[Federal Register Volume 62, Number 4 (Tuesday, January 7, 1997)]
[Notices]
[Pages 969-973]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-296]


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DEPARTMENT OF COMMERCE
A-122-047


Elemental Sulphur From Canada: 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.

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SUMMARY: In response to requests by respondents, the Department of 
Commerce (the Department) is conducting an administrative review of the 
antidumping finding on elemental sulphur from Canada. The review covers 
the period December 1, 1994 through November 30, 1995.
    As a result of the review, we have preliminarily determined that 
sales have been made below normal value (NV). If these preliminary 
results are adopted in our final results of administrative review, we 
will instruct U.S. Customs to assess antidumping duties equal to the 
difference between United States price (USP) and NV.
    Interested parties are invited to comment on these preliminary 
results. Parties who submit arguments in this segment of the proceeding 
are requested to submit with each argument (1) a statement of the issue 
and (2) a brief summary of the argument.

EFFECTIVE DATE: January 7, 1997.

FOR FURTHER INFORMATION CONTACT: Rick Johnson or Jean Kemp, Office of 
Antidumping and Countervailing Duty Enforcement, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230; 
telephone: (202) 482-3793.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

    Unless otherwise indicated, all citations to the statute refer 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 to the current 
regulations, as amended by the interim regulations published in the 
Federal Register on May 11, 1995 (60 FR 25130).

Background

    On December 17, 1973, the Department of the Treasury published in 
the Federal Register (38 FR 34655) the antidumping finding on elemental 
sulphur from Canada. On December 4, 1995, the Department published in 
the Federal Register a notice of opportunity to request an 
administrative review of this antidumping finding for the period 
December 1, 1994 through November 30, 1995 (60 FR 62070).
    On January 11, 1996, Mobil Oil Canada, Ltd. (Mobil) requested an 
administrative review of its sales. On January 22, 1996, Husky Oil Ltd. 
(Husky) requested an administrative review of its sales. The review was 
initiated on February 1, 1996 (61 FR 3670-71).
    The Department is conducting this review in accordance with section 
751 of the Tariff Act of 1930, as amended (the Act).

Scope of the Review

    Imports covered by these reviews are shipments of elemental sulphur 
from Canada. This merchandise is classifiable under Harmonized Tariff 
Schedule (HTS) subheadings 2503.10.00, 2503.90.00, and 2802.00.00. 
Although the HTS subheadings are provided for convenience and for U.S. 
Customs purposes, the written description of the scope of this finding 
remains dispositive.
    The period of review (``POR'') is December 1, 1994 through November 
30, 1995, and covers two companies.

Verification

    As provided in section 782(i) of the Act, we verified information 
provided by Mobil, using standard verification procedures, including 
on-site inspection of the manufacturer's facilities, examination of 
relevant sales and financial records, and selection of original 
documentation containing relevant information. Our verification results 
are outlined in the public versions of the verification reports.

Mobil

Facts Available

    On May 31, 1996, petitioners alleged that Mobil made home market 
sales of subject merchandise below cost of production (``COP''). On 
June 28, 1996, we concluded that petitioners' allegation provided the 
Department with ``reasonable grounds to believe or suspect'' that Mobil 
made below cost sales in the home market within the meaning of section 
773(2)(A)(i) of the Act. Therefore, we initiated a COP investigation of 
Mobil's sales, and directed Mobil to respond to Section D of the 
Department's February 8, 1996 questionnaire.
    Mobil has maintained throughout this review that because sulphur is 
a ``waste product'', it does not track sulphur production and handling 
costs. In its August 5, 1996 cost response, Mobil estimated its cost of 
manufacture (``COM'') based on an engineering estimate of sulphur 
loading costs at one plant, representing 5% of Mobil's sulphur 
production. However, Mobil could not prove that this estimate bore any 
relation to Mobil's actual costs as recorded in Mobil's cost accounting 
system. Moreover, the estimate only applied to 5% of Mobil's production 
of

