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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-429-601]

Final Results of Antidumping Duty Administrative Review of Solid

Urea From the Former German Democratic Republic

AGENCY: Import Administration, International Trade Administration,

Department of Commerce

ACTION: Notice of final results of antidumping duty administrative

review

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SUMMARY: On July 8, 1997, the Department of Commerce (the Department)

published the preliminary results of its administrative review of the

antidumping duty order on solid urea from the Former German Democratic

Republic (GDR). The review covers one manufacturer/exporter, SKW

Stickstoffwerke Piesteritz GmbH (SKWP), and the period July 1, 1995

through June 30, 1996. We gave interested parties an opportunity to

comment on our preliminary results.

EFFECTIVE DATE: November 17, 1997.

FOR FURTHER INFORMATION CONTACT: Nithya Nagarajan or Steven Presing,

Office VII, Import Administration, International Trade Administration,

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

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

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

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

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

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

citations to the Department's regulations are to the regulations, as

codified at 19 C.F.R. part 353 (1996).

Background

On July 8, 1996, the Department published in the Federal Register

(61 FR 35712) a notice of ``Opportunity to Request Administrative

Review'' for the July 1, 1995 through June 30, 1996, period of review

(POR) of the antidumping duty order on solid urea from the former GDR.

In accordance with 19 CFR 353.22, the Ad Hoc Committee of Domestic

Nitrogen Producers (petitioners) requested a review for the

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

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

Department is conducting a review of this respondent pursuant to

section 751 of the Act.

On July 8, 1997, the Department published the preliminary results

of review ( 62 FR 36492). The Department has now completed the review

in accordance with section 751 of the Act.

Scope of Review

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

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

classifiable under item 480.30 of the Tariff Schedules of the United

States Annotated (TSUSA). This merchandise is currently classified

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

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

convenience and Customs purposes only. The Department's written

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

Analysis of Comments Received

Comment 1: Affiliation. Petitioners argue that the Department must

adjust SKWP's cost of production to reflect an appropriate amount for

depreciation of production equipment transferred to SKWP by

Stickstoffwerke AG Wittenberg-Piesteritz (STAG). Petitioners contend

that STAG is under the ``control'' of SKWP and that in accordance with

section 771(33) of the Act, the Department must find SKWP and STAG to

be ``affiliated'' persons. According to petitioners, the Department is

required by sections 773(f)(2) and (3) of the Act to disregard STAG's

``transfer'' price to SKWP of the production equipment and substitute,

in

[[Page 61272]]

its place, the higher of market value or cost.

Respondent insists that there is no evidence of affiliation between

SKWP and STAG. Respondent maintains that the production equipment was

purchased at a market price and that the Department verified SKWP's

reported depreciation expense. Respondent adds that the purchase

transaction between SKWP and STAG was scrutinized by the German

government and independent auditors, and found to be properly valued

through arm's-length negotiations.

Department's Position: We disagree with petitioners' contention

that the purchase of the production equipment was a transaction between

affiliated persons. Consequently, for the final results of this review,

we have not adjusted SKWP's reported depreciation expense pursuant to

sections 773(f)(2) and (3) of the Act.

In 1993, SKWP and STAG concluded an agreement whereby SKWP

purchased certain assets from STAG. These assets consisted largely of

the accounts receivable, inventories, and production equipment from a

nitrogen production facility owned by STAG. As part of this contractual

arrangement, SKWP also assumed responsibility for certain debts and

other obligations of STAG's nitrogen facility, including accounts

payable and costs associated with old, environmentally hazardous sites

formerly owned by STAG. In accordance with German generally accepted

accounting principles (GAAP), the total purchase price paid by SKWP

determined the cost of the assets acquired by the company. Because the

degree of convertibility to cash was taken into consideration in

allocating the purchase price, much of that price was allocated to

accounts receivable and other liquid assets with very little of the

price allocated to the capital equipment acquired in the transaction.

In addition to the nitrogen facilities, SKWP also acquired from

STAG as part of the purchase transaction, a five percent interest in

VCE Vertriebsgesellschaft fur Chemische Erzeugnisse Piesteritz GmbH

(VCE), a distributor of STAG's (now SKWP's) urea products. STAG

continued to hold the remaining 95 percent of VCE's shares. At the same

time, SKWP and STAG entered into a five-year agreement under which VCE

became the exclusive distributor of SKWP's urea products and each

company agreed to share in the profits or losses of VCE in accordance

with their respective interests in the distributor. As part of this

contractual arrangement, STAG also agreed that SKWP would assume

complete operational control over VCE, providing all management and

sales personnel as well as accounting, management and support staff.

