Industrial Phosphoric Acid From Belgium; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-423-602]

Industrial Phosphoric Acid From Belgium; Final Results of

Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

review of industrial phosphoric acid from Belgium.

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SUMMARY: On May 11, 1998, The Department of Commerce (``the

Department'') published the preliminary results of its administrative

review of the antidumping order on industrial phosphoric acid from

Belgium. This review covers imports of industrial phosphoric acid from

one producer, Societe Chimique Prayon-Rupel S.A. (``Prayon'') and the

period August 1, 1996, through July 31, 1997.

We gave interested parties an opportunity to comment on our

preliminary results. Based on our analysis of the comments received, we

have revised the results from those presented in preliminary results of

review.

EFFECTIVE DATE: October 14, 1998.

FOR FURTHER INFORMATION CONTACT:

Todd Peterson or Thomas Futtner, AD/CVD Enforcement Office 4, Import

Administration, International Trade Administration, U.S. Department of

Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C.

20230; telephone (202) 482-4195, and 482-3814, respectively.

[[Page 55088]]

SUPPLEMENTARY INFORMATION:

The 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

otherwise indicated, all citations to the Department of Commerce's

(``the Department's'') regulations refer to the regulations codified at

19 CFR Part 351, 62 FR 27296 (May 19, 1997).

Background

On August 20,1 987, the Department published in the Federal

Register (52 FR 31439) the antidumping duty order on industrial

phosphoric acid (``IPA'') from Belgium. On August 4, 1997, the

Department published in the Federal Register (62 FR 41925) a notice of

opportunity to request an administrative review of this antidumping

duty order. On August 29, 1997, in accordance with 19 CFR 351.213(b),

Prayon, the petitioner FMC Corporation (``FMC''), and Albright & Wilson

Americas Inc. (``Wilson''), a domestic producer of the subject

merchandise, requested that the Department conduct an administrative

review of Prayon's exports of subject merchandise to the United States.

We published the notice of initiation of this review on September 25,

1997 (62 FR 50292). On May 11, 1998, the Department published the

preliminary results of review (63 FR 25830). The Department has now

completed this review in accordance with section 751 of the Act.

Scope of the Review

The products covered by this review include shipments of IPA from

Belgium. This merchandise is currently classifiable under the

Harmonized Tariff Schedule (``HTS'') item numbers 2809.2000 and

4163.0000. The HTS item numbers are provided for convenience and

Customs purposes. The written description remains dispositive.

Analysis of the Comment Received

We gave interested parties an opportunity to comment on the

preliminary results of review. We received comments from respondent and

petitioner.

Comment 1: Sale comparisons. According to petitioner, the

Department erroneously compared Prayon's U.S. sales made in one channel

of distribution with the home market sales made in three channels of

distribution. For the U.S. channel, Prayon sold only through its

related sales agent to end-users. In Belgium, Prayon made sales through

three channels: (1) Direct to end-users; (2) through its related sales

agent to end-users; and (3) through its related sales agent to

distributors. Petitioner maintains there are selling, quantity and

price differences between sales made in the second channel and sales

made in the first and third channels. As a result of these differences,

petitioner requests that the Department exclude from its antidumping

calculation sales made through the first and third channels in the home

market. Petitioner argues that the level of trade (``LOT'') provision

of the regulations requires comparing sales transactions which are as

nearly identical as possible, such that the Department must match only

sales made to end-users through its related sales agent in Belgium with

sales made to end-users through its related sales agent in the United

States.

Prayon argues there is only one channel of distribution in the home

market. Prayon maintains that the selling functions performed for all

of its home market sales are the same, whether or not its related sales

agent is involved, and whether or not the purchaser is an end-user or a

distributor. Moreover, since the commission paid to the related sales

agents was disregarded in the dumping calculation, there are no

significant differences between sales to end-users made by Prayon and

sales made by Prayon through its related sales agents. For these sales

to end-users in the home market, there are not two different

distribution channels but only identical selling functions performed by

two different offices in the home market. Moreover, these home market

end-user sales are identical in all respects to the sales to end-users

in the United States. These functions include communications with

customers, taking orders, directing shipments and receiving payment.

Finally, Prayon asserts that the Department in previous cases has not

used channels of distribution as an appropriate basis for grouping

sales for comparison purposes.

DOC position: We disagree with petitioner. Before evaluating and

excluding any sales transactions to alleged home market customer

groups, the Department first matches Prayon's U.S. sales to Prayon's

home market sales. Only after Commerce has determined the most

physically similar model match for a U.S. sale does the Department

determine whether or not that sale has been matched to a home market

sale at the same LOT. See Import Administration Policy Bulletin Number

92/1 July 29, 1992) (``Matching at Levels of Trade''). If not, the U.S.

sale may be matched to a home market sale of that most similar model at

a different LOT. In this case, however, all home market sales are at

the same LOT.

