Aramid Fiber Formed of Poly Para-Phenylene Terephthalamide From the Netherlands; Final Results of Antidumping Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-421-805]

Aramid Fiber Formed of Poly Para-Phenylene Terephthalamide From

the Netherlands; Final Results of Antidumping Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of the antidumping duty administrative

review; aramid fiber formed of poly para-phenylene terephthalamide from

the Netherlands.

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EFFECTIVE DATE: November 15, 1999.

SUMMARY: On July 8, 1999, the Department of Commerce (``the

Department'') published the preliminary results of its administrative

review of the antidumping duty order on aramid fiber formed of poly

para-phenylene terephthalamide (``PPD-T aramid'') from the Netherlands.

The review covers one manufacturer/exporter and the period June 1, 1997

through May 31, 1998.

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 the preliminary

results of review.

FOR FURTHER INFORMATION CONTACT: Russell Morris, Office of AD/CVD

Enforcement VI, Group II, Import Administration, International Trade

Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, N.W., Washington, D.C. 20230; Telephone: (202)

482-1775.

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 references to the Department's regulations are

to 19 CFR 351 (1998).

Background

The Department published in the Federal Register the antidumping

duty order on PPD-T aramid from the Netherlands on June 24, 1994 (59 FR

32678). On June 10, 1998, we published in the Federal Register (63 FR

31717) a notice of ``Opportunity to Request an Administrative Review''

of this order covering the period June 1, 1997, through May 31, 1998.

In accordance with 19 CFR 351.213(b), Aramid Products V.o.F. and Akzo

Nobel Aramid Products, Inc. (collectively ``Akzo'' or respondent), and

E.I. DuPont de Nemours and Company (``petitioner''), requested that we

conduct an administrative review of the aforementioned period of review

(``POR''). On July 28, 1998, the Department published a notice of

``Initiation of Antidumping Review'' (63 FR 40258). On July 8, 1999,

the Department published the preliminary results of the review. See

Aramid Fiber Formed of Poly-Phenylene Terephthalamide from the

Netherlands: Preliminary Results of Antidumping Administrative Review,

64 FR 36841 (July 8, 1999). The Department has now completed the review

in accordance with section 751 of the Act.

Scope of Review

The products covered by this review are all forms of PPD-T aramid

from the Netherlands. These consist of PPD-T aramid in the form of

filament yarn (including single and corded), staple fiber, pulp (wet or

dry), spun-laced and spun-bonded nonwovens, chopped fiber, and floc.

Tire cord is excluded from the class or kind of merchandise under

review. This merchandise is currently classifiable under the Harmonized

Tariff Schedule of the United States (``HTSUS'') item numbers

5402.10.3020, 5402.10.3040, 5402.10.6000, 5503.10.1000, 5503.10.9000,

5601.30.0000, and 5603.00.9000. The HTSUS item numbers are provided for

convenience and Customs purposes. The written description of the scope

remains dispositive.

Fair Value Comparisons

We calculated constructed export price (``CEP'') and normal value

(``NV'') based on the same methodology used in the preliminary results.

Changes From the Preliminary Results

The Department corrected a clerical error that involves a missing

variable which affected the assessment rate. See Comment 3.

Analysis of the Comments Received

We gave interested parties an opportunity to comment on the

preliminary results of review. We received comments from respondent and

petitioner on August 9, 1999, and rebuttal comments from Akzo on August

16, 1999.

[[Page 61823]]

Comment 1: Use of Parents' Consolidated Financial Statements.

Petitioner contends that the Department should revise Akzo's reported

U.S. indirect selling expenses, arguing that the calculation of the net

interest expense, a component of indirect selling expenses, was

improperly based on the consolidated financial statements of Akzo Nobel

Inc., and should have instead been based upon the financial statements

of Akzo Nobel Aramid Product Inc. (``ANAPI''--the exclusive sales agent

of Aramid Products V.o.F. in the United States (``Aramid'')).

Petitioner also asserts that the Department should reject Akzo's

use of consolidated financial data in calculating the net interest

expenses included in Aramid's cost of production, because the

consolidated financial data does not reflect Aramid's actual financing

expenses.