Further, SKWP assumed absolute control over all pricing and production

decisions at VCE. Thus, STAG has, by contract, given up whatever

control over VCE it would otherwise have by virtue of its ownership

interest.

Petitioners cite, as evidence of affiliation between SKWP and STAG,

the profit and loss sharing arrangement and SKWP's operational control

over VCE. Indeed, petitioners assert, ``STAG is wholly `reliant' upon

SKWP for income (through VCE), and STAG's pricing of assets sold to

SKWP have affected the cost of the subject merchandise, as well as

future income, to STAG.''

For the following reasons, we cannot agree with petitioners. First,

the temporary profit and loss agreement between SKWP and STAG is part

of a larger asset purchase arrangement between two companies. It is

part of the consideration that STAG received from SKWP for the assets.

Therefore, as discussed in greater detail in response to Comment 2,

below, we consider any profits accruing to STAG under the agreement to

be part of the arm's-length purchase price paid by SKWP for the assets

it acquired.

Second, petitioners do not allege (and nothing in the record

suggests) that SKWP and STAG were affiliated at the time of the sale of

the assets. STAG may be dependent upon SKWP to act in good faith and to

pay whatever additional monies are owed for the assets, but that does

not mean STAG and SKWP are ``affiliated'' within the meaning of the

statute. STAG did not have to sell its equipment and other assets to

SKWP. SKWP was not in a position to dictate the terms of the sale.

Rather, each company was pursuing its own economic interests and those

interests were in no way mutual. STAG's interest was to obtain the

highest price possible for its assets at the time of the sale. Of its

own choosing, it accepted an initial payment and the potential of

additional payments over a five-year period. Nothing about this

transaction put SKWP in a position to ``legally or operationally * * *

exercise restraint or direction'' over STAG when it came to the price

paid for the production equipment.

Third, there is no evidence on the record to suggest, as

petitioners contend, that STAG would understate the value of the

capital equipment that it sold SKWP in the hopes that SKWP, which

controls the price and volume of urea products sold through VCE, would

obtain greater profits on sales made by VCE. In fact, contrary to

petitioners' assertions, STAG's pricing of the assets sold to SKWP does

not affect directly the level of VCE's profits since VCE's costs (and

thus its' profits) are determined based on the price SKWP charges VCE

for urea and not on SKWP's production costs.

Petitioners also rely on two other points to advance their argument

that SKWP and STAG are affiliated persons. First, petitioners note that

VCE's financial results are consolidated with those of SKWP. According

to petitioners, this would only be possible if STAG's 95 percent

interest was indistinguishable from SKWP's interest. Second,

petitioners consider STAG's agreement to absorb certain personnel costs

associated with the purchase of its assets to be an indication of

affiliation between STAG and SKWP.

In response to the first point, the consolidation of financial

statements is done for accounting purposes when a parent company

controls the operations of a subsidiary entity. In the present case,

the consolidation of VCE's financial statements into SKWP's is merely

an indication that SKWP controls VCE, not that SKWP controls STAG (or

that both companies control VCE). As explained above, STAG contracted

away its right to control VCE as part of the five-year distribution

agreement.

In response to the second point, STAG's commitment to absorb

certain personnel costs resulted from the arm's-length negotiations

that took place between the parties. Stated differently, absorption of

these costs was part of the quid pro quo that enabled STAG to obtain

the highest price possible for its assets at the time of sale.

In conclusion, the Department finds no evidence to consider STAG

and SKWP to be affiliated within the meaning of section 771(33) of the

Act, and for purposes of these final results, will continue to treat

them as parties to an arm's-length transaction in relation to the sale

and acquisition of SKWP's production equipment.

Comment 2: Profit Adjustment. Petitioners argue that even if the

Department were to find STAG and SKWP unaffiliated, we should account

for STAG's share of VCE's profit or loss as compensation for the assets

transferred to SKWP, and add the value of these profits and losses to

the reported costs of production.

Respondents counter that there is no statutory authority to add

profit to a COP calculation, and these profits and losses are properly

excluded from the reported costs.

