[Federal Register Volume 60, Number 88 (Monday, May 8, 1995)]
[Notices]
[Pages 22550-22557]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11261]



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DEPARTMENT OF COMMERCE
[A-791-802]


Final Determination of Sales at Less Than Fair Value: Furfuryl 
Alcohol From South Africa

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

[[Page 22551]] EFFECTIVE DATE: May 8, 1995.

FOR FURTHER INFORMATION CONTACT: John Brinkmann or Donna Berg, Office 
of Antidumping Investigations, Import Administration, U.S. Department 
of Commerce, 14th Street and Constitution Avenue, N.W., Washington, 
D.C. 20230; telephone (202) 482-5288 or 482-0114, respectively.

Final Determination

    We determine that furfuryl alcohol from South Africa is being sold 
in the United States at less than fair value (LTFV), as provided in 
section 735 of the Tariff Act of 1930, as amended (``the Act''). The 
estimated margins are shown in the ``Suspension of Liquidation'' 
section of this notice.

Case History

    Since the preliminary determination of sales at LTFV on December 9, 
1994, (59 FR 65012, December 16, 1994), the following events have 
occurred:
    On January 25, 1995, ISL submitted its response to Section D of the 
Department's questionnaire which requests information on the COP and 
constructed value (CV). The Department issued a supplemental cost 
questionnaire on January 30, 1995. ISL submitted its response to this 
supplemental questionnaire on February 8, 1995. QO Chemicals, Inc. (the 
petitioner) submitted comments concerning the respondent's Section D 
responses on February 14, 1995.
    On January 17, 1995, the respondent submitted relevant audited 
financial statements for 1994. On January 20, 1995, ISL and Harborchem 
submitted revisions to its U.S. sales data.
    The Department issued its verification outline to the respondent on 
January 24, 1995. Verifications of the respondent's sales and cost 
questionnaire responses were conducted during the months of January, 
February, and March 1995. The Department issued reports concerning 
these verifications in March 1995.
    The respondent and the petitioner submitted case briefs on March 
30, 1994, and rebuttal briefs on April 4, 1995. At the request of both 
the respondent and the petitioner, we held a public hearing on April 6, 
1995.

Scope of Investigation

    The product covered by this investigation is furfuryl alcohol 
(C<INF>4H<INF>3OCH<INF>2OH). Furfuryl alcohol is a primary alcohol, and 
is colorless or pale yellow in appearance. It is used in the 
manufacture of resins and as a wetting agent and solvent for coating 
resins, nitrocellulose, cellulose acetate, and other soluble dyes.
    The product subject to this investigation is classifiable under 
subheading 2932.13.00 of the Harmonized Tariff Schedule of the United 
States (HTSUS). Although the HTSUS subheading is provided for 
convenience and customs purposes, our written description of the scope 
of this proceeding is dispositive.

Period of Investigation

    The period of investigation (POI) is December 1, 1993, through May 
31, 1994.

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute and to the 
Department's regulations are in reference to the provisions as they 
existed on December 31, 1994.

Such or Similar Comparisons

    For purposes of the final determination, we have determined that 
furfuryl alcohol constitutes a single ``such or similar'' category of 
merchandise. Further, because the respondent had sales in the home 
market of merchandise identical to that sold to the United States, 
similar comparisons were not necessary.

Fair Value Comparisons

    To determine whether sales of furfuryl alcohol from South Africa to 
the United States were made at less than fair value, we compared the 
United States price (USP) to the foreign market value (FMV), as 
specified in the ``United States Price'' and ``Foreign Market Value'' 
sections of this notice. In accordance with 19 CFR 353.58, we made 
comparisons at the same level of trade, where possible.

