Initiation of Antidumping Duty Investigation: Solid Fertilizer Grade Ammonium Nitrate From the Russian Federation

DEPARTMENT OF COMMERCE

International Trade Administration

[A-821-811]

Initiation of Antidumping Duty Investigation: Solid Fertilizer

Grade Ammonium Nitrate From the Russian Federation

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: August 19, 1999.

FOR FURTHER INFORMATION CONTACT: Rick Johnson at (202) 482-3818, Import

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

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

20230.

INITIATION OF INVESTIGATION:

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's regulations are

references to the provisions codified at 19 CFR Part 351 (1998).

The Petition

On July 23, 1999, the Department of Commerce (``the Department'')

received a petition filed in proper form by the Committee for Fair

Ammonium Nitrate Trade (``COFANT'' or ``petitioner''), whose members

are domestic producers of solid fertilizer grade ammonium nitrate. The

Department received supplemental information to the petition on August

6, 1999.

In accordance with section 732(b) of the Act, petitioner alleges

that imports of fertilizer grade ammonium nitrate from the Russian

Federation (``Russia'') are being, or are likely to be, sold in the

United States at less than fair value within the meaning of section 731

of the Act, and that such imports are materially injuring an industry

in the United States.

The Department finds that petitioner filed the petition on behalf

of the domestic industry because it is an interested party as defined

in sections 771(9)(C) and (F) of the Act and has demonstrated

sufficient industry support with respect to the investigation it is

requesting the Department to initiate (see Determination of Industry

Support for the Petition below).

Scope of Investigation

For purposes of this investigation, the products covered are solid,

fertilizer grade ammonium nitrate products, whether prilled, granular

or in other solid form, with or without additives or coating, and with

a bulk density equal to or greater than 53 pounds per cubic foot.

Specifically excluded from this scope is solid ammonium nitrate with a

bulk density less than 53 pounds per cubic foot (commonly referred to

as industrial or explosive grade ammonium nitrate).

The merchandise subject to this investigation is classified in the

Harmonized Tariff Schedule of the United States (``HTSUS'') at

subheading 3102.30.00.00. Although the HTSUS subheadings are provided

for convenience and Customs purposes, the written description of the

merchandise under investigation is dispositive.

During our review of the petition, we discussed the scope with

petitioner to ensure that the scope in the petition accurately reflects

the product for which the domestic industry is seeking relief.

Moreover, as we discussed in the preamble to the Department's

regulations (62 FR 27323), we are setting aside a period for parties to

raise issues regarding product coverage. In particular, we seek

comments on the

[[Page 45237]]

specific densities of fertilizer grade ammonium nitrate set out in the

description above. The Department encourages all parties to submit such

comments by August 23, 1999. Comments should be addressed to Import

Administration's Central Records Unit at Room 1870, U.S. Department of

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

20230. The period of scope consultations is intended to provide the

Department with ample opportunity to consider all comments and consult

with parties prior to the issuance of the preliminary determination.

Determination of Industry Support for the Petitions

Section 732(b)(1) of the Act requires that a petition be filed on

behalf of the domestic industry. Section 732(c)(4)(A) of the Act

provides that a petition meets this requirement if the domestic

producers or workers who support the petition account for: (1) at least

25 percent of the total production of the domestic like product; and

(2) more than 50 percent of the production of the domestic like product

produced by that portion of the industry expressing support for, or

opposition to, the petition.

Section 771(4)(A) of the Act defines the ``industry'' as the

producers of a domestic like product. Thus, to determine whether the

petition has the requisite industry support, the statute directs the

Department to look to producers and workers who produce the domestic

like product. The International Trade Commission (``ITC''), which is

responsible for determining whether ``the domestic industry'' has been

injured, must also determine what constitutes a domestic like product

in order to define the industry. While both the Department and the ITC

must apply the same statutory definition regarding the domestic like

product (section 771(10) of the Act), they do so for different purposes

and pursuant to separate and distinct authority. In addition, the

Department's determination is subject to limitations of time and

information. Although this may result in different definitions of the

like product, such differences do not render the decision of either

agency contrary to the law.1

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\1\ See Algoma Steel Corp. Ltd., v. United States, 688 F. Supp.