[[Page 61273]]

Department Position: We agree, in principle, with petitioners that

any profits that accrue to STAG under its profit and loss sharing

arrangement with SKWP should be considered part of the purchase price

of the assets acquired by SKWP from STAG. As discussed in our response

to comment 1, above, the five-year arrangement between STAG and SKWP to

share in the profits and losses of VCE, a distributor of SKWP's urea

products, was concluded as an integral part of the asset purchase

agreement between the two companies. Under the arrangement, SKWP agreed

to forego its share of VCE's earnings from urea sales as part of the

compensation it paid to STAG for the assets acquired. As such, any

profits paid to STAG under the arrangement can reasonably be viewed as

part of the purchase price for the assets.

We note, however, that evidence on the record shows that from 1993

to 1996 (the first three years of the arrangement), VCE incurred only

losses on its sales of SKWP's urea products. Thus, as of the POR, STAG

has not received any additional compensation for the assets it sold

beyond that paid by SKWP at the time the agreement was concluded. In

addition, we note that, were VCE to earn profits in the final two years

of the agreement, such profits would first be netted against VCE's

accumulated losses (in accordance with the arrangement) before

distribution to STAG.

Finally, as a theoretical matter, we disagree with petitioners that

all profits paid to STAG under the arrangement should go to increase

the value of the production equipment purchased by SKWP. Rather,

consistent with SKWP's GAAP accounting for all of the assets it

acquired from STAG, any additional compensation in the form of VCE

profits paid to STAG would first be applied to other, more liquid

assets to reduce any remaining difference between their value at the

time of purchase and the amount of the purchase price allocated to

them.

Comment 3: Renovation Project. Petitioners argue that the

Department should increase SKWP's cost of production to account for

amounts received from the German government to offset expenses

associated with an ongoing renovation project at its nitrogen facility.

According to petitioners, the Department routinely considers renovation

costs to be part of the cost of production. In this regard, petitioners

highlight the fact that SKWP has accounted for costs associated with

the project as part of the company's operating costs. Citing Certain

Iron Metal Castings from India, 46 FR 28463 (1981), petitioners contend

that it is the Department's long-standing practice not to reduce costs

to reflect the benefits received from government subsidies.

SKWP argues that, because it did not incur the renovation costs for

which the subsidies were granted, these costs could not be part of the

company's cost of production.

Department's Position: We disagree with petitioners. Costs

associated with the renovation of SKWP's production facility were not

incurred by SKWP. The costs in question were funded by the German

government through reimbursement which was recorded in the audited

financial statements of SKWP.

Contrary to petitioners' apparent belief, the Department's long-

standing practice is to base COP upon a producer's actual costs and not

to restate such costs to exclude government payments, linked to

specific costs. See, e.g., Red Raspberries from Canada; Final

Determination of Sales at Less Than Fair Value, 50 FR 19768 (1985);

Certain Iron Construction Castings from India; Final Determination of

Sales at Less Than Fair Value, 51 FR 9486, 9488 (1986). This practice

has been upheld by the courts on many occasions. See, e.g., United

States v. European Trading Company, 27 CCPA 289, C.A.D. 103 (1940);

Washington Red. Raspberry Comm. v. United States, 657 F. Supp. 537 (CIT

1987); Alhambra Foundry Co., Ltd. v. United States, 685 F. Supp. 1252

(CIT 1988). Indeed, in the one case cited by petitioners, the very

practice at issue was upheld by the court. See Al Tech Specialty Steel

Corp. v. United States, 10 CIT 743, 751, 651 F. Supp. 1421 (1986)

(court refused to overturn calculation of ``fixed costs merely because

the adjustment is based on subsidies'').

Comment 4: Special Depreciation. Petitioners argue that the

Department should increase SKWP's reported depreciation expense to

account for ``special'' depreciation excluded from COP and CV by the

company. Petitioners maintain that the Department has a consistent

practice of including special depreciation items in its calculation of

respondent's costs and there is no justification for departing from

that practice in this instance.

SKWP insists that it properly excluded special depreciation from

the COP and CV figures it submitted to the Department. SKWP notes that

the special depreciation in question relates to tax-basis depreciation

granted by the German government to companies operating in the former

GDR and, thus, represents no real additional cost to the company and

should not be included in the cost of production. SKWP adds that actual

depreciation (i.e., not tax-related depreciation) is included in SKWP's

fully-absorbed cost of production.