United States Price

    We have found that ISL and its exclusive selling agent, Harborchem, 
are related parties pursuant to section 771(13)(A) of the Act (see 
Comment 1 and the concurrence memorandum, dated May 1, 1995, on file in 
Room B-099 of the Main Commerce Department building), and that all of 
ISL's U.S. sales to the first unrelated purchaser took place after 
importation into the United States. Therefore, we based USP on 
exporter's sales price (ESP), in accordance with section 772(c) of the 
Act.
    We calculated ESP based on FOB U.S. storage facility or delivered 
prices to unrelated customers in the United States. We made deductions, 
where appropriate, for the following movement charges in accordance 
with section 772(e) of the Act: foreign loading on ship, foreign inland 
freight, ocean freight, marine insurance, tank car rental, U.S. inland 
freight, U.S. inland insurance, U.S. brokerage and handling, and U.S. 
duty. We also made deductions, where appropriate, for credit expenses, 
indirect selling expenses incurred in South Africa, and indirect 
selling expenses incurred in the United States, including quality 
control testing, inventory carrying expenses, warehousing expenses, and 
U.S. storage insurance. We also increased U.S. price, as appropriate, 
to account for additional freight revenue (see Comment 8).
    In accordance with our standard practice, and pursuant to the 
decision of the U.S. Court of International Trade in Federal-Mogul 
Corp. v. United States, 834 F. Supp. 1391 (CIT 1993), our calculations 
include an adjustment to U.S. price for the consumption tax levied on 
comparison sales in South Africa. See Preliminary Antidumping Duty 
Determination: Color Negative Photographic Paper and Chemical 
Components from Japan, 59 FR 16177, 16179 (April 6, 1994), for an 
explanation of this methodology.

Cost of Production

    As indicated in the preliminary determination, the Department 
initiated an investigation of sales below the COP in the home market on 
December 9, 1994. In order to determine whether home market sales 
prices were below COP within the meaning of section 773(b) of the Act, 
we calculated COP based on the sum of the respondent's cost of 
materials, fabrication, general, and packing expenses, in accordance 
with 19 CFR 353.51(c). We made the following adjustments to 
respondent's reported COP data:
    1. We recalculated the cost of furfuryl, the primary material input 
into FA, used in the production of furfuryl alcohol during the POI 
based on ISL's normal first-in first out inventory valuation method;
    2. We removed selling, general and administrative costs from the 
cost of sales figure used in the denominator of the submitted general 
and administrative rate calculation;
    3. We increased ISL's reported furfuryl steam overhead expenses by 
the amount actual steam costs exceeded budgeted costs; and
    4. We disallowed ISL's reduction of furfuryl production costs for a 
certain proprietary item.

After computing COP, we added the sales-specific VAT to the COP figure. 
We compared product-specific COP to reported prices that were net of 
movement charges, direct and indirect selling expenses, and inclusive 
of VAT. In accordance with section 773(b) of the [[Page 22552]] Act, we 
followed our standard methodology to determine whether the home market 
sales of each product were made at prices below their COP in 
substantial quantities over an extended period of time, and whether 
such sales were made at prices that would permit recovery of all costs 
within a reasonable period of time in the normal course of trade.
    To satisfy the requirement of section 773(b)(1) that below-cost 
sales be disregarded only if made in substantial quantities, we apply 
the following methodology. Where we find that over 90 percent of a 
respondent's sales were at prices above the COP, we do not disregard 
any below-cost sales because we determine that a respondent's below-
cost sales are not made in substantial quantities. If between ten and 
90 percent of a respondent's sales were at prices above the COP, we 
disregard only the below-cost sales if made over an extended period of 
time. Where we find that more than 90 percent of a respondent's sales 
were at prices below the COP and were sold over an extended period of 
time, we disregard all sales and calculate FMV based on CV, in 
accordance with section 773(b) of the Act.
    In accordance with section 773(b)(1) of the Act, in order to 
determine whether below-cost sales had been made over an extended 
period of time, we compare the number of months in which below-cost 
sales occurred to the number of months in the POI in which the product 
was sold. If a product is sold in three or more months of the POI, we 
do not exclude below-cost sales unless there are below-cost sales in at 
least three months during the POI. When we find that sales occur in one 
or two months, the number of months in which the sales occur 
constitutes the extended period of time; i.e., where sales are made in 
only two months, the extended period of time is two months, where sales 
are made in only one month, the extended period of time is one month. 
(See Final Determination of Sales at Less Than Fair Value: Certain 
Carbon Steel Butt-Weld Pipe Fittings from the United Kingdom (60 FR 
10558, 10560, February 27, 1995)).
    In this case, we found that none of the respondent's sales of 
furfuryl alcohol were at prices below the COP. As a result, we did not 
need to test whether below-cost sales had been made over an extended 
period of time. Therefore, we included all home market sales in 
calculating a weighted-average FMV.