639, 642-44 (CIT 1988); High Information Content Flat Panel Displays

and Display Glass Therefore from Japan: Final Determination;

Rescission of Investigation and Partial Dismissal of Petition, 56 FR

32376, 32380-81 (July 16, 1991).

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Section 771(10) of the Act defines the domestic like product as ``a

product which is like, or in the absence of like, most similar in

characteristics and uses with, the article subject to an investigation

under this title.'' Thus, the reference point from which the domestic

like product analysis begins is ``the article subject to an

investigation,'' i.e., the class or kind of merchandise to be

investigated, which normally will be the scope as defined in the

petition. Moreover, petitioner does not offer a definition of domestic

like product distinct from the scope of the investigation.

The domestic like product referred to in the petition is the single

domestic like product defined in the ``Scope of the Investigation''

section, above. The Department has no basis on the record to find the

petitioner's definition of domestic like product to be inaccurate. We

found that petitioner submitted sufficient reasonably available

information that there is a clear dividing line between fertilizer and

explosive grade ammonium nitrate based on their physical

characteristics and uses. The Department has, therefore, adopted the

domestic like product definition set forth in the petition.

The Department has determined that the petition contains accurate

and adequate evidence of industry support because petitioner

established industry support representing 74 percent of total

production of the domestic like product (see Attachment to the

Initiation Checklist, Re: Industry Support, August 12, 1999).

Accordingly, the Department determines that this petition is filed

on behalf of the domestic industry within the meaning of section

732(b)(1) of the Act.

Export Price and Normal Value

Petitioner identified (1) JSC Angarsk Petrochemical Co., (2) JSC

Berezniki Azot, (3) JCS Cherepovets PO Azot, (4) JSC Dorogobuzh, (5)

JSC Kemerovo ``Azot,'' (6) JSC Kirovo-Chepetsk, (7) JSC Meleuz Prod.

Assoc. Minudobreniya, (8) JSC Nevinnomysskiy Azot, (9) JSC Acron, (10)

JSC Novomendeleyevsk Chemical Plant, (11) JSC Novomoskovsk AK ``Azot,''

(12) JSC ``Minudobreniya'', and (13) JSC ``Kuybyshevazot'' as possible

producers/exporters of solid fertilizer grade ammonium nitrate from

Russia. Petitioner further asserted that two of these producers, JSC

Acron and JSC Nevinnomysskiy Azot, have exported significant amounts of

ammonium nitrate into the United States during the last twelve months.

Petitioner based export price (``EP'') on two methods: (1) import

values declared to the U.S. Customs Service during the anticipated

period of investigation (``POI''); and (2) an actual U.S. selling price

known to petitioner based on a quote in the anticipated POI provided by

a U.S. importer on an ex-factory basis. Petitioner based its

calculation of EP on the average unit value (customs value) of ammonium

nitrate from Russia, as provided by the U.S. Bureau of the Census, for

the applicable HTSUS category (3102.30) for the period January, 1999

through May, 1999. Petitioner deducted foreign inland freight from the

customs value in order to obtain ex-factory prices. In order to

calculate foreign inland freight, petitioner used Polish rail and truck

rates because the per-capita GNP of Poland is much closer to Russia's

GNP than is U.S. GNP, and because petitioner found transport rates on a

per ton basis, based on distance traveled. Petitioner also used the

Polish transport rates because they were the only published reasonably

available to petitioner, and petitioner had no reasonable basis to know

whether Russian producers relied on truck or rail transport to move the

product from plant to port. Petitioner calculated foreign inland

freight for the two significant producers noted above. Using estimated

distances for each of these producers, petitioner calculated both a

rail freight and truck freight estimate, and calculated normal values

(``NV'') based on each of these estimates. Based on the information

provided by petitioner, we believe that the use of Polish transport

rates represents accurate and adequate information reasonably available

to petitioner and is acceptable for purposes of initiation of this

investigation.

In order to calculate actual U.S. selling prices known to

petitioner, petitioner relied on a quote offered to an unaffiliated

purchaser. Because the price was based on a ex-factory basis, no

adjustments were made for foreign inland freight.