Department's Position: We disagree with SKWP in that, for purpose

of computing COP and CV, we cannot simply ignore the amount that the

company recorded as ``special'' depreciation expense during the POR.

Each year in its accounting books and records, SKWP recognizes what it

maintains is ``normal'' depreciation expense for the year. In addition,

because SKWP operates in the former GDR, German tax law allows the

company to recognize a ``special'' depreciation expense in the year in

which an asset is purchased. Like normal depreciation, the amount of

the special depreciation taken during the year of acquisition reduces

the depreciable basis of the assets. Thus, while the special tax

depreciation may be stated on an accelerated basis which may or may not

reflect the underlying economic useful lives of the assets purchased by

SKWP, to ignore the expense altogether, as SKWP suggests, fails to

recognize as a cost that portion of each asset's depreciable basis that

is written off as special depreciation in the year of acquisition. SKWP

has not provided us with any alternative method of recognizing an

appropriate amount for depreciation expense that is based on the

economic useful lives of the assets purchased by the company. Rather,

SKWP's position is that the Department must exclude special

depreciation costs from COP and CV because the amounts at issue do not

reflect what it calls ``real'' costs. However, as described above, the

special depreciation expense amounts recorded by SKWP do reflect actual

depreciation costs on an accelerated basis. Therefore, absent any other

information on the record from which to derive an alternative measure

of depreciation expense, we have included SKWP's special depreciation

expense in the company's COP and CV.

Comment 5: Other Expenses Excluded from SKWP's Submitted Costs.

Petitioners claim that the Department should include in SKWP's COP and

CV figures certain costs reported by the company in its financial

statements. Specifically, petitioners contend that the Department

should increase SKWP's reported costs for three expense items: amounts

incurred by the company for environmental damages relating to SKWP's

100% owned affiliate, Agrochemie Handelsgesellschaft GmbH (Agrochemie);

amounts incurred for the demolition of certain plant facilities;

[[Page 61274]]

and, costs relating to worker severance pay.

SKWP argues that the amounts reported in its financial statements

for environmental damages and demolition costs were properly excluded

from the costs reported to the Department. According to SKWP, expenses

relating to environmental damages caused by Agrochemie were paid for by

the German government and, therefore, no costs were actually incurred

by the company. With respect to amounts reported for plant demolition,

SKWP contends that the facilities at issue were not involved in the

production of urea and that these amounts, too, were paid for by the

German government.

Department's Position: We agree with petitioners and have adjusted

SKWP's reported COP and CV figures to include amounts for Agrochemie's

environmental damages, demolition of certain SKWP facilities, and

worker severance pay as reported in the company's financial statements.

As part of our cost verification, we reconciled the total amount of

costs reported by SKWP in response to our antidumping questionnaire to

the costs reported in the company's audited financial statements. Our

reconciliation showed that SKWP had excluded from its COP and CV

figures specific income statement items relating to reserves

established for each of the three expense items described above.

Although the record of this case shows that SKWP received funds from

the German government to offset costs incurred by the company for

certain plant renovations and for environmental clean-up at its

nitrogen facility, SKWP failed to show that the receipt of these funds

was specifically related to either the environmental damages caused by

Agrochemie or to the demolition costs at issue. As petitioners note in

their briefs, in past cases, the Department has accounted for expenses

associated with environmental clean-up by respondents as part of the

cost of production where, as in this case, such expenses are included

in respondent's financial statements and reflect costs incurred during

the period of investigation or review. See Final Determination of Sales

at Less Than Fair Value: Stainless Steel Wire Rod from France, 58 FR

68865 (1993). With respect to SKWP's argument that the demolition costs

relate to non-urea facilities, our understanding based on the evidence

in the record is that the amounts incurred relate to the destruction of

factory assets for discontinued operations. As such, we consider these

costs to be related to SKWP's general operations and have therefore

included them in COP and CV.

Comment 6: Reported Costs. Petitioners contend that SKWP has

reported the costs for only one type of urea product and that a second,

more costly type of urea referred to as ``konf.'' in the verification

exhibits, was manufactured by SKWP during the POR. Petitioners maintain

that cost verification exhibits do not support SKWP's contention that

``konf.'' urea is actually bagged urea since these exhibits show an

amount for packing costs in the cost center report for what SKWP claims

is bulk urea. Petitioners argue that the Department must increase

SKWP's reported COP and CV to reflect the weighted-average cost for the

two types of urea produced by the company.

