[Federal Register Volume 62, Number 221 (Monday, November 17, 1997)]
[Notices]
[Pages 61271-61276]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30144]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-429-601]


Final Results of Antidumping Duty Administrative Review of Solid 
Urea From the Former German Democratic Republic

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce

ACTION: Notice of final results of antidumping duty administrative 
review

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SUMMARY: On July 8, 1997, the Department of Commerce (the Department) 
published the preliminary results of its administrative review of the 
antidumping duty order on solid urea from the Former German Democratic 
Republic (GDR). The review covers one manufacturer/exporter, SKW 
Stickstoffwerke Piesteritz GmbH (SKWP), and the period July 1, 1995 
through June 30, 1996. We gave interested parties an opportunity to 
comment on our preliminary results.

EFFECTIVE DATE: November 17, 1997.

FOR FURTHER INFORMATION CONTACT: Nithya Nagarajan or Steven Presing, 
Office VII, Import Administration, International Trade Administration, 
U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, DC 20230; telephone (202) 482-3793.

SUPPLEMENTARY INFORMATION:

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 indicated, all 
citations to the Department's regulations are to the regulations, as 
codified at 19 C.F.R. part 353 (1996).

Background

    On July 8, 1996, the Department published in the Federal Register 
(61 FR 35712) a notice of ``Opportunity to Request Administrative 
Review'' for the July 1, 1995 through June 30, 1996, period of review 
(POR) of the antidumping duty order on solid urea from the former GDR. 
In accordance with 19 CFR 353.22, the Ad Hoc Committee of Domestic 
Nitrogen Producers (petitioners) requested a review for the 
aforementioned period. On August 15, 1996, the Department published a 
notice of initiation of antidumping review (61 FR 42416, 42417). The 
Department is conducting a review of this respondent pursuant to 
section 751 of the Act.
    On July 8, 1997, the Department published the preliminary results 
of review ( 62 FR 36492). The Department has now completed the review 
in accordance with section 751 of the Act.

Scope of Review

    Imports covered by this review are those of solid urea. At the time 
of the publication of the antidumping duty order, such merchandise was 
classifiable under item 480.30 of the Tariff Schedules of the United 
States Annotated (TSUSA). This merchandise is currently classified 
under the Harmonized Tariff Schedule of the United States (HTS) item 
number 3102.10.00. These TSUSA and HTS item numbers are provided for 
convenience and Customs purposes only. The Department's written 
description of the scope remains dispositive for purposes of the order.

Analysis of Comments Received

    Comment 1: Affiliation. Petitioners argue that the Department must 
adjust SKWP's cost of production to reflect an appropriate amount for 
depreciation of production equipment transferred to SKWP by 
Stickstoffwerke AG Wittenberg-Piesteritz (STAG). Petitioners contend 
that STAG is under the ``control'' of SKWP and that in accordance with 
section 771(33) of the Act, the Department must find SKWP and STAG to 
be ``affiliated'' persons. According to petitioners, the Department is 
required by sections 773(f)(2) and (3) of the Act to disregard STAG's 
``transfer'' price to SKWP of the production equipment and substitute, 
in

[[Page 61272]]