[[Page 970]]

subject merchandise. Therefore, in response to the Department's 
September 3, 1996 request for supplemental information, Mobil submitted 
a response on September 25, 1996 based on an entirely different 
methodology, in which total plant costs (including production of gas, 
oil, and sulphur) were reported and then allocated to the production of 
subject merchandise.
    In accordance with section 782(i) of the Act, during the week 
October 21-25, 1996, the Department conducted verification of Mobil's 
cost responses. At verification, Mobil revealed for the first time that 
two of its 22 plants maintained sulphur cost centers, including one 
whose sulphur cost center was active during the POR. The Department 
verification team then found that sulphur cost centers in fact were 
maintained during the POR for five of Mobil's plants, accounting for 
over 50% of Mobil's sulphur production during the POR. In response to 
the verification team's inquiry, Mobil stated while it was preparing 
its responses, it had not sought to ascertain whether the producing 
plants maintained sulphur cost centers. Moreover, the verification team 
found that the allocation methodology employed by Mobil in its 
September 25, 1996 response was based on a barrel of oil equivalent 
(``BOE''), a unit of measurement not used in the normal course of 
business by Mobil to allocate costs and not relevant to sulphur because 
sulphur is not burned.
    Section 776(a)(2) of the Act provides that if an interested party 
or other person--(A) withholds information that has been requested by 
the Department, (B) fails to provide such information by the deadlines 
for submission of the information or in the form and manner requested, 
(C) significantly impedes a proceeding, or (D) provides such 
information but the information cannot be verified as provided in 
section 782(i), the Department shall, subject to section 782(d), use 
the facts otherwise available in reaching the applicable determination.
    Section 782(d) provides that if the Department ``determines that a 
response to a request for information . . . does not comply with the 
request, {the Department} shall promptly inform the person submitting 
the response of the nature of the deficiency and shall, to the extent 
practicable, provide the person with an opportunity to remedy or 
explain the deficiency in light of the time limits established for 
completion of investigations or reviews under this title.'' In 
accordance with that section, the Department provided Mobil ample 
opportunity to correct the defects in its submitted cost response. As 
indicated above, the deficiency in Mobil's original cost response 
methodology was brought to Mobil's attention in a supplemental 
questionnaire. See Supplemental Cost Questionnaire Concerning the 1994-
1995 Administrative Review of the Antidumping Finding on Elemental 
Sulphur from Canada, Question 6, September 3, 1996 (``Please report 
costs for all facilities in which Mobil has an interest and which 
produce sulphur, and included costs from each facility in your 
calculations of the cost of production and constructed value. . . . 
Although you need not provide cost information with respect to any 
facility accounting for less than five percent of Mobil's total 
production volume, not sales volume, you must account for at least 90 
percent of Mobil's total production volume in reporting Mobil's costs'' 
{emphasis in original}). In response to the Department's supplemental 
questionnaire, Mobil developed another methodology, yet continued to 
claim that it was unable to report costs in the form and manner 
requested by the Department. Only at verification did the Department 
discover that Mobil maintained cost centers specific to sulphur in its 
accounting records for the majority of its reported POR production.
    Mobil's failure to provide the Department with the requested cost 
information constitutes a withholding of information within the meaning 
of section 776(a)(2)(A) of the Act. We must therefore consider whether 
the submitted cost data is usable under section 782(e) of the Act.
    Section 782(e) provides that the Department shall not decline to 
consider information that is submitted by an interested party and is 
necessary to the determination but does not meet all the applicable 
requirements established by the Department if: (1) the information is 
submitted by the deadline established for its submission; (2) the 
information can be verified; (3) the information is not so incomplete 
that it cannot serve as a reliable basis for reaching the applicable 
determination; (4) the interested party has demonstrated that it acted 
to the best of its ability in providing the information and meeting the 
requirements established by the Department with respect to the 
information; and (5) the information can be used without undue 
difficulties.
    When examined in light of the requirements of section 782(e), the 
facts of the case indicate that Mobil's cost data is so fundamentally 
flawed as to render it unusable. Because the discovery of sulphur cost 
centers occurred only at verification (and therefore, would have 
remained undiscovered were it not for the Department's decision to 
verify Mobil's response), this information was not provided to the 
Department by the deadlines established for its submissions, as 
required by subsection (e)(1).
    Additionally, as a consequence of the discovery at verification of 
these sulphur cost centers, the Department was unable to verify this 
information, as required by subsection (e)(2). It is a central tenet of 
Departmental practice that verification is not intended to be an 
opportunity for submitting new factual information. Further, the 
Department also stated in its verification outline that new information 
will be accepted at verification only when (1) the need for that 
information was not evident previously, (2) the information makes minor 
corrections to information already on the record, or (3) the 
information corroborates, supports, or clarifies information already on 
the record. See Letter to Mobil Oil Canada: Sales and Cost 
Verification: Administrative Review of the Antidumping Duty Order on 
Elemental Sulphur from Canada, page 2 (October 11, 1996). The discovery 
of sulphur cost centers meets none of these qualifications. As such, 
the Department could not verify this information during its 
verification of Mobil.
    We also find the information which Mobil supplied in its responses 
to be so incomplete that it cannot serve as a reliable basis for 
reaching the applicable determination, as required by subsection 
(e)(3). First, we have determined that the use of facts available for 
Mobil's cost data renders its sales data unusable. Because of the 
flawed nature of the cost data, home market sales cannot be tested to 
determine whether they were made at prices above production cost. 
Insofar as the Department only makes price-to-price comparisons (normal 
value to export price) using those home market sales that are made 
above cost, the flawed nature of the cost data makes these comparisons 
impossible.
    In the absence of home market sales data, (i.e., when the home 
market is viable but there are no comparison sales for a particular 
U.S. sale), the Department would normally resort to the use of 
constructed value as normal value. However, the constructed value 
information reported by Mobil is based on the discredited cost data. 
Therefore, the use of facts available for cost of production data 
precludes the use of the submitted constructed value information.