SKWP maintains that ``konf.'' urea is, in fact, bagged urea, and

that the Department verified packing costs associated with bagged urea

as part of its sales verification. SKWP adds that the Department has

factored the company's reported packing costs for bagged urea into its

COP analysis.

Department's Position: We disagree with petitioners that SKWP

failed to report the costs of a second type of urea that it produced

during the POR. SKWP manufactures and sells urea in both bulk form,

called ``lager lose,'' and in bagged form, or ``konf.'' In response to

the Department's cost questionnaire, SKWP reported the cost of urea in

bulk form only. The company reported the additional packing costs it

incurred for bagged urea on a transaction-specific basis in response to

the Department's sales questionnaire. In performing our COP test of

SKWP's home market sales, we adjusted for the packing costs associated

with bagged urea by deducting the reported amount from the home market

sales price before comparing that price to the COP for bulk urea. Thus,

to compute a single weighted-average cost for both bulk and bagged

urea, as petitioners advocate, would result in an overstatement of

costs.

With respect to petitioners observation that SKWP's cost center

report for bulk urea shows an amount for packing costs, we note the

fact that these amounts represent insignificant costs of less than one

DEM per metric ton that are associated with packing bulk urea for sale.

SKWP included these costs in its reported COP and CV amounts for bulk

urea.

Comment 7: Labor Costs. Petitioners contend that a substantial

portion of costs associated with SKWP's labor force are unaccounted for

in the company's reported COP. In support of their claim, petitioners

point to an agreement by SKWP to employ a minimum number of the workers

formerly employed by STAG. Petitioners note the fact that, during the

POR, the actual number of workers employed by SKWP exceeded the

company's commitment level. According to petitioners, because SKWP

developed its accounting systems subsequent to the date of the

antidumping duty order, the company may have inappropriately assigned

(or absorbed) excess personnel costs in areas responsible for producing

non-subject merchandise, thereby artificially understating labor costs

for urea.

As further evidence of their claim that SKWP may have understated

its labor costs for the subject merchandise, petitioners assert that

ammonia production reports obtained by the Department during its cost

verification show what petitioners believe is a small percentage of the

company's total workforce assigned to production of the input, and that

there is no other evidence on the record to show the number of urea

production workers.

SKWP argues that the Department thoroughly verified the company's

cost centers and found that all labor costs had been appropriately

allocated and accounted for. SKWP maintains that it is puzzled by

petitioners' claim with respect to the number of workers in its ammonia

production facility, noting that such facilities are not labor-

intensive operations. SKWP also points out petitioners' own admission

that personnel expenses are also accounted for through factory overhead

and general and administrative (G&A) expenses.

Department's Position: We disagree with petitioners assertion that

the analysis contained in their brief provides any basis for us to

believe that SKWP may have understated its labor costs for urea.

Rather, based on the results of our verification, we find that SKWP

properly accounted for all labor costs incurred to produce the subject

merchandise. Thus, for the final results of this review, we have not

adjusted SKWP's labor costs as argued by petitioners. In a pre-

verification letter to the Department dated April 2, 1997, petitioners

expressed their concern that, in light of SKWP's commitment to employ a

minimum number of former STAG employees, the variable overhead figure

reported by SKWP appeared low. Based on this, petitioners requested

that, as part of verification, ``SKWP should explain how it has

accounted for all labor costs.'' During verification, SKWP did, in

fact, provide a full explanation of the methodology it used in its

normal books and records to account for labor costs incurred to produce

both subject and non-subject

[[Page 61275]]

merchandise. Moreover, SKWP personnel demonstrated how that methodology

was used to calculate the COP and CV data submitted to the Department.

As described in SKWP's cost response and in the Department's cost

verification report, SKWP charges labor costs, as well as other

production costs, to a series of cost centers by cost type. The amounts

charged to each ``cost type-cost center'' are then distributed in a

multi-stage allocation to ``process-cost centers'' maintained by SKWP

for both subject and non-subject merchandise. As explained in the

Department's cost verification report, Department verifiers examined

how production costs incurred within each of the various cost type-cost

centers were allocated to the various process-cost centers under SKWP's

accounting system. See Cost Verification Report at page 21.