its place, the higher of market value or cost.
    Respondent insists that there is no evidence of affiliation between 
SKWP and STAG. Respondent maintains that the production equipment was 
purchased at a market price and that the Department verified SKWP's 
reported depreciation expense. Respondent adds that the purchase 
transaction between SKWP and STAG was scrutinized by the German 
government and independent auditors, and found to be properly valued 
through arm's-length negotiations.
    Department's Position: We disagree with petitioners' contention 
that the purchase of the production equipment was a transaction between 
affiliated persons. Consequently, for the final results of this review, 
we have not adjusted SKWP's reported depreciation expense pursuant to 
sections 773(f)(2) and (3) of the Act.
    In 1993, SKWP and STAG concluded an agreement whereby SKWP 
purchased certain assets from STAG. These assets consisted largely of 
the accounts receivable, inventories, and production equipment from a 
nitrogen production facility owned by STAG. As part of this contractual 
arrangement, SKWP also assumed responsibility for certain debts and 
other obligations of STAG's nitrogen facility, including accounts 
payable and costs associated with old, environmentally hazardous sites 
formerly owned by STAG. In accordance with German generally accepted 
accounting principles (GAAP), the total purchase price paid by SKWP 
determined the cost of the assets acquired by the company. Because the 
degree of convertibility to cash was taken into consideration in 
allocating the purchase price, much of that price was allocated to 
accounts receivable and other liquid assets with very little of the 
price allocated to the capital equipment acquired in the transaction.
    In addition to the nitrogen facilities, SKWP also acquired from 
STAG as part of the purchase transaction, a five percent interest in 
VCE Vertriebsgesellschaft fur Chemische Erzeugnisse Piesteritz GmbH 
(VCE), a distributor of STAG's (now SKWP's) urea products. STAG 
continued to hold the remaining 95 percent of VCE's shares. At the same 
time, SKWP and STAG entered into a five-year agreement under which VCE 
became the exclusive distributor of SKWP's urea products and each 
company agreed to share in the profits or losses of VCE in accordance 
with their respective interests in the distributor. As part of this 
contractual arrangement, STAG also agreed that SKWP would assume 
complete operational control over VCE, providing all management and 
sales personnel as well as accounting, management and support staff. 
Further, SKWP assumed absolute control over all pricing and production 
decisions at VCE. Thus, STAG has, by contract, given up whatever 
control over VCE it would otherwise have by virtue of its ownership 
interest.
    Petitioners cite, as evidence of affiliation between SKWP and STAG, 
the profit and loss sharing arrangement and SKWP's operational control 
over VCE. Indeed, petitioners assert, ``STAG is wholly `reliant' upon 
SKWP for income (through VCE), and STAG's pricing of assets sold to 
SKWP have affected the cost of the subject merchandise, as well as 
future income, to STAG.''
    For the following reasons, we cannot agree with petitioners. First, 
the temporary profit and loss agreement between SKWP and STAG is part 
of a larger asset purchase arrangement between two companies. It is 
part of the consideration that STAG received from SKWP for the assets. 
Therefore, as discussed in greater detail in response to Comment 2, 
below, we consider any profits accruing to STAG under the agreement to 
be part of the arm's-length purchase price paid by SKWP for the assets 
it acquired.