[[Page 971]]

    The Department's prior practice has been to reject a respondent's 
submitted information in toto when flawed and unreliable cost data 
renders any price-to-price comparison impossible. See Notice of Final 
Determination of Sales at Less Than Fair Value: Certain Pasta from 
Italy, 61 FR 30326, 30329 (June 14, 1996); Notice of Final 
Determination of Sales at Less Than Fair Value: Certain Pasta from 
Turkey, 61 FR 30309, 30311 (June 14, 1996). The rationale for this 
policy is contained in Notice of Final Determination of Sales at Less 
than Fair Value: Grain Oriented Electrical Steel From Italy, 59 FR 
33952, 33594 (July 1, 1994), where the respondent failed the cost 
verification. The Department explained that the rejection of a 
respondent's questionnaire response in toto is appropriate and 
consistent with past practice in instances where a respondent failed to 
provide verifiable COP information:

    ``[I]f the Department were to accept verified sales information 
when a respondent's cost information (a substantial part of the 
response) does not verify, respondents would be in a position to 
manipulate margin calculations by permitting the Department to 
verify only that information which the respondent wishes the 
Department to use in its margin calculation.''

This situation applies to Mobil, which provided sales information in 
proper form, but did not provide cost data which could be verified. 
Although Electrical Steel from Italy was a case involving best 
information available (BIA) under the pre-URAA statute, it is evidence 
of the Department's practice of regarding verified sales information as 
unusable when the corresponding cost data is so flawed that price-to-
price comparisons are rendered impossible. The Department has 
reiterated this position in its Notice of Preliminary Results of 
Antidumping Administrative Review: Cut-to-Length Carbon Steel Plate 
from Sweden, 61 FR 51898, 51900 (October 4, 1996), a case under the 
post-URAA statute.
    In addition, we find that Mobil has not demonstrated that it acted 
to the best of its ability in providing the information and meeting the 
requirements established by the Department in this review. As noted in 
the verification report, Mobil did not ask any of its plants whether 
they maintained sulphur-specific cost centers when preparing its 
responses. See Cost Verification of Mobil Oil Canada, Ltd. (``Mobil''): 
Administrative Review of Elemental Sulphur From Canada, November 18, 
1996, pp. 7-8. Thus, we find that section 782(e)(4) of the Act provides 
a further basis for declining to consider Mobil's information.
    Accordingly, we find that there is no reasonable basis for 
determining normal value for Mobil in this review. As a result, we 
could not use Mobil's U.S. sales data in determining an antidumping 
margin, in accordance with section 782. The Department has no choice, 
therefore, but to resort to a total facts available methodology.
    Section 776(b) provides that adverse inferences may be used in 
selecting from the fact otherwise available if the Department finds 
that an interested party has failed to cooperate by not acting to the 
best of its ability to comply with requests for information. See also 
SAA at 870.
    We have determined that Mobil did not act to the best of its 
ability to comply with our requests for information. As discussed 
above, Mobil did not even ask the producing plants whether they 
maintained sulphur cost centers. Accordingly, as authorized by section 
776(b) of the Act, we have applied an adverse inference in selecting 
Mobil's margin.
    Section 776(b) authorizes the Department to use as adverse facts 
available information derived from the petition, the final 
determination, a previous administrative review, or any other 
information placed on the record. The SAA provides that ``[i]n 
employing adverse inferences, one factor the [Department] will consider 
is the extent to which a party may benefit from its own lack of 
cooperation.'' SAA at 870. Section 776(c) of the Act provides that the 
Department shall, to the extent practicable, corroborate ``secondary 
information'' by reviewing independent sources reasonably at its 
disposal. The SAA, at 870, makes it clear that ``secondary 
information'' includes information from the petition in the less-than-
fair-value (LTFV) investigation and information from a previous section 
751 review of the subject merchandise. The SAA also provides that 
``corroborate'' means simply that the Department will satisfy itself 
that the secondary information to be used has probative value. Id.
    For our total adverse FA margin, we chose to apply the highest 
calculated margin from any prior administrative review which the 
Department is able to corroborate, 7.17%. This rate was calculated in 
the 1991-92 administrative review of this proceeding, the most recently 
concluded portion of this proceeding.
    As the Department noted in Tapered Roller Bearings and Parts 
Thereof, Finished and Unfinished, from Japan, and Tapered Roller 
Bearings, Four Inches or Less in Outside Diameter, and Components 
Thereof, from Japan; Preliminary Results of Antidumping Duty 
Administrative Reviews and Partial Termination of Administrative 
Reviews, 61 FR 57391, 57392 (November 6, 1996), to corroborate 
secondary information, the Department will, to the extent practicable, 
examine the reliability and relevance of the information used. However, 
unlike other types of information, such as input costs or selling 
expenses, there are no independent sources for calculated dumping 
margins. The only source for margins is administrative determinations. 
Thus, in an administrative review, if the Department chooses as total 
adverse facts available a calculated dumping margin from a prior 
segment of the proceeding, it is not necessary to question the 
reliability of the margin for that time period.
    The Department notes that the above rate, in addition to being 
calculated, was also used as ``second-tier'' (cooperative) BIA in the 
1991-92 administrative review. Because we have determined that Mobil 
has not acted to the best of its ability to comply with our requests 
for information, we also considered the application of 28.9%, which was 
the ``first tier'' BIA rate for nine companies (not including Mobil) in 
the 1991/1992 review of this finding. However, we could not corroborate 
this rate based on the Department's official records of this 
proceeding. If this rate is corroborated subsequent to these 
preliminary results, we will consider its application as total adverse 
facts available for Mobil for the purposes of the final results of 
review.
    Finally, we will also consider final rates calculated in the 1992/
93 and the 1993/94 administrative reviews in determining total adverse 
facts available for Mobil for the purposes of the final results of this 
review.