In accordance with section 773(a)(1)(B) of the Act, to the extent

practicable, we determine normal value (``NV'') based on sales in the

comparison market at the same LOT as the export price (``EP'') or

constructed export price (``CEP'') transaction. The NV LOT is that of

the starting price of the comparison sale in the foreign market or,

when NV is based on constructed value (``CV''), that of the sales from

which we derive selling, general and administrative (``SG&A'') expenses

and profit. For EP, the U.S. LOT is also the level of the starting-

price sale, which is usually from exporter to importer. See Notice of

Final Determination of Sales at Less Than Fair Value: Certain Cut-to-

Length Carbon Steel Plate from South Africa, 62 FR 61731 (November 19,

1997). All of the U.S. sales in this review are EP sales. See

Industrial Phosphoric Acid From Belgium; Preliminary Results of

Antidumping Duty Administrative Review, 63 FR 25830 (May 11, 1998). To

determine whether NV sale are at a different LOT than U.S. sales, we

examine stages in the marketing process and selling functions along the

chain of distribution between producer and the unaffiliated customer.

Customers categories such as distributors, retailers, or end-users

are commonly used by petitioners respondents to describe different

LOTs, but without substantiation, they are insufficient to establish

that a claimed LOT is valid. An analysis of the chain of distribution

and of the selling functions substantiates or invalidates the claimed

LOTs.

The marketing process in both markets begins with goods being sold

by the producer and extends to the sale to the final user. The chain of

distribution between the producer and the final user may have many or

few links, and each respondent's sales occur somewhere along this

chain. In the United States, the respondent's sales are generally to an

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

distribution systems in the home market and the United States,

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

level of selling expenses for each claimed LOT. Unless the sales being

compared are at different stages in the marketing process, the

Department will not find that a difference in LOT exists, even if

selling functions are different.

[[Page 55089]]

If the claimed LOTs are different, the selling functions performed

in selling to each level should also be different. Therefore, unless we

find that there are different selling functions for sales to the U.S.

and HM sales, we will not determine that there are separate LOTs.

Different LOTs necessarily involve differences in selling functions,

but differences in selling functions, even substantial ones, are not

alone sufficient to establish a difference in the LOTs. Differences in

LOTs are characterized by purchasers at different stages of marketing

or their equivalent.

Because the existence of different channels of distribution

suggested that differences in LOT might possibly be present in this

case, the Department analyzed the selling functions associated with

Prayon's U.S. sales with Prayon's home market sales through the three

channels of distribution described above. As Prayon has noted, all four

of these groups of sales involve substantially the same selling

functions. Specifically, for all of these sales Prayon communicates

with customers, takes orders, directs shipments and receives payment

and we found no differences in selling functions. The Department has

stated in the preamble to its LOT regulation that, in order to find a

level of trade difference ``each more remote level must be

characterized by an additional layer of selling activities, amounting

in the aggregate to a substantially different selling function.'' 62 FR

27296, 27371 (May 19, 1997) (emphasis added).

Because there are no substantially different selling functions

associated with the home market sales through any of the home market

channels of distribution, we determined that there are no LOT

differences between Prayon's U.S. sales and any of its home market

sales, regardless of the differences in channel of distribution.

Because none of Prayon's home market sales are at an LOT that is

different from that of the U.S. states, there is no reason to eliminate

any of Prayon's home market sales from the matching pool or from the

model-specific price averaging groups based on an LOT rationale.

Further, it is not our practice to limit price-averaging groups based

solely on channels of distribution. See Final Determination of Sales at

Less Than Fair Value: Certain Pasta From Turkey, 61 FR 30309 (June 14,

1996) (``channels are not an appropriate basis for creating product

average groups * * *. The SAA does not contemplate the use of channels

of distribution as a basis for creating an averaging group'').

Therefore, we have compared U.S. sale prices, properly adjusted, to a

model-specific average of all of Prayon's home market sales.

Comment 2: Credit expenses. Petitioner claims that the Department

should have used the same methodology it used for home market credit

expense to calculate U.S. credit expenses. In the preliminary results,

the Department determined that the discount transactions for home

market credit expenses between Prayon and its affiliated coordination

center were not made at arm's length. As a result, the Department

deducted from the price to the first unaffiliated customer in the home

market an imputed credit expense, rather than using the home market

credit expense reported by Prayon. According to petitioner, the

discount transactions for the U.S. credit expense between Prayon and

its affiliates, Quadra and Prayon Services and Finance, also were not

made at arm's length. Therefore, the Department should reject these

reported credit expense values and calculate an imputed U.S. credit

expense. For the purposes of the final results, the imputed credit

expense must be incorporated in the antidumping margin calculation.

Petitioner also argues that Prayon erroneously reported its credit

expense on these U.S. transactions in Belgian francs, and that the

Department must calculate the imputed credit expense using the interest

rate of the currency in which Prayon incurred credit expense on U.S.

sales, i.e., U.S. dollars.

Prayon argues that the Department should use the actual credit cost

incurred by Prayon and reported in Prayon's questionnaire response.

Although Prayon's actual cost is the cost incurred in factoring

invoices for U.S. sales with a related company, the related company

operates as a ``coordination center'' under Belgian law and is legally

required to charge an arms's length interest rate. This rate is based

on the prevailing Belgian interbank rate plus a premium to reflect a

commercial loan. If, however, the Department disregards Prayon's actual

credit expense and uses an imputed expense, then a Belgian franc-

denominated rate should be used in the calculation.

DOC position: We agree with petitioner. In the preliminary results,

we determined that Prayon's home market credit expense paid to its

affiliates was not incurred on an arm's length basis. Therefore, we

calculated an imputed home market credit value using our standard

credit calculation, i.e., (date of payment less date of shipment/365)*

monthly home market short term rate interest rate* gross price. We also

determined that Prayon's U.S. credit expense paid to its affiliates was

not incurred at arm's length and intended to calculate an imputed U.S.

credit value using the standard credit calculation. For these Final

Results, we have made this change.

In our calculation, we have used the prevailing U.S. dollar prime

rate in effect during the period of review See Federal Reserve Bulletin

``Prime Rate Charged By Banks,'' June 28, 1998, p.A 22, Number 1.33.

For this instant review, the application of the prime rate is

consistent with the Department's policy of calculating an imputed

credit expense using the interest rate of the currency of sale. As we

stated in a recent Import Administration Policy Bulletin, ``for the

purposes of calculating imputed credit expenses, we will use a short-

term interest rate tied to the currency in which the sales are

denominated. We will base this interest rate on the respondent's

weighted-average short-term borrowing experience in the currency of the

transaction.'' See Import Administration Policy Bulletin Number 98.2 at

3 (February 23, 1998). Further, our use of the prime rate in the

calculation of an imputed credit expense for this review adheres to the

Department's standard policy as outlined in the Bulletin cited above:

``(1) The surrogate rate should be reasonable; (2) it should be readily

obtainable and predictable; and (3) it should be a short-term interest

rate actually realized by borrowers in the course of the usual

commercial behavior in the United States.'' The U.S. dollar prime rate

meets this standard.

We disagree that any imputed credit expense should be calculated

using Belgian francs. In our Section C questionnaire, we explicitly

stated that it is our practice to calculate imputed credit expense in

U.S. dollars when the U.S. sales are denominated in dollars. We stated

that, if Prayon did not borrow in U.S. dollars, then it should use a

U.S. published commercial bank prime rate short-term lending rate in

reporting credit expense. Therefore, we have calculated the imputed

U.S. credit expense in U.S. dollars.

Finally, we find that Prayon's assertion that its affiliate, Prayon

Services, is required, under Belgian law, to charge an arm's length

interest rate to an affiliated company provides insufficient indication

that these credit transactions are in fact made at arm's length. Since

the arm's length standard established by Belgian law is not

sufficiently similar to the practice established by the Department, we

cannot rely on Prayon's compliance with the law as evidence that the

rate

[[Page 55090]]

charged by Prayon Services to Prayon is at arm's length. See Industrial

Phosphoric Acid from Belgium; Final Results of Antidumping

Administrative Review, 61 FR 20227 (May 6, 1996).

Currency Conversion

We made currency conversions in accordance with section 773A of the

Act based on rates certified by the Federal Reserve Bank in effect on

the dates of the U.S. sales. See Change in Policy Regarding Currency

Conversions, 61 FR 9434 (March 8, 1996).

Final Results of the Review

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

exists for the period August 1, 1996 through July 31, 1997:

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Margin

Manufacturer/exporter (percent)

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Prayon.................................................... 4.35

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The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between normal value and export price may vary from the

percentage stated above. We have calculated an importer-specific duty

assessment rate based on the ratio of the total amount of antidumping

duties calculated for the examined sales to the total entered value of

the same sales. The rate will be assessed uniformly on all entries of

that particular company made during the POR. The Department will issue

appraisement instructions directly to the Customs Service.

Furthermore, the following deposit requirements will be effective

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

all shipments of IPA from Belgium entered, or withdrawn from warehouse,

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

section 751(a) of the Act: (1) For the companies named above, the cash

deposit rate will be the rate listed above (2) for merchandise exported

by manufacturers or exporters not covered in this review but covered in

a previous segment of this proceeding, the cash deposit rate will

continue to be the company-specific rate published in the most recent

final results which covered that manufacturer or exporter; (3) if the

exporter is not a firm covered in this review or in any previous

segment of this proceeding, but the manufacturer is, the cash deposit

rate will be that established for the manufacturer of the merchandise

in these final results of review or in the most recent final results

which covered that manufacturer; and (4) if neither the exporter nor

the manufacturer is a firm covered in this review or in any previous

segment of this proceeding, the cash deposit rate will be 14.67

percent, the ``all others'' rate established in the LFTV investigation.

These deposit requirements shall remain in effect until publication of

the final results of the next administrative review.

This notice serves as a final reminder to importers of their

responsibility under 19 CFR 351.402(f) 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 doubled antidumping duties.

This notice also serves as the only reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with section 351.306 of the Department's regulations.

Timely 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

sections 751(a)(1) and 777(i)(1) of the Act.

Dated: October 7, 1998.

Robert S. LaRussa,

Assistant Secretary, Import Administration.

[FR Doc. 98-27568 Filed 10-13-98; 8:45 am]

BILLING CODE 3510-DS-M