    Second, petitioners do not allege (and nothing in the record 
suggests) that SKWP and STAG were affiliated at the time of the sale of 
the assets. STAG may be dependent upon SKWP to act in good faith and to 
pay whatever additional monies are owed for the assets, but that does 
not mean STAG and SKWP are ``affiliated'' within the meaning of the 
statute. STAG did not have to sell its equipment and other assets to 
SKWP. SKWP was not in a position to dictate the terms of the sale. 
Rather, each company was pursuing its own economic interests and those 
interests were in no way mutual. STAG's interest was to obtain the 
highest price possible for its assets at the time of the sale. Of its 
own choosing, it accepted an initial payment and the potential of 
additional payments over a five-year period. Nothing about this 
transaction put SKWP in a position to ``legally or operationally * * * 
exercise restraint or direction'' over STAG when it came to the price 
paid for the production equipment.
    Third, there is no evidence on the record to suggest, as 
petitioners contend, that STAG would understate the value of the 
capital equipment that it sold SKWP in the hopes that SKWP, which 
controls the price and volume of urea products sold through VCE, would 
obtain greater profits on sales made by VCE. In fact, contrary to 
petitioners' assertions, STAG's pricing of the assets sold to SKWP does 
not affect directly the level of VCE's profits since VCE's costs (and 
thus its' profits) are determined based on the price SKWP charges VCE 
for urea and not on SKWP's production costs.
    Petitioners also rely on two other points to advance their argument 
that SKWP and STAG are affiliated persons. First, petitioners note that 
VCE's financial results are consolidated with those of SKWP. According 
to petitioners, this would only be possible if STAG's 95 percent 
interest was indistinguishable from SKWP's interest. Second, 
petitioners consider STAG's agreement to absorb certain personnel costs 
associated with the purchase of its assets to be an indication of 
affiliation between STAG and SKWP.
    In response to the first point, the consolidation of financial 
statements is done for accounting purposes when a parent company 
controls the operations of a subsidiary entity. In the present case, 
the consolidation of VCE's financial statements into SKWP's is merely 
an indication that SKWP controls VCE, not that SKWP controls STAG (or 
that both companies control VCE). As explained above, STAG contracted 
away its right to control VCE as part of the five-year distribution 
agreement.
    In response to the second point, STAG's commitment to absorb 
certain personnel costs resulted from the arm's-length negotiations 
that took place between the parties. Stated differently, absorption of 
these costs was part of the quid pro quo that enabled STAG to obtain 
the highest price possible for its assets at the time of sale.
    In conclusion, the Department finds no evidence to consider STAG 
and SKWP to be affiliated within the meaning of section 771(33) of the 
Act, and for purposes of these final results, will continue to treat 
them as parties to an arm's-length transaction in relation to the sale 
and acquisition of SKWP's production equipment.
    Comment 2: Profit Adjustment. Petitioners argue that even if the 
Department were to find STAG and SKWP unaffiliated, we should account 
for STAG's share of VCE's profit or loss as compensation for the assets 
transferred to SKWP, and add the value of these profits and losses to 
the reported costs of production.
    Respondents counter that there is no statutory authority to add 
profit to a COP calculation, and these profits and losses are properly 
excluded from the reported costs.