Petitioner acknowledges that the Department generally uses

consolidated financial expense data to calculate a subsidiary's

financing expenses. However, petitioner asserts that this is not an

automatic requirement. Further, petitioner contends that the Department

must not use consolidated data where using the consolidated data would

distort actual financing expenses. Petitioner asserts that such would

be the case in the instant circumstance because Akzo's reported

financial interest expense factor is unrelated to the financing

requirements of Akzo's PPD-T aramid fiber business in the United

States. Moreover, petitioner argues that Akzo justifies its use of

consolidated figures on the grounds that the U.S. parent borrows on

behalf of its related companies, and then charges the units a share of

this cost, without explaining how it allocates the financing expenses.

Petitioner argues that Akzo calculated the reported financing

expenses based on outstanding loans between the U.S. parent and ANAPI

and speculates as to the reasons why ANAPI borrowed money from its

parent company to finance its U.S. operations. Petitioner further

argues that the Department and the Court of International Trade

(``CIT'') misapplied binding precedent when affirming the Department's

use of Akzo's consolidated data in E.I. DuPont de Nemours & Co. v.

United States, No. 96-11-02509, Slip Op. 98-7, 1998 WL 42598 (CIT

January 29, 1998) (hereinafter ``DuPont I''). Moreover, petitioner

contends that the Department and the CIT in DuPont I failed to follow

the express mandate of the 1994 amendments to the antidumping statute,

which directs the Department to capture ``all of the actual costs

incurred in producing and selling'' the subject merchandise and to

ensure that reported costs constitute a representative measure of the

respondent's true costs.

Akzo argues that the CIT's decisions in DuPont I and more recently

in E.I. DuPont de Nemours & Co. v. United States, No. 97-08-1335, Slip

Op. 99-47, (CIT June 2, 1999) (hereinafter ``DuPont II''), properly

affirmed the Department's use of Akzo's consolidated financial expense

in the first, second, and third administrative reviews, respectively.

Akzo urges the Department to follow the same methodology in the final

results of this administrative review. Further, Akzo emphasizes that

petitioner did not point to any evidence or provide any new information

to justify a deviation from the Department's standard practice of using

the parent's consolidated interest expense in cases where there is a

consolidated group of companies.

Additionally, Akzo argues that the petitioner's claim that the

amendments to the antidumping statute set a new standard for

calculating interest expense is in error. Contrary to petitioner's

argument, Akzo contends that neither the SAA nor the amended section

773(f) of the antidumping statute directs the Department to change its

existing practice. Akzo refers to the CIT's analysis of the statutory

amendment and the SAA and the CIT's subsequent finding that neither the

amended statute nor the SAA mandated a change in Commerce's past

practice at issue here. See DuPont I at 7-9. Moreover, Akzo points out

that the petitioner's argument on the issue was dismissed by the CIT

both in DuPont I and in DuPont II.

Akzo claims that the only loans and corresponding interest expense

on the books of ANAPI and Aramid are intercompany loans from the parent

companies, Akzo Nobel Inc. and Akzo Nobel N.V. In addition, Akzo argues

that the Department has repeatedly verified that the financial

statements of the subsidiary companies reconcile to the financial

statements of the parent companies. Akzo explains that the only actual

interest expense is recorded on the books of the parent companies

because it is only these entities that actually borrow money and incur

the related interest expense. Akzo asserts that it is only the parent

that determines the sources of money, borrows the money, and incurs the

actual interest expense and that therefore, petitioner's speculations

on how and why companies borrow money and how a parent determines the

amount of loans and interest are irrelevant because these are internal

decisions that take into account a variety of factors.

Department's Position: We agree with Akzo. In the first, second and

third administrative reviews, petitioner similarly urged the Department

to rely on Aramid's own financial records to determine its net interest

expense, instead of following the Department's normal practice of using

the parent company's financing expenses incurred on behalf of the

consolidated group of companies. In the second and third reviews,

petitioner's emphasis has been on the interest expense included in U.S.

indirect selling expenses rather than on the interest expense included

in the cost of production (``COP'') and constructed value (``CV'') (as

was the case in the first review). Nevertheless, the issues are the

same. Petitioner disagrees with the Department's long-standing practice

of basing financing expenses on consolidated interest expenses. The

Department has consistently disagreed with petitioner's position,

explaining in detail that any departure from the Department's normal

practice in this case was not warranted in light of Akzo Nobel N.V.''s

majority ownership interest in Aramid, which constituted prima facie

evidence of the parent's corporate control. For a detailed explanation

of this issue, see Aramid Fiber Formed of Poly-Phenylene

Terephthalamide from the Netherlands: Final Results of Antidumping

Administrative Review, 61 FR 51406 (October 2, 1996) (``Final Aramid

Fiber I''); Aramid Fiber Formed of Poly-Phenylene Terephthalamide from

the Netherlands: Final Results of Antidumping Administrative Review, 62

FR 38058 (July 16, 1997) (``Final Aramid Fiber II''); and Aramid Fiber

Formed of Poly-Phenylene Terephthalamide from the Netherlands: Final

Results of Antidumping Administrative Review, 63 FR 37516 (July 13,

1998) (``Final Aramid Fiber III'').