Foreign Market Value

    As stated in the preliminary determination, we found that the home 
market was viable for sales of FA, in accordance with 19 CFR 353.48(a).
    We calculated FMV based on FOB storage facility or delivered prices 
to unrelated customers. We treated both pre-sale home market movement 
expenses and pre-sale home market warehousing expenses as indirect 
expenses because these expenses could not be tied directly to specific 
sales. We also treated ISL's home market rebate as an indirect, rather 
than direct, expense because ISL did not adequately tie the rebate to 
specific home market sales (see Comment 4). We deducted these indirect 
selling expenses along with inventory carrying costs, capped by the sum 
of U.S. indirect selling expenses, in accordance with 19 CFR 
353.56(b)(1) and (2).
    FMV was reduced by home market packing costs and increased by U.S. 
packing costs in accordance with section 773(a)(1) of the Act. We 
deducted post-sale home market inland freight from FMV under the 
circumstance-of-sale provision of 19 CFR 353.56(a). The Department also 
made other circumstance-of-sale adjustments for home market direct 
selling expenses, which included imputed credit expenses, as 
recalculated by the Department, in accordance with 19 CFR 353.56(a)(2). 
The Department recalculated home market credit expenses based on gross 
prices exclusive of imputed valued added tax expenses.
    We adjusted for the consumption tax in accordance with our practice 
(see ``United States Price'' section of this notice).
    No deduction was made for the claimed quantity discount because ISL 
failed to place adequate information on the record to demonstrate that 
the discount met the criteria for quantity discounts set forth in 19 
CFR 353.55(b) (see Comment 5). We did not exclude home market sales of 
furfuryl alcohol packed in drums from the base of home market sales 
used for comparison to U.S. sales, as requested by ISL, because ISL did 
not demonstrate that these sales were outside the ordinary course of 
trade (see Comment 7).

Currency Conversion

    We have made currency conversions based on the official exchange 
rates, as certified by the Federal Reserve Bank of New York, in effect 
on the dates of the U.S. sales, pursuant to 19 CFR 353.60.

Verification

    As provided in section 776(b) of the Act, we verified the 
information used in making our final determination.

Interested Party Comments

Comment 1: Purchase Price versus Exporter's Sales Price

    In the preliminary determination, the Department relied on ESP 
methodology to calculate USP because we found that Harborchem was ISL's 
agent and thus, a related party within the meaning of section 
771(13)(A) of the Act.
    The petitioner argues that the Department should revise its 
methodology and base USP on purchase price because Harborchem failed to 
meet the criteria for an agent under either the law of agency or the 
Department's four-part test.
    ISL asserts that reliance on ESP is appropriate in the final 
determination, maintaining that the information on the record, which 
the Department verified, confirms that ISL and Harborchem are related 
parties.

DOC Position

    We agree with the respondent. Based on the findings at 
verification, the Department has determined that ISL and its exclusive 
U.S. selling agent, Harborchem, constitute the ``exporter'' pursuant to 
section 771(13)(A) of the Act (see concurrence memorandum, dated May 1, 
1995), and that all of ISL's U.S. sales to the first unrelated 
purchaser took place after importation into the United States. 
Therefore, it is appropriate to base USP on exporter's sales prices, in 
accordance with section 772(c) of the Act.
    In evaluating related party claims based on agency, the Department 
examines: (1) Whether the foreign manufacturer participates in the 
marketing of the product to the U.S. customers; (2) whether the foreign 
manufacturer participates in setting prices and in the negotiation of 
other terms of sales to U.S. customers; (3) whether U.S. customers look 
to the U.S. importer or the foreign manufacturer for product testing 
and quality control; and (4) whether the foreign manufacturer interacts 
directly with U.S. customers. See Electrolytic Manganese Dioxide from 
Japan: Final Results of Antidumping Duty Administrative Review, 58 FR 
28551, 28555 (May 14, 1993), and Final Determination of Sales at Not 
Less Than Fair Value: Certain Forged Steel Crankshafts from Japan, 52 
FR 36984, 36985 (October 2, 1987) (Crankshafts).
    During verification, we were able to confirm that ISL and 
Harborchem view their relationship as one of principal and agent and 
communicate continually on matters related to U.S customer marketing 
and sales of furfuryl alcohol. Based on our examination of 
[[Page 22553]] correspondence files and interviews with company 
personnel we also determined that ISL: (1) Participates directly with 
Harborchem in marketing furfuryl alcohol to U.S. customers; (2) 
participates directly in pricing and sales negotiations with U.S. 
customers; (3) interacts directly, as well as through Harborchem, with 
U.S. customers on product testing and quality control matters; and (4) 
interacts with U.S. customers directly.
    Therefore, because Harborchem meets the criteria established in 
Crankshafts, we determine that Harborchem is ISL's agent for sales made 
in the U.S. during the POI.