[[Page 61273]]

    Department Position: We agree, in principle, with petitioners that 
any profits that accrue to STAG under its profit and loss sharing 
arrangement with SKWP should be considered part of the purchase price 
of the assets acquired by SKWP from STAG. As discussed in our response 
to comment 1, above, the five-year arrangement between STAG and SKWP to 
share in the profits and losses of VCE, a distributor of SKWP's urea 
products, was concluded as an integral part of the asset purchase 
agreement between the two companies. Under the arrangement, SKWP agreed 
to forego its share of VCE's earnings from urea sales as part of the 
compensation it paid to STAG for the assets acquired. As such, any 
profits paid to STAG under the arrangement can reasonably be viewed as 
part of the purchase price for the assets.
    We note, however, that evidence on the record shows that from 1993 
to 1996 (the first three years of the arrangement), VCE incurred only 
losses on its sales of SKWP's urea products. Thus, as of the POR, STAG 
has not received any additional compensation for the assets it sold 
beyond that paid by SKWP at the time the agreement was concluded. In 
addition, we note that, were VCE to earn profits in the final two years 
of the agreement, such profits would first be netted against VCE's 
accumulated losses (in accordance with the arrangement) before 
distribution to STAG.
    Finally, as a theoretical matter, we disagree with petitioners that 
all profits paid to STAG under the arrangement should go to increase 
the value of the production equipment purchased by SKWP. Rather, 
consistent with SKWP's GAAP accounting for all of the assets it 
acquired from STAG, any additional compensation in the form of VCE 
profits paid to STAG would first be applied to other, more liquid 
assets to reduce any remaining difference between their value at the 
time of purchase and the amount of the purchase price allocated to 
them.
    Comment 3: Renovation Project. Petitioners argue that the 
Department should increase SKWP's cost of production to account for 
amounts received from the German government to offset expenses 
associated with an ongoing renovation project at its nitrogen facility. 
According to petitioners, the Department routinely considers renovation 
costs to be part of the cost of production. In this regard, petitioners 
highlight the fact that SKWP has accounted for costs associated with 
the project as part of the company's operating costs. Citing Certain 
Iron Metal Castings from India, 46 FR 28463 (1981), petitioners contend 
that it is the Department's long-standing practice not to reduce costs 
to reflect the benefits received from government subsidies.
    SKWP argues that, because it did not incur the renovation costs for 
which the subsidies were granted, these costs could not be part of the 
company's cost of production.
    Department's Position: We disagree with petitioners. Costs 
associated with the renovation of SKWP's production facility were not 
incurred by SKWP. The costs in question were funded by the German 
government through reimbursement which was recorded in the audited 
financial statements of SKWP.
    Contrary to petitioners' apparent belief, the Department's long-
standing practice is to base COP upon a producer's actual costs and not 
to restate such costs to exclude government payments, linked to 
specific costs. See, e.g., Red Raspberries from Canada; Final 
Determination of Sales at Less Than Fair Value, 50 FR 19768 (1985); 
Certain Iron Construction Castings from India; Final Determination of 
Sales at Less Than Fair Value, 51 FR 9486, 9488 (1986). This practice 
has been upheld by the courts on many occasions. See, e.g., United 
States v. European Trading Company, 27 CCPA 289, C.A.D. 103 (1940); 
