65 FR 55939 September 15, 2000 

                                                A-588-806
                                                AR: 98/99
                                                Public Document
                                                G1O3: EMD Team

MEMORANDUM TO:         Troy H. Cribb
                       Acting Assistant Secretary 
                         for Import Administration

FROM:                  Richard W. Moreland
                       Deputy Assistant Secretary
                        for Import Administration

SUBJECT:   Issues and Decision Memorandum for the Administrative Review of the
Antidumping Duty Order of Electrolytic Manganese Dioxide from Japan - April 1,
1998, through March 31, 1999.
           
Summary
  
 On May 8, 2000, the Department of Commerce published the preliminary results
of the administrative review of the antidumping duty order on electrolytic
manganese dioxide from Japan.  The review covers one producer/exporter, Tosoh
Corporation, during the period of review April 1, 1998, through March 31,
1999.  
 We gave interested parties an opportunity to comment on the preliminary
results.  Based on our analysis of the comments received, we made no changes
for the final results.  The review indicates the existence of no dumping
margins for Tosoh Corporation during this period.  We recommend that you
approve the positions we have developed in the Discussion of the Issuessection
of this memorandum.  Below is the complete list of the issues in this
administrative review regarding which we received comments and rebuttal
comments from parties: 
1.  Determination of U.S. Price
2.  Affiliation
3.  Matching Methodology
  
Background
 On May 8, 2000, the Department of Commerce (the Department) published in the
Federal Register the preliminary results of the administrative review of the
antidumping duty order on electrolytic manganese dioxide (EMD) from Japan.  See
Preliminary Results of Antidumping Duty Administrative Review: Electrolytic
Manganese Dioxide from Japan, 65 FR 26570 (Preliminary Results).  Kerr-McGee
Chemical LLC and Chemetals, Inc. (collectively "the petitioners"), submitted
their case brief on June 7, 2000.  Tosoh Corporation (Tosoh), the sole
respondent in this review, submitted its case brief on June 7, 2000.  Both the
petitioners and Tosoh submitted their rebuttal briefs on June 12, 2000.  

Discussion of the Issues

1.   Determination of U.S. Price

 Comment 1:  The petitioners assert that the Department cannot determine the
U.S. price for the sale at issue.  The petitioners argue that the formula for
calculating the U.S. price takes into account a post-sale adjustment which
cannot be determined until normal value has been ascertained in a final
determination.  (Due to the business-proprietary nature of the petitioners'
explanation, we are unable to go into further detail here.  See the
petitioners' case brief dated June 7, 2000.)  The petitioners also argue that,
since the Department cannot determine the U.S. price applicable to the
transaction at issue, the Department cannot verify the U.S. price ultimately
paid for the imported merchandise.  The petitioners conclude that, as a result,
the Department cannot appropriately determine U.S. price, the Department should
apply the margin from the original less-than-fair-value investigation as facts
available.  

 Tosoh argues that the Department has already made adjustments to reflect a
non-dumped price and that the petitioners do not substantiate their claim with
legal or factual information to deviate from the price the Department used in
the Preliminary Results.  Therefore, Tosoh contends that the petitioners'
assertion that the U.S. price cannot be determined and that the Department
should therefore use facts available to determine the dumping margin is
erroneous. Tosoh asserts that it has submitted all the information necessary
for the Department to calculate the U.S. price.  Tosoh states that in reaching
the preliminary results the Department reduced the U.S. sales price by the
maximum possible post-sale rebate due under the sales contract.  Thus,
according to Tosoh, the U.S. sales price is final and determinate, and there is
no basis for resorting to facts available as the petitioners suggest. 

  With respect to the petitioners' last point, Tosoh argues that the
Department is not required to verify this information in this review because
there have not been two immediately preceding reviews and, therefore, no good
cause for verification exists.  In sum, Tosoh contends that, for the reasons
stated above, the petitioners have not shown any legal or factual reason to
resort to facts available. 