Comment 2: Related Party ``Commission'' Paid to Harborchem

    Should the Department employ its ESP methodology in the final 
determination, the petitioner urges the Department to adjust USP to 
reflect the commission received by Harborchem. The adjustment is 
necessary, argues the petitioner, because the Department's practice is 
to deduct commissions paid to related parties from USP under the ESP 
methodology. Specifically, section 772(e)(1) of the Act provides that 
the exporter's sales price shall be reduced by the amount of 
``commission for selling in the United States the particular 
merchandise under consideration.'' See also 19 CFR 353.41(e)(1).
    ISL maintains that its compensation arrangement with Harborchem 
does not fit the traditional definition of commission for antidumping 
calculations, and, as such, an adjustment to USP is not appropriate.

DOC Position

    We disagree with the petitioner. The petitioner's characterization 
of Departmental practice is misleading. Under the ESP methodology, the 
foreign exporter and its related importer are effectively treated as 
one unit. Thus, any compensation paid by ISL to its agent Harborchem, 
whether or not specifically called a commission, is considered a 
related party transfer and ignored for the purposes of the margin 
calculation. Instead, the Department deducts the amount of the related 
importer's (i.e., Harborchem's) U.S. indirect and direct selling 
expenses pursuant to section 772(e)(2) of the Act. This methodology 
avoids double-counting the same expenses (i.e., the commission which 
includes an amount for the related importer's selling expenses, and 
indirect selling expenses) and avoids deducting any profit of the 
related importer as established in Timken Co. v. United States, 630 F. 
Supp. 1327, 1343 (CIT 1986) (Timken).
    These practices are fully described in the notice of the Final 
Determination of Sales at Less Than Fair Value: Fresh Cut Roses from 
Colombia and Ecuador 60 FR 7019, 7028 (February 6, 1995) (Roses), and 
are consistent with the Department's past practice on this issue (see 
e.g., Antifriction Bearings (Other than Tapered Roller Bearings) and 
Parts Thereof, 56 FR 39729 (July 26, 1993); LMI--La Metalli 
Industriale, S.p.A. v. United States, 912 F.2d 455, 459 (Fed. Cir. 
1990); Certain Fresh Cut Flowers from Colombia; Final Results of 
Administrative Review, 55 FR 20491 (May 17, 1990); and Porcelain-on-
Steel Cooking Ware from Mexico, 51 FR 36438 (October 10, 1986)).

Comment 3: Misreported Ocean Freight, Marine Insurance, and U.S. Duty

    The petitioner contends that the respondent vastly underreported 
its ocean freight and marine insurance costs to the Department. It 
alleges that the underreporting is discernible from the official U.S. 
Customs entry documents for ISL's U.S. shipments, which indicate a 
difference between the CIF and FOB values greater than ISL's reported 
freight and insurance costs. Furthermore, contends the petitioner, this 
underreporting is also discernible from the responses which indicate 
that ISL reported the ocean freight and insurance charges for only one 
of the shipments corresponding to U.S. sales of furfuryl alcohol during 
the POI. Based on these contentions, the petitioner argues that the 
Department should reject the respondent's information and apply the 
amount deduced from the official Customs documents for ocean freight 
and marine insurance costs as the best information available.
    According to the respondent, the Department should rely on the 
actual ocean freight, marine insurance, and U.S. duty charges as 
verified, not unverified estimates deduced from customs forms. The 
respondent argues that if the Department believes an adjustment is 
necessary, it should revise the amount of U.S. duty applicable to U.S. 
sales during the POI. ISL suggests that the adjustment to U.S. duty 
should equal the amount which would have been paid had the deductions 
to calculate FOB price been correctly calculated and applied in the 
customs entry documents.

DOC Position

    Consistent with our treatment of minor changes to submitted data, 
the Department has used verified data for ocean freight and marine 
insurance (see Roses, 60 FR at 7035; and Final Determination of Sales 
at Less Than Fair Value: New Minivans from Japan, 57 FR 21937, 21952 
(May 26, 1992)). Inasmuch as the Department has the necessary 
information to determine the actual ocean freight and insurance charges 
applicable to U.S. sales during the POI, it is appropriate to apply 
this information to the final margin calculations.
    With respect to U.S. duty, we determined that it was appropriate to 
recalculate the amount applicable to the respondent's U.S. sales during 
the POI. This recalculation was necessary because we verified that the 
entry documents for the respondent's U.S. shipments incorrectly 
reflected the FOB value which was used to calculate U.S. duty and 
therefore, the actual duty paid by ISL was understated.

