphur handling facilities do not

exist at some plants and the sulphur must be poured to block because it

cannot be sold. Husky argues that for the Department to allocate block

costs to sulphur at a plant that contains sulphur handling facilities,

yet ignore block costs incurred at facilities where there are no

sulphur handling facilities, is inconsistent with the Department's

prior decision to make cost determinations on a company-wide basis.

Husky argues that block cost is either a gas/oil cost or a sulphur

cost, and that if a facility cannot allocate the cost over sulphur

(because none is sold), the cost allocation methodology will invariably

differ from facility to facility. Husky argues that, based on these

inherent inconsistencies, the Department should eliminate the block

cost from the sulphur cost and treat the cost as a cost of Husky's

primary operation.

Petitioners argue that the Department unequivocally rejected

Husky's argument that block storage costs should be associated with oil

and natural gas production in the final results of the 1991/92 review.

Petitioners argue that Husky has not raised any new arguments or cited

new facts that would warrant reconsideration of this determination.

Petitioners contend that, although Husky claims that it pours sulphur

to block as a means of disposal, Husky has publicly acknowledged that

its sulphur storage facilities are designed to enable it to stockpile

sulphur for later sale. Petitioners contend that, in light of the

foregoing, the Department should reject Husky's argument that its

sulphur block storage costs should not be attributed to sulphur

production.

Department Position: We disagree with Husky. Consistent with the

Department's decision in the 1991/92 review, we determined that block

costs are appropriate to include as part of the cost of producing

sulphur. We stated, in the 1991/92 review, that:

* * * inclusion of the direct operating and general facility

costs related to sulphur block storage in CV is appropriate * * *

all costs incurred after the liquid sulphur recovery unit relate to

the production of sulphur. At this point in the production process,

Husky has the choice of either selling the liquid sulphur, forming

it for overseas sale, or pouring it to block for long-term storage.

All of these choices relate to selling sulphur, either currently or

in the future. Accordingly, we consider it appropriate to include,

as part of the cost of producing sulphur, all costs incurred in the

block storage lease.

Elemental Sulphur From Canada; Final Results of Antidumping Finding

Administrative Review, 61 FR 8239 (March 4, 1996) (1991/92 Final)

Husky has not raised new arguments or presented new evidence that

would warrant a reconsideration of this determination.

We disagree with Husky that the Department would be inconsistent

with its decision to make cost determinations on a company-wide basis

by including the block from some facilities and ignoring block costs

from facilities which do not have sulphur handling facilities. Because

sulphur poured to block must be remelted and then processed through

either liquid or forming facilities before it can be sold, block

sulphur is not considered finished production. We required Husky to

account for at least 90 percent of its total production volume in

reporting costs. A facility which does not have sulphur handling

facilities and, therefore, does not produce sulphur for sale, would not

be a facility Husky was required to report. Therefore, the Department

would not be inconsistent because the weighted-average cost of

manufacturing of sulphur would include the sulphur costs from

facilities representing 90 percent of Husky's sulphur production as

required.

Comment 6

Husky argues that if the sulphur poured to block is considered

production, as the Department preliminarily decided in these reviews,

it should be treated consistently. Husky contends that either sulphur

poured to block must be considered a separate type of liquid sulphur,

with only block costs allocated to the block production, or, at the

very least, the total costs incurred for sulphur production at a

particular facility must be allocated over total production, including

the quantity of sulphur poured to block. Husky argues that, in its cost

responses in the current reviews, it allocated the costs charged to the

functional unit associated with block over the total sulphur handling

throughput and block production. Husky maintains that the remaining

costs were allocated over the sulphur handling throughput quantity to

arrive at a single cost for marketable sulphur. Husky argues that it

used the sulphur handling throughput quantity in the calculation of the

weighted-average cost for all Husky-produced sulphur. Husky argues that

because block sulphur does not flow through any units other than the

sulphur block leasehold, it is in effect, a different product and

accordingly Husky calculated a separate per-unit cost for this product.

Husky argues that if block sulphur is to be considered production at

all, it should be defined as a separate product with separate costs.

Husky argues that, under that approach, only the costs of the lease

associated with block costs would be charged to block sulphur. Husky

contends that, if block sulphur is not treated as a separate liquid

product, the Department must reallocate all costs over the block and

sulphur handling throughput volumes. Husky contends that it is a well-

established principle of accounting that costs increase when throughput

decreases. Accordingly, Husky contends, if the block volume had been

processed at the sulphur handling facility the cost would have

decreased significantly. Husky argues that the Department's failure to

allocate all sulphur production costs over the total of block volume

and sulphur handling throughput volume and its decision to include the

block volume in weight averaging the COM significantly distort the

facility's actual costs and must be remedied.

Petitioners assert that, contrary to Husky's allegations, there is

nothing inconsistent about the Department's treatment of block storage

volume. Petitioners argue that it is the Department's longstanding

practice to calculate the weighted-average COM based on the

respondent's production volume at each facility whose costs are

included in the weighted-average COM. Petitioners argue that the volume

of liquid sulphur production at a plant is the volume of liquid sulphur

produced, regardless of whether that sulphur is sold in liquid form,

formed for the purpose of overseas shipments, or inventoried in block

form for later sale. Petitioners contend that contrary to Husky's

argument that block sulphur inventory is not marketable, the Department

determined in the 1991/92 review that liquid sulphur poured to block

has inventory value and that Husky has publicly acknowledged its

[[Page 37975]]

sulphur storage facilities are designed to enable it to stockpile

sulphur for later sale. Accordingly, petitioners argue, the Department

properly included block volume in its calculation of the weighted-

average COM of Husky sulphur.

Petitioners argue that the Department calculated per-unit sulphur

handling costs in a manner that is both logical and consistent with its

longstanding practice. Petitioners assert that the Department

calculated per-unit sulphur handling costs by dividing the total cost

incurred at each sulphur handling leasehold by the quantity of sulphur

passing through that leasehold. Petitioners assert that this approach

properly recognizes that direct operating costs are a function of

throughput. Petitioners contend that the record establishes that the

sulphur poured to block passes exclusively through the sulphur block

leasehold and does not pass through the other sulphur handling

leaseholds. Petitioners argue that volumes that do not pass through the

sulphur handling leaseholds cannot be included in the calculation of

per-unit costs; to do so would artificially reduce Husky's per-unit

sulphur handling costs. Petitioners argue that Husky's claim that per-

unit direct operating costs at the various sulphur handling leaseholds

would decrease if block volume were to pass through them is purely

speculative. Petitioners assert that, as throughput increases, total

operating costs will increase as well. More importantly, petitioners

assert, if the Department were to adopt Husky's methodology and include

the volume poured to block in calculating per-unit sulphur handling

costs, the portion of sulphur handling costs allocated to block storage

would never be included in the COM of sulphur. Petitioners argue that

block sulphur is sold only after it is remelted and because the costs

of the block storage are not included in the costs of remelting block

sulphur, the portion of sulphur handling costs allocated to the

quantity of sulphur poured to block would never be captured.

Petitioners contend that Husky's argument that the Department

should treat block sulphur as a separate product would be directly

inconsistent with the Department's treatment of block storage costs in

the 1991/92 review. Petitioners assert that there is no legal or

factual basis for treating block sulphur as a separate product.

Petitioners contend that Husky's proposed treatment of block storage

costs artificially reduces the COM of sulphur.

Department Position: We have determined that block storage costs

are appropriately included in the cost of producing sulphur and that

sulphur poured to block is not considered production. See our response

to comment 5. Further, we do not consider sulphur poured to block to be

a separate liquid sulphur product. Because we do not consider sulphur

poured to block sulphur production, we have not included the volume of

sulphur poured to block in allocating sulphur costs and weight-

averaging the COM, and, therefore, have not allocated any sulphur costs

to sulphur poured to block.

Comment 7

Petitioners argue that Husky's failure to report crucial data and

to follow the Department's methodology in calculating the COM and

constructed value (CV) of its sulphur requires the use of total BIA to

establish Husky's margin. Petitioners contend that the statute requires

the Department to use BIA ``whenever a party * * * refuses or is unable

to produce information requested in a timely manner and in a form

required, or otherwise significantly impedes an investigation.''

Section 776(c) of the Act.

Petitioners argue that, in view of the wholesale nature of Husky's

failure to report required cost data and its general failure to follow

the Department's methodology in calculating the COM and CV of its

liquid and formed sulphur despite the Department's repeated explicit

instructions to do so, the Department must resort to total (not

partial) BIA for Husky. Petitioners assert that the Department applies

partial BIA when a respondent's submission is deficient in limited or

minor respects but as a whole is still considered reliable. Petitioners

contend that the deficiencies in Husky's reported data are not limited

or minor. First, petitioners argue that Husky failed to provide its

production volume of liquid sulphur at all facilities, as required by

the cost and supplemental cost questionnaires. Second, Husky did not

provide the sulphur handling, storage and forming costs for the

facilities accounting for 90% of its liquid and formed sulphur

production. Third, Husky excluded the liquid sulphur handling costs at

a particular facility from its weighted-average COM for liquid sulphur.

Fourth, Husky did not include in its reported costs all of the sulphur

production costs required by the Department's methodology, including

costs associated with liquid storage at a particular facility. Fifth,

Husky did not provide requested information to support the sulphur

costs it elected to provide. Sixth, Husky did not follow the

Department's methodology in allocating plant-wide depreciation expenses

to sulphur and natural gas, and did not directly assign the cost of

very significant sulphur handling assets to sulphur. Finally, Husky

reported a COM for liquid sulphur that is based entirely on one

particular facility. Petitioners argue that in such circumstances the

Department does not apply partial BIA.

Petitioners argue that, in the 1993/94 review, Husky reported a

weighted-average COM and a CV for liquid sulphur in this review which

is less than the public CV reported in the 1991/92 review, which the

Department adjusted upward.

Petitioners argue that Husky has not claimed its real sulphur

production costs have decreased. Accordingly, petitioners assert, using

the same methodology in this review as in the 1991/92 review should

yield comparable CVs. Petitioners argue that Husky failed to even offer

an explanation for the massive decrease in its reported costs in this

review period. Petitioners argue that the enormous reduction in Husky's

reported CV is in part attributable to identifiable fundamental

deficiencies in Husky's reported data.

Petitioners argue that, in selecting total BIA, the Department

applies its established two-tier methodology. When a respondent submits

questionnaire responses but fails to provide the information in a

timely fashion or in the form required, Husky notes, the Department

will normally assign to that company the higher of (1) the highest rate

ever applicable to that company from the less-than-fair-value

investigation or a prior administrative review, or (2) the highest

calculated rate in the current review for any respondent. Petitioners

assert, however, that the Department is not constrained by this

methodology, particularly when use of an alternate source is necessary

to make adverse inferences sufficient to induce cooperation and ensure

that the application of BIA does not reward noncompliance. Petitioners

argue that the 1992/93 review presents such a case. Petitioners contend

that applying the Department's sulphur cost methodology to the 1992/93

data reported by Husky, even without the costs Husky failed to provide,

shows that the margin is dramatically higher than the highest rate

previously assigned to Husky. Petitioners urge the Department to

continue to apply its cost methodology to Husky for the final results,

but as total BIA, making appropriate adverse inferences where Husky

failed to provide requested information.

[[Page 37976]]

Petitioners assert that the Department only departs from its two-

tier methodology in limited circumstances, i.e., where the application

of that methodology would reward a respondent's noncompliance and

therefore would not induce cooperation. Petitioners assert that such

circumstances are not present in the 1993/94 review and that the

Department departed from its two-tier method in establishing what

petitioners term a BIA margin for Husky in the preliminary results.

Petitioners argue that, if the Department calculates a rate for Husky

in the 1992/93 review which is at all reflective of the actual margin,

that rate will be the highest for Husky in any current or any preceding

segment of this proceeding. Therefore, petitioners claim, that rate

will be the proper rate to assign to Husky in the 1993/94 review under

the two-tier methodology, even if Husky is deemed to be a cooperative

respondent in the 1993/94 period. Petitioners urge the Department to

assign to Husky, for the 1993-94 period, the rate calculated for Husky

for the 1992-93 period. Petitioners contend that responses in the 1993/

94 review are at least as deficient as in the 1992/93 review yet the

BIA margin in the 1993/94 review for Husky is less than one-third the

margin for Husky in the 1992/93 review. Petitioners argue that Husky

has no incentive to report its complete sulphur costs as required if

the Department departs from its normal two-tier methodology and

calculates a margin for Husky.