Washington Red. Raspberry Comm. v. United States, 657 F. Supp. 537 (CIT 
1987); Alhambra Foundry Co., Ltd. v. United States, 685 F. Supp. 1252 
(CIT 1988). Indeed, in the one case cited by petitioners, the very 
practice at issue was upheld by the court. See Al Tech Specialty Steel 
Corp. v. United States, 10 CIT 743, 751, 651 F. Supp. 1421 (1986) 
(court refused to overturn calculation of ``fixed costs merely because 
the adjustment is based on subsidies'').
    Comment 4: Special Depreciation. Petitioners argue that the 
Department should increase SKWP's reported depreciation expense to 
account for ``special'' depreciation excluded from COP and CV by the 
company. Petitioners maintain that the Department has a consistent 
practice of including special depreciation items in its calculation of 
respondent's costs and there is no justification for departing from 
that practice in this instance.
    SKWP insists that it properly excluded special depreciation from 
the COP and CV figures it submitted to the Department. SKWP notes that 
the special depreciation in question relates to tax-basis depreciation 
granted by the German government to companies operating in the former 
GDR and, thus, represents no real additional cost to the company and 
should not be included in the cost of production. SKWP adds that actual 
depreciation (i.e., not tax-related depreciation) is included in SKWP's 
fully-absorbed cost of production.
    Department's Position: We disagree with SKWP in that, for purpose 
of computing COP and CV, we cannot simply ignore the amount that the 
company recorded as ``special'' depreciation expense during the POR. 
Each year in its accounting books and records, SKWP recognizes what it 
maintains is ``normal'' depreciation expense for the year. In addition, 
because SKWP operates in the former GDR, German tax law allows the 
company to recognize a ``special'' depreciation expense in the year in 
which an asset is purchased. Like normal depreciation, the amount of 
the special depreciation taken during the year of acquisition reduces 
the depreciable basis of the assets. Thus, while the special tax 
depreciation may be stated on an accelerated basis which may or may not 
reflect the underlying economic useful lives of the assets purchased by 
SKWP, to ignore the expense altogether, as SKWP suggests, fails to 
recognize as a cost that portion of each asset's depreciable basis that 
is written off as special depreciation in the year of acquisition. SKWP 
has not provided us with any alternative method of recognizing an 
appropriate amount for depreciation expense that is based on the 
economic useful lives of the assets purchased by the company. Rather, 
SKWP's position is that the Department must exclude special 
depreciation costs from COP and CV because the amounts at issue do not 
reflect what it calls ``real'' costs. However, as described above, the 
special depreciation expense amounts recorded by SKWP do reflect actual 
depreciation costs on an accelerated basis. Therefore, absent any other 
information on the record from which to derive an alternative measure 
of depreciation expense, we have included SKWP's special depreciation 
expense in the company's COP and CV.
    Comment 5: Other Expenses Excluded from SKWP's Submitted Costs. 
Petitioners claim that the Department should include in SKWP's COP and 
CV figures certain costs reported by the company in its financial 
statements. Specifically, petitioners contend that the Department 
should increase SKWP's reported costs for three expense items: amounts 
incurred by the company for environmental damages relating to SKWP's 
100% owned affiliate, Agrochemie Handelsgesellschaft GmbH (Agrochemie); 
amounts incurred for the demolition of certain plant facilities;