Comment 4: Home Market Rebate

    ISL claims the rebates granted to one customer during the POI are 
related to POI sales and thus should be taken into account in the 
Department's final margin calculations. ISL reports that it granted 
rebates to a home market customer that manufactures and exports resins 
using furfuryl alcohol purchased from ISL. According to ISL, this 
rebate was granted based on the customer's providing documentation 
concerning the actual amount of furfuryl alcohol used in the resins 
exported from South Africa.
    The petitioner alleges that ISL's claimed rebate should be rejected 
because there is no information on the record that ties ISL's rebate to 
specific sales in the POI.

DOC Position

    We agree with the petitioner that ISL was unable to demonstrate 
that the reported rebates were directly linked to POI sales. However, 
it is the Department's practice in such instances to reclassify the 
adjustment as an indirect selling expense (see e.g., Tapered Roller 
Bearings, Four Inches or Less in Outside Diameter, and Components 
Thereof, From Japan: Final Results of Antidumping Duty Administrative 
Review, 57 FR 4976, 4982-83 (February 11, 1992)). Accordingly, we have 
treated ISL's home market rebate as an indirect expense in the 
calculations for the final determination.

Comment 5: Home Market Quantity Discount

    The respondent contends that it has met the criterion established 
by section 353.55(b)(1) of the Department's [[Page 22554]] regulations 
to qualify for a quantity discount adjustment insofar as the quantity 
discount was granted to one home market customer that accounts for over 
20 percent of home market sales of the same magnitude during the POI. 
ISL submits that no other home market customer receives the discount 
because no other home market customer regularly places orders of the 
same size as the customer in question.
    According to the petitioner, the respondent's claim is defective 
because the quantity discount at issue was available to only one 
customer and not, as the Department requires, to any prospective 
purchasers. Furthermore, the petitioner argues that ISL failed to 
establish the necessary linkage between the discount in question and 
the volume of individual sales, as required by 19 CFR 353.55(b)(1). For 
these reasons, the petitioner argues that the Department should reject 
this claimed adjustment.

DOC Position

    We agree with the petitioner. The Department requires that (1) 
quantity discounts are available to any prospective purchaser; (2) and 
that the discount is based on the quantity of the sale in question. 
This policy was articulated in Circular Welded Non-Alloy Steel Pipe 
from Mexico: Final Determination, 57 FR 42953, 42955, (September 17, 
1992) and Color Television Receivers from the Republic of Korea, 55 FR 
26225 (June 27, 1990). ISL was unable to establish that the discount 
was available to any prospective home market customer. ISL also was 
unable to sufficiently support its claim that the discount is linked to 
the volume of individual sales. Therefore, we have determined, pursuant 
to section 353.55(b) of the Department's regulations, that the 
information on the record does not justify granting ISL's claimed 
adjustment for quantity discounts.

Comment 6: Home Market Export Incentive Payments

    ISL reports that it receives export incentive payments from the 
South African government for all of its exports of FA. ISL argues that 
the amount earned from the subsidy payments during the POI should be 
added to the gross unit price of each U.S. sale for the purpose of 
calculating dumping margins.
    The petitioner argues that the Department abandoned its former 
practice of making circumstance of sale adjustments to account for 
payments from export programs. The Department's current practice is to 
make no adjustments to either FMV or to USP for payments received 
pursuant to export subsidy programs. Moreover, the petitioner contends 
that the Department has concluded that it does not have the statutory 
authority to adjust USP for the payments received from an export 
subsidy program. See Oil Country Tubular Goods from Israel: Final 
Determination of Sales At Less Than Fair Value, 52 FR 1511 (January 14, 
1987) (OCTG).

DOC Position

    We agree with the petitioner and reject the respondent's request 
for this adjustment to USP. Section 772(d)(1) of the Act permits the 
Department to increase U.S. price for purposes of fair value 
comparisons only under four specific circumstances: by the amount of 
the packing, if not included in the U.S. price; by the amount of import 
duties imposed and rebated upon export; by the amount of any taxes 
imposed on the merchandise that are rebated upon export; and by the 
amount of countervailing duties levied to offset an export subsidy. The 
Department does not make adjustments to the USP for export subsidy 
payments because payments of this type are not enumerated within 
section 772(d)(1) of the Act (see OCTG, 52 FR 1513).
    There is no CVD investigation or order on the subject merchandise, 
thus, as required by section 772(d)(1)(D), we cannot adjust USP for an 
export subsidy.