In their case brief, petitioners cite to a list of participants at

the cost verification as evidence that the Department verifiers

examined only the labor costs incurred by SKWP in the production of

ammonia and urea, and neglected to review the labor allocations to non-

subject merchandise. Moreover, petitioners argue that verification

exhibits collected by the Department show only the number of workers

employed by SKWP at its ammonia production facility. While we do not

believe that the participants list cited by petitioners provides any

indication of the testing performed during verification, the

Department's cost verification report does explain that the verifiers

examined carefully amounts charged to, and allocated from, the various

cost type-cost centers, including amounts incurred for labor costs.

With respect to the ammonia production reports cited by petitioners,

the verification report makes clear that these documents represent

examples of the supporting documentation reviewed by the verifiers as

part of their testing of SKWP's cost type-cost centers. As stated in

the report, although the Department verifiers reviewed costs recorded

in, and charged from, each category of cost type-cost center (including

those in which SKWP recorded its labor costs), they did not collect as

verification exhibits copies of all cost center reports. In fact, to

have collected copies of all documents examined during verification

would have placed an extreme and unnecessary burden on the respondent

in this case.

Comment 8: Factory Overhead. Petitioners note that SKWP's reported

factory overhead costs contain an adjustment that reduces a portion of

those costs. Petitioners contend that there is no evidence on the

record concerning the nature of this adjustment. According to

petitioners, if, upon re-examining the record of this case, the

Department finds that the amount of the adjustment is not justified, it

should increase SKWP's factory overhead costs accordingly.

SKWP asserts that petitioners are overreaching when they request

that the Department adjust the company's factory overhead costs for an

offset that is included among thousands of other numbers contained in

the record of this case. SKWP argues that its factory overhead costs

should be accepted as reported since those amounts were verified by the

Department.

Department's Position: For the final results of this review, we

have not adjusted SKWP's factory overhead costs for the offset. The

offset represents miscellaneous income earned by SKWP's Cunnersdorf

research facility for projects conducted on behalf of outside parties.

We did not describe the offset in our cost verification report simply

because, relative to the production costs at issue in this case and the

complexity of SKWP's cost accounting system, it is insignificant.

Technically, because the work conducted was not so significant as to

represent a separate line of business (and, thus, be excluded from COP

and CV altogether), both the revenues from the projects and the

associated R&D costs would more appropriately be considered part of G&A

expense. However, in this instance, reclassification of these amounts

would have little, if any, effect on SKWP's submitted costs. Thus, as

noted above, we have not made any adjustments to SKWP's reported

factory overhead costs.

Comment 9: Sales Reporting. Petitioners argue that SKWP only

provided sales information on certain types of urea without consulting

the Department. Petitioners insist that the Department should affirm in

the final determination the inappropriateness of this unilateral

modification.

Respondent argues that they reported all home market sales of

identical merchandise rather than sales of the foreign like product.

They claim that they did this in accordance with the statute at Section

773(a)(1) and Section 771(16)(A). Respondent also argues that the

Department implicitly acknowledged this requirement when it advised

SKWP that its omission of sales of non-identical merchandise may result

in the use of facts available. Due to the fact that the Department's

analysis indicates that only sales of identical merchandise were

necessary for comparison purposes, petitioners' concerns are not

justified.

Department's Position: During the review, SKWP only provided home

market sales information of identical merchandise. In an October 30,

1996, letter to the respondent, the Department notified SKWP that

failure to report the entire universe of the foreign like product may

result in the Department using facts available, particularly if the

Department determined after further analysis and verification of all

relevant data that the omitted sales were necessary for comparison

purposes. As evidenced by the preliminary results of review, the

reported home market sales database of identical merchandise was

adequate for making comparisons to the U.S. sales database and the

omitted sales were not necessary for comparison purposes.

Comment 10: Model Match. Petitioners argue that SKWP

inappropriately added a product characteristic in the model matching

section and has not justified this modification. Petitioners argue that

although there is no difference in the material costs of the two

products, there is a difference in selling price. Additionally,

petitioners argue that due to the fact that the U.S. sale is of one

particular type of urea, SKWP's reporting methodology would cause the

Department to select only certain home market sales for comparison

purposes. Therefore, the Department should reject SKWP's reporting

methodology. Alternatively, petitioners argue that if the Department

accepts this SKWP's reporting methodology then it should adjust the

cost for the second type of urea to ensure that all costs for all

models are properly accounted for.