[[Page 61274]]

and, costs relating to worker severance pay.
    SKWP argues that the amounts reported in its financial statements 
for environmental damages and demolition costs were properly excluded 
from the costs reported to the Department. According to SKWP, expenses 
relating to environmental damages caused by Agrochemie were paid for by 
the German government and, therefore, no costs were actually incurred 
by the company. With respect to amounts reported for plant demolition, 
SKWP contends that the facilities at issue were not involved in the 
production of urea and that these amounts, too, were paid for by the 
German government.
    Department's Position: We agree with petitioners and have adjusted 
SKWP's reported COP and CV figures to include amounts for Agrochemie's 
environmental damages, demolition of certain SKWP facilities, and 
worker severance pay as reported in the company's financial statements. 
As part of our cost verification, we reconciled the total amount of 
costs reported by SKWP in response to our antidumping questionnaire to 
the costs reported in the company's audited financial statements. Our 
reconciliation showed that SKWP had excluded from its COP and CV 
figures specific income statement items relating to reserves 
established for each of the three expense items described above. 
Although the record of this case shows that SKWP received funds from 
the German government to offset costs incurred by the company for 
certain plant renovations and for environmental clean-up at its 
nitrogen facility, SKWP failed to show that the receipt of these funds 
was specifically related to either the environmental damages caused by 
Agrochemie or to the demolition costs at issue. As petitioners note in 
their briefs, in past cases, the Department has accounted for expenses 
associated with environmental clean-up by respondents as part of the 
cost of production where, as in this case, such expenses are included 
in respondent's financial statements and reflect costs incurred during 
the period of investigation or review. See Final Determination of Sales 
at Less Than Fair Value: Stainless Steel Wire Rod from France, 58 FR 
68865 (1993). With respect to SKWP's argument that the demolition costs 
relate to non-urea facilities, our understanding based on the evidence 
in the record is that the amounts incurred relate to the destruction of 
factory assets for discontinued operations. As such, we consider these 
costs to be related to SKWP's general operations and have therefore 
included them in COP and CV.
    Comment 6: Reported Costs. Petitioners contend that SKWP has 
reported the costs for only one type of urea product and that a second, 
more costly type of urea referred to as ``konf.'' in the verification 
exhibits, was manufactured by SKWP during the POR. Petitioners maintain 
that cost verification exhibits do not support SKWP's contention that 
``konf.'' urea is actually bagged urea since these exhibits show an 
amount for packing costs in the cost center report for what SKWP claims 
is bulk urea. Petitioners argue that the Department must increase 
SKWP's reported COP and CV to reflect the weighted-average cost for the 
two types of urea produced by the company.
    SKWP maintains that ``konf.'' urea is, in fact, bagged urea, and 
that the Department verified packing costs associated with bagged urea 
as part of its sales verification. SKWP adds that the Department has 
factored the company's reported packing costs for bagged urea into its 
COP analysis.
    Department's Position: We disagree with petitioners that SKWP 
failed to report the costs of a second type of urea that it produced 
during the POR. SKWP manufactures and sells urea in both bulk form, 
called ``lager lose,'' and in bagged form, or ``konf.'' In response to 
the Department's cost questionnaire, SKWP reported the cost of urea in 
bulk form only. The company reported the additional packing costs it 
incurred for bagged urea on a transaction-specific basis in response to 
the Department's sales questionnaire. In performing our COP test of 
SKWP's home market sales, we adjusted for the packing costs associated 
with bagged urea by deducting the reported amount from the home market 
sales price before comparing that price to the COP for bulk urea. Thus, 
to compute a single weighted-average cost for both bulk and bagged 
urea, as petitioners advocate, would result in an overstatement of 
costs.
    With respect to petitioners observation that SKWP's cost center 
report for bulk urea shows an amount for packing costs, we note the 
fact that these amounts represent insignificant costs of less than one 
DEM per metric ton that are associated with packing bulk urea for sale. 
SKWP included these costs in its reported COP and CV amounts for bulk 
urea.
    Comment 7: Labor Costs. Petitioners contend that a substantial 
portion of costs associated with SKWP's labor force are unaccounted for 
in the company's reported COP. In support of their claim, petitioners 
point to an agreement by SKWP to employ a minimum number of the workers 
formerly employed by STAG. Petitioners note the fact that, during the 
POR, the actual number of workers employed by SKWP exceeded the 
company's commitment level. According to petitioners, because SKWP 
developed its accounting systems subsequent to the date of the 
antidumping duty order, the company may have inappropriately assigned 
(or absorbed) excess personnel costs in areas responsible for producing 
non-subject merchandise, thereby artificially understating labor costs 
for urea.
    As further evidence of their claim that SKWP may have understated 
its labor costs for the subject merchandise, petitioners assert that 
ammonia production reports obtained by the Department during its cost 
verification show what petitioners believe is a small percentage of the 
company's total workforce assigned to production of the input, and that 
there is no other evidence on the record to show the number of urea 
production workers.
    SKWP argues that the Department thoroughly verified the company's 
cost centers and found that all labor costs had been appropriately 
allocated and accounted for. SKWP maintains that it is puzzled by 
petitioners' claim with respect to the number of workers in its ammonia 
production facility, noting that such facilities are not labor-
intensive operations. SKWP also points out petitioners' own admission 
that personnel expenses are also accounted for through factory overhead 
and general and administrative (G&A) expenses.
    Department's Position: We disagree with petitioners assertion that 
the analysis contained in their brief provides any basis for us to 
believe that SKWP may have understated its labor costs for urea. 
Rather, based on the results of our verification, we find that SKWP 
properly accounted for all labor costs incurred to produce the subject 
merchandise. Thus, for the final results of this review, we have not 
adjusted SKWP's labor costs as argued by petitioners. In a pre-
verification letter to the Department dated April 2, 1997, petitioners 
expressed their concern that, in light of SKWP's commitment to employ a 
minimum number of former STAG employees, the variable overhead figure 
reported by SKWP appeared low. Based on this, petitioners requested 
that, as part of verification, ``SKWP should explain how it has 
accounted for all labor costs.'' During verification, SKWP did, in 
fact, provide a full explanation of the methodology it used in its 
normal books and records to account for labor costs incurred to produce 
both subject and non-subject