Comment 7: Exclusion of Sales of Furfuryl Alcohol in Drums

    ISL requests that the Department exclude its home market sales of 
furfuryl alcohol in drums in the pool of home market sales used for 
comparison to U.S. sales. ISL argues that exclusion of the drummed 
furfuryl alcohol sales is appropriate because they are not 
representative of home market sales in terms of price and quantity and 
because of the small amount of total sales involved.
    The petitioner argues that the Department should uphold its 
decision in the preliminary determination to reject ISL's request. The 
petitioner maintains that there are two primary reasons for rejecting 
ISL's request. First, the petitioner argues that furfuryl alcohol is 
physically identical, whether sold on a drummed or semi-bulk basis. And 
second, the petitioner contends that ISL's sales listing indicates the 
drummed sales are comparable to ISL's bulk transactions.

DOC Position

    We agree with the petitioner. There is no physical difference 
between furfuryl alcohol that is sold in drums and that sold on a semi-
bulk basis. Furthermore, the quantities of these drum sales are 
comparable to many of ISL's sales on a semi-bulk basis. Accordingly, 
the Department has included these sales in the pool of home market 
sales used for comparison to U.S. sales.

Comment 8: U.S. Freight Charges

    The respondent requests that the Department include the adjustment 
for U.S. freight cost reimbursement claimed by Harborchem. Although the 
Department disallowed the adjustment in the preliminary determination 
based on the lack of adequate information, ISL indicates that the 
Department specifically reviewed data on customer reimbursement of 
these freight expenses at verification. Inasmuch as the reported data 
verified, ISL requests that the Department include an adjustment to USP 
in the final margin calculations.

DOC Position

    We agree with the respondent. The Department fully verified the 
respondent's information concerning the freight cost reimbursement. 
Accordingly, this information was included in the calculation of USP 
for the final determination.

Comment 9: Untimely Data

    The petitioner alleges that ISL submitted new factual information 
in Exhibit 1 of its case brief concerning the COPs for furfuryl and FA. 
According to the petitioner, the Department should strike this 
information from the record.

DOC Position

    We disagree with the petitioner. Careful examination of this 
information revealed Exhibit 1 to be a reconfiguration of information 
already on the record in this investigation. The majority of 
information contained in Exhibit 1 was submitted by ISL in its original 
and supplemental response to Section D of the questionnaire. Other data 
was derived from exhibits to the cost verification (see cost 
verification exhibits 4 and 13). Accordingly, this information is not 
new factual information, and the Department has allowed this 
information to remain on the record of this investigation.

Comment 10: Rescinding the COP Investigation

    The respondent contends that the information on the record does not 
support the Department's finding that there are reasonable grounds to 
believe or suspect that sales below COP have been made. Rather, ISL 
argues that the information used to support the COP 
[[Page 22555]] investigation should properly be viewed as amounting to 
statistical aberrations in the data reported. Therefore, ISL requests 
that the Department rescind the COP investigation in this case.
    According to the petitioner, the Department properly initiated the 
COP investigation after it conducted a thorough examination of the 
petitioner's allegation. Based on this examination, the Department 
determined that there were reasonable grounds to believe or suspect 
that sales were made at prices which were less than ISL's COP. 
Accordingly, the petitioner argues that ISL's request should be 
rejected.

DOC Position

    We agree with the petitioner that the COP investigation should not 
be rescinded. Based on our analysis of the petitioner's COP allegations 
at the time they were made, we determined, in accordance with section 
773(b) of the Act, that there was a reasonable basis to believe or 
suspect that home market sales of ISL were made at less than the COP. 
(For a description of the Department's analysis, see concurrence 
memorandum, dated December 9, 1994). As a result, initiation of the COP 
investigation was appropriate.

Comment 11: Use of Best Information Available (BIA)

    The petitioner asserts that ISL has purposely impeded this 
investigation by failing to provide all of the costs for furfuryl used 
in furfuryl alcohol production during the POI. The petitioner contends 
that the Department has repeatedly asked ISL to submit actual cost data 
for all of the furfuryl used to produce furfuryl alcohol during the 
POI. In response to these requests, however, the petitioner maintains 
that ISL submitted two flawed furfuryl costing methodologies. 
Accordingly, pursuant to section 776(c) of the Act, the petitioner 
urges the Department to use noncooperative BIA to determine ISL's 
antidumping duty margin.
    According to ISL, the petitioner's claim that ISL has significantly 
impeded the investigation by failing to provide sufficient furfuryl 
cost information is totally without merit. ISL maintains that it has 
complied with all of the Department's requests regarding the actual 
cost of furfuryl consumed during the POI. ISL submitted furfuryl cost 
data covering an eighteen-month period, including the six months of the 
POI. Moreover, ISL notes that it has submitted furfuryl costs using 
three different methodologies.