Husky argues that there is no basis for imposing any BIA penalties

on Husky. Husky asserts that, as the Department recognized in preparing

the preliminary decision, Husky provided more than sufficient data for

calculating Husky's cost of production. Husky cites the preliminary

results of these reviews where the Department stated, ``* * * we are

able to calculate a margin for Husky in each review using data which

has been provided * * *.'' Husky contends that petitioners' request

that additional BIA be applied or total BIA replace Husky's verifiable

responses has no basis in law. Husky asserts that it is well

established that the Department will rely on information submitted by

the respondent even if the Department must make small adjustments to

the data. See, e.g., Certain Fresh Cut Flowers from Mexico; Final

Results of Antidumping Administrative Review, 57 FR 19597 (1992); Final

Determination of Sales at Less Than Fair Value: Certain Small Business

Telephone Systems and Subassemblies Thereof from Taiwan, 54 FR 42543

(1989). Moreover, Husky notes that the Department has stated: ``in

cases where the respondent has substantially cooperated with the

Department * * *, we [the Department] do[es] not typically apply total

BIA, but rather partial BIA to the particular deficiencies in a

respondent's questionnaire response.'' Dynamic Random Access Memory

Semiconductors of One Megabit or Above From the Republic of Korea;

Final Results of Antidumping Administrative Review, 61 FR 20216 (1996).

Husky argues that it provided all data necessary for the Department's

analysis and to the extent that data required the Department's

adjustment, the Department had the requisite information.

Department Position: We agree with Husky that total BIA for Husky

is not warranted. Husky has cooperated with the Department and provided

sufficient information for the Department's analysis. In comments 8

though 12, we have discussed the particular deficiencies alleged by

petitioners. The Department's two-tier methodology does not apply in

cases where we are applying partial BIA to particular deficiencies in a

respondent's questionnaire responses, and therefore is inapplicable

here. Thus, there is no question of the Department departing from its

standard two-tier methodology in this case. In those instances where

sufficient information was not provided, we applied partial BIA.

Petitioners' comparison of Husky's public CV figure for 1991/92

with its CV for 1993/94 is irrelevant. Each review is based on the

facts specific to that review, and it is not unreasonable to conclude

that Husky's costs changed significantly from one period to the next.

Comment 8

Petitioners argue that the Department failed to account for sulphur

general facilities costs in the calculation of depreciation expenses

for Husky. Petitioners assert that in the 1991/92 review the Department

included the general facilities costs assigned to sulphur and general

facilities costs assigned to natural gas in the calculation of the

relative amounts of plant-wide depreciation allocated to gas processing

assets and sulphur handling assets. Petitioners argue that the

Department failed to account for the sulphur general facilities costs

in the calculation of depreciation expenses in the preliminary results.

Petitioners argue that the department may have decided to depart from

the 1991/92 methodology because Husky failed to report the general

facilities costs it assigned to natural gas. Petitioners argue that

this failure to report the natural gas general facilities costs should

not result in the exclusion of the sulphur general facilities costs

from the calculation of depreciation. Petitioners argue that the

failure to account for the sulphur general facilities costs in the

allocation of depreciation between sulphur and natural gas results in a

misallocation of plant-wide depreciation expenses and rewards Husky for

failure to provide the general facilities expense assigned to natural

gas. Petitioners contend that this result runs contrary to the

Department's BIA practice which holds that the application of BIA must

be adverse and cannot reward a respondent for failing to provide

requested information.

Husky argues that the exclusion of general facilities costs in the

calculation of depreciation in no way distorts the allocated ratio.

Husky contends that, because it does not maintain a separately

identifiable depreciation expense for sulphur handling assets, it was

necessary for Husky to allocate a portion of plant-wide depreciation

expenses to sulphur. Husky maintains that for that reason, it allocated

depreciation at all of its reported facilities on the basis of sales

value and, alternatively, on the basis of direct operating costs. Husky

asserts that the Department accepted Husky's cost-based allocation and

then applied the ratio in its preliminary decision. Husky argues that

petitioners suggest that the Department add the general facilities

expenses allocated to sulphur to the total cost figure for sulphur

handling and add no equivalent gas/oil general facilities expenses to

the total cost figure for the gas/oil plant. Husky contends that

petitioners suggest this as punishment for Husky's failure to provide

general facilities expenses related solely to gas and oil. Husky

contends that gas/oil costs were not requested or needed by the

Department in this review and are not subject to this or any other

dumping order. Husky maintains that it cannot be penalized for its

interest in protecting information sensitive to its primary commercial

operations and outside the scope of the Department's jurisdiction.

Husky asserts that, as the Department verified in the 1991/92 review

and Husky explained in detail in a separate letter to the Department,

separate general facilities expenses are maintained for sulphur

handling at one of Husky's facilities. Husky argues that the Department

has no basis to knowingly distort the calculation of depreciation by

adding a cost to the numerator (sulphur handling costs) without making

a corresponding

[[Page 37977]]

adjustment to the denominator (plant-wide costs). Husky maintains that

its exclusion of the general facilities expenses in the allocation does

not distort the resultant ratio. Husky argues that it excluded general

facilities expenses from both the total, plant-wide direct cost figure

and from the sulphur direct cost total. Husky argues that its

allocation is reasonable and undistorted.

Department Position: We agree with Husky. Excluding the general

facilities expenses from the allocation of depreciation is not

distortive and is reasonable. The general facilities expenses are

indirect costs incurred to operate the plant which are not directly

related to a particular function or product. When separate depreciation

is not maintained for particular assets, using direct costs as the

basis for the allocation of depreciation is reasonable. Even if we were

to include indirect expenses in the allocation of depreciation,

including the general facilities expenses related to sulphur handling

while excluding general facilities expenses related to oil/gas from the

calculation would be distortive. Therefore, we are continuing to use

direct costs to allocate plant-wide depreciation for the final results.

Comment 9

Petitioners argue that the Department understated depreciation for

a particular complex. Petitioners assert that Husky failed to report

whether it records separate depreciation for sulphur assets at that

complex, including sulphur handling and storage facilities at Facility

X and the pipeline connecting the gas plant to the sulphur handling

facility. Petitioners assert that, in the 1991/92 review, the

Department determined that it is distortive for antidumping purposes

not to assign sulphur handling costs to sulphur, even if the respondent

does not assign these costs to sulphur in its normal accounting

records.

Petitioners argue that, in light of this failure, the Department

should conclude, in accordance with its BIA practice, that separate

depreciation expenses are recorded. Petitioners contend that the

correct amount of depreciation for the pipeline greatly exceeds the

amount allocated by the Department and that such an allocation is

distortive. Petitioners argue that, for the final results, the

Department should recalculate the depreciation expenses for this

complex by (1) reducing Husky's share of total depreciation at this

complex by Husky's share of depreciation on the pipeline and (2)

attributing Husky's share of depreciation on the pipeline exclusively

to sulphur production.

Furthermore, petitioners argue that Husky failed to report liquid

storage costs at this complex. Petitioners contend that as a result of

this failure, less of the complex-wide depreciation expenses at this

complex are being allocated to sulphur production than would be the

case if Husky had reported these costs. Petitioners argue that the

Department should require Husky to report the liquid storage costs at

this facility and should include such costs in the sulphur costs used

in allocating plant-wide depreciation and in its calculation of COM and

CV of Husky's liquid and formed sulphur in the final results.

Husky argues that the Department overstated depreciation at this

facility. Husky argues that petitioners assumes that Husky allocates a

separate depreciation expense for sulphur handling at this facility in

the normal course of business and should, therefore, not be permitted

to allocate the cost. Husky asserts that it submitted actual costs to

the Department and certified the reliability of that data to the

Department. Husky argues that it clearly stated that ``[d]epreciation

is not allocated to any products in the normal course of business.''

March 1, 1996 Husky Supplemental Questionnaire Response. Husky

maintains that it cannot produce a separate depreciation expense for

sulphur handling at this facility if one does not exist.

Husky contends that it has reported all of the costs associated

with sulphur handling at this facility, including its portion of the

sulphur pipeline. Husky argues that a newspaper article describing this

facility generally, and cited by petitioner in support of its argument

in no way substitutes for Husky's certified submissions of factual

data. Husky asserts that the numbers that appear in that article are

not recorded or in any way related to Husky's books and cannot be

verified by the Department and that the Department cannot base Husky's

depreciation expense on a newspaper article when Husky has provided

actual data. Husky argues that the depreciation at that facility was

actually overstated because the Department included certain indirect,

general facilities expenses in the allocation of depreciation. Husky

asserts that the Department should recalculate the expenses in

accordance with the allocation in Husky's case brief and supplemental

cost response. See comment 2.

Department Position: We agree with Husky. The record does not

indicate that Husky maintains a separate depreciation expense for the

sulphur handling facility at this particular facility. We agree with

Husky that there is no basis in these reviews to use information from a

newspaper article rather than information submitted by the respondent

which is subject to verification. Therefore, it was appropriate for

Husky to allocate depreciation to sulphur handling at this facility

based on costs.

Comment 10

Petitioners argue that the Department failed to use appropriate BIA

for the COM for a sulphur-producing facility for which Husky failed to

report costs. Petitioners point out that the Department used the

highest COM calculated for a facility for which Husky reported cost

data and applied that COM to this facility. Petitioners contend that,

under the Department's established practice the COM of sulphur produced

at the facility for which Husky did not report costs is considered

higher than the COM of sulphur produced at the facilities for which

Husky elected to provide cost data. (Otherwise, petitioners assert,

Husky would have reported cost data for this facility.)

Furthermore, petitioners argue, Husky incurred liquid loading and

block storage costs (plus associated depreciation expenses) at the

facility during the period of review (POR), and the COM calculated for

the liquid sulphur facility which the Department used as BIA did not

include amounts for these expenses. Petitioners argue that,

accordingly, the Department improperly excluded costs that the record

demonstrates were incurred at the facility in question. Petitioners

assert that the Department has recognized that a calculated BIA margin

may not exclude costs that the record shows the respondent incurred,

citing the Notice of Amended Preliminary Determinations of Sales at

Less Than Fair Value: Antidumping Duty Investigations of Pure and Alloy

Magnesium from The Russian Federation and Pure Magnesium from Ukraine,

60 FR 7519, 7520 (February 8, 1995). Petitioners argue that, in light

of the fact the COM for this facility is presumed to be higher than the

calculated COMs and the fact that the calculated liquid sulphur COM

used by the Department as BIA does not include the costs of liquid

loading, block storage and associated depreciation expenses incurred at

the facility, the Department should recalculate COM for this facility

by using the highest costs on record for each component of the COM of

liquid sulphur as calculated at other Husky facilities for the final

results.

[[Page 37978]]

Husky argues that it did not ``elect'' facilities for which to

report costs. Husky contends that it responded to the Department's

request for costs accounting for 90% of Husky's production. Husky

asserts that, based on the Department's lack of clarity regarding this

facility and refusal to accept Husky's full and verifiable cost data at

that facility in the 1991/92 review, Husky did not provide costs at

that facility in this review. Husky argues that, given the confusion

regarding the term ``production'' in this case and conflicting messages

concerning the Department's interest in costs at this facility, there

is no basis for inflating Husky's costs as petitioners suggest. Husky

argues that the Department should reverse its decision to impose any

BIA at this facility and to penalize Husky for confusion which Husky

did not create.

Department Position: We disagree with petitioners and, in part,

with Husky. Husky should have reported the costs for this facility. In

the supplemental cost questionnaires of February 2, 1996, we stated

that Husky must account for at least 90% of its total production volume

in reporting its costs. Furthermore, in those supplemental cost

questionnaires, we specifically asked Husky to provide the operating

statements for this facility:

Please provide the 1993 operating statements for [ ].

If no operating statements are prepared for the facilities, or if

such statements do not exist, provide complete expense, revenue, and

production data, and provide copies of all internal management

reports showing revenues, expenses, and production volumes of all

products manufactured by the facilities during 1993.

Supplemental Questionnaire Concerning the 1992/93 Administrative Review

of the Antidumping Duty Finding on Elemental Sulphur from Canada,

February 2, 1996. Language in the supplemental questionnaire for the

1993/94 period includes the same language, but requests information for

1994. The name of the facility under discussion in this comment appears

in brackets in both questionnaires.

Furthermore, our decision not to use costs from this facility

during the 1991/92 review period was based on the facts of that review,

and in no way negates our requests for information regarding the

facility in subsequent reviews, or precludes us from using the costs

from that facility in future reviews. Further, use of the highest

calculated COM from among facilities for which Husky reported costs is

sufficiently adverse.