On January 29, 1998, the CIT affirmed the Department's

determination on this issue in the first administrative review, ruling

that neither the SAA nor the amended statute mandate a change of

practice with respect to using a parent company's consolidated

statements when calculating the respondent's interest expense ratio,

and that this practice is consistent with the principle of allocating

costs in a manner that reasonably reflects the actual costs. See DuPont

I at 8-9. (Emphasis added). Citing Gulf States Tube Div. of Quanex

Corp. v. United States, Slip Op. 97-124, Consol. Court No. 95-09-01125,

at 38-39 (CIT August 29, 1997), the Court noted in DuPont I that the

focus of the analysis is on whether the consolidated group's

controlling entity has the power to determine the capital structure of

each member of the group. The Court

[[Page 61824]]

concluded that the administrative record in prior reviews was supported

by the Department's finding that Akzo Nobel N.V. was a controlling

entity. In DuPont II, the CIT adopted its reasoning from DuPont I and

again sustained the Department's determination on this issue in the

second administrative review.

In the instant administrative review, petitioner reiterates its

position argued in the previous three reviews but does not point to any

new evidence in the administrative record, which would demonstrate that

the parent, Akzo Nobel N.V., does not exercise corporate control over

the respondent company. Thus, consistent with the Department's prior

determinations and the CIT's decisions in DuPont I and DuPont II, we

are using Akzo Nobel N.V.''s consolidated financial interest expense in

computing the respondent's net interest ratio.

Similarly, petitioner's contention that we should revise Akzo's

reported U.S. indirect selling expense lacks merit. As the Department

stated in the prior administrative reviews, the Department bases its

calculations on the consolidated financial statements of the parent,

not the subsidiary when calculating the financial interest expense.

This method is grounded in a well-established practice. See Final

Aramid Fiber I at 51407 and Final Aramid Fiber II at 38060. As stated

above, the focal point of the analysis is upon the parent company's

control over the subsidiary. See also, Final Administrative Review:

Porcelain-on-Steel Cooking Ware from Mexico, 58 FR 32095 at comment 9

(indicating the parent has the power to decide the composition of the

subsidiary's capital structure (i.e., to what extent the subsidiary

will be financed by debt and equity)). More importantly, the petitioner

has failed to produce any evidence to rebut the prima facie evidence of

Akzo's control over ANAPI. For the reasons stated above, we are

adhering to the Department's current practice in this final

determination.

Comment 2: Treatment of Goodwill Expenses. Petitioner contends that

Akzo's reported cost of production fails to include an amount for

amortized goodwill expenses that should be added to Akzo's general

expenses. Moreover, the petitioner argues that the Department's

treatment of Akzo's goodwill expenses in the first, second and third

administrative reviews is not supported by substantial evidence on the

record and is contrary to law, which requires the calculation of actual

costs attributable to the production of the subject merchandise.

Petitioner argues that the Department should amortize these costs over

a period that covers the POR to avoid improperly understating the

actual cost of producing PPD-T aramid fiber during the POR.

Akzo argues that petitioner's position is unsubstantiated and

contrary to law. Akzo notes that the proper treatment of the goodwill

expense was the focus of the first administrative review and was

addressed by the CIT in DuPont I and DuPont II. Respondent further

notes that the Department spent a significant amount of time gathering

and analyzing all aspects of the purchase. See Final Aramid Fiber I at

51406. Akzo cites the CIT's rulings in DuPont I and DuPont II to affirm

the Department's treatment of goodwill in the instant review.

Respondent cites specifically to the CIT's approval of the Department's

analysis, affirming that it was appropriate to isolate those components

of goodwill that pertained to assets used in the production of subject

merchandise. Akzo states that in preparing the questionnaire response

for this review, it complied with the Department's determination in the

first three administrative reviews. Finally, Respondent contends that

no circumstances exist warranting any deviation from the Department's

prior approach, as affirmed twice by the CIT.