DOC Position

    We have not found that ISL has impeded this investigation. Rather, 
ISL has cooperated in every aspect of this investigation. Therefore, we 
have determined that it is appropriate to use ISL's information in our 
margin calculation.

Comment 12: Furfuryl Costs

    The petitioner argues that all three of ISL's submitted furfuryl 
costing methodologies fail to accurately reflect the cost of furfuryl 
used in production during the POI. The petitioner therefore contends 
that the Department should reject these methodologies and resort to BIA 
as the basis for computing ISL's antidumping margin.
    ISL maintains that each of the methodologies used in the 
questionnaire responses to calculate furfuryl production costs are 
reasonable and should be accepted by the Department. However, ISL 
contends that its fiscal year furfuryl cost calculation is most 
appropriate because it represents all costs normally incurred during a 
full seasonal cycle.

DOC Position

    We agree with the petitioner that none of the three methodologies 
ISL has proposed properly values the cost of furfuryl consumed in the 
furfuryl alcohol process during the POI. ISL's first methodology 
included the cost of furfuryl produced after the POI, June through 
September 1994. ISL's second methodology reflected furfuryl production 
costs for only part of the furfuryl consumed during the POI. Lastly, 
the furfuryl costs computed by the company under the third methodology 
were based on a weighted-average cost rather than on ISL's normal 
first-in first-out (FIFO) inventory valuation method. However, the 
information on the record is sufficient to allow the Department to 
recalculate the furfuryl cost.
    We have recalculated the cost of furfuryl used to produce furfuryl 
alcohol during the POI based on ISL's normal FIFO inventory valuation 
method. The Department normally follows the respondent's inventory 
valuation method unless it fails to reasonably reflect the costs 
associated with producing the merchandise. There is no information on 
the record to indicate that ISL's FIFO method distorts per-unit 
furfuryl costs.

Comment 13: Accounting Adjustment

    The petitioner argues that ISL's submission methodology for a 
particular proprietary adjustment distorts the COP. The respondent 
argues that its submission methodology provides a reasonable basis for 
the calculation of the effect of this item on the COP.

DOC Position

    Because of the business proprietary nature of this item, we have 
addressed the parties comments and analyzed the issue in detail in the 
proprietary concurrence memorandum dated May 1, 1995. But, our 
determination was not to allow respondent's submitted methodology but 
rather to rely on respondent's normal accounting practice with respect 
to this adjustment.

Comment 14: Bagasse

    The petitioner asserts that ISL failed to properly account for the 
value of its bagasse used to produce furfuryl and that the value should 
be included in ISL's COP. The petitioner notes that during the POI, ISL 
sold bagasse generated from one of its sugar mills to an unrelated 
paper producer located near the mill. It argues that the Department 
should utilize this sales value in assigning a cost to bagasse consumed 
during the POI.
    The respondent maintains that its submission methodology of 
assigning no cost to bagasse usage is reasonable and consistent with 
its financial and cost accounting systems. The respondent contends that 
its methodology considers the value of bagasse based on its energy 
content. Additionally, respondent argues that there is no market for 
bagasse from its Sezela mill where the company produced the subject 
merchandise. Furthermore, respondent notes that the sale of bagasse 
from one of ISL's other mills was possible only because of the close 
proximity of this mill to the purchaser's manufacturing plant.