Comment 11

Petitioners argue that the Department should exclude the production

costs from a certain Husky facility from the weighted-average COM for

the final results. Petitioners assert that Husky 1) failed to report

labor costs for the sulphur handling facility, and 2) did not state

whether the total depreciation amount determined for this particular

facility was allocated to particular sections in the normal course of

business, so that the Department cannot determine whether Husky records

separate depreciation for the sulphur handling facility. Petitioners

argue that, by utilizing this facility's cost, the Department permits

Husky to manipulate foreign market value by self-selecting the

facilities for which it is willing to provide cost data. The inclusion

of this facility in the calculation of weighted-average COM,

petitioners argue, further rewards Husky's failure to provide cost data

for the facility discussed in Comment 10.

Petitioners assert that, if the Department continues to include

this facility's production costs in the calculation of the COM and CV

of Husky's sulphur, it should adjust the reported production volume so

that it reflects only Husky's share of the facility's production.

Petitioners contend that, in the preliminary results calculations, the

Department erred by using the total volume of liquid and formed sulphur

sold at the facility, rather than Husky's share of total production, in

its calculation of the weighted-average COM of Husky's liquid sulphur.

Husky argues that the costs at this particular facility are

legitimate and relevant to these reviews. Husky contends that

Petitioners have themselves pointed out that it is established

Department practice to calculate a weighted-average COM for subject

merchandise based on the respondent's costs at all plants producing the

subject merchandise. Husky argues that the Department must reject what

it characterizes as petitioners' attempt to manipulate the Department

into inflating and distorting Husky's verifiable, weighted-average

costs.

Department Position: We agree with Husky that it is the

Department's practice to calculate a weighted-average COM for the

subject merchandise based on the respondent's costs at all plants

producing the subject merchandise. Therefore, we will continue to

include costs from this facility in our calculation of the weighted-

average cost of Husky's sulphur production. However, we agree with

petitioners that, in calculating that weighted-average cost for the

preliminary results, we erred in assigning to this facility a weight

based on all sulphur production at the facility; for the final results,

we have assigned it a weight based on Husky's share of sulphur

production at the facility, as we have done with other facilities in

our calculation.

Comment 12

Petitioners argue that the Department should make two adjustments

to the calculation of Husky's general and administrative (G&A)

expenses. First, the Department should exclude Husky's nonoperating

income in its calculation of Husky's G&A expenses. Petitioners contend

that Husky improperly offset its G&A expenses with nonoperating income

which consists of rental income (for both review periods) and gains

realized on the disposal of certain unidentified assets (for 1993/94).

Petitioners assert that rental income represents income from a separate

line of business and, in accordance with Department practice, should

not be deducted from G&A expenses. Petitioners argue that, because

there is no evidence on record that the gains realized on the disposal

of certain assets were realized on the sale of sulphur assets and thus

were linked to the production of subject merchandise, those gains

should not be deducted from G&A.

Petitioners argue that Husky failed to explain why reducing its G&A

expenses with non-operating income is appropriate. Petitioners contend

that it is Department practice, which has been upheld by the Court of

International Trade, to require respondents to bear the burden of

proving their right to adjustments. Koyo Seiko v. United States, Ct.

No. 93-08-00448, slip op. 95-171 (CIT 1995); NSK, Ltd. v. United

States, 825 F. Supp. 315, 321 (CIT 1993).

In addition, petitioners contend that the Department improperly

failed to include, in the calculation of G&A expenses for Husky, G&A

expenses incurred by Husky on behalf of its parent, Husky Oil

Operations Ltd. (HOOL).

Husky contends that the Department properly included Husky's

nonoperating income in, and excluded certain G&A expenses from, the

calculation of Husky's G&A expenses. Husky argues that it reported G&A

expenses in this review in accordance with the Department's decision in

the 1991/92 review. Husky contends that, in that review, the Department

included the nonoperating income amount for rental

[[Page 37979]]

income, after verifying that associated expenses were included in the

reported cost. Husky contends that the Department was not concerned

with inclusion of the rental income, as can be seen from the public

verification report in that review. Husky argues that petitioners'

general discussion of Department practice disregards the Department's

practice in this case, the most relevant of the Department's recent

decisions.

Husky maintains that the Department also determined in the 1991/92

review that it was unnecessary for Husky to include in G&A the G&A

expenses considered to be insignificant. Husky maintains that, contrary

to petitioners' understanding, HOOL performs all sale related services

for Husky, which is the corporate parent. Husky argues that, based on

the Department's decision to exclude the G&A expense incurred by Husky,

the corporate parent, in the prior review and the overall

insignificance of the expense, the Department should reject

petitioners' request to include it.

Department Position: We agree with Husky. For these reviews, Husky

reported that these non-operating expenses were related to production.

Because we have no evidence to the contrary, we have continued to

include these items in the calculation of G&A.

Because sales of subject merchandise are handled by HOOL, a portion

of G&A incurred by HOOL is relevant to sulphur production. The

corporate parent, Husky, does not maintain its own personnel and the

portion of Husky G&A expenses which are not incurred by a Husky

subsidiary and which could be allocated to sales of all Husky

merchandise including sulphur is not significant in these reviews.

Therefore, we have continued to exclude the G&A incurred by Husky from

the calculation of G&A allocated to sulphur.

Comment 13

Petitioners argue that the Department should include at least a

portion of sulphur recovery costs in its calculation of the COM and CV

of Husky's sulphur. Petitioners argue that the Department should

require Husky to report the costs of sulphur recovery at each of the

facilities for which it reported costs, in accordance with: (1) 19

U.S.C. section 1677b(e)(1)(A), which expressly requires that the cost

of ``fabrication or other processing of any kind'' be included in CV;

(2) generally accepted cost accounting principles, which require all

post-split-off costs to be included in the cost of producing by-

products; (3) the Department's practice in cases in which by-products

are the subject merchandise, which requires that all-after separation

costs be included in CV; (4) the Department's practice in cases in

which by-products are not the subject merchandise, which requires that

all after-separation costs be assigned to the by-product; (5) the

Department's cost initiation memorandums in the 1992/93 and 1993/94

administrative reviews in which the Department included the cost of the

``sulphur plant'' (sulphur recovery unit) and ``plant supporting

facilities'' (sulphur handling) in its calculation of the cost of

producing sulphur; (6) record evidence that the sales values of sulphur

and natural gas on a per metric ton basis were roughly equivalent from

the mid-1980s through the early 1990s; and (7) the extensive record

evidence that sulphur revenues were, and continue to be, important

considerations in decisions to develop and operate major sour gas

facilities.

Petitioners contend that, although the Department determined not to

include all such costs in the COM and CV of sulphur in the 1991/92

administrative review, it did not consider whether a portion of sulphur

recovery costs should be allocated to sulphur production. Petitioners

argue that at least a portion of sulphur recovery costs should be

allocated to sulphur production for the reasons enumerated above and

because Husky made the decision to sell sulphur in both the home market

and the United States during the POR and derived significant revenues

from those sales. Accordingly, petitioners argue, the Department should

require Husky to submit sulphur recovery cost data and include at least

a portion of these costs in the COM and CV calculated for Husky for the

final results.

Husky argues that petitioners suggest that the Department resurrect

the most fundamental of all of the decisions made in the 1991/92

review--the split-off point for the sulphur by-product. Husky contends

that, contrary to petitioners' allegations, the Department absolutely

and unequivocally considered whether a portion of the sulphur recovery

costs should be allocated to sulphur production in the 1991/92 review.

Husky argues that the first half of the Department's decision in the

1991/92 review was that the only costs allocable to sulphur are those

incurred subsequent to the split-off point, the point at which sulphur

exits the sulphur recovery unit. Husky contends that petitioners have

not supported and cannot support its position that costs incurred prior

to the split-off point are in any way allocable to the sulphur by-

product, particularly when the facts have not changed.

Department Position: We agree with Husky. In the 1991/92 review, we

determined that sulphur is a by-product and that all costs incurred up

to and including the sulphur recovery unit of the gas processing

facility (the split-off point) are allocable solely to natural gas

production. We determined that Husky must incur the costs in the

sulphur recovery unit in order to refine natural gas. Only costs

incurred after the liquid sulphur exits the sulphur recovery unit of

the gas processing facility relate to the production of sulphur. See

1991/92 Final (Comment 3). The production process has not changed since

the 1991/92 final, and petitioners have submitted no new information

for the Department to reverse this issue. Therefore, consistent with

the 1991/92 final we are not assigning any costs of the sulphur

recovery unit to sulphur production.

Comment 14

Petitioners argue that the Department erred in using the weighted-

average calculated cost for liquid and formed sulphur in this review as

BIA for Husky's sales of powdered sulphur. Petitioners agree with the

Department's determination, in the preliminary results of the 1992/93

review, that Husky failed to report the required cost data for powdered

sulphur. Petitioners assert that the Department must presume, as BIA,

that the margin on Husky's U.S. sales of powdered sulphur is higher

than the margin on its sales for which it provided cost information.

Petitioners argue that the Department should apply the highest non-

aberrational margin calculated for any of Husky's sales during the

period of review (POR) as BIA for each of Husky's U.S. sales of

powdered sulphur.

Husky argues that it was unable to provide the sulphur cost data in

its original sales response because the company which produced powdered

sulphur was sold during the POR. Husky contends that it tried in good

faith to gather the requested data and did not refuse to cooperate or

significantly impede the proceeding. For this reason, Husky asserts

that the Department is under no legal obligation to impose a more

severe BIA rate for the powdered sulphur in question.

Department Position: We agree with Husky. Husky has cooperated with

the Department in this review. The Department stated in Antifriction

Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From

France, et al.; Final Results of Antidumping Duty Administrative

Reviews, Partial Termination of Administrative Reviews, and Revocation

in Part of Antidumping Duty Orders, 60 FR 10900 (February 28, 1995),

that:

[[Page 37980]]

In cases where the overall integrity of the questionnaire

response warrants a calculated rate, but a firm failed to provide

certain FMV information (i.e., corresponding HM sales within the

contemporaneous window or CV data for a few U.S. sales), we applied

the second-tier BIA rate * * * and limited its application to the

particular transactions involved. See Final Results of Antidumping

Administrative Reviews and Revocation in Part of the Antidumping

Duty Order, Antifriction Bearings (Other Than Tapered Roller

Bearings) and Parts Thereof from France, et al., 58 FR 39729, 39739

(July 26, 1993).

Accordingly, we applied, as partial BIA for the powdered sulphur

transactions where Husky was unable to provide us with the requested

information, the highest rate ever applicable to Husky in this or any

previous review. Therefore, we have continued to apply Husky's

calculated margin on sales of liquid and formed sulphur from this

review as BIA.

Comment 15

Petitioners argue that Husky failed to provide required information

regarding its property, plant and equipment writedowns. Petitioners

note that the Department's supplemental cost questionnaire in the 1992/

93 review specifically required Husky to state whether changes in

expected future cash flows from sulphur reserves were taken into

account in property, plant and equipment writedowns, and if so, to

report these writedowns. Petitioners argue that Husky did not answer

these questions based on the Department's finding in the Final Results

of the 1991-1992 Administrative Review that such writedowns were

inapplicable to sulphur. Petitioners allege that the Department's

finding in the 1991/92 review that writedowns are for property, plant

and equipment at the plant were inapplicable to sulphur is erroneous

because the writedowns are for property, plant and equipment, at a

particular plant, including the sulphur handling plant and equipment

located after the point of recovery. Since all costs are incurred after

the point of sulphur recovery at one particular plant, petitioners

further argue that Husky should report any writedown of property, plant

and equipment for the 1992/93 review.

Husky argues that property, plant and equipment writedown

information is unnecessary to the Department's analysis. Husky contends

that, since petitioners did not appeal the Department's decision to

exclude the writedown in the 1991/92 review, when all the costs for the

particular facility in question were reported, petitioners have no

basis for its complaint in this review.

Department Position: We agree with Husky that writedowns are for

property, plant and equipment at the plant are not necessary for our

analysis. In the 1991/92 review, we excluded Husky's property, plant

and equipment writedown from the calculated sulphur costs. In that

review, we determined that ``since such costs are associated entirely

with exploration and development of mineral reserves, we consider this

type of writedown to be a cost incurred prior to the sulphur production

split-off point. As such we consider these costs to be part of Husky's

natural gas operations.'' 1991/92 Final. There are no facts specific to

these reviews that warrant our including a portion of property, plant

and equipment writedown in the cost of sulphur. Therefore, we have

continued to exclude the property, plant and equipment writedown for

the calculation of COM.

Comment 16

Mobil argues that it supplied the information requested by the

Department and that the Department cannot apply BIA simply because it

lacks the information that it believes is necessary to calculate a

margin, but which it never requested. Mobil argues that, in this case,

it clearly supplied the Department with a complete set of data that

fully answers the questions asked. Mobil states that it even went so

far as to calculate two separate sets of cost data in an effort to

comply with the Department's requirements. Mobil argues that should

these complete responses for some reason had not satisfied the

Department, then the Department had an obligation to ask subsequent

questions or give Mobil notice that its response was deficient before

resorting to BIA.

Mobil argues that, to the extent that the Department gave Mobil

notice it had concerns about it response to the original questionnaire,

Mobil responded by supplying the Department with alternative data.

Mobil argues that the Department resorted to BIA without informing

Mobil of any deficiencies in this second set of data, and, apparently

without even considering it.

Mobil argues that the Department may not properly apply BIA when a

respondent has provided all of the information requested. Mobil cites

Olympic Adhesives, Inc. v. United States, (Olympic Adhesives) 899 F.2d

1565, 1574 (Fed. Cir. 1990), which states that section 1677e(b)

``clearly requires noncompliance with an information request before

resort to the best information rule is justified * * *.'' and Usinor

Sacilor, Sollac, and GTS v. United States, 872 F.Supp. 1000, 1010 (CIT

1994), which Mobil contends stated that the Department erred in

applying BIA when respondent reported product codes according to actual

yield strength, rather than industry standards, in absence of the

explicit Department instructions. Mobil argues that this is true even

if the Department discovers that it has not asked the right questions.

Mobil cites Olympic Adhesives, 899 F.2d at 1574, which states that the

Department ``may not properly conclude that resort to the best

information rule is justified in circumstances where a questionnaire is

sent and completely answered, just because the ITA concludes that the

answers do not definitely resolve the overall issue presented.'' Mobil

also cites to Outokumpu Copper Rolled Prods. AB v. United States,

(Outokumpu Copper) 829 F. Supp. 1371, 1386 (CIT 1993).

Mobil argues that in Outokumpu Copper (829 F. Supp. At 1387), the

Department attempted to resolve an apparent conflict in the record by

asking a supplemental question, but did not specifically refer to the

conflict nor request the respondent to clarify its responses. Mobil

contends that, because the respondent's answer did not resolve the

issue, the Department applied BIA. Mobil notes that the CIT reversed

this decision based on the fact that the respondent had completely

answered the question asked, stating that if Commerce desired an

explanation of the alleged conflict, it should have expressly requested

one. Mobil also cites to Hussey Copper, Ltd v. United States, 852 F.

Supp. 1116, 1120 (CIT 1994), which Mobil contends argues that Commerce

erred in rejecting respondent's constructed prices because the

respondent had no reason to believe that its methodology was

impermissible and the Department had never indicated during the review

that the method was unacceptable.

Petitioners argue that Mobil failed to make a good faith effort to

respond to the Department's cost questionnaires, and did not provide

cost data that could possibly be used to calculate the COP and CV of

its sulphur. Petitioners contend that in the preliminary results, the

Department thoroughly considered the question of whether Mobil

cooperated with the Department in this review and for a multitude of

very good reasons determined that Mobil failed to provide a significant

amount of requested information. Petitioners contend that Mobil's

argument that it has been cooperative and has responded to the best of

its ability is merely a reflection of the fundamental strategy that

Mobil has pursued throughout this

[[Page 37981]]

proceeding. Petitioners contend that Mobil's strategy has been to claim

that sulphur is a waste product and that, for that reason, Mobil does

not maintain separate cost data for sulphur in its normal accounting

system, and, therefore cannot report sulphur costs in a manner that

would permit its actual sulphur COP and CV to be determined.

Petitioners contend that this claim is false, that sulphur is a

commercial product that is the source of substantial revenues to Mobil

and other Canadian producers. Petitioners argue that Mobil has reported

that it does not separately account for any of the joint products of

natural gas production, including what it describes as its primary

products such as oil, gas, condensates, and NGLs.

Petitioners argue that, if Mobil's accounting system does not

routinely record sulphur cost data separately, that does not mean that

Mobil does not have in its possession, or have access to, the

information necessary to comply with the Department's information

requests. Petitioners contend that, while it may be true that under

Mobil's normal accounting system the costs of producing and handling

sulphur are labeled as something other than sulphur costs or that

sulphur costs are commingled with certain other costs of producing the

joint products, Mobil somewhere has a record of, or access to, cost

data for sulphur that could be used to provide the costs that the

Department has determined are sulphur production costs. Petitioners

argue that, despite this, Mobil has made no real effort to derive

sulphur costs from the information that it does have or could obtain

from the operators of its facilities.

Petitioners maintain that the record conclusively establishes that

information sufficient to comply with the Department's requests was

readily available to Mobil. Petitioners argue that Husky provided cost

information for certain facilities, but that Mobil did not. Petitioners

argue that, if sufficient data are available for facilities operated by

parties other than Mobil to comply with the Department's requests, then

Mobil also possesses sufficient information for facilities it owns and

operates. Petitioners argue that Mobil admitted that its records

contain full details of all costs incurred at the facility it owned and

operated, including sulphur handling cost, yet failed to provide the

required information for that facility. Petitioners contend that the

record also reflects that where Mobil made even a limited effort to

obtain requested data, it was successful. Petitioners cite, as an

example, Mobil's ability to obtain estimates of sulphur forming cost

for some sulphur-producing facilities it did not operate merely by

making telephone calls to plant operators, and its ability to provide

what Mobil described as liquid sulphur handling costs for certain

facilities.

Petitioners contend that Mobil attempts to diminish the importance

of its failure to report the information requested by the Department by

claiming that the Department asked Mobil to report costs using a

methodology tailored to Husky's accounting system. Petitioners maintain

that, contrary to this claim, the questions asked by the Department

were not tailored to Husky's accounting system; rather, during the

1991/92 review, the Department determined what it believed to be the

proper methodology for calculating the COP and CV of sulphur.

Petitioners argue that, in the final results of review of the 1991/92

review, the Department determined that the sulphur recovery unit must

be included in the COM of sulphur, and that this methodology was

reflected in the cost deficiency questionnaire sent to Mobil, which

required these costs to be included in the reported COM of sulphur.

Petitioners also argue that Husky, like Mobil, reported that it does

not separately account for sulphur in its accounting system; however,

petitioners argue, Husky, for the most part, broke out costs in the

manner required by the questionnaire. Petitioners contend that the same

data were available to Mobil, and that there is no evidence that Mobil

made any attempt to obtain these data.

Petitioners maintain that Mobil is attempting to manipulate the

outcome of this review by claiming that the Department can only use the

sulphur cost data that it chose to report, which are unrepresentative,

grossly understated, and allocated to sulphur using a patently wrong

allocation method. Petitioners argue that the Department should reject

this approach because, in circumstances such as these, it has been the

Department's consistent practice to apply total BIA. Petitioner state

that this case is analogous to Fresh Cut Flowers From Mexico; Final

Results of Antidumping Duty Administrative Reviews, 60 FR 49569

(September 26, 1995), where the Department found respondents that had

submitted multiple questionnaire responses to be uncooperative because

answers to the Department's supplemental questionnaires were

misleading, and significantly impeded the progress of the review.

Petitioners argue that this case is distinguishable from Certain

Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-to-

Length Carbon Steel Plate from Canada: Final Results of Antidumping

Duty Administrative Reviews 61 FR 13815 (March 28, 1996) (Carbon Steel

from Canada). Petitioners contend that, unlike the respondent in Carbon

Steel from Canada, Mobil provided costs that were unusable and severely

understated, and that in Carbon Steel from Canada, the respondent had

provided complete information for the mill producing the vast majority

of the subject merchandise and supporting documentation for its

reported costs. Petitioners contend that Mobil did not provide complete

information for any facilities which produce Mobil-owned sulphur for

sale, nor did it provide any supporting documentation for the costs

that it chose to provide.

Petitioners argue that, contrary to Mobil's assertions that it

answered the questions asked and provided usable data (see comments 18-

23), Mobil did not provide useable cost data in either Appendix SQ-13

or Appendix SQ-11 of its supplemental response. Instead of complying

with the Department's instruction that it report all costs incurred

after sulphur recovery, Mobil reported what it described as the total

operating costs (less those costs that could be clearly identified as

costs incurred prior to the split-off point) incurred in the production

of all products at each facility which produces ``marketable'' sulphur.

Petitioners claim that Mobil used an inappropriate methodology, the

barrel of oil equivalent (BOE) methodology, to allocate a portion of

the costs to liquid sulphur production. According to petitioners,

Mobil's BOE methodology should not be used because the market value of

sulphur derives from its value in fertilizer production rather than its

thermal heat value. Petitioners state that, in the 1991/92

administrative review, the Department was unable to verify the basis

for the BOE Mobil assigned to sulphur, and noted in the verification

report that this methodology, ``might not be an appropriate basis for

the allocation of joint costs.'' Petitioners cite Mobil's supplemental

response where Mobil reported that it employs the BOE methodology to

account for the appropriate volume of natural gas and oil reserves on a

uniform basis. In the supplemental response, petitioners claim, Mobil

specifically noted that sulphur is not usually included in the

determination of reserve volumes, and that the only time that BOE is

used for sulphur is in conjunction with equalization of sulphur volumes

in a planning or performance management study. Petitioners further

argue that Mobil's BOE method is not consistent

[[Page 37982]]

with Statement of Financial Accounting Standard Board (FAS) No. 19. In

summary, petitioners claim that the allocation of costs to sulphur

based on a BOE allocation factor is erroneous, understates the cost of

producing sulphur, and therefore cannot be used to derive COM.

Petitioners claim that Mobil was inconsistent in the application of the

BOE methodology because it did not apply the BOE allocation factor to

its total plant costs. Instead, Mobil applied the BOE factor to its

total plant costs ``less those costs that could be clearly identified

as costs incurred prior to the split-off point.'' Thus, petitioners

argue, Mobil applied its artificially low BOE allocation factor only to

the costs which the Department determined to be sulphur costs, and to

certain other costs which Mobil could not identify as non-sulphur

costs.

Petitioners further argue that Mobil made significant improper

offsets to the costs reported in Appendix SQ-11 of the supplemental

response. Petitioners note that, for some facilities, Mobil offset the

reported plant costs with net income from ``contract services,'' and

for other facilities, Mobil offset the reported costs by an amount for

``joint interest recoveries.'' Petitioners contend that Mobil provided

no explanation of why such offsets are necessary and provided no

support for the calculation of the cost data contained in Appendix SQ-

11.

Department Position: We disagree with Mobil. Mobil did not provide

the cost data we requested. In the original questionnaires, we

specified that, if the subject merchandise were manufactured at more

than one facility, the reported COM should be the weighted-average

manufacturing cost from all facilities. Mobil responded that it

provided the weighted-average COM of sulphur for all facilities which

produced marketable sulphur. Mobil did not base the weighted-average

COM in the original responses on costs from all its facilities which

produced sulphur or even all facilities that produced marketable

sulphur.

We further disagree with Mobil's claim that it provided the data

requested by the Department in its response to the Department's

supplemental cost questionnaire. (Any reference to question 11 of the

Department's 1992/93 supplemental cost questionnaire also pertains to

question 12 of the Department's 1993/94 supplemental cost

questionnaire. Any reference to question 14 of the Department's 1992/93

supplemental cost questionnaire also pertains to question 15 of the

Department's 1993/94 supplemental cost questionnaire.) In question 11

of our February 2, 1996 supplemental cost questionnaire, we requested

that Mobil ``provide detailed worksheets breaking out costs for 1994

for producing and handling sulphur by cost center or functional cost

area,'' to ``clearly describe how, for each facility, the costs in the

worksheet were determined and identify the source of your numbers,''

and to ``include in the worksheets the costs before the allocation,

explain what those costs represent, and clearly show the allocation

factor used.'' We asked further that Mobil ``clearly explain the

allocation methodology and the allocation base, and why you chose that

methodology for your reported costs.'' See Mobil 1992/93 and 1993/94

supplemental cost questionnaires both dated February 2, 1996 at 2-3. In

Appendix SQ-13 of Mobil's supplemental cost questionnaire responses,

Mobil reported a single cost amount for each of the facilities for

which it reported costs. The narrative explanation provided in the

response states that the costs provided in that appendix were generally

obtained from information provided by facility handlers, which

indicates that these costs include forming, loading, and general

facilities expenses.

First, we note that, in response to the questions regarding the

supplemental cost questionnaires which Mobil raised at the meeting on

February 8, 1996 with Department officials (see Memorandum from Karin

Price to the File, dated February 20, 1996, ``Meeting and telephone

conversation with counsel for Mobil Oil Canada, Ltd. in the 92/93 and

93/94 reviews of elemental sulphur from Canada'' (Mobil Memorandum)),

the Department stated that Mobil should provide cost information as

recorded in its records. However, we also requested that Mobil provide

a statement received in the normal course of business from each

facility which it does not operate, and explain how these statements

were used to determine the reported sulphur costs. See Mobil

Memorandum. Mobil did not provide any such statements, nor did it

explain any attempts made to obtain such statements. We also requested,

in question four of the supplemental cost questionnaires, that Mobil

provide its operating statements for two specific facilities in each

review. We requested that, if Mobil were unable to provide those

operating statements, it alternatively provide complete expense,

revenue, and production data and all internal management reports

showing this information for all products manufactured by the facility.

Mobil provided only the audited financial statement for one facility.

However, Mobil is not the operator of that facility and did not provide

a copy of any statements it received from that facility in the ordinary

course of business. The financial statement did not include the

detailed information that would normally be included on an operating

statement. Furthermore, Mobil did not provide the detailed information

we requested as an alternative to an operating statement.

Mobil responded that it did not have operating statements as

contemplated by the Department for two owned and operated facilities

specifically requested by the Department. Mobil prepared ``income

statements'' for these facilities for the purposes of the supplemental

cost questionnaire response. Mobil states on pages 6-7 of its

supplemental cost questionnaire responses that the statements were

prepared from information in the financial database used to prepare

Appendix SQ-11 of the supplemental cost questionnaire responses, as

well as from Mobil's audited financial statements. The information in

the income statements indicates that Mobil has more detail regarding

its costs for the two facilities than is provided in Appendix SQ-13.

We disagree with Mobil that the costs reported in Appendix SQ-13

should not have been broken out to the extent Mobil could do so.

Appendix SQ-13 was provided in response to our request in question 14

of the supplemental cost questionnaire for an explanation of how the

costs for each facility were weight averaged to determine the COM to

provide worksheets showing the calculation. For the facilities for

which Mobil reported liquid sulphur costs as well as formed sulphur

costs, the total cost amount had to be split between liquid handling

costs and forming costs. However, Mobil provided no explanation or

detail as to how this was done.

Mobil has claimed in its briefs that the information necessary for

the Department's margin calculations is alternatively provided in

Appendix SQ-11. The Department requested that Mobil provide costs for

its facilities accounting for at least 90 percent of its sulphur

production volume. However, Mobil has only reported liquid sulphur

costs for a few facilities which represent less than 90% of production.

The information provided in Appendix SQ-11 shows that Mobil should also

have included costs for several other of its facilities in order to

provide costs corresponding to 90% of production, as requested by the

Department.

The BOE methodology used to allocate costs to sulphur in Appendix

SQ-11 is based on a relative energy

[[Page 37983]]

content and is generally used to equate volumes of oil and gas. Gas and

oil are energy sources and therefore it is appropriate to use the BOE

methodology to uniformly account for volumes of oil and gas reserves.

Sulphur is not purchased for its heat or energy content and therefore

an allocation based on BOE is not appropriate. Mobil also stated that

it excluded certain costs that it determined were related to oil and

gas. We cannot determine whether the costs reported in Appendix SQ-11

are representative of Mobil's sulphur production costs and which costs

are included. Mobil stated, regarding the information in Appendix SQ-

11, in a letter dated April 2, 1996, it was aware that ``the Department

does not intend to use that information to calculate COP and CV.''

Therefore, we cannot rely upon the data in Appendix SQ-11 to calculate

COP and CV in these reviews.

We further disagree with Mobil's claim that we had an obligation to

ask subsequent questions if we were not satisfied with Mobil's

responses. When a respondent has been asked for certain information in

the questionnaire and sent a supplemental with more specific requests

for data, and has not provided it, that response is deficient. Not only

did the Department send the supplemental questionnaire to Mobil,

Department officials met with Mobil and clarified what we wanted Mobil

to report. See Mobil Memorandum.

We have found the deficiencies to be so extensive that Mobil's

responses cannot be used to calculate a margin. Although Mobil states

that it provided the information available to it in its records, it did

not provide the operating statements requested to show how its reported

costs were obtained. Mobil did not report costs for facilities

accounting for 90 percent of production volume as requested. We are not

able to determine if the data Mobil provided in Appendix SQ-11 is

representative of sulphur handling costs. Mobil did not provide any

support for the cost data provided in Appendix SQ-13. Therefore, we are

continuing to apply total BIA to Mobil.

We have addressed the specific deficiencies we found with Mobil's

cost questionnaire responses in comments 17-22 below.

Comment 17

Mobil argues that the Department did not request that it supply the

cost of pouring sulphur to block as part of its sulphur handling costs.

Mobil adds that, in any event, the plant cost data include block costs.

Mobil asserts that the Department states that it had specifically

requested that Mobil supply block costs in questions 11 and 14 of the

1992/93 supplemental cost questionnaire and in questions 12 and 15 of

the 1993/94 supplemental cost questionnaire and that Mobil failed to do

so. Mobil contends that the question 14 did not require Mobil to report

its block costs. Furthermore, Mobil argues, the block costs were

included in Mobil's response to question 11.

Mobil argues that in its cost response it reported sulphur handling

costs as defined by the Department in the preliminary results of the

1991/92 review and the underlying memorandum which, Mobil argues,

specifically excluded block costs. Mobil asserts that question 14 of

the supplemental cost questionnaire first asked Mobil to explain how

the costs from each facility were weight-averaged to determine the

reported COM, and then indicated that the reported costs should include

costs associated with pouring sulphur to block. Mobil argues that it

met with Department officials because the costs it originally reported

did not include block costs. Mobil contends that the Department told it

not to recalculate its costs in response to the questionnaire, but

simply to explain how the reported cost figure was calculated. Mobil

states that it acknowledged in its supplemental response, filed a few

weeks later, that it was aware that in the recently-released final

results of the 1991/92 review, the Department had reversed its position

on block costs; the Department decided that they should now be

included. Mobil argues that it did not know how to apply this

determination because it was made with respect to Husky, and because

Mobil did not have time to ascertain block costs before the

questionnaire due date. Accordingly, Mobil asserts, it indicated in its

supplemental response that it needed guidance from the Department on

how to treat block costs.

Furthermore, Mobil argues, in its initial response, omitting block

costs was in full accordance with the Department's policy at the time.

Mobil contends that the case analyst did not require Mobil to change

its previously-submitted costs by adding block costs and that the

Department failed to give Mobil any guidance as to how to comply with

the Department's recent change regarding inclusion of block costs.

Mobil contends that the Department may not apply BIA for failing to

provide information that was never requested.

Mobil argues that block costs are included in the second set of

cost data supplied by Mobil to the Department in response to question

11 of the supplemental cost questionnaire. Mobil argues that the

reported costs under this alternative methodology include more costs

than the Department requested. Mobil contends that the response to

question 11 is fully responsive in that it reported the costs

associated with producing and handling sulphur incurred after the point

at which hydrogen sulphide is split off from the main gas stream. Mobil

first explained that it accounts for costs on a facility, rather than a

product basis and that, in any event, no costs were attributed to

sulphur in its accounting system. Mobil contends that the only way to

respond to the Department's request was to report all operating costs

incurred at the facilities, including overhead, less those costs that

could be clearly identified as costs incurred prior to the split-off

point. Mobil asserts that it provided a detailed breakdown of costs, on

a plant-by-plant basis, for all of its sulphur-producing plants.

Mobil argues that because its normal accounting system does not

break out costs on a product-specific basis, Mobil allocated the costs

between the various products produced at each plant by using the

allocation basis that it routinely uses for internal purposes. Mobil

argues that these costs include all of the costs specifically

identified by the Department, including the costs for pouring sulphur

straight to block. Mobil notes that these costs included a number of

costs incurred before the split-off point. However, Mobil argues that

it should not be penalized for supplying the Department with a

conservative figure that represents an overstatement of cost.

Petitioners contend that the Department's supplemental cost

questionnaire specifically and unambiguously required Mobil to report

its block sulphur costs. Petitioners agree with the Department's

determination in the preliminary results of these reviews that Mobil

could not refuse to respond to a request for information based on a

preliminary determination in a previous review. In response to Mobil's

argument that the Department did not require the submission of new cost

data in the supplemental response, petitioners claim that the language

of the supplemental cost questionnaire clearly requires Mobil to report

block sulphur costs.

Petitioners argue that the costs provided by Mobil in Appendix SQ-

11 are not sufficient because they neither separately break out any of

the costs associated with producing and handling sulphur, nor do they

break out block sulphur costs.

Department Position: We disagree with Mobil. We specifically

required in question 11 of the cost supplemental

[[Page 37984]]

questionnaire, that ``all costs after the split-off point in the joint

production process for refining natural gas and elemental sulphur

should be reported, such as costs associated with sulphur recovery,

pouring sulphur straight to block, * * *.'' Question 14 of the

supplemental cost questionnaire required that ``the reported cost of

manufacturing should include costs * * * associated with pouring

sulphur straight to block * * *.'' Regardless of Mobil's presumption

that the Department excluded block costs in the preliminary results of

the 1991/92 review, we required that block costs be included in the

reported COM of these reviews. Despite the Department's request, Mobil

presumed that the block costs were not necessary in these reviews

because the final results of the 1991/92 review were still pending.

That such costs were not used in the preliminary results of a previous

administrative review does not mean that a respondent can unilaterally

decide that such costs need not be reported in another administrative

review of the same case, especially when it was specifically requested

to report such costs. Mobil was required to be guided by the explicit

language of the questionnaire to which it was responding.

While Mobil argues that it provided block costs in response to

question 11 in Appendix SQ-11, it stated that the provided costs

include a number of costs before the split-off point and it did not

segregate any sulphur costs or indicate if and where block costs were

reported. We disagree with Mobil that such costs are necessarily

conservative and represent an overstatement because these costs were

allocated using an inappropriate methodology. See response to comment

16.

Comment 18

Mobil argues that it provided production costs for at least 90% of

its production. Mobil contends that in its original response, it

reported the handling costs for as many plants as it could. Because

Mobil did not operate the vast majority of facilities which produced

sulphur Mobil owned (i.e., owned but not operated facility), Mobil

claims, it had to rely on its operators to gather this data. Mobil

argues that it reported the handling costs to the best of its ability

given the limitations imposed by the failure of each of the operators

to cooperate. Mobil argues that the plant cost data provided by it in

its supplemental cost response included sulphur handling costs for all

of its production. Thus, Mobil argues, it fully responded to the

Department's request for cost data for at least 90 percent of its

sulphur production. Mobil argues that the Department ignored the

alternative data in Appendix SQ-11.

Petitioners argue that Mobil failed to provide cost data for

facilities that account for 90 percent of its production. Petitioners

claim that, in reporting costs used to calculate COP and CV, Mobil

based the COM of liquid sulphur on data from only a small number of

self-selected facilities as contained in Appendix SQ-13. Petitioners

assert that these plants account for much less than 90% of Mobil's

production of liquid sulphur. While petitioners acknowledge that

Appendix SQ-11 contains selected cost data for all of Mobil's

facilities, they assert that this cost data is not sulphur production

costs, but improperly allocated costs that understate the COM of

Mobil's sulphur. Petitioners further note that Mobil was aware that the

Department did not intend to use the data in Appendix SQ-11 to

calculate the COP and CV of sulphur.

Department Position: We disagree with Mobil. Mobil did not report

costs for its facilities accounting for 90% of its sulphur production

in Appendix SQ-13. Appendix SQ-13 contains Mobil's reported weighted-

average COM. Mobil provided only a single cost figure for each facility

reported and did not breakdown or explain the figure or provide support

documentation. While Mobil did report alternative information on all of

its facilities in Appendix SQ-11, the data provided was not based on

sulphur production costs. Mobil provided total facility costs and

stated that it excluded certain costs that it determined were solely

related to oil and gas. Mobil did not provide any support documentation

or an explanation of what costs were provided. Therefore, we cannot

determine whether the costs reported in Appendix SQ-11 are

representative of Mobil's sulphur production costs and which costs are

included. As noted in our response to comment 16, the submitted

information in Appendix SQ-11 is not sufficient to calculate COP and

CV.

Comment 19

Mobil argues that it provided a detailed breakdown of costs. Mobil

argues that the Memorandum from Holly Kuga to Joseph Spetrini,

``Whether to Use Best Information Available for Husky Oil Ltd. and

Mobil Oil Canada, Ltd. in the 1992/93 Administrative Review of

Elemental Sulphur for Canada,'' dated June 4, 1996, and also Memorandum

from Holly Kuga to Joseph Spetrini, ``Whether to Use Best Information

Available for Husky Oil Ltd. and Mobil Oil Canada, Ltd. in the 1993/94

Administrative Review of Elemental Sulphur for Canada,'' dated June 4,

1996, (collectively, Decision memorandum) states that Mobil failed to

provide a detailed breakdown of costs as requested in question 11 of

the supplemental cost questionnaire, and notes that Appendix SQ-13 of

Mobil's supplemental cost questionnaire listed a single cost amount for

each plant. Mobil argues that the Department's reasoning is faulty for

two reasons. First, Mobil argues, Appendix SQ-13 responded not to

question 11, but to question 14, which simply required Mobil to explain

how it had weight-averaged the costs from the different plants to

arrive at the cost of production reported in the original response.

Mobil contends that question did not ask for a detailed breakdown of

costs.

Secondly, Mobil argues that it provided in Appendix SQ-11 a

detailed, plant-by-plant breakdown of costs as the Department requested

in question 11. In this question, the Department asked Mobil to provide

all costs of sulphur incurred after the gas split-off point, including

the cost of the sulphur recovery unit.

Mobil asserts that in its Decision Memorandum, the Department

stated that it would not even consider Appendix SQ-11 on the grounds

that it included costs in the sulphur recovery unit which the

Department had decided should not be included in the cost of

production. Mobil states that the Department accused Mobil of failing

to provide a detailed breakdown of costs as requested in Question 11,

and yet refused to consider Mobil's completely responsive answer on the

grounds that it contained ``irrelevant'' costs.

Petitioners argue that Mobil failed to provide a detailed breakdown

of costs as required in question 11 of the supplemental questionnaire.

Petitioners assert that, although Mobil claims that the requested

breakdown of costs was contained in Appendix SQ-11, this data does not

satisfy the requirements of question 11 because it fails to identify

any of the cost incurred in producing sulphur and it does not clearly

describe how the costs were determined. Petitioner maintains that Mobil

failed to provide any support for the cost data contained in Appendix

SQ-11.

Department Position: We disagree with Mobil. Question 11 required

Mobil to provide worksheets which were to include a ``description of

each cost center or functional unit, and identify the costs included in

each.'' As noted above in Comment 16, Appendix SQ-

[[Page 37985]]

11, which was provided in response to question 11, does not contain a

breakdown of costs sufficient to determine where and how sulphur

handling costs are included in the reported costs. We required Mobil to

provide detailed worksheets breaking out costs for producing and

handling sulphur by cost center and functional cost area. We also

required Mobil to clearly describe how, for each facility, the costs in

the worksheets were determined, and identify the source of the numbers

and to clearly explain the allocation methodology and the allocation

base, and why Mobil chose this methodology for reporting its cost. The

data in SQ-11 does not satisfy the requirements of question 11.

Appendix SQ-11 does not identify any of the costs incurred in producing

sulphur nor does it describe how the costs were determined. Mobil also

failed to provide any support for the cost data contained in Appendix

SQ-11.

Our discussion of Appendix SQ-13 in the Decision Memorandum does

not indicate that Appendix SQ-13 was provided in response to question

11. Mobil provided cost information in both Appendix SQ-11 and Appendix

SQ-13. In question 14, we required Mobil to show how the worksheets

provided in response to question 11 tie to the worksheets provided in

response to question 14. Appendix SQ-13 was provided in response to

question 14. Therefore, the response to question 14 should have tied to

the worksheet provided in response to question 11. Based upon all of

the above, the Department concluded that Mobil's response with respect

to the requested cost breakout was seriously deficient.

Comment 20

Mobil points out that the Department stated in its Decision

Memorandum that Mobil failed to provide statements from operators of

the plants operated by parties other than Mobil and to explain how

these were used to calculate the sulphur handling costs. Mobil argues

that the statements from the operators used to determine the reported

sulphur handling costs are in the record and that the underlying data

was available for verification.

Mobil argues that in question 4 of the supplemental cost

questionnaire, the Department asked Mobil to provide operating

statements for two plants in each review, or, ``if no operating

statements are prepared for the facilities * * * provide complete

expense, revenue, and production data * * *.'' Mobil argues that it

provided a copy of the audited financial statement for one of the

plants, which Mobil believed to be responsive to the request for an

operating statement. Mobil also asserts that it explained that since it

did not prepare an operating statement for the other plant in the

ordinary course of business, it had followed the alternative method

specified in the question and prepared an income statement from the

financial database used to generate Mobil's financial statements. Mobil

argues that since the statement included complete expense, revenue, and

production data, Mobil fully complied with the alternative specified in

the questionnaire. The Decision Memorandum, Mobil asserts, merely

states that Mobil had been requested to supply an operating statement,

but ignored the fact that the Department had directed Mobil to provide

expense, revenue, and production data in the event the operating

statement did not exist. Mobil claims that the Department concluded

that it could not rely on the income statement because it was not kept

in the ordinary course of business.

Petitioners argue that Mobil failed to provide operating statements

of its plants which were operated by parties other than Mobil, and

failed to explain how costs of those plants were used to calculate its

sulphur handling costs as required by the supplemental cost

questionnaires. Petitioners contend that the Department clearly

required Mobil to provide these operating statements, and Mobil offered

no explanation for its failure to comply with the Department's

requests.

Petitioners argue that Mobil failed to provide the operating

statements for two of Mobil's plants in each review which were

requested in question four of the Department's supplemental cost

questionnaires. Petitioners argue question 4 stated that, if no

operating statements were prepared, or such statements did not exist,

Mobil was to provide complete expense, revenue, and production data, as

well as internal management reports. Petitioners assert that the

Department clarified this request by asking Mobil to provide statements

received in the normal course of business. Petitioners contend that

Mobil's submission of financial statements in lieu of operating

statements for one of the two plants was unresponsive to the

Department's request. Petitioners claim that the financial statements

do not contain the majority of the requested information and Mobil

offered no reason for the appropriateness of substituting financial

statements for operating statements. Petitioners note that Mobil also

did not submit revenue and production volume statements received in the

normal course of business. For the second plant in both reviews,

petitioners contend, Mobil did claim that operating statements were

unavailable but submitted income statements which do not detail

revenues and production volumes for the products produced at that

plant. According to petitioners, these statements should not be relied

upon because they were prepared solely for the purposes of this review

rather than in the normal course of business.

Department Position: As noted in the Mobil Memorandum, we spoke

with counsel for Mobil and clarified some specific questions about the

cost supplemental questionnaire. We stated that:

With regard to question 11 in the 92/93 review and 12 in the 93/

94 review, * * * Mobil should include an explanation as to how the

statements received from facilities where Mobil is not the operator

were used to determine the reported sulphur costs, that the costs

included in the reported sulphur costs should be identified, and

that a sample statement from each facility should be submitted.''

Mobil Memorandum

Mobil did not provide the statements from each facility as

requested or any other source documents in response to question 11.

Mobil did not explain any attempts made to obtain such statements from

each operator. While Mobil maintains that the alternative data to

operating statements provided in response to question four is fully

responsive, we do not agree that the financial statement and the

``income statements'' prepared for the supplemental cost responses

sufficiently answered the Department's request for complete revenue,

expense and production data for all products manufactured by the

facilities.

Comment 21

Mobil claims that, by submitting the information provided in

Appendix SQ-13 of its supplemental questionnaire response, it was fully

responsive to question 14 of the Department's supplemental cost

questionnaire. Question 14 also requested Mobil to ``separately

identify the variable and fixed costs, as requested in questions 3.B.2

and 3.B.3 of the questionnaire.'' Mobil points out that it responded to

this question by stating that it had weight-averaged the handling costs

from the individual plants based on the quantity of sulphur produced

and sold, and included a worksheet demonstrating the calculation.

Further, Mobil states, it noted in its response that it was unable to

segregate these costs into fixed and variable components as this

information was unavailable to it.

[[Page 37986]]

Mobil claims that it then noted in its supplemental response that,

because sulphur handling occurs when the sulphur is destined for sale,

the cost of the entire operation should be considered to be variable.

Mobil argues that it answered the question as asked, yet the

Department states that Mobil should have broken out its costs in more

detail to the extent it could do so in the Decision Memorandum. Mobil

argues that it cannot be given BIA for failing to provide information

that was never requested. Mobil challenges the Department's claim in

the Decision Memorandum that Mobil could have provided a more detailed

response than that provided in Appendix SQ-13 based on the fact that

Mobil prepared a detailed income statement for a particular plant in

response to Question 4 of the supplemental cost questionnaire. Mobil

argues that the income statement shows that it contains no detail of

sulphur handling, because Mobil does not break out these costs in its

accounting system.

Mobil argues that the Department was incorrect in stating in the

Decision Memorandum that the forming costs reported in Appendix SQ-11

for each plant with forming facilities had been used to calculate the

cost of formed sulphur in Appendix SQ-13. Thus, Mobil asserts, the

Department was also incorrect in concluding that it was able to break

out its sulphur costs to some extent. In fact, states Mobil, it used

the information in Appendix 13 to include the forming costs separately

in Appendix SQ-11. Mobil argues that, in the 1992/93 review, the

reverse is true. Mobil added the forming costs from Appendix SQ-13 to

Appendix SQ-11 to avoid double counting. Mobil argues that, in the

1993/94 review, the forming costs were not added.

Petitioners argue in support of the Department's use of BIA because

Mobil's cost data contained in Appendix SQ-13 did not adequately

respond to question 14 of the supplemental questionnaire. Petitioners

note that questions 11 and 14 specifically required Mobil to report

detailed information for the costs used to calculate the COP and CV of

its sulphur. As a result of Mobil's failure to report its sulfur costs

in the manner requested by the Department, petitioners claim that it is

unclear what costs were included in the COMs reported in Appendix SQ-

13. Petitioners argue that Mobil's response failed to include such

major cost elements as block storage, liquid sulphur transfer,

remelting, and depreciation. Petitioners contend that neither appendix

provided an explanation for the calculation of per-unit costs reported

in Appendix SQ-13.

Department Position: We agree with petitioners. Mobil reported a

single cost for each of the facilities for which it reported costs in

Appendix SQ-13. It is unclear what costs were included in the COMs

reported in Appendix SQ-13. Also, for the facilities for which Mobil

reported liquid sulphur costs as well as formed sulphur costs, the

total costs amount had to be split between liquid handling costs and

forming costs. Mobil provided no explanation or detail as to how this

was done. Mobil stated in its response that it generally relied on

information provided by facility operators, but did not explain what

this information contained or provide any support. Therefore, we have

no explanation for the calculation of per-unit costs reported in

Appendix SQ-13 and cannot rely on this data.

Comment 22

Mobil argues that the Department may not penalize it for reporting

its data in a manner that differs from typical cost accounting methods.

Mobil argues that the decision to apply BIA appears to be a decision to

penalize Mobil for failing to report sulphur handling costs in a manner

that the Department would prefer. Mobil argues that, if the Department

persists in applying BIA to a company that has reported its costs to

the best of its ability, it is informing that company that it can never

satisfy the Department and will always be subject to a BIA rate. Mobil

argues that this conflicts with the Department's own stated policy, as

well as judicial authority.

Mobil cites Atlantic Sugar, Ltd. v. United States, 744 F.2d 1556

(Fed. Cir. 1984), which involved an International Trade Commission

(ITC) injury determination, where the Federal Circuit rejected an

interpretation that would authorize agencies to impose particular

accounting methods on companies according to agency needs. Mobil notes

that the court stated:

[I]t is inflating out of all proportion the importance of the

laws with which the lower court deals to expect that business people

and corporate accountants would keep their books with an eye to an

obscure and wholly arbitrary statutory geographic region, which a

relatively small Government agency might declare for the purposes of

one antidumping injury investigation.

Id. At 1561. Mobil argues that the CIT similarly cautioned the

Department against overextending its authority during investigations:

``Commerce's desire to obtain documentation should not fly in the face

of established business practice, and should not be transformed into a

do-or-die requirement,'' citing Industrial Quimica del Nalon, S.A. v.

United States, 15 CIT 240, 244 (CIT 1991).

Mobil argues that the Department itself has acknowledged that it

cannot penalize a respondent for failing to maintain business records

in a particular manner or for using an allocation method that the

Department subsequently rejects. Mobil argues that in a case closely

analogous to this one, Carbon Steel Plate from Canada (61 FR at 13815),

at comment 7, the Department accepted the respondent's reported costs

for one production location as a proxy for costs at another production

location. Mobil argues that the respondent, like Mobil, did not

maintain records that would enable it to calculate the actual cost of

producing the subject merchandise at each of its plants. Mobil argues

that the Department accepted costs from one plant as a surrogate for

total costs based on three factors that are also present in this case:

(1) the nature of the respondent's accounting system prevented more

detailed reporting; (2) the Department verified the respondent's

inability to provide more specific costs; and (3) the respondent's

alternative methodology was a conservative estimate of costs. In

addition, Mobil argues that the Department accepted respondent's

allocation of indirect selling expenses because the respondent did not

maintain records of the actual indirect selling expenses of each of its

markets as a matter of normal business procedure. Mobil also cites

Smith-Corona Group v. United States 713 F. 2d 1568, 1580 (Fed. Cir.

1983), in which, it argues, the Department properly accepted

respondent's allocation of rebates based on actual figures when the

company did not maintain records directly tying each rebate to a

particular sale; Zenith Elecs. Corp. v. United States, No. 90-07-00339,

slip-op. 94-148 (CIT 1994), in which, it argues, the Department

properly declined to adopt petitioners adverse allocation methodology

for discounts given that the respondent reported the information in the

best manner it could, given its accounting system; Final Results of

Antidumping Duty Administrative Review; Certain Cold-Rolled Carbon

Steel Flat Products from Germany, 60 FR 65264 (December 19, 1995), in

which, it argues, the Department accepted respondent's data because the

necessary records were not maintained; Final Determination of Sales at

Less than Fair Value: High Capacity Pagers from Japan, 48 FR 28682

(June 23,

[[Page 37987]]

1983), in which, it argues, the Department allowed an adjustment for

technical services, including certain allocated costs, because they

were reasonably calculated and actual data were not kept as ordinary

business records.

Mobil argues that a decision to resort to BIA is even less

justifiable when the respondent, recognizing the limitations of its

accounting system, provides the Department with alternative data or

methodologies. Mobil cites Federal-Mogul Corp. v. United States, 918 F.

Supp. 386, 410 (CIT 1996) (citing Allied-Signal Aerospace Co. v. United

States 996 F. 2d 1185, 1193 (Fed. Cir. 1993)), and notes that the CIT

stated that the Department may not resort to BIA by ignoring certain

data, which the respondent had provided as an alternative reporting

method, simply because it does not like it.

Petitioners argue that, in light of the fundamental deficiencies in

the data provided by Mobil, the Department properly relied on total BIA

to establish Mobil's margin in the preliminary results. Petitioners

argue that, in addition, the Department properly recognized that Mobil

had in its possession or had access to information sufficient to comply

with the Department's requests for information and to calculate COM of

its sulphur in accordance with the methodology adopted by the

Department in the 1991/92 review. Petitioners conclude that the

Department should assign to Mobil, as BIA, the highest rate ever

assigned to Mobil in this proceeding.

Department's Position: We disagree with Mobil that we have

penalized it for not keeping its books in the manner we would prefer.

As detailed in the Decision Memorandum and discussed in comment 16,

Mobil did not provide operating statements, block storage sulphur

costs, any support or explanation of the costs included in the reported

COM and did not report the costs for the percentage of production

volume requested. These were items (1) that Mobil could have provided

to the Department or (2) if they were unable to provide them, for which

Mobil should have explained why it could not respond sufficiently to

the Department's requests. Mobil did not explain or document what steps

were taken to obtain sulphur production costs and support documents

from each facility. Mobil did not explain or detail the costs included

nor provide support for the reported COM. In light of these

deficiencies, it is appropriate to apply BIA to Mobil.

Comment 23

Mobil argues that the Department should not reject Mobil's

responses and resort to BIA without conducting verification. Mobil

argues that if the Department's decision is not an effort to penalize

Mobil for not maintaining more detailed cost records, then it must be

based on a belief that Mobil's accounting system contains more detail

than it has supplied. Mobil argues that it has clearly and repeatedly

explained that its cost system does not allow it to respond to the

Department's standard questionnaire in the detail required. Mobil

argues that the Department verified during the 1991/92 review that

Mobil's cost accounting system differs significantly from the systems

the Department normally encounters. Mobil argues that as a result of

the cost verification by the Office of Accounting, the Department

concluded that ``[t]he cost accounting details included in both of the

company's submissions were limited primarily by the constraints of

Mobil's accounting system,'' and that the system ``does not allow for

the level of detail contemplated by the Department's suggested

format.'' (Cost of Production and Constructed Value Verification

Report, 1991/92 Administrative Review (September 27, 1994) at 6.) Mobil

argues that in this review the Department appears to have ignored the

findings of its own cost analysts and concluded that Mobil's accounting

system has more detail than Mobil has divulged. Mobil argues that the

Department has no basis for this assumption. Mobil argues that each of

its submissions is accompanied by sworn statements that attest to the

completeness and accuracy of the information. Mobil argues that the

Department's own verifications support its statements. Mobil argues

that, if the Department were somehow convinced that Mobil's assertions

were false or that the facts had changed substantially, the Department

could have verified the information. Mobil asserts that the Department

declined its suggestion that the Department verify Mobil 1993/94

response concurrently with the verification of the 1994/95 response.

Mobil argues that it was informed that the Department would prefer

to address Mobil's unique cost situation in the 1994/95 review. Mobil

argues that the verification of its cost system in the 1994/95 review

will come too late to rectify the results of this review. Mobil

contends that, if the Department persists in applying BIA in the final

results of the 1993/94 review, it will be subjected to unjustifiably

high antidumping duty cash deposit rates. Mobil also argues, that

improperly applying BIA to Mobil may unfairly delay Mobil's ability to

qualify for revocation of the order. Mobil argues that, by declining to

conduct verification, the Department failed to follow its regular

practice of first providing a respondent with an opportunity to satisfy

the Department that it has provided complete responses before resorting

to BIA. Mobil cites Rautaruukki Oy v. United States, No. 93-09-00560,

slip-op. 95-56 (CIT 1995) (quoting International Trade Administration

Revisions to 19 CFR Part 353, 54 FR 12742, 12766 (March 28, 1989)), in

which the CIT stated ``prior to resorting to best information

available, the Department as a matter of practice often * * * permits a

respondent to correct a deficiency during the verification process * *

*.'' Mobil argues that because the Department did not verify Mobil's

responses, Mobil was never given the opportunity to demonstrate that

its responses were complete even though it was available at all times

during the course of this review for verification.

Petitioners argue that the Department should not verify Mobil's

cost responses. Petitioners argue that, as set forth in detail in

Section II.A., the record conclusively establishes that information

sufficient to comply with the Department's information requests was

available to Mobil. Petitioners argue that the record also establishes

that Mobil made no real effort to supply this information, and that

there is no need to verify what the record already establishes.

Petitioners contend that, as a matter of law, the Department has no

obligation to verify the unrepresentative and understated sulphur cost

data that Mobil chose to report, because those cost data cannot be used

to calculate the COP and CV of Mobil's sulphur. Petitioners argue that

the Department has routinely canceled verification in instances where a

respondent has not provided usable cost data in its questionnaire

responses, and that the Department has already verified that Mobil

misreported its forming costs at one of its sulphur producing

facilities.

Department's Position: We agree with petitioners, in part. We do

not necessarily verify respondents' information in each administrative

review. Furthermore, the purpose of verification is to verify the

information submitted to the Department in questionnaire responses. It

is not an opportunity for respondents to submit additional information.

While we often will permit, at the beginning of verification, minor

corrections to the response that were found in preparing for

verification, verification is not an

[[Page 37988]]

opportunity to correct for deficiencies in the questionnaire responses.

If, as in the present case, we find prior to verification that the

information is so deficient that we would not be able to use it, then

we do not proceed with verification. To do otherwise would be a waste

of resources. See for example, Chrome-plated Lug Nuts From Taiwan;

Preliminary Results of Antidumping Duty Administrative Review and

Termination in Part, July 8, 1996 (61 FR 35725), where two companies

informed us prior to verification that we would not be able to

reconcile data. Because we found prior to verification that Mobil had

not adequately responded to our requests for information, it was not

appropriate to verify the deficient information. Regarding Mobil's

comments about the 1994/95 review, we treat each segment of the

proceeding separately. Our decision not to verify in the 1993/94 review

was based on the information on the record for that review. Issues

arising in the 1994/95 review will be considered based on what is on

the record of that review.

Comment 24

Mobil argues that the Department improperly applied total, rather

than partial, BIA. Mobil argues that it is the Department's practice to

apply partial BIA when a respondent's submitted information is

deficient in only limited respects, and cites as an example, Ad Hoc

Committee of AZ-NM-TX-FL Producers of Gray Portland cement v. United

States, 865 F. Supp. 857, 863 (CIT 1994), aff'd on other grounds, 68 F

3d 487 (Fed. Cir. 1995). Mobil contends that the Department generally

accepts a respondent's U.S. sales data, even if the cost data is found

to be deficient, and cites as examples, Preliminary Determination of

Sales at Less Than Fair Value and Postponement of Final Determination:

Dynamic Random Memory Semiconductors of One Megabit and Above from the

Republic of Korea, 57 FR 49066 (October 29, 1992); Final Results of

Antidumping Duty Administrative Review and Revocation, in part of the

Antidumping Duty Order: Certain Cut Flowers from Colombia 56 FR 50554

(October 7, 1991), in which the Department stated, ``While continuing

to use the verified sales portion of their response, BIA was only used

for that portion of the response which was unverifiable.''); and

Silicon Metal from Brazil; Final Results of Antidumping Duty

Administrative Review, 59 FR 42806, (August 19, 1994) (comment 1), in

which, Mobil argues, the Department accepted portions of respondent's

cost response that were not deficient, and noted that some of the areas

of concern were related to the methodology used, rather that the

accuracy of the submitted data. Thus, Mobil argues, the Department's

decision to reject Mobil's sales data is inexplicable given that it

apparently found no deficiencies in Mobil's sales response. Mobil

further argues that the Department found Mobil to be cooperative and

yet still applied total BIA. Mobil argues that, if the Department finds

Mobil's cost data to be deficient, despite the fact that it is

complete, it should at least use Mobil's U.S. sales data in calculating

a margin.

Mobil notes that the Department issued a preliminary determination

in Certain Cut-to-Length Carbon Steel Plate from Sweden; Preliminary

Results of Antidumping Duty Administrative Review, 61 FR 51898 (October

4, 1996) (Steel from Sweden), in which Mobil argues the Department

decided to apply total BIA because of deficiencies in the cost data,

even though the sales data was verified. Mobil contends that the

Department noted that there were no alternative sets of cost data for

the Department to use. Mobil argues that, in this case, the Department

has several alternatives, including petitioners' data as adjusted by

the Department to initiate the sales-below-cost allegation; Mobil's

verified 1991/92 cost data (adjusted for inflation), which the

Department verified; and Husky's reported liquid sulphur cost. Thus,

Mobil argues, the factors that necessitated total BIA in Steel from

Sweden are not present in Mobil's case.

Petitioners disagree with Mobil. Petitioners argue that, as set

forth in Section II.A., Mobil deliberately withheld a substantial

amount of requested information from the Department and has attempted

to manipulate the outcome of this review by arguing that the Department

must use the cost data it chose to report which, as set forth in

Section II.B., are unrepresentative, understated, and allocated to

sulphur using a patently wrong allocation method. Petitioners argue

that it is consistent with the statute and Department practice to apply

total BIA to Mobil in these circumstances. Furthermore, petitioners

argue, it is Department practice to reject a respondent's submitted

information in toto where a respondent fails to provide reliable cost

data. Petitioners contend that the Department has recognized that if it

were to utilize a respondent's sales information when a respondent

fails to provide usable cost information, respondents would be in a

position to manipulate the outcome of reviews by supplying only that

information which the respondent wants the Department to use in its

margin calculations.

Department's Position: We disagree with Mobil. Our determination to

apply total BIA in this case, rather than partial BIA, is proper and in

accordance with both the Department's stated practice in this area, and

the law effective for these reviews. See Final Determination of Sales

at Less Than Fair Value: Grain-Oriented Electrical Steel From Italy, 59

FR 33952 (July 1, 1994) (``The rejection of a respondent's

questionnaire responses in toto and use of BIA is appropriate and

consistent with past practice in instances where a respondent has

failed to provide verifiable COP information.'' (Citing as examples of

past practice Final Determination of Sales At Less Than Fair Value:

Certain Forged Stainless Steel Flanges From Taiwan, 58 FR 68859

(December 29, 1993) and Final Determination of Sales At Less Than Fair

Value: Certain Hot-Rolled Lead & Bismuth Carbon Steel Products From

France, 58 FR 6203 (January 27, 1993).))

Where the Department determines that parts of a respondent's

submitted cost data are reliable, BIA ``plugs'' may be used to fill in

gaps created by missing or unreliable data. In the present case,

however, Mobil's cost response was found to have extensive deficiencies

rendering the entire cost response unusable. See comments 16 and 18

above. Therefore, in accordance with the Department's practice, we have

applied cooperative total BIA to Mobil in these reviews.

Contrary to Mobil's contention, Silicon Metal From Brazil is

consistent with the above practice. In that case, the Department stated

that, while there were areas in which the costs were not appropriately

quantified, ``we have not found these deficiencies to be so significant

or pervasive as to call into question the accuracy of the entire [cost]

response.'' (59 FR 42806, 42807; August 19, 1994). Accordingly, in that

case the Department relied on BIA only ``in the instances where [it]

found insufficient verification support.'' Id. at 42807. For the cost

in general, the Department used the respondent's data in reaching the

final results in that review. Id. Similarly, in DRAMs From Korea, cited

by Mobil, the Department once again relied on BIA only for those

portions of the cost response found to have ``insufficient verification

support''. DRAMs From Korea, 54 FR 15467,15471 (March 23, 1993). For

the methodological issues, where appropriate, ``the costs were

recalculated to quantify or value that particular cost element.'' Id.

By contrast, in the present case, we do not have

[[Page 37989]]

usable cost data for Mobil. Without such data, the Department cannot

calculate an appropriate foreign market value (FMV), and thus cannot

perform sales comparisons. See also, Notice of Final Determination of

Sales at Less Than Fair Value: Certain Pasta From Turkey, 61 FR 30309,

30312 (June 14, 1996).

Furthermore, even if the Department were to contemplate use of an

alternative to total BIA in this situation, we note that no appropriate

alternative data is available to use as BIA for FMV in this case. Mobil

suggests that the Department use as BIA the company's reported costs

for the previous period,--i.e., the 1991/92 review. However, in past

cases, the Department has specifically rejected this type of

application even under both the new statutory provisions concerning the

basis for the use of facts available enacted through the URAA, and the

pre-URAA provisions. For example, in Steel From Sweden, the case cited

by Mobil, the Department not only rejected the respondent's entire cost

database, but further rejected application of any alternative to total

facts available. In applying total facts available, the Department

specifically rejected use of actual costs from a previous review

because ``[i]f the Department were to rely on such data, a respondent

would have no incentive to report its costs once it was satisfied with

the verified costs from a particular review period.'' Steel From

Sweden, 62 FR 18396 (April 15, 1997). The same concern is also present

in the instant case. In this type of application, manipulation of

either the U.S. price or the FMV component of the margin calculation

has the potential to have a dramatic impact on the dumping margin.

Mobil's other suggested alternatives--i.e., petitioners' data used

in its below-cost allegation, or, alternatively, another respondent's

CV data reported in the present reviews, would also be inappropriate.

The cost data submitted by petitioners in these reviews is not public

data and is therefore not available for consideration as BIA. With

respect to applying another respondent's CV data, it would not be

appropriate to use the ranged public CV data submitted by Husky as BIA

in this case. First, for that part of Husky's cost data that was

applied and adjusted by the Department in calculating COM and CV in

these reviews, no ranged public data were reported. Second, the

reported public CV is an unadjusted figure which cannot properly

reflect CV without further adjustment. Husky's public cost and

production data lacks the proper detail to make appropriate adjustments

to the public CV figure. Accordingly, no appropriate public data would

be available for consideration as BIA in this case.

Comment 25

Mobil argues that, even if the Department's decision to apply BIA

is correct, its decision to apply a BIA rate that is itself based on

partial BIA cannot be supported. Mobil argues that, although the

Department has discretion in its choice of BIA, the CIT cautioned in

National Steel Corp. v. United States, 913 F. Supp. 593, 597 (CIT 1996)

(National Steel) (citing Rhone Poulenc, Inc. v. United States, 899 F.2d

1185, 1191 (Fed. Cir. 1990)) that it must exercise that discretion in

light of the ``Basic requirement of the BIA rule * * * to determine

margins as accurately as possible.'' Mobil also cites to National Steel

870 F. Supp. 1130, 1136 (CIT 1994) (quoting Manifattura Emmepi S.p.A.

v. United States 799 F. Supp. 110, 115 (CIT 1992)), in which the CIT

stated that there must be a ``rational relationship * * * between the

`data chosen and the matter to which they are to apply.' '' Mobil

contends that in National Steel, the court found that the Department's

choice of BIA might have been aberrant based on the fact that a

significant portion of the respondent's sales had margins well below

the selected rate.

Mobil argues that, in this case, the Department's decision to base

Mobil's BIA rate on Husky's rate, which, it argues, is itself based, to

a significant extent, on BIA, violates the Department's own consistent

policy of using another respondent's rate only if that rate is a non-

BIA rate. Mobil argues that, in the 1991/92 review in this case, the

Department rejected the petitioners' suggestion that the Department

apply to Mobil, as a BIA rate, the rate applied to Petrosul, since the

latter was itself a BIA rate. Mobil also cites Roller Chain, Other Than

Bicycle, from Japan; Preliminary Results of Antidumping Duty

Administrative Reviews 57 FR 3745 (January 31, 1992) in which it argues

the Department selected, as BIA, the highest non-BIA rate of any firm

in a prior review; Roller Chain Other Than Bicycle, from Japan: Final

Results of Antidumping Duty Administrative Review, 57 FR 43697

(September 22, 1992), in which it notes that the BIA rate remained

unchanged in the final results; Drycleaning Machinery from Germany;

Final Results of Antidumping Duty Administrative Review, 56 FR 66838

(December 26, 1991), in which it argues, as BIA, the Department chose

another respondent's non-BIA rate; Final Results of Antidumping Duty

Administrative Review and Revocation, in part of the Antidumping Duty

Order: Certain Cut Flowers from Colombia, 56 FR 50554 (Comment 6)

(October 7, 1991), in which it argues, as BIA for non-responding firms,

the Department chose the highest non-BIA rate from any review; and Saha

Thai Steel Pipe Co. v. United States, 828 F. Supp. 57, 63 (CIT 1993),

in which the CIT stated, ``In selecting the BIA rate for a given

subsidy program, Commerce asserts its practice is to select the highest

published non-BIA rate for the identical program in the same country.''

Mobil argues that, contrary to the Department's own stated

practice, as upheld by the CIT, the Department has simply applied the

rate chosen for Husky which itself is partially based on BIA. Mobil

argues that this is clearly improper.

Mobil argues that the standards that govern the Department's choice

of BIA are now more stringent as a result of the dictates of the 1994

Antidumping Code (Agreement on Implementation of Article VI of the

General Agreement on Tariffs and Trade 1994), and argues that the code

makes it clear that the Department must have some rational basis in its

choice of BIA. Mobil notes that paragraph 7 in Annex II of the Code

establishes the standards that govern the choice of BIA, and, Mobil

argues, cautions the administering authority to exercise its discretion

to use BIA with ``special circumspection.'' Mobil argues, that to

ensure that some rational basis exists between the choice of BIA and

the respondent's actual antidumping margin, the Code directs the

authority to check the information used to support its choice of BIA

with information from other independent sources, ``such as published

price lists, official import statistics and customs returns, and from

the information obtained from other interested paries during the

investigation.'' Mobil argues that, based on these criteria, the

Department would not be able to support its choice of BIA in Mobil's

case because it has not even attempted to choose a BIA based on

information that the Department perceives to be the best alternative to

Mobil's own reported costs.

Petitioners argue that the application of Husky's rate to Mobil, as

BIA, is fully consistent with Department practice. Petitioners argue

that Husky's rate is a calculated rate in this review, and that the

fact that certain elements of Husky's costs were based on BIA does not

alter this fact. Petitioners argue that there have been numerous

instances where the Department has used rates that were, in part, based

on BIA to establish a total BIA rate for another company, and that

indeed, a significant percentage of the

[[Page 37990]]

rates calculated by the Department have an element of BIA in them.

Petitioners maintain that Mobil's argument that it would be

inconsistent with Department practice to apply Husky's rate to Mobil,

as BIA, should be rejected.

Department's Position: We disagree with Mobil. It is the

Department's long-standing practice to use partial BIA with respect to

a respondent and apply that rate, as BIA, to other firms who have

failed to provide adequate responses. In this case, Husky's rate is a

calculated rate, and, therefore, is appropriate as BIA for Mobil. We

also disagree with Mobil that we have not exercised caution in choosing

the rate. We have followed the law and have chosen a rate that is

consistent with Department practice. As we stated in the preliminary

results notice for these reviews, the applicable statute and

regulations are as they existed on December 31, 1994. These reviews are

not subject to the 1994 Antidumping Code and therefore it does not

apply. Accordingly, the Department's established second-tier BIA

practice in this case is required by the law applicable in these

reviews. Therefore, for these final results, as BIA, we have continued

to apply Husky's rate to Mobil.

Final Results of the Reviews

As a result of our reviews, we finally determine that the following

margins exist for the periods December 1, 1992 through November 30,

1993, and December 1, 1993 through November 30, 1994:

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

Margin

Manufacturer/exporter Time period \5\

---------------------------------------------------------------(percent)

Alberta Energy Co., Ltd................. 12/1/92-11/30/93 \1\ 5.56

12/1/93-11/30/94 \1\ 5.56

Allied-Signal Inc....................... 12/1/92-11/30/93 \2\ 40.38

Brimstone Export........................ 12/1/92-11/30/93 \2\ 40.38

Burza Resources......................... 12/1/92-11/30/93 \2\ 40.38

Fanchem................................. 12/1/92-11/30/93 \2\ 40.38

Husky Oil Ltd........................... 12/1/92-11/30/93 40.38

12/1/93-11/30/94 3.38

Mobil Oil Canada, Ltd................... 12/1/92-11/30/93 \3\ 40.38

12/1/93-11/30/94 \3\ 40.38

Norcen Energy Resources................. 12/1/92-11/30/93 \2\ 40.38

12/1/93-11/30/94 \4\ 40.38

Petrosul International.................. 12/1/92-11/30/93 \2\ 40.38

12/1/93-11/30/94 \2\ 40.38

Saratoga Processing Co., Ltd............ 12/1/92-11/30/93 \4\ 28.90

Sulbow Minerals......................... 12/1/92-11/30/93 \2\ 40.38

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

\1\ No shipments or sales subject to this review. The firm has no

individual rate from any segment of this proceeding. As a result, the

firm will be subject to the ``all others'' rate.

\2\ Non-cooperative total BIA rate.

\3\ Cooperative total BIA rate.

\4\ No shipments to the United States during the period of review. Rate

is the rate established during the immediately preceding

administrative review.

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between U.S. price and FMV may vary from the percentage

stated above. The Department will issue appraisement instructions

directly to the Customs Service.

Furthermore, the following deposit rates will be effective upon

publication of these final results of administrative review for all

shipments of elemental sulphur from Canada entered, or withdrawn from

warehouse, for consumption on or after the publication date, as

provided for by section 751(a)(1) of the Tariff Act: (1) the cash

deposit rates for the reviewed companies will be those rates

established in the final results of the most recent review in which the

company was involved; (2) for previously reviewed or investigated

companies not listed 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 either of these reviews, a prior

review, or the original less than fair value (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) if neither the exporter nor the manufacturer is a firm covered in

these or any previous review, or the LTFV investigation, the cash

deposit rate will be the ``new shipper'' rate of 5.56 percent

established in the first review conducted by the Department in which a

``new shipper'' rate was established. 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 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 CR 353.34(d)(1). Timely written notification

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

353.22.

Dated: July 7, 1997.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-18445 Filed 7-14-97; 8:45 am]

BILLING CODE 3510-DS-P