Respondent rebuts petitioners' argument by stating that the

Department's questionnaire allows for the modification of the product

characteristics if necessary. Respondent also objects to petitioners

claim that the modification of the physical characteristics resulted in

the comparison of U.S. sales to home market sales of similar

merchandise. Respondent argues that due to the fact the record

demonstrates that both types of urea are physically different products,

comparison of one with the other is inappropriate.

Department's Position: The Department agrees with respondent. The

Department's model match allows for respondent to report additional

product characteristics if necessary. As evidenced by the preliminary

results of review, the Department was able to compare the U.S. sale to

the most comparable home market sale(s) and ensure that there were no

distortions in the analysis. Based on the fact that there

[[Page 61276]]

is no evidence on the record to show that the product characteristics

reported resulted in a distortive comparison, the Department has

continued to use the model matching criteria set forth in the

preliminary results of review.

Comment 11: Downstream Sales. Petitioners argue that sales from

Agrochemie were not reported to the Department. Petitioners contend

that SKWP has not indicated that it is otherwise justified in its

reporting methodology, therefore, there exists the strong possibility

for SKWP to avoid reporting less favorable home market sales to end-

users by manipulating the transfer price to Agrochemie. Petitioners

argue that the Department must increase normal value to reflect

Agrochemie's profits on the resale of urea through its reseller.

Because there is no evidence of Agrochemie's sales prices on the

record, petitioners argue that the Department should use facts

available regarding VCE's profit level to determine the selling price

to Agrochemie's final customer.

Respondent argues that petitioners' request is without merit.

Respondent asserts that the purpose of the arm's length test is to

determine if the prices for sales between affiliated parties may have

been manipulated to lower normal value. However, due to the fact that

the Department found that sales to Agrochemie were at arm's length it

would be inappropriate to penalize SKWP for avoiding the burden of

reporting downstream sales that the Department did not require for its

analysis.

Department's Position:. The Department agrees with respondent.

During the review, SKWP did not report sales made from Agrochemie to

unaffiliated customers in the home market. In an October 30, 1996,

letter to the respondent, the Department notified SKWP that failure to

report the Agrochemie sales to the first unaffiliated party may result

in the Department using facts available, particularly if the Department

determined after further analysis and verification of all relevant

data, that these omitted sales were necessary for comparison purposes.

As evidenced by the preliminary results of review, the Department found

that SKWP's sales to Agrochemie were at arm's length and these omitted

sales were not necessary for comparison purposes.

Final Results of Review

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

weighted-average margin exists:

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

Margin

Manufacturer/exporter (percent)

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

SKW Piesteritz............................................. 0.00

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

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between export price and normal value may vary from the

percentage stated above. The Department will issue appraisment

instructions on each exporter directly to the Customs Service.

Furthermore, the following deposit requirements will be effective

upon publication of this notice of final results of review for all

shipments of subject merchandise entered, or withdrawn from warehouse,

for consumption on or after the publication date, as provided by

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

reviewed company will be the rate listed above; (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 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)

for all other producers and/or exporters, as indicated in the

preliminary results of this review, the cash deposit rate shall be

44.80 percent, the ``all others'' rate established in the LTFV

investigation (53 FR 2636). These deposit requirements shall remain in

effect until publication of the final results of the next

administrative review. In addition, we are terminating suspension of

liquidation for shipments of solid urea produced by other firms in

Germany.

This notice serves as a final reminder to importers of their

responsibility under 19 CFR 353.26 to file a certificate regarding the

reimbursement of antidumping duties prior to liquidation of the

relevant entries during this review period. Failure to comply with this

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and subsequent assessment

of double antidumping duties.

Notification to Interested Parties

This notice also serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 353.34(d). Timely written notification of

return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

regulations and the terms of an APO is a sanctionable violation.

This administrative review and notice are in accordance with

section 751(a)(1) of the Act (19 USC 1675(a)(1)) and 19 CFR 353.22.

Dated: November 5, 1997.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 97-30144 Filed 11-14-97; 8:45 am]

BILLING CODE 3510-DS-P