 Department's Position:  In its December 17, 1999, submission, Tosoh makes
clear that the U.S. price includes an amount that reflects the antidumping duty
cash deposit.  In addition, Tosoh states that the customer retains the right to
a refund of the deposit up to the amount by which the net U.S. price is
determined in this review to exceed normal value.  Furthermore, Tosoh explains
that in no event will the refund to the customer exceed the amount of the
antidumping duty deposit, which is 77.43 percent of the freight-on-board price.
In this case, using the information Tosoh submitted on December 17, 1999, we
established the amount by which U.S. price exceeded normal value.  In addition,
since the difference between U.S. price and normal value reflects the maximum
antidumping duty amount Tosoh agreed to refund the U.S. purchaser, we reduced
Tosoh's U.S. price by this amount in our calculations to arrive at a U.S. price
net of any adjustments.  Since this amount reflects the maximum possible
refundable antidumping duty amount stipulated in Tosoh's contract, we deducted
the amount in calculating the U.S. price.  Therefore, our calculation is
consistent with Tosoh's legally binding contract with its customer, and we
conclude that the U.S. price is not an "indeterminate" price as the petitioners
contend.  Furthermore, the sales contract itself is a source document which
serves to support the price adjustment we have made. 
 
   Under section 776(a) of the Act, use of facts available is permitted when
the necessary information is not available on the record or a party withholds
information, fails to comply with the Department's reporting requirements,
impedes a proceeding, or provides unverifiable information.  Since Tosoh has
reported all the necessary information needed to calculate U.S. price
accurately and cooperated fully with our requests for information, we find no
reason to apply facts available.   

2.    Affiliation

 Comment 2:  Tosoh alleges that the Department erred in classifying Tosoh and
a Japanese trading company as affiliated parties simply because of their
ownership interest in a third-country joint venture and, therefore, the
Department should have classified Tosoh's U.S. sale as a export price (EP)
transaction rather than a constructed export price (CEP) transaction.  Tosoh
cites section 771(33)(f) of the Act, which states that two or more persons
directly or indirectly controlling, controlled by, or under common control with
any person are considered affiliated. Tosoh also relies on 19 CFR 351.102,
which outlines specific factors considered when determining affiliation,
including corporate or family groupings, franchise or joint-venture agreements,
debt financing, and close supplier relationships.  Tosoh emphasizes that this
regulation provides that such control will not be found to exist on the basis
of these factors unless the relationship has the potential affect decisions
concerning the production, pricing, or cost of the subject merchandise or
foreign like product.

 The respondent argues that, since the third-country joint venture has no
potential to affect decisions concerning the production, pricing, or cost of
the subject merchandise or foreign like product, the requisite control does not
exist and, accordingly, Tosoh and the Japanese trading company are not
affiliated.  Tosoh states that the third-country joint venture has no role in
producing or selling EMD from Japan and claims that, as a result, the
requirement that the control must have the potential to affect the subject
merchandise is not met.

 The respondent also alleges that the Department erred in its judgment that
Tosoh's and the Japanese trading company's ownership interest in the third-
country company create a potential for control.  Tosoh states that the
Department merely speculated that this relationship has the potential to affect
decisions concerning cost, production, or pricing but that it offers no record
evidence to support this conclusion.

 Citing Mitsubishi Heavy Industries, Ltd. v. United States,15 F Supp. 2d 807
(CIT 1998), regarding the application of section 771(33)(F) of the Act, the
petitioners argue that a situation where two companies exercise control over a
third party meets the statutory definition of affiliation.  Citing Stainless
Steel Sheet and Strip Coils from Italy; Final Results of Administrative Review,
64 FR 116-118 (January 4, 1999), the petitioners assert that the Department
routinely treats ownership interests of 20 percent or more as giving rise to a
control relationship.  In addition, the petitioners assert that, because the
EMD produced by Tosoh in Japan and the EMD produced in the third-country joint
venture compete in the U.S. market, Tosoh's and the Japanese trading company's
control over the third-country joint venture with regard to production,
pricing, and cost necessarily has the potential to affect decisions concerning
the production, pricing, or cost of the subject merchandise. 