Husky

Fair Value Comparisons

    To determine whether sales of subject merchandise to the United 
States were made at less than fair value, we compared the EP to the NV, 
as described in the ``Export Price'' and ``Normal Value'' sections of 
this notice. In accordance with section 777A(d)(2), we calculated 
monthly weighted-average prices for NV and compared these to individual 
U.S. transactions.

Export Price

    For calculation of the price to the United States, we used EP, in 
accordance with section 772(a) of the Act, because Husky's subject 
merchandise was sold to the first unaffiliated purchaser in the United 
States prior to importation and use of

[[Page 972]]

CEP methodology was not otherwise warranted. We calculated export price 
based on f.o.b. plant or delivered prices to unrelated customers. We 
made adjustments, where applicable, for brokerage and handling, foreign 
inland freight, and tank car expenses, in accordance with section 
772(c) of the Act.

Normal Value

    We found that Husky's quantity of sales in its home market of the 
foreign like product exceeded five percent of its sales to the United 
States. Therefore, we have determined that Husky's home market sales 
are viable for purposes of comparison with sales of the subject 
merchandise to the United States, pursuant to section 773(a)(1)(C)(ii) 
of the Act. Moreover, there is no evidence on the record indicating a 
particular market situation in the exporting country that would not 
permit a proper comparison of home market and U.S. prices. See section 
773(a)(1)(C)(iii). Thus, we based NV on the prices at which the foreign 
like products were first sold for consumption in the home market, in 
the usual commercial quantities, in the ordinary course of trade, and 
at the same level of trade as the EP sales.
    We based NV on home market prices to unaffiliated purchasers (Husky 
made no sales to affiliated parties). Home market prices were based on 
ex-factory or delivered prices. We made adjustments, where applicable, 
for movement expenses in accordance with sections 773(a)(6)(B) of the 
Act. We also made adjustments for differences in circumstances of sale 
(``COS'') in accordance with 773(a)(6)(C)(iii) of the Act and 19 CFR 
353.56 by deducting home market direct selling expenses and adding U.S. 
direct selling expenses. These amounts included imputed credit expenses 
in the home market and imputed credit expenses in the U.S. market.
    On May 31, 1996, petitioners alleged that Husky made home market 
sales of foreign like product below cost of production (``COP''). On 
June 28, 1996, we concluded that petitioners' allegation provided the 
Department with ``reasonable grounds to believe or suspect'' that Husky 
made below cost sales in the home market within the meaning of section 
773(2)(A)(i) of the Act. Therefore, we initiated a COP investigation of 
Husky's sales.
    In accordance with section 773(b)(3) of the Act, we calculated the 
COP based on the sum of the costs of materials and fabrication employed 
in producing the foreign like product plus selling, general and 
administrative (SG&A) expenses and all costs and expenses incidental to 
placing the foreign like product in condition for shipment. In our COP 
analysis, we used home market sales and COP information provided by 
Husky in its questionnaire response.
    After calculating COP, we tested whether home market sales of the 
foreign like product were made at prices below COP and, if so, whether 
they were made within an extended period of time in substantial 
quantities and at prices which did not permit recovery of all costs 
within a reasonable period of time. See section 773(b)(1). Because each 
individual price was compared against the POR-long weighted average 
COP, any sales that were below cost were also not at prices which 
permitted cost recovery within a reasonable period of time. We compared 
the COP for liquid sulphur to the reported home market prices less any 
applicable movement charges.
    Pursuant to section 773(b)(2)(C) of the Act, we concluded that 
Husky's below cost sales were made in substantial quantities because 
the volume of these sales represented more than 20 percent of the 
volume of sales under consideration for the determination of normal 