[[Page 61275]]

merchandise. Moreover, SKWP personnel demonstrated how that methodology 
was used to calculate the COP and CV data submitted to the Department. 
As described in SKWP's cost response and in the Department's cost 
verification report, SKWP charges labor costs, as well as other 
production costs, to a series of cost centers by cost type. The amounts 
charged to each ``cost type-cost center'' are then distributed in a 
multi-stage allocation to ``process-cost centers'' maintained by SKWP 
for both subject and non-subject merchandise. As explained in the 
Department's cost verification report, Department verifiers examined 
how production costs incurred within each of the various cost type-cost 
centers were allocated to the various process-cost centers under SKWP's 
accounting system. See Cost Verification Report at page 21.
    In their case brief, petitioners cite to a list of participants at 
the cost verification as evidence that the Department verifiers 
examined only the labor costs incurred by SKWP in the production of 
ammonia and urea, and neglected to review the labor allocations to non-
subject merchandise. Moreover, petitioners argue that verification 
exhibits collected by the Department show only the number of workers 
employed by SKWP at its ammonia production facility. While we do not 
believe that the participants list cited by petitioners provides any 
indication of the testing performed during verification, the 
Department's cost verification report does explain that the verifiers 
examined carefully amounts charged to, and allocated from, the various 
cost type-cost centers, including amounts incurred for labor costs. 
With respect to the ammonia production reports cited by petitioners, 
the verification report makes clear that these documents represent 
examples of the supporting documentation reviewed by the verifiers as 
part of their testing of SKWP's cost type-cost centers. As stated in 
the report, although the Department verifiers reviewed costs recorded 
in, and charged from, each category of cost type-cost center (including 
those in which SKWP recorded its labor costs), they did not collect as 
verification exhibits copies of all cost center reports. In fact, to 
have collected copies of all documents examined during verification 
would have placed an extreme and unnecessary burden on the respondent 
in this case.
    Comment 8: Factory Overhead. Petitioners note that SKWP's reported 
factory overhead costs contain an adjustment that reduces a portion of 
those costs. Petitioners contend that there is no evidence on the 
record concerning the nature of this adjustment. According to 
petitioners, if, upon re-examining the record of this case, the 
Department finds that the amount of the adjustment is not justified, it 
should increase SKWP's factory overhead costs accordingly.
    SKWP asserts that petitioners are overreaching when they request 
that the Department adjust the company's factory overhead costs for an 
offset that is included among thousands of other numbers contained in 
the record of this case. SKWP argues that its factory overhead costs 
should be accepted as reported since those amounts were verified by the 
Department.
    Department's Position: For the final results of this review, we 
have not adjusted SKWP's factory overhead costs for the offset. The 
offset represents miscellaneous income earned by SKWP's Cunnersdorf 
research facility for projects conducted on behalf of outside parties. 
We did not describe the offset in our cost verification report simply 
because, relative to the production costs at issue in this case and the 
complexity of SKWP's cost accounting system, it is insignificant. 
Technically, because the work conducted was not so significant as to 
represent a separate line of business (and, thus, be excluded from COP 
and CV altogether), both the revenues from the projects and the 
associated R&D costs would more appropriately be considered part of G&A 
expense. However, in this instance, reclassification of these amounts 
would have little, if any, effect on SKWP's submitted costs. Thus, as 
noted above, we have not made any adjustments to SKWP's reported 
factory overhead costs.
    Comment 9: Sales Reporting. Petitioners argue that SKWP only 
provided sales information on certain types of urea without consulting 
the Department. Petitioners insist that the Department should affirm in 
the final determination the inappropriateness of this unilateral 
modification.
    Respondent argues that they reported all home market sales of 
identical merchandise rather than sales of the foreign like product. 
They claim that they did this in accordance with the statute at Section 
773(a)(1) and Section 771(16)(A). Respondent also argues that the 
Department implicitly acknowledged this requirement when it advised 
SKWP that its omission of sales of non-identical merchandise may result 
in the use of facts available. Due to the fact that the Department's 
analysis indicates that only sales of identical merchandise were 
necessary for comparison purposes, petitioners' concerns are not 
justified.
    Department's Position: During the review, SKWP only provided home 
market sales information of identical merchandise. In an October 30, 
1996, letter to the respondent, the Department notified SKWP that 
failure to report the entire universe of the foreign like product may 
result in the Department using facts available, particularly if the 
Department determined after further analysis and verification of all 
relevant data that the omitted sales were necessary for comparison 
purposes. As evidenced by the preliminary results of review, the 
reported home market sales database of identical merchandise was 
adequate for making comparisons to the U.S. sales database and the 
omitted sales were not necessary for comparison purposes.
    Comment 10: Model Match. Petitioners argue that SKWP 
inappropriately added a product characteristic in the model matching 
section and has not justified this modification. Petitioners argue that 
although there is no difference in the material costs of the two 
products, there is a difference in selling price. Additionally, 
petitioners argue that due to the fact that the U.S. sale is of one 
particular type of urea, SKWP's reporting methodology would cause the 
Department to select only certain home market sales for comparison 
purposes. Therefore, the Department should reject SKWP's reporting 
methodology. Alternatively, petitioners argue that if the Department 
accepts this SKWP's reporting methodology then it should adjust the 
cost for the second type of urea to ensure that all costs for all 
models are properly accounted for.
    Respondent rebuts petitioners' argument by stating that the 
Department's questionnaire allows for the modification of the product 
characteristics if necessary. Respondent also objects to petitioners 
claim that the modification of the physical characteristics resulted in 
the comparison of U.S. sales to home market sales of similar 
merchandise. Respondent argues that due to the fact the record 
demonstrates that both types of urea are physically different products, 
comparison of one with the other is inappropriate.
    Department's Position: The Department agrees with respondent. The 
Department's model match allows for respondent to report additional 
product characteristics if necessary. As evidenced by the preliminary 
results of review, the Department was able to compare the U.S. sale to 
the most comparable home market sale(s) and ensure that there were no 
distortions in the analysis. Based on the fact that there