 Department's Position:  We continue to find that Tosoh and the Japanese
trading company are affiliated within the meaning of section 771(33)(F) of the
Act and that the potential to affect decisions concerning the production,
pricing, or cost of the subject merchandise or foreign like product exists. 
Section 771(33)(F) of the Act provides, in pertinent part, that two or more
entities are affiliated where they directly or indirectly control, are
controlled by, or are under common control of, another entity.  In addition,
the Department's regulations provide further guidance regarding findings of
affiliation based upon control relationships.  Specifically, section 351.102 of
the regulations provides that "[t]he Secretary will not find that control
exists unless the relationship has the potential to impact decisions concerning
the production, pricing, or cost of the subject merchandise or foreign like
product."  See19 CFR 351.102.  In this case, we continue to find that Tosoh's
and the Japanese trading company's affiliation with a third-country joint
venture are such that Tosoh and the Japanese trading company are each "legally
or operationally in a position to exercise restraint or direction" over the
third-country joint venture.  As we stated in our May 1, 2000, Preliminary
Results Decision Memorandum from Laurie Parkhill to Richard W. Moreland
(Decision Memo), we recognize the regulatory guidance indicating that a control
relationship will not establish affiliation unless the relationship "has the
potential to impact decisions concerning the production, pricing, or cost of
the subject merchandise or foreign like product." (emphasis added).  See 19 CFR
351.102(b).  See also Decision Memo at page 4 for further discussion on
affiliation.  Here, we find that the potential to affect decisions concerning
the production, pricing, or cost of the subject merchandise exists due to the
fact that the third-country joint venture manufactures EMD for sale to a
variety of markets, including the United States.  Therefore, we continue to
find that Tosoh is in a position that permits it to coordinate production and
sales activities for its two EMD production facilities.  

 Furthermore, because the wholly owned U.S. subsidiary of Tosoh's customer
negotiates the prices and terms of U.S. sales for both Tosoh and its third-
country joint venture, we find that the Japanese trading company, through the
U.S. subsidiary of Tosoh's customer, has the potential to direct U.S. sales of
EMD to either Tosoh or its third-country joint venture and in that capacity
potentially influences pricing and possibly production decisions for the
subject merchandise.  See Tosoh's December 17, 1999, questionnaire response at
page A-6.  Therefore, we continue to find that Tosoh and the Japanese trading
company control the third-country joint venture within the meaning of the
statute, our regulations, and practice.  For these reasons, we conclude that
Tosoh and the Japanese trading company are affiliated parties pursuant to
section 771(33)(F) of the Act. 

 With regard to Tosoh's argument that we offer no record evidence to support
the conclusion that the relationship between Tosoh and the Japanese trading
company has the potential to affect decisions concerning cost, production, or
pricing, we disagree.  As explained in the Preamble to the Antidumping Duties;
Countervailing Duties; Final Rule, 62 FR 27296 (May 19, 1997) (Preamble), we
need not find evidence of actual control to satisfy the statutory definition. 
Id. at 27297.  Furthermore, as we explained in Certain Welded Carbon Steel
Pipes and Tubes from Thailand; Final Results of Antidumping Duty Administrative
Review, 63 FR 55573, 55582-83 (October 16, 1998), evidence of actual control is
not a prerequisite to finding "control" within the meaning of section 771(33)
of the Act, which defines control in terms of the ability of one person to
restrain or direct another person.  The Preamble states: "[i]n general we agree
with the suggestion that we focus on relationships that have the potential to
impact decisions concerning production, pricing or cost.  This does not mean
however, that proof is required that a relationship in fact has had an impact."
In this regard, section 771(33) of the Act, which refers to a person being "in
a position to exercise restraint or direction," properly focuses us on the
ability to exercise "control" rather than the actual exercise of control over
specific decisions.  See Antidumping Duties; Countervailing Duties; Final Rule,
62 FR at 27296-27247 (May 17, 1997).  Therefore, our analysis of whether
control exists in this case conforms with our statute and regulations.    
  