Department's Position: The Department agrees with Akzo. As

explained at length in the final results of the first, second and third

administrative reviews, and affirmed by the CIT in DuPont I and DuPont

II, the Department accepted Akzo's accounting method for the

amortization of goodwill expense as reasonable. See Final Aramid Fiber

I at 51406; Final Aramid Fiber II at 38063; and Final Aramid Fiber III

at 37516.

The Department gathered and analyzed all aspects of the facts

surrounding the goodwill issue during the first administrative review.

Upon completion of its analysis, the Department determined that, for

cost calculation purposes, it was appropriate to isolate those

components of goodwill that pertained to assets used in the production

of subject merchandise. See Final Aramid Fiber I at 51406. The

Department verified that Akzo complied with the Department's decision

in the first administrative review, and calculated the reported

depreciation expenses exclusive of goodwill expenses in preparing its

response for the subsequent reviews. The methodology used in the

instant review is consistent with the final results of the first,

second and third administrative reviews.

Moreover, in DuPont I and DuPont II, the CIT rejected petitioner's

arguments with respect to goodwill, affirming the Department's

treatment of inventory write-downs and residual goodwill expenses. See

DuPont I at 15--24 and DuPont II at 13. Therefore, for purposes of the

instant review, the Department is using Akzo's reported cost of

production and constructed value data in calculating the antidumping

duty margin.

Comment 3: Calculation Errors in Preliminary Results

Akzo claims that the computer program used in calculating the

preliminary results contained two errors that must be corrected for the

final determination. First, Akzo states that the constructed export

price (``CEP'') profit ratio is based on the ratio of total revenues

and costs, without regard to the unit of measure in which the sales and

costs were reported. Akzo argues that by dividing the total home market

revenue (``TOTREVH'') and the individual components of the total home

market expenses (i.e., cost of goods sold (``TOTCOGSH''), selling

expenses (``TOTSELLH''), and movement expenses (``TOTMOVEH'')) by

2.2046 (conversion of kilograms to pounds), the Department incorrectly

cut the revenue and expenses by more than half. Akzo contends that this

error minimized the contribution of home market sales in the

calculation of the CEP profit and resulted in an overstatement of the

CEP profit ratio, which in turn caused a higher than appropriate

deduction from the U.S. price.

Second, Akzo claims that in calculating the assessment rate, the

margin program fails to specify a variable for the unit margin, thereby

incorrectly calculating the first numeric variable for the amount due

and overstating the assessment rate. Akzo provided suggested changes to

correct the alleged errors.

Petitioner did not rebut any of Akzo's aforementioned suggested

corrections.

Department's Position: The Department agrees with Akzo and has

revised the final margin program to reflect the appropriate changes. We

have reviewed our calculations and agree that we made an unintentional

error when we divided the fields TOTREVH, TOTCOGSH, TOTSELLH, and

TOTMOVEH by 2.2046, for purposes of calculating the CEP profit ratio.

Concerning the second issue, we have reexamined our calculations, and

agree with Akzo's observations. We found that the assessment rate was

inappropriately calculated and, therefore, we inserted the proper

variable name in the margin program to sum the amount due.

[[Page 61825]]

Final Results of Review

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

weighted-average margin exists:

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

Exporter/

manufacturer

Weighted-average margin

(percent)

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

Akzo...................................................... 2.90

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

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. The Department

will issue appraisement instructions on each exporter directly to the

Customs Service. Because we have only one importer of the subject

merchandise, we have calculated an importer specific duty assessment

rate for the merchandise based on the ratio of the total amount of

antidumping duties calculated for the examined sales to the total

entered value of sales examined.

Furthermore, the following deposit requirements will be effective

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

shipments of PPD-T aramid fiber from the Netherlands 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) if the

exporter is not a firm covered in this review, a prior review, or the

original Less Than Fair Value (``LTFV'') investigation, but the

manufacturer is, the cash deposit rate will be the rate established for

the most recent period for the manufacturer of the merchandise; and (3)

for all other producers and/or exporters of this merchandise, the cash

deposit rate shall be 66.92 percent, the ``all others'' rate

established in the LTFV investigation (59 FR 32678, June 24, 1994).

These deposit requirements shall remain in effect until publication of

the final results of the next administrative review.

Notification to Interested Parties

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 subsequent assessment

of double antidumping duties.

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 351.305 and 19 CFR 351.306. 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 and 19 CFR 351.221.

Dated: November 5, 1999.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-29749 Filed 11-12-99; 8:45 am]

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