Petitioner asserted that Russia is a non-market economy country

(``NME'') to the extent that sales or offers for sale of such or

similar merchandise in Russia or to third countries do not permit

calculation of NV under 19 CFR 351.404. Petitioner, therefore,

constructed NV based on the factors of production methodology pursuant

to section 773(c) of the Act. In previous investigations, the

Department has determined that Russia is an NME. See, e.g., Notice of

Final Determination of Sales at Less Than Fair Value: Hot-Rolled Flat-

Rolled Carbon-Quality Steel Products from the Russian Federation, 64 FR

38626 (July 19, 1999) (``Russian HR Steel''). In accordance with

section

[[Page 45238]]

771(18)(C)(i) of the Act, a determination of NME status remains in

effect until revoked by the Department. The determination of NME status

for Russia has not been revoked by the Department and, therefore,

remains in effect for purposes of the initiation of this investigation.

Accordingly, the NV of the product appropriately is based on factors of

production valued in a surrogate market economy country in accordance

with section 773(c) of the Act. In the course of this investigation,

all parties will have the opportunity to provide relevant information

related to the issues of Russia's NME status and the granting of

separate rates to individual exporters. See, e.g., Final Determination

of Sales at Less Than Fair Value: Silicon Carbide from the PRC, 59 FR

22585 (May 2, 1994).

For the calculation of NV, petitioner based the factors of

production, as defined by section 773(c)(3) of the Act (raw materials,

labor, energy and capital cost), for ammonium nitrate on the quantities

of inputs used by a representative U.S. producer. Petitioner stated

that it was unable to furnish information on Russian factors of

production. Thus, petitioner has assumed, for purposes of the petition,

that producers in Russia use the same inputs in the same quantities as

petitioner. Because data regarding the quantities of inputs used by

Russian producers was not reasonably available to petitioner, for

purposes of this initiation we have accepted petitioner's U.S.

quantities.

Petitioner selected Poland as its primary surrogate. Petitioner

stated that the per-capita GNP of Poland differs only slightly from

that of Russia and, thus, it maintains that Poland is the most suitable

surrogate among the potential surrogates, because it is at a comparable

level of economic development and is a significant producer of

comparable merchandise (in accordance with section 773(c)(4) of the

Act). Based on the information provided by petitioner, we believe that

the petition contains adequate and accurate information supporting its

allegation for using Poland as a surrogate country for purposes of

initiation of this investigation.

In accordance with section 773(c)(4) of the Act, petitioner valued

factors of production, where possible, on reasonably available, public

surrogate country data. Labor was valued using the regression-based

wage rate for Russia provided by the Department, in accordance with 19

CFR 351.408(c)(3). Electricity and natural gas were valued using the

rate for Poland published in a quarterly report of the OECD's

International Energy Agency for the fourth quarter of 1998. Petitioner

attempted to obtain Polish import values for materials used in the

production of ammonium nitrate, but stated that it could not reasonably

obtain publicly available surrogate information from a comparable

economy. Because petitioner could not reasonably identify this

information for materials used in the production of ammonium nitrate

(chemicals, stabilizers, coating agents and catalysts), petitioner

relied on costs incurred by the U.S. producer to value the usage

requirements, which represent only a small portion of total production

costs. For overhead (exclusive of depreciation), depreciation, general

expenses, and profit, petitioner applied rates derived from the 1997

public annual report of a Polish producer of subject merchandise,

Zaklady Azotowe Kedzierzyn (``ZAK''). For purposes of initiation, we

made two minor revisions to general expenses. For a further discussion

of this revision, see Initiation Checklist, page 6, and Attachment III,

dated August 12, 1999. Based on the information provided by petitioner,

we believe that the surrogate values represent information reasonably

available to petitioner and are acceptable for purposes of initiation

of this investigation. For a more detailed discussion of home market

price, U.S. price, factors of production and sources of data, see

Initiation Checklist, dated August 12, 1999. Should the need arise to

use as facts available under section 776 of the Act any of this

information in our preliminary or final determinations, we may re-

examine the information and revise the margin calculations, if

appropriate.

Based on comparisons of EP to NV, calculated in accordance with

section 773(c) of the Act, the calculated dumping margins for ammonium

nitrate from Russia range from 112.08 to 357.09 percent.

Fair Value Comparisons

Based on the data provided by petitioner, there is reason to

believe that imports of solid fertilizer grade ammonium nitrate from

Russia are being, or are likely to be, sold at less than fair value.