DOC Position

    ISL's furfuryl and furfuryl alcohol plant is located adjacent to 
its sugar cane processing plant. Bagasse is generated from the 
processing of sugar cane. Bagasse generated at the sugar mill is 
transferred to the furfural plant. In the first stage of the furfural 
process, ISL extracts a chemical from bagasse called pentosan. After 
the furfural plant performs the extraction, the remaining bagasse 
residue is transferred to the boiler as an energy source. The bagasse 
loses a minimal amount of its energy content from the extraction 
process. ISL has one boiler which generates high pressure steam for 
both its sugar mill and furfural process. ISL uses coal, bagasse and 
bagasse residue to fuel this boiler.
    In its normal accounting system, ISL assigns no costs to the 
bagasse used to [[Page 22556]] extract pentosan and as a fuel source 
for the boiler. All coal costs incurred for the boiler are charged to 
furfural production.
    During verification, we noted that the energy content of the coal 
charged to the furfural process exceeded the sum of the energy content 
of steam used in the furfural process plus the net energy loss from 
bagasse used in furfural production. Consequently, we found that ISL's 
actual reported coal costs charged to furfural exceeded the value of 
the bagasse and steam used in the furfural production process. We 
therefore consider it reasonable for ISL to assign no cost to the 
bagasse consumed in the furfural production process.
    We believe that the circumstances surrounding ISL's bagasse sales 
during the POI do not reflect the operations of the Sezela mill where 
ISL produces the subject merchandise. The Sezela sugar mill has no 
bagasse customers located within its vicinity, whereas the bagasse 
customer of ISL's other mill is located next to that mill. Thus, unlike 
the Sezela mill, sales between the other ISL sugar mill and the 
unrelated company were economically feasible because transportation of 
bagasse between seller and customer was reasonably available and 
relatively inexpensive.

Comment 15: General and Administrative (G&A)

    The petitioner maintains ISL's G&A calculation methodology is 
flawed for numerous reasons and urges the Department to reject it. 
Specifically, the petitioner maintains that ISL's G&A expense 
calculation methodology failed to compute G&A on a company-wide basis 
and included both G&A and selling expenses in the denominator.
    ISL contends its reported G&A expense methodology is appropriate. 
The G&A expenses were based on amounts recorded in separate general 
ledger accounts for the chemical division G&A departments and were 
properly allocated to the operations receiving the benefit. However, 
respondent agrees that the denominator incorrectly included both G&A 
and selling expenses.

DOC Position

    To compute G&A expenses for COP, ISL calculated a company-wide G&A 
rate for G&A expenses that related to the operations of the company as 
a whole. In addition, ISL calculated separate G&A rates for its 
chemical operations and the operations of its Sezela furfuryl alcohol 
plant. These rates excluded G&A expenses relating to the company's 
sugar operations (i.e., non-subject merchandise).
    During verification, ISL demonstrated that it normally records 
certain G&A expenses by product line for chemical operations (including 
furfuryl and furfuryl alcohol) and sugar. The company showed that it 
recorded these product-line expenses in specific G&A accounts 
maintained in its general ledger. Since ISL demonstrated that some of 
its G&A expenses relate exclusively to the company's non-subject sugar 
operation, we consider respondent's submitted G&A expense methodology 
reasonable.
    We further note that because we are applying the G&A rate to cost 
of manufacturing exclusive of selling, general and administrative 
(SG&A) expenses, we recalculated ISL's G&A rate by excluding SG&A from 
the cost of sales figure used as the denominator in the calculation.

Comment 16: Decentralization Incentive

    ISL claims its decentralization incentive payments were approved by 
and received from the South African government during fiscal year 1994. 
Since the revenue was recorded in its audited financial statements, ISL 
maintains that it appropriately included this amount in its submitted 
G&A rate calculation.
    The petitioner argues the Department should exclude ISL's 
decentralization incentive revenue as the revenue relates to expenses 
incurred before the POI. Additionally, the petitioner argues this 
revenue is not linked to the sales made during the POI.

DOC Position

    According to both South African and U.S. generally accepted 
accounting principles (GAAP), companies do not normally recognize 
revenue in the income statement unless they are relatively certain that 
the amount will be collected. In ISL's case, even though the government 
approved ISL's grant application in 1993, the company did not record 
the revenue for financial statement purposes until the money was 
received in 1994. We consider ISL's conservative treatment of not 
recording the grant revenue for financial statement purposes until the 
year of receipt a reasonable approach. Accordingly, we included the 
grant revenue in ISL's G&A calculation.

Comment 17: Overhead Expense Allocation

    ISL contends that the method used to allocate overhead costs for 
submission purposes is the same as that applied in its normal 
accounting records.
    The petitioner contends ISL's overhead allocation method distorts 
costs. According to the petitioner, ISL understated furfuryl costs by 
allocating an excessive amount of overhead expenses to the furfuryl 
alcohol process.
    ISL maintains that, contrary to the petitioner's arguments, its 
normal overhead allocation methodology is reasonable. Moreover, ISL 
asserts that the method of allocation between furfuryl and furfuryl 
alcohol does not significantly effect the overall furfuryