Elemental Sulphur From Canada: Preliminary Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

A-122-047

Elemental Sulphur From Canada: Preliminary Results of Antidumping

Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of preliminary results of Antidumping Duty

Administrative Review.

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SUMMARY: In response to requests by respondents, the Department of

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

antidumping finding on elemental sulphur from Canada. The review covers

the period December 1, 1994 through November 30, 1995.

As a result of the review, we have preliminarily determined that

sales have been made below normal value (NV). If these preliminary

results are adopted in our final results of administrative review, we

will instruct U.S. Customs to assess antidumping duties equal to the

difference between United States price (USP) and NV.

Interested parties are invited to comment on these preliminary

results. Parties who submit arguments in this segment of the proceeding

are requested to submit with each argument (1) a statement of the issue

and (2) a brief summary of the argument.

EFFECTIVE DATE: January 7, 1997.

FOR FURTHER INFORMATION CONTACT: Rick Johnson or Jean Kemp, Office of

Antidumping and Countervailing Duty Enforcement, Import Administration,

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

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

telephone: (202) 482-3793.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

Unless otherwise indicated, all citations to the statute refer to

the provisions effective January 1, 1995, the effective date of the

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

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

all citations to the Department's regulations are to the current

regulations, as amended by the interim regulations published in the

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

Background

On 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 December 4, 1995, the Department published in

the Federal Register a notice of opportunity to request an

administrative review of this antidumping finding for the period

December 1, 1994 through November 30, 1995 (60 FR 62070).

On January 11, 1996, Mobil Oil Canada, Ltd. (Mobil) requested an

administrative review of its sales. On January 22, 1996, Husky Oil Ltd.

(Husky) requested an administrative review of its sales. The review was

initiated on February 1, 1996 (61 FR 3670-71).

The Department is conducting this review 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 period of review (``POR'') is December 1, 1994 through November

30, 1995, and covers two companies.

Verification

As provided in section 782(i) of the Act, we verified information

provided by Mobil, using standard verification procedures, including

on-site inspection of the manufacturer's facilities, examination of

relevant sales and financial records, and selection of original

documentation containing relevant information. Our verification results

are outlined in the public versions of the verification reports.

Mobil

Facts Available

On May 31, 1996, petitioners alleged that Mobil made home market

sales of subject merchandise below cost of production (``COP''). On

June 28, 1996, we concluded that petitioners' allegation provided the

Department with ``reasonable grounds to believe or suspect'' that Mobil

made below cost sales in the home market within the meaning of section

773(2)(A)(i) of the Act. Therefore, we initiated a COP investigation of

Mobil's sales, and directed Mobil to respond to Section D of the

Department's February 8, 1996 questionnaire.

Mobil has maintained throughout this review that because sulphur is

a ``waste product'', it does not track sulphur production and handling

costs. In its August 5, 1996 cost response, Mobil estimated its cost of

manufacture (``COM'') based on an engineering estimate of sulphur

loading costs at one plant, representing 5% of Mobil's sulphur

production. However, Mobil could not prove that this estimate bore any

relation to Mobil's actual costs as recorded in Mobil's cost accounting

system. Moreover, the estimate only applied to 5% of Mobil's production

of

[[Page 970]]

subject merchandise. Therefore, in response to the Department's

September 3, 1996 request for supplemental information, Mobil submitted

a response on September 25, 1996 based on an entirely different

methodology, in which total plant costs (including production of gas,

oil, and sulphur) were reported and then allocated to the production of

subject merchandise.

In accordance with section 782(i) of the Act, during the week

October 21-25, 1996, the Department conducted verification of Mobil's

cost responses. At verification, Mobil revealed for the first time that

two of its 22 plants maintained sulphur cost centers, including one

whose sulphur cost center was active during the POR. The Department

verification team then found that sulphur cost centers in fact were

maintained during the POR for five of Mobil's plants, accounting for

over 50% of Mobil's sulphur production during the POR. In response to

the verification team's inquiry, Mobil stated while it was preparing

its responses, it had not sought to ascertain whether the producing

plants maintained sulphur cost centers. Moreover, the verification team

found that the allocation methodology employed by Mobil in its

September 25, 1996 response was based on a barrel of oil equivalent

(``BOE''), a unit of measurement not used in the normal course of

business by Mobil to allocate costs and not relevant to sulphur because

sulphur is not burned.

Section 776(a)(2) of the Act provides that if an interested party

or other person--(A) withholds information that has been requested by

the Department, (B) fails to provide such information by the deadlines

for submission of the information or in the form and manner requested,

(C) significantly impedes a proceeding, or (D) provides such

information but the information cannot be verified as provided in

section 782(i), the Department shall, subject to section 782(d), use

the facts otherwise available in reaching the applicable determination.

Section 782(d) provides that if the Department ``determines that a

response to a request for information . . . does not comply with the

request, {the Department} shall promptly inform the person submitting

the response of the nature of the deficiency and shall, to the extent

practicable, provide the person with an opportunity to remedy or

explain the deficiency in light of the time limits established for

completion of investigations or reviews under this title.'' In

accordance with that section, the Department provided Mobil ample

opportunity to correct the defects in its submitted cost response. As

indicated above, the deficiency in Mobil's original cost response

methodology was brought to Mobil's attention in a supplemental

questionnaire. See Supplemental Cost Questionnaire Concerning the 1994-

1995 Administrative Review of the Antidumping Finding on Elemental

Sulphur from Canada, Question 6, September 3, 1996 (``Please report

costs for all facilities in which Mobil has an interest and which

produce sulphur, and included costs from each facility in your

calculations of the cost of production and constructed value. . . .

Although you need not provide cost information with respect to any

facility accounting for less than five percent of Mobil's total

production volume, not sales volume, you must account for at least 90

percent of Mobil's total production volume in reporting Mobil's costs''

{emphasis in original}). In response to the Department's supplemental

questionnaire, Mobil developed another methodology, yet continued to

claim that it was unable to report costs in the form and manner

requested by the Department. Only at verification did the Department

discover that Mobil maintained cost centers specific to sulphur in its

accounting records for the majority of its reported POR production.

Mobil's failure to provide the Department with the requested cost

information constitutes a withholding of information within the meaning

of section 776(a)(2)(A) of the Act. We must therefore consider whether

the submitted cost data is usable under section 782(e) of the Act.

Section 782(e) provides that the Department shall not decline to

consider information that is submitted by an interested party and is

necessary to the determination but does not meet all the applicable

requirements established by the Department if: (1) the information is

submitted by the deadline established for its submission; (2) the

information can be verified; (3) the information is not so incomplete

that it cannot serve as a reliable basis for reaching the applicable

determination; (4) the interested party has demonstrated that it acted

to the best of its ability in providing the information and meeting the

requirements established by the Department with respect to the

information; and (5) the information can be used without undue

difficulties.

When examined in light of the requirements of section 782(e), the

facts of the case indicate that Mobil's cost data is so fundamentally

flawed as to render it unusable. Because the discovery of sulphur cost

centers occurred only at verification (and therefore, would have

remained undiscovered were it not for the Department's decision to

verify Mobil's response), this information was not provided to the

Department by the deadlines established for its submissions, as

required by subsection (e)(1).

Additionally, as a consequence of the discovery at verification of

these sulphur cost centers, the Department was unable to verify this

information, as required by subsection (e)(2). It is a central tenet of

Departmental practice that verification is not intended to be an

opportunity for submitting new factual information. Further, the

Department also stated in its verification outline that new information

will be accepted at verification only when (1) the need for that

information was not evident previously, (2) the information makes minor

corrections to information already on the record, or (3) the

information corroborates, supports, or clarifies information already on

the record. See Letter to Mobil Oil Canada: Sales and Cost

Verification: Administrative Review of the Antidumping Duty Order on

Elemental Sulphur from Canada, page 2 (October 11, 1996). The discovery

of sulphur cost centers meets none of these qualifications. As such,

the Department could not verify this information during its

verification of Mobil.

We also find the information which Mobil supplied in its responses

to be so incomplete that it cannot serve as a reliable basis for

reaching the applicable determination, as required by subsection

(e)(3). First, we have determined that the use of facts available for

Mobil's cost data renders its sales data unusable. Because of the

flawed nature of the cost data, home market sales cannot be tested to

determine whether they were made at prices above production cost.

Insofar as the Department only makes price-to-price comparisons (normal

value to export price) using those home market sales that are made

above cost, the flawed nature of the cost data makes these comparisons

impossible.

In the absence of home market sales data, (i.e., when the home

market is viable but there are no comparison sales for a particular

U.S. sale), the Department would normally resort to the use of

constructed value as normal value. However, the constructed value

information reported by Mobil is based on the discredited cost data.

Therefore, the use of facts available for cost of production data

precludes the use of the submitted constructed value information.

[[Page 971]]

The Department's prior practice has been to reject a respondent's

submitted information in toto when flawed and unreliable cost data

renders any price-to-price comparison impossible. See Notice of Final

Determination of Sales at Less Than Fair Value: Certain Pasta from

Italy, 61 FR 30326, 30329 (June 14, 1996); Notice of Final

Determination of Sales at Less Than Fair Value: Certain Pasta from

Turkey, 61 FR 30309, 30311 (June 14, 1996). The rationale for this

policy is contained in Notice of Final Determination of Sales at Less

than Fair Value: Grain Oriented Electrical Steel From Italy, 59 FR

33952, 33594 (July 1, 1994), where the respondent failed the cost

verification. The Department explained that the rejection of a

respondent's questionnaire response in toto is appropriate and

consistent with past practice in instances where a respondent failed to

provide verifiable COP information:

``[I]f the Department were to accept verified sales information

when a respondent's cost information (a substantial part of the

response) does not verify, respondents would be in a position to

manipulate margin calculations by permitting the Department to

verify only that information which the respondent wishes the

Department to use in its margin calculation.''

This situation applies to Mobil, which provided sales information in

proper form, but did not provide cost data which could be verified.

Although Electrical Steel from Italy was a case involving best

information available (BIA) under the pre-URAA statute, it is evidence

of the Department's practice of regarding verified sales information as

unusable when the corresponding cost data is so flawed that price-to-

price comparisons are rendered impossible. The Department has

reiterated this position in its Notice of Preliminary Results of

Antidumping Administrative Review: Cut-to-Length Carbon Steel Plate

from Sweden, 61 FR 51898, 51900 (October 4, 1996), a case under the

post-URAA statute.

In addition, we find that Mobil has not demonstrated that it acted

to the best of its ability in providing the information and meeting the

requirements established by the Department in this review. As noted in

the verification report, Mobil did not ask any of its plants whether

they maintained sulphur-specific cost centers when preparing its

responses. See Cost Verification of Mobil Oil Canada, Ltd. (``Mobil''):

Administrative Review of Elemental Sulphur From Canada, November 18,

1996, pp. 7-8. Thus, we find that section 782(e)(4) of the Act provides

a further basis for declining to consider Mobil's information.

Accordingly, we find that there is no reasonable basis for

determining normal value for Mobil in this review. As a result, we

could not use Mobil's U.S. sales data in determining an antidumping

margin, in accordance with section 782. The Department has no choice,

therefore, but to resort to a total facts available methodology.

Section 776(b) provides that adverse inferences may be used in

selecting from the fact otherwise available if the Department finds

that an interested party has failed to cooperate by not acting to the

best of its ability to comply with requests for information. See also

SAA at 870.

We have determined that Mobil did not act to the best of its

ability to comply with our requests for information. As discussed

above, Mobil did not even ask the producing plants whether they

maintained sulphur cost centers. Accordingly, as authorized by section

776(b) of the Act, we have applied an adverse inference in selecting

Mobil's margin.

Section 776(b) authorizes the Department to use as adverse facts

available information derived from the petition, the final

determination, a previous administrative review, or any other

information placed on the record. The SAA provides that ``[i]n

employing adverse inferences, one factor the [Department] will consider

is the extent to which a party may benefit from its own lack of

cooperation.'' SAA at 870. Section 776(c) of the Act provides that the

Department shall, to the extent practicable, corroborate ``secondary

information'' by reviewing independent sources reasonably at its

disposal. The SAA, at 870, makes it clear that ``secondary

information'' includes information from the petition in the less-than-

fair-value (LTFV) investigation and information from a previous section

751 review of the subject merchandise. The SAA also provides that

``corroborate'' means simply that the Department will satisfy itself

that the secondary information to be used has probative value. Id.

For our total adverse FA margin, we chose to apply the highest

calculated margin from any prior administrative review which the

Department is able to corroborate, 7.17%. This rate was calculated in

the 1991-92 administrative review of this proceeding, the most recently

concluded portion of this proceeding.

As the Department noted in Tapered Roller Bearings and Parts

Thereof, Finished and Unfinished, from Japan, and Tapered Roller

Bearings, Four Inches or Less in Outside Diameter, and Components

Thereof, from Japan; Preliminary Results of Antidumping Duty

Administrative Reviews and Partial Termination of Administrative

Reviews, 61 FR 57391, 57392 (November 6, 1996), to corroborate

secondary information, the Department will, to the extent practicable,

examine the reliability and relevance of the information used. However,

unlike other types of information, such as input costs or selling

expenses, there are no independent sources for calculated dumping

margins. The only source for margins is administrative determinations.

Thus, in an administrative review, if the Department chooses as total

adverse facts available a calculated dumping margin from a prior

segment of the proceeding, it is not necessary to question the

reliability of the margin for that time period.

The Department notes that the above rate, in addition to being

calculated, was also used as ``second-tier'' (cooperative) BIA in the

1991-92 administrative review. Because we have determined that Mobil

has not acted to the best of its ability to comply with our requests

for information, we also considered the application of 28.9%, which was

the ``first tier'' BIA rate for nine companies (not including Mobil) in

the 1991/1992 review of this finding. However, we could not corroborate

this rate based on the Department's official records of this

proceeding. If this rate is corroborated subsequent to these

preliminary results, we will consider its application as total adverse

facts available for Mobil for the purposes of the final results of

review.

Finally, we will also consider final rates calculated in the 1992/

93 and the 1993/94 administrative reviews in determining total adverse

facts available for Mobil for the purposes of the final results of this

review.

Husky

Fair Value Comparisons

To determine whether sales of subject merchandise to the United

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

as described in the ``Export Price'' and ``Normal Value'' sections of

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

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

U.S. transactions.

Export Price

For calculation of the price to the United States, we used EP, in

accordance with section 772(a) of the Act, because Husky's subject

merchandise was sold to the first unaffiliated purchaser in the United

States prior to importation and use of

[[Page 972]]

CEP methodology was not otherwise warranted. We calculated export price

based on f.o.b. plant or delivered prices to unrelated customers. We

made adjustments, where applicable, for brokerage and handling, foreign

inland freight, and tank car expenses, in accordance with section

772(c) of the Act.

Normal Value

We found that Husky's quantity of sales in its home market of the

foreign like product exceeded five percent of its sales to the United

States. Therefore, we have determined that Husky's home market sales

are viable for purposes of comparison with sales of the subject

merchandise to the United States, pursuant to section 773(a)(1)(C)(ii)

of the Act. Moreover, there is no evidence on the record indicating a

particular market situation in the exporting country that would not

permit a proper comparison of home market and U.S. prices. See section

773(a)(1)(C)(iii). Thus, we based NV on the prices at which the foreign

like products were first sold for consumption in the home market, in

the usual commercial quantities, in the ordinary course of trade, and

at the same level of trade as the EP sales.

We based NV on home market prices to unaffiliated purchasers (Husky

made no sales to affiliated parties). Home market prices were based on

ex-factory or delivered prices. We made adjustments, where applicable,

for movement expenses in accordance with sections 773(a)(6)(B) of the

Act. We also made adjustments for differences in circumstances of sale

(``COS'') in accordance with 773(a)(6)(C)(iii) of the Act and 19 CFR

353.56 by deducting home market direct selling expenses and adding U.S.

direct selling expenses. These amounts included imputed credit expenses

in the home market and imputed credit expenses in the U.S. market.

On May 31, 1996, petitioners alleged that Husky made home market

sales of foreign like product below cost of production (``COP''). On

June 28, 1996, we concluded that petitioners' allegation provided the

Department with ``reasonable grounds to believe or suspect'' that Husky

made below cost sales in the home market within the meaning of section

773(2)(A)(i) of the Act. Therefore, we initiated a COP investigation of

Husky's sales.

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

COP based on the sum of the costs of materials and fabrication employed

in producing the foreign like product plus selling, general and

administrative (SG&A) expenses and all costs and expenses incidental to

placing the foreign like product in condition for shipment. In our COP

analysis, we used home market sales and COP information provided by

Husky in its questionnaire response.

After calculating COP, we tested whether home market sales of the

foreign like product were made at prices below COP and, if so, whether

they were made within an extended period of time in substantial

quantities and at prices which did not permit recovery of all costs

within a reasonable period of time. See section 773(b)(1). Because each

individual price was compared against the POR-long weighted average

COP, any sales that were below cost were also not at prices which

permitted cost recovery within a reasonable period of time. We compared

the COP for liquid sulphur to the reported home market prices less any

applicable movement charges.

Pursuant to section 773(b)(2)(C) of the Act, we concluded that

Husky's below cost sales were made in substantial quantities because

the volume of these sales represented more than 20 percent of the

volume of sales under consideration for the determination of normal

value. We also concluded that these below-cost sales were made within

an extended period of time (i.e., within the period of review) within

the meaning of section 773. See SAA at 832.

In accordance with section 773(b)(2)(D), we concluded that Husky's

below-cost sales were not at prices which permit recovery of all costs

within a reasonable period of time because the prices for the below-

cost sales were below the weighted average per unit cost of production

for the period of review.

Based on these tests, we disregarded below-cost sales with respect

to Husky.

Preliminary Results of the Review

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

following margins exist for the period December 1, 1994 through

November 30, 1995:

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

Margin

Manufacturer/Exporter Time period (percent)

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

Husky Oil Ltd....................... 12/1/94-11/30/95 \1\ 0.33

Mobil Oil Canada, Ltd............... 12/1/94-11/30/95 \7\.17

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

\1\ This is a de minimis rate.

\2\ As described above, this total adverse facts available rate is

subject to change for the final results of review.

Parties to this proceeding may request disclosure within 5 days of

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

request a hearing within 10 days of the date of publication of this

notice. Any hearing, if requested, will be held 44 days after the date

of publication or the first business day thereafter. Case briefs and/or

other written comments from interested parties may be submitted not

later than 30 days after the date of publication. Rebuttal briefs and

rebuttals to written comments, limited to issues raised in those

comments, may be filed not later than 37 days after the date of

publication of this notice. The Department will publish the final

results of this administrative review, including its analysis of issues

raised in any written comments or at a hearing, not later than 120 days

after the date of publication of this notice.

Upon issuance of the final results of review, the Department shall

determine, and the U.S. Customs Service shall assess, antidumping

duties on all appropriate entries. The following deposit requirements

will be effective for all shipments of the subject merchandise entered,

or withdrawn from warehouse, for consumption on or after the

publication date of the final results of these administrative reviews,

as provided by section 751(a)(1) of the Act: (1) the cash deposit rates

for the reviewed companies will be those rates established in the final

results of these reviews (except that no deposit will be required for

firms with zero or de minimis margins, i.e., margins less than 0.5

percent); (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 this review, 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) the cash

deposit

[[Page 973]]

rate for all other manufacturers or exporters will continue to be the

``all others'' rate made effective by the final results of the 1991-

1992 administrative review of this order (see Elemental Sulphur from

Canada: Final Results of Administrative Review, 61 FR 8239, 8252 (March

4, 1996)). As noted in those final results, the Department determined

this rate to be 5.56 percent. These deposit requirements, when imposed,

shall remain in effect until publication of the final results of the

next administrative reviews.

This notice also serves as a preliminary reminder to importers of

their responsibility under 19 CFR 353.26 to file a certificate

regarding the reimbursement of antidumping duties prior to liquidation

of the relevant entries during this review period. Failure to comply

with this requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This administrative review and notice are in accordance with

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

353.22(c)(5).

Dated: December 30, 1996.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-296 Filed 1-6-97; 8:45 am]

BILLING CODE 3510-DS-P