[[Page 61276]]

is no evidence on the record to show that the product characteristics 
reported resulted in a distortive comparison, the Department has 
continued to use the model matching criteria set forth in the 
preliminary results of review.
    Comment 11: Downstream Sales. Petitioners argue that sales from 
Agrochemie were not reported to the Department. Petitioners contend 
that SKWP has not indicated that it is otherwise justified in its 
reporting methodology, therefore, there exists the strong possibility 
for SKWP to avoid reporting less favorable home market sales to end-
users by manipulating the transfer price to Agrochemie. Petitioners 
argue that the Department must increase normal value to reflect 
Agrochemie's profits on the resale of urea through its reseller. 
Because there is no evidence of Agrochemie's sales prices on the 
record, petitioners argue that the Department should use facts 
available regarding VCE's profit level to determine the selling price 
to Agrochemie's final customer.
    Respondent argues that petitioners' request is without merit. 
Respondent asserts that the purpose of the arm's length test is to 
determine if the prices for sales between affiliated parties may have 
been manipulated to lower normal value. However, due to the fact that 
the Department found that sales to Agrochemie were at arm's length it 
would be inappropriate to penalize SKWP for avoiding the burden of 
reporting downstream sales that the Department did not require for its 
analysis.
    Department's Position:. The Department agrees with respondent. 
During the review, SKWP did not report sales made from Agrochemie to 
unaffiliated customers in the home market. In an October 30, 1996, 
letter to the respondent, the Department notified SKWP that failure to 
report the Agrochemie sales to the first unaffiliated party may result 
in the Department using facts available, particularly if the Department 
determined after further analysis and verification of all relevant 
data, that these omitted sales were necessary for comparison purposes. 
As evidenced by the preliminary results of review, the Department found 
that SKWP's sales to Agrochemie were at arm's length and these omitted 
sales were not necessary for comparison purposes.

Final Results of Review

    As a result of our review, we determine that the following 
weighted-average margin exists:

------------------------------------------------------------------------
                                                                Margin  
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
SKW Piesteritz.............................................         0.00
------------------------------------------------------------------------

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. Individual 
differences between export price and normal value may vary from the 
percentage stated above. The Department will issue appraisment 
instructions on each exporter directly to the Customs Service.
    Furthermore, the following deposit requirements will be effective 
upon publication of this notice of final results of review for all 
shipments of subject merchandise 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) 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 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) 
for all other producers and/or exporters, as indicated in the 
preliminary results of this review, the cash deposit rate shall be 
44.80 percent, the ``all others'' rate established in the LTFV 
investigation (53 FR 2636). These deposit requirements shall remain in 
effect until publication of the final results of the next 
administrative review. In addition, we are terminating suspension of 
liquidation for shipments of solid urea produced by other firms in 
Germany.
    This notice serves as a final 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 subsequent assessment 
of double antidumping duties.

Notification to Interested Parties

    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 353.34(d). 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 (19 USC 1675(a)(1)) and 19 CFR 353.22.

    Dated: November 5, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 97-30144 Filed 11-14-97; 8:45 am]
BILLING CODE 3510-DS-P