Critical Circumstances

Petitioner has alleged that critical circumstances exist with

regard to imports of solid fertilizer grade ammonium nitrate from

Russia, and has supported its allegations with the following

information.

First, petitioner claims that there is a history of injurious

dumping of the subject merchandise by Russian producers. Petitioner

argues that the Department considers the existence of an antidumping

duty order covering the subject merchandise in another country as

sufficient evidence of a history of injurious dumping. Petitioner

provided a copy of a 1995 antidumping order imposed by the European

Union on imports of Russian ammonium nitrate (see Exhibit 32, Petition

dated July 23, 1999). Since this order is still in effect, petitioner

claims that there is a history of injurious dumping by Russian

producers of the subject merchandise.

Petitioner also has alleged that imports from Russia have been

massive over a relatively short period. Alleging that there was

sufficient pre-filing notice of the antidumping duty petition,

petitioner contends that the Department should compare imports during

September-December 1998 (base period) to imports during January-April

1999 (comparison period) for purposes of this determination, as

provided in 19 CFR. 351.206(h)(2)(i). Specifically, petitioner

supported this allegation with copies of news articles discussing the

likelihood of filing antidumping complaints against Russian ammonium

nitrate producers. See Petition dated July 23, 1999, Exhibit 37.

According to the import statistics contained in the petition, during

the time periods petitioner has requested for comparison, imports of

ammonium nitrate from Russia increased by 270.35 percent (based on

volume) from the period September-December 1998 to the period January-

April 1999.

In the instant case, the increase in imports was more than fifteen

times the amount considered ``massive.'' Taking into consideration the

foregoing, we find that petitioner has alleged the elements of critical

circumstances and supported them with information reasonably available

for purposes of initiating a critical circumstances inquiry. For these

reasons, we will investigate this matter further and will make a

preliminary determination at the appropriate time, in accordance with

section 735(e)(1) of the Act and Department practice (see Policy

Bulletin 98/4 (63 FR 55364, October 15, 1998)).

Allegations and Evidence of Material Injury and Causation

Petitioner alleges that the U.S. industry producing the domestic

like product is being materially injured, and is threatened with

material injury, by reason of the individual and cumulated imports of

the subject merchandise sold at less than NV. Petitioner explained that

the industry's injured condition is evident in the declining trends in

net

[[Page 45239]]

operating profits, net sales volumes, as well as domestic prices of

ammonium nitrate. The allegations of injury and causation are supported

by relevant evidence including U.S. Customs import data, lost sales,

and pricing information. The Department assessed the allegations and

supporting evidence regarding material injury and causation and

determined that these allegations are supported by accurate and

adequate evidence and meet the statutory requirements for initiation

(see Attachments to Initiation Checklist, Re: Material Injury, August

12, 1999).

Initiation of Antidumping Investigation

Based upon our examination of the petition on solid fertilizer

grade ammonium nitrate and petitioner's responses to our supplemental

questionnaire clarifying the petition, we have found that the petition

meets the requirements of section 732 of the Act. Therefore, we are

initiating an antidumping duty investigation to determine whether

imports of solid fertilizer grade ammonium nitrate from Russia are

being, or are likely to be, sold in the United States at less than fair

value. Unless this deadline is extended, we will make our preliminary

determinations no later than 140 days after the date of this

initiation.

Distribution of Copies of the Petition

In accordance with section 732(b)(3)(A) of the Act, a copy of the

public version of the petition has been provided to the representatives

of Russia. We will attempt to provide a copy of the public version of

the petition to each exporter named in the petition, as appropriate.

International Trade Commission Notification

We have notified the ITC of our initiations, as required by section

732(d) of the Act.

Preliminary Determination by the ITC

The ITC will determine, by no later than September 7, 1999, whether

there is a reasonable indication that imports of solid fertilizer grade

ammonium nitrate from Russia are causing material injury, or

threatening to cause material injury, to a U.S. industry. A negative

ITC determination will result in the investigation being terminated;

otherwise, this investigation will proceed according to statutory and

regulatory time limits.

This notice is published pursuant to section 777(i) of the Act.

Dated: August 12, 1999.

Bernard Carreau,

Acting Assistant Secretary for Import Administration.

[FR Doc. 99-21569 Filed 8-18-99; 8:45 am]

BILLING CODE 3510-DS-P