value. We also concluded that these below-cost sales were made within 
an extended period of time (i.e., within the period of review) within 
the meaning of section 773. See SAA at 832.
    In accordance with section 773(b)(2)(D), we concluded that Husky's 
below-cost sales were not at prices which permit recovery of all costs 
within a reasonable period of time because the prices for the below-
cost sales were below the weighted average per unit cost of production 
for the period of review.
    Based on these tests, we disregarded below-cost sales with respect 
to Husky.

Preliminary Results of the Review

    As a result of our review, we preliminarily determine that the 
following margins exist for the period December 1, 1994 through 
November 30, 1995:

------------------------------------------------------------------------
                                                                Margin  
        Manufacturer/Exporter              Time period        (percent) 
------------------------------------------------------------------------
Husky Oil Ltd.......................      12/1/94-11/30/95      \1\ 0.33
Mobil Oil Canada, Ltd...............      12/1/94-11/30/95       \7\.17 
------------------------------------------------------------------------
\1\ This is a de minimis rate.                                          
\2\ As described above, this total adverse facts available rate is      
  subject to change for the final results of review.                    

    Parties to this proceeding may request disclosure within 5 days of 
the date of publication of this notice. Any interested party may 
request a hearing within 10 days of the date of publication of this 
notice. Any hearing, if requested, will be held 44 days after the date 
of publication or the first business day thereafter. Case briefs and/or 
other written comments from interested parties may be submitted not 
later than 30 days after the date of publication. Rebuttal briefs and 
rebuttals to written comments, limited to issues raised in those 
comments, may be filed not later than 37 days after the date of 
publication of this notice. The Department will publish the final 
results of this administrative review, including its analysis of issues 
raised in any written comments or at a hearing, not later than 120 days 
after the date of publication of this notice.
    Upon issuance of the final results of review, the Department shall 
determine, and the U.S. Customs Service shall assess, antidumping 
duties on all appropriate entries. The following deposit requirements 
will be effective for all shipments of the subject merchandise entered, 
or withdrawn from warehouse, for consumption on or after the 
publication date of the final results of these administrative reviews, 
as provided by section 751(a)(1) of the Act: (1) the cash deposit rates 
for the reviewed companies will be those rates established in the final 
results of these reviews (except that no deposit will be required for 
firms with zero or de minimis margins, i.e., margins less than 0.5 
percent); (2) for previously reviewed or investigated companies not 
listed above, the cash deposit rate will continue to be the company-
specific rate published for the most recent period; (3) 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 (4) the cash 
deposit

[[Page 973]]

rate for all other manufacturers or exporters will continue to be the 
``all others'' rate made effective by the final results of the 1991-
1992 administrative review of this order (see Elemental Sulphur from 
Canada: Final Results of Administrative Review, 61 FR 8239, 8252 (March 
4, 1996)). As noted in those final results, the Department determined 
this rate to be 5.56 percent. These deposit requirements, when imposed, 
shall remain in effect until publication of the final results of the 
next administrative reviews.
    This notice also serves as a preliminary reminder to importers of 
their responsibility under 19 CFR 353.26 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 notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 
353.22(c)(5).

    Dated: December 30, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-296 Filed 1-6-97; 8:45 am]
BILLING CODE 3510-DS-P