Matching Methodology

 Comment 3:  Tosoh contends that the Department erred in concluding that all
types of powdered alkaline-grade EMD which Tosoh produces comprise one category
of EMD for model- matching purposes.  Tosoh also claims that the Department
erred in using sales of all such EMD to determine normal value and that it
should not have rejected Tosoh's proposed matching criteria.  Tosoh claims that
the EMD it sold in Japan is not identical to the EMD it sold in the United
States and that the Department should have matched Tosoh's U.S. sales to sales
of the most similar home-market product.  Citing section 771(16)(B) of the Act,
Tosoh argues that, because there were no home-market sales of merchandise
identical to the merchandise it sold in the United States, the Department
should match U.S. sales to sales of the most similar home- market product.
 Citing Electrolytic Manganese Dioxide from Japan; Final Results of the Less-
Than-Fair-Value Investigation, 54 FR 8778-8779 (February 22, 1989) (EMD Japan
LTFV), Tosoh asserts that in the past the Department has found that different
grades of EMD within the broad grade categories were not identical for matching
purposes.  

 Tosoh states that the physical characteristics of EMD that the Department
found in itsPreliminary Results of the current review to be not commercially
meaningful are important characteristics of different grades of EMD.  Tosoh
relies on Notice of Final Determination of Sales at Less Than Fair Value;
Certain Cut-To-Length Carbon-Quality Steel Plate Products from France, 64 FR
73143-73144 (December 29, 1999) (Steel Plate), which matched foreign like
products based on physical characteristics reported by the respondents in
product comparisons. In addition, citing Certain Hot-Rolled Lead and Bismuth
Carbon Steel Products From the United Kingdom; Final Results of Antidumping
Duty Administrative Review, 63 FR 18879-18881 (April 16, 1998) (Bismuth), Tosoh
argues that the Department distinguishes among products within product
categories routinely in order to find the most similar match.  

 Tosoh argues that the Department's limited focus on only price and cost in
assessing the commercial significance of Tosoh's proposed matching criteria is
not supported by the Department's matching practice.  Citing Certain Forged
Stainless Steel Flanges From India; Final Results of Antidumping Duty
Administrative Review, 61 FR 51263-51265 (October 1, 1996) (Flanges), Tosoh
argues that the Department, in determining a most similar match, resorts to an
examination of cost and price differences only when there is more than one home-
market product that is equally similar to the product exported to the United
States based on the physical characteristics reported by respondents. 
According to Tosoh, this is not the case here, as Tosoh provided the Department
with information on physical characteristics that establishes three matches,
ranked by similarity, making the reliance on cost or pricing differences
unnecessary because there are no equally similar matches.

 The petitioners respond that Tosoh did not establish the commercial
significance of these distinctions independently and that the only
justification Tosoh presented on the record was the assertion that product
categories reflected customer preferences.  The petitioners argue that Tosoh's
reliance on Bismuth is misplaced.  According to the petitioners, in that case,
the Department did not base its matching methodology solely on distinctions
based on customer preferences.  Here, the petitioners contends, in contrast to
Bismuth, Tosoh has offered no evidence that would establish the independent
significance of its proposed matching criteria. 

 Department's Position:  As we stated in the Preliminary Results, 64 FR at
26570-26571, we are not persuaded by Tosoh's assertion that a more refined
product-matching methodology is appropriate.  The record indicates that there
are no differences in cost attributable to physical differences among the sub-
types of alkaline-grade EMD and differences in price are minimal. 

 The Department has discretion to define certain products as being "identical"
within the meaning of section 771(16)(A) of the Act, even where there are minor
differences.  Similarly, we need not account for every conceivable physical
characteristic of a product in its hierarchy. Thus, we may consider a range of
products as identical within the meaning of the statute.  See Stainless Steel
Bar From Japan; Final Results of Antidumping Administrative Review, 64 FR 36333
(July 6, 1999).  Here, we find that all of the sub-types of alkaline-grade EMD
produced in Japan are identical to the alkaline-grade EMD exported to the
United States because they are all produced within the same range of physical
characteristics.  See Appendix V of the Department's June 7, 2000,
questionnaire.  Therefore, we find that any differences are minor and do not
materially affect our model-match comparison.  
  
 With regard to our determination in EMD Japan LTFV, we disagree with Tosoh's
assertion that the facts in that case are similar to the facts in this case. 
For example, during this review, all sub-grades of alkaline EMD were produced
in the same electrolytic plant and were neutralized with the same ingredient,
plus the primary application of all sub-grade alkaline EMD was the same (i.e.,
incorporation in alkaline manganese batteries).  Moreover, during this review
period, Tosoh produced all of the sub-types of alkaline-grade EMD using the
same raw materials and the same production process; in EMD Japan LTFV, Mitsui
Mining and Smelting Co., Ltd., produced the two sub-types of alkaline-grade EMD
with different production processes.  See Mitsui Mining and Smelting Company
Ltd's October 18, 1988, submission and Tosoh's July 21, 1999, submission at
page A-21.  In addition, according to the to Tosoh's July 21, 1999, submission,
the raw materials Tosoh used in the production of alkaline-grade EMD in this
review period are different from the raw materials used to produce alkaline-
grade EMD discussed inEMD Japan LTFV. Based on these reasons, we find that the
facts in this case are not similar to the facts addressed for a different
respondent in EMD Japan LTFV.  

 With regard to Tosoh's reliance on Bismuth, there are distinguishing factors
between that case and this one.  For example, in Bismuth, we did not base our
matching methodology solely on distinctions concerning customer preferences. 
Rather we stated that the particular product- matching criterion was "an
essential physical characteristic in the creation of the model match
concordance."  See Bismuth FR at 18881.  In addition, in Bismuth, we stated
that product differences due to residuals are commercially significant and not
incidental because they were designed into the product.  Id.  Here, Tosoh has
not provided any information demonstrating that the physical differences in sub-
types were more than incidental. 

 Furthermore, Tosoh's use of Steel Plate is inapplicable here because, in that
case, the Department determined that it was satisfied with the information
submitted on the record regarding product specifications.  In this case,
however, we find that the information on the record does not provide us with
sufficient information to determine that minor differences among the sub-types
of alkaline-grade EMD are significant.

 Finally, as we noted in Flanges, the courts have recognized in numerous cases
that we have broad discretion to devise the model-match methodology that we
deem the most appropriate to determine what constitutes similar merchandise. 
See Flanges 61 FR at 51263-51265.  Given the lack of evidence proving that
minor differences among the alkaline-EMD sub-groups are significant, we
conclude that the model-matching methodology we have used in this review is
appropriate.  Therefore, for these final results, we have continued to match
Tosoh's U.S. sales of EMD to its home-market sales based on the model-matching
criteria established in the original LTFV investigation.

Recommendation

 Based on our analysis of the comments received, we recommend adopting all of
the above positions.  If these recommendations are accepted, we will publish
the final results of the review and the final weighted-average dumping margin
in the Federal Register. 

Agree _________  
Disagree_______

_________________________
Troy H. Cribb
Acting Assistant Secretary
  for Import Administration

_________________________
Date

 

_____________________________________________________________________________
Appendix
Comments and Responses
1.  Determination of U.S. Price
2.  Affiliation
3.  Matching Methodology