Industrial Nitrocellulose From the United Kingdom; Preliminary Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-412-803]

Industrial Nitrocellulose From the United Kingdom; 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.

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

summary: The Department of Commerce (the Department) is conducting an

administrative review of the antidumping duty order on industrial

nitrocellulose (INC) from the United Kingdom in response to a request

by the petitioner, Hercules Incorporated. This review covers one

manufacturer/exporter of the subject merchandise to the United States

during the period of July 1, 1997 through June 30, 1998. Based on our

analysis, the Department has preliminarily determined that a dumping

margin exists for the manufacturer/exporter during the period of review

(POR). If these preliminary results are adopted in our final results of

administrative review, we will instruct the United States Customs

Service (Customs) to assess antidumping duties as appropriate.

Interested parties are invited to comment on these preliminary results.

Parties who submit comments in this proceeding are requested to submit

with each comment (1) a statement of the issue, and (2) a brief summary

of the comment.

Effective date: August 6, 1999.

[[Page 42909]]

for further information contact: Thomas F. Futtner or Ron Trentham, AD/

CVD Enforcement, Group II, Office 4, Import Administration,

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

and Constitution Avenue, NW., Washington, DC 20230; telephone: (202)

482-3814 and (202) 482-6320, respectively.

Applicable Statute and Regulations

Unless otherwise stated, all citations to the Tariff Act of 1930,

as amended (``the Act''), are references to the provisions as of

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

by the Uruguay Round Agreements Act (``URAA''). In addition, unless

otherwise indicated, all citations to the Department's regulations

refer to the regulations codified in 19 CFR Part 351 (April 1998).

supplementary information:

Background

On July 10, 1990, the Department published in the Federal Register

(55 FR 28270) the antidumping duty order on INC from the United

Kingdom. On July 1, 1998, the Department published a notice of

``Opportunity to Request an Administrative Review'' of this antidumping

duty order for the period of July 1, 1997 through June 30, 1998 (63 FR

35909).

In accordance with 19 CFR 351.221, the petitioner requested that

the Department conduct an administrative review of sales of subject

merchandise made by respondent, Imperial Chemical Industries PLC (ICI).

We published a notice of initiation of this antidumping duty

administrative review on August 27, 1998. See initiation of Antidumping

and Countervailing Duty Administrative Reviews and Requests for

Revocation in Part, 63 FR 45796, August 27, 1998.

Under Section 751(a) of the Act, the Department may extend the

deadline for completion of an administrative review if it determines

that it is not practicable to complete the review within the

established time limit. On April 6, 1999, the Department published in

the Federal Register a notice extending the time for the preliminary

results from April 2, 1999, until July 31, 1999. See Industrial

Nitrocellulose From the United Kingdom: Notice of Extension of

Preliminary Results of Antidumping Duty Administrative Review, 64 FR

16707, April 6, 1999.

Scope of the Review

Imports covered by this review are shipments of INC from the United

Kingdom. INC is a dry, white, amorphous, synthetic chemical with a

nitrogen content between 10.8 and 12.2 percent, which is produced from

the reaction of cellulose with nitric acid. INC is used as a film-

former in coatings, lacquers, furniture finishes, and printing inks.

The scope of this order does not include explosive grade

nitrocellulose, which has a nitrogen content of greater than 12.2

percent. INC is currently classified under Harmonized Tariff System

(HTS) item number 3912.20.00. While the HTS item number is provided for

convenience and Customs purposes, the written description remains

dispositive as to the scope of the product coverage.

Fair Value Comparisons

To determine whether sales of INC from the United Kingdom to the

United States were made at less than fair value (LTFV), we compared the

constructed export price (CEP) to the normal value (NV), as described

in the ``Constructed Export Price'' and ``Normal Value'' sections of

this notice, below. When making produce comparisons in accordance with

section 771(16) of the Act, we considered all products as covered by

the ``Scope of Review'' section of this notice, above, that were sold

by the respondent in the home market in the ordinary course of trade

during the POR for purposes of determining appropriate product

comparisons to U.S. sales. Where there were no sales of the identical

or the most similar merchandise made in the home market that were

suitable for comparison, we compared U.S. sales to sales of the next

most similar foreign like product, based on the characteristics listed

in Section B and C of our antidumping questionnaire.

Constructed Export Price

ICI initially reported U.S. sales as export price (EP) sales.

However, in a previous segment of this proceeding, the Department

determined that ICI's U.S. sales were CEP transactions. See Industrial

Nitrocellulose From the United Kingdom; Notice of Final Results of

Antidumping Duty Administrative Review, 64 FR 6609, February 10, 1999.

In response to the Department's supplemental questionnaire of February

17, 1999, ICI reported all of its U.S. sales as CEP transactions.

In calculating price to the United States price for ICI, the

Department used CEP, as defined in section 772(b) of the Act because

all sales to the first unaffiliated purchaser in the United States took

place after importation. We calculated CEP based on packed, factory

prices to unaffiliated customers in the United States. We made

deductions from the starting price, where appropriate, for rebates,

international freight, marine insurance, U.S. brokerage and handling,

U.S. inland freight, U.S. duties, and direct and indirect selling

expenses to the extent that they were associated with economic activity

in the United States. These included credit expenses and commissions as

applicable, in accordance with sections 772(c)(2) and 772(d)(1) of the

Act. Finally, we made an adjustment for CEP profit in accordance with

sections 772(d)(3) and 772(f) of the Act.

For INC that was imported by a U.S. affiliate of ICI and then

further processed into lacquer, sealer, and primer products before

being sold to unaffiliated parties in the United States, we determined

that the special rule for merchandise with value added after

importation under section 772(e) of the Act applied. Where appropriate,

in accordance with Section 772(d)(2) of the Act, the Department also

deducts from CEP the cost of any further manufacture or assembly in the

United States, except where the special rule provided in Section 772(e)

of the Act is applied. Section 772(e) of the Act provides that, where

the subject merchandise is imported by an affiliated person and the

value added in the United States by the affiliated person is likely to

exceed substantially the value of the subject merchandise, we shall

determine the CEP for such merchandise using the price of identical or

other subject merchandise sold in the United States if there is a

sufficient quantity of sales to provide a reasonable basis for

comparison. If there is not a sufficient quantity of such sales or if

we determine that using the price of identical or other subject

merchandise is not appropriate, we may use any other reasonable basis

to determine the CEP.

To determine whether the value added is likely to exceed

substantially the value of the subject merchandise, we estimated the

value added, pursuant to Sec. 351.401(c)(2) of the Department's

regulations, based on the difference between the averages of the prices

charged to the first unaffiliated purchaser for the merchandise as sold

in the United States and the averages of the prices paid for the

subject merchandise by the affiliated person. Based on this analysis,

we determined that the estimated value added in the United States by

ICI's U.S. affiliate accounted for at least 65 percent of the price

charged to the first unaffiliated customer for the merchandise as sold

in the United States. Therefore, in accordance with Sec. 351.402(c)(2),

we determined that the value added is likely to exceed substantially

the value of the subject merchandise. We also

[[Page 42910]]

determined that there was a sufficient quantity of sales of identical

merchandise available in the U.S. market to provide a reasonable basis

for comparison and that the use of such sales is appropriate in

accordance with 772(e). Accordingly, for purposes of determining

dumping margins for these sales, we have used the weighted-average

dumping margins calculated on sales of identical merchandise sold to

unaffiliated persons in the United States. See Sec. 351.402(c)(3).

Discussion of the information which the Department used in making these

determinations is not possible due to its proprietary nature. For a

complete discussion, see Memorandum on Whether to Determine the

Constructed Export Price for Certain Further-Manufactured Sales Sold by

Imperial Chemical Industries PLC (ICI) in the United States During the

Period of Review Under Section 772(e) of the Act dated July 31, 1999.

Level of Trade

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

practicable, we determine NV based on sales in the comparison market at

the same level of trade (LOT) as the EP or CEP transactions. The NV LOT

is that of the starting-price sales in the comparison 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 the exporter to the importer. For CEP, it is the

level of the constructed sale from the exporter to the importer. See

Notice of Final Determination of Sales at Less Than Fair Value: Certain

Cut-to-Length Steel Plate from South Africa, 62 FR 61731 (November 19,

1997) (Carbon Steel Plate).

To evaluate the LOT, we examined information regarding the

distribution systems in both the U.S. and U.K. markets, including the

selling functions, classes of customer, and selling expenses for the

respondent. Customer categories such as distributors, retailers, or

end-users are commonly used by petitioners and respondents to describe

different LOT's but, without substantiation, they are insufficient to

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

distribution and the selling functions substantiates or invalidates the

claimed LOTs.

Our analysis of the marketing process in both the home market and

the United States begins with goods being sold by the producer and

extends to the sale of 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. 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 we find that there are different selling functions for sales

to the U.S. and home market sales, we will not determine that there are

different LOTs. Different LOTs necessarily involve differences in

selling functions, but differences in selling functions, even

substantial ones, are not sufficient alone to establish a difference in

the LOTs. Differences in LOTs are characterized by purchasers at

different stages in the chain of distribution and sellers performing

qualitatively different functions in selling to them. If the

comparison-market sale is at a different LOT, and the difference

affects price comparability, as manifested in a pattern of consistent

price differences between the sales on which NV is based and

comparison-market sales at the LOT of the export transaction, we make a

LOT adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP

sales, if the NV level is more remote from the factory than the CEP

level and there is no basis for determining whether the difference in

the levels between NV and CEP affects price comparability, we adjust NV

under section 773(a)(7)(B) of the Act (the CEP offset provision).

ICI did not claim a LOT adjustment. Nevertheless, we evaluated

whether a LOT adjustment was necessary by examining the ICI's

distribution system, including selling functions, classes of customers,

and selling expenses. In reviewing ICI's home market distribution

channels, we found that the POR sales of the merchandise under review

in the comparison market were made at only one LOT. With respect to

U.S. sales, after making deductions to the CEP sales pursuant to

section 772(d) of the Act, we found the selling activities performed by

ICI for the CEP sales to its affiliate were limited to order processing

and arranging transportation. Therefore, we found that the selling

functions performed at the CEP LOT were sufficiently different from the

selling functions performed at the NV LOT (i.e., sales solicitation,

price negotiation, customer visits, advertising, technical support,

invoicing, and billing adjustment) to consider these to be different

LOTs. We, therefore, evaluated whether the difference in LOT affected

price comparability. The effect on price comparability must be

demonstrated by a pattern of consistent price differences between sales

at the two relevant LOTs in the comparison market. Because there was

only one home market LOT, we were unable to determine whether there was

a pattern of consistent price differences based on home market sales of

subject merchandise.

The Statement of Administrative Action (SAA) provides that, ``if

information on the same products and company is not available, the LOT

adjustment may also be based on sales of other products by the same

company. In the absence of any sales, including those in recent time

periods, to different LOTs by the exporter or producer under

investigation, the Department may further consider the selling expenses

of other producers in the foreign market for the same product or other

products.'' See SAA at 830. In accordance with the SAA, we have

considered alternative sources of information to make the necessary LOT

adjustment, but we did not have information on the record that would

allow us to examine or apply these alternative methods for calculating

a LOT adjustment. Therefore, we do not have an appropriate basis to

determine a LOT adjustment.

Because we have found that all of the comparison sales in the home

market were at a more advanced LOT than the sales to the United State,

we were unable to qualify a LOT adjustment based on a pattern of

consistent price differences, in accordance with section 773(a)(7)(B)

of the Act. Therefore, we have preliminarily determined to grant a CEP

offset to ICI. See Memorandum Regarding industrial Nitrocellulose from

the United Kingdom-Level of Trade Analysis-Imperial Chemical

Industries, PLC, August 2, 1999.

Normal Value

1. Home-Market Viability

In order to determine whether there was a sufficient volume of

sales of INC in the home market to serve as a viable basis for

calculating normal value, we compared ICI's volume of home market sales

of the foreign like product to the volume of U.S. sales of the subject

merchandise, in accordance with section 773(a)(1)(B) of the Act.

Because the aggregate volume of home market sales of the foreign like

product by ICI was greater than five percent of the respective

aggregate volume of U.S. sales of the subject merchandise, we

determined that the home market provides a viable basis for calculating

NV for ICI's home market sales.

2. Arm's-Length Transactions

Sales to an affiliated customer in the home market which were

determined

[[Page 42911]]

not to be at arm's length were excluded from our analysis. To test

whether these sales were made at arm's length, we compared the prices

of sales of comparison products to affiliated and unaffiliated

customers, net of all movement charges, direct selling expenses,

discounts, and packing. Pursuant to section 351.403 of the Department's

regulations, where prices to the affiliated party were on average less

than 99.5 percent of the price to unaffiliated parties, we determined

that the sales made to the affiliated party were not at arm's length.

Therefore, we disregarded all sales to that home market customer. See

19 CFR 351.403(c) and Preamble to the Department's regulations, 62 FR

at 27355.

Price-to-Price Comparisons

In accordance with section 773(a)(1)(B)(i) of the Act, we based NV

on the price at which the foreign like product was first sold for

consumption in the exporting country in the usual commercial quantities

and in the ordinary course of trade and, to the extent practicable, at

the same LOT as the CEP sale. In accordance with section 773(a)(6) of

the Act, where applicable, we made adjustments to home market prices

for discounts and movement expenses (inland freight). Under section

773(a)(6)(C)(iii) of the Act, the Department adjusts for differences in

circumstances of sales (COS) between the home market and CEP

transactions in the United States. We reduced home market prices by an

amount for home market credit pursuant to section 351.410(c) of the

Department's regulations. We also made adjustments for indirect selling

expenses incurred in the comparison market or U.S. sales where

commissions were granted on sales in one market but not in the other

(the commission offset), pursuant to section 351.410(e). In addition,

based on our determination as the ICI's LOT (see ``Level of Trade''

section of this notice), we made a CEP offset adjustment pursuant to

section 773(a)(7)(B) of the Act. See Carbon Steel Plate, 62 FR at

61732. To adjust for differences in packing between the two markets, we

deducted HM packing costs and added U.S. packing costs under section

773(a)(6) of the Act. In addition, we made adjustments, where

appropriate, for differences in costs attributable to physical

differences of the merchandise (DIFMER) pursuant to section

773(a)(6)(C)(ii) of the Act.

Preliminary Results of Review

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

following weighted-average dumping margin exists for the period

covering July 1, 1997 through June 30, 1998:

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

Margin

Manufacturer/exporter (percent)

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

Imperioal Chemical Industries PLC.......................... 19.87

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

Pursuant to 19 CFR 351.224(b), the Department will disclose to

parties to the proceeding any calculations performed in connection with

these preliminary results within 5 days of the date of publication of

this notice. Any interested party participating in the proceeding may

request a hearing within 30 days of the date of publication of this

notice. A hearing, if requested, will be held two days after the date

the rebuttal briefs are filed or the first business day thereafter.

Parties who submit arguments in this proceeding are requested to submit

with each argument: (1) a statement of the issue and (2) a brief

summary of the argument. Interested parties may submit case briefs

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

briefs, which are limited to issues raised in the case briefs, may be

filed not later than seven days after the case briefs are filed.

The Department will publish a notice of the final results of this

administrative review, which will include the results of its analysis

of the issues raised in any written comments or at the hearing, within

120 days from the publication of these preliminary results.

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

shall determine, and Customs shall assess, antidumping duties on all

appropriate entries. The Department will issue appraisement

instructions directly to Customs. We have calculated importer-specific

ad valorem duty assessment rates for the subject merchandise based on

the ratio of the total amount of importer-specific antidumping duties

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

sales used to calculate those duties. These rates will be assessed

uniformly on all entries made by particular importers during the POR.

Furthermore, the following cash deposit requirements will be

effective upon completion of the final results of this administrative

review for all shipments of INC from the United Kingdom entered, or

withdrawn from warehouse, for consumption on or after the publication

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

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

reviewed company will be the rate established in the final results of

this administrative review; (2) for exporters not covered in this

review, but covered in the original LTFV investigation or a previous

review, the cash deposit rate will continue to be the company-specific

rate published in the most recent period; (3) if the exporter is not a

firm covered in this review, a previous 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) if neither the exporter nor the manufacturer

is a firm covered in this or any previous reviews or the LTFV

investigation, the cash deposit rate will be 11.13 percent, the ``all-

others'' rate established in the LTFV investigation. See 55 FR 21058,

May 22, 1990. These deposit requirements, when imposed, shall remain in

effect until publication of the final results of the next

administrative review.

This notice serves as a preliminary reminder to importers of their

responsibility under 19 CFR 351.402(f) of the Department's regulations

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 this notice are in accordance with

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

Dated: August 2, 1999.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 99-20345 Filed 8-5-99; 8:45 am]

BILLING CODE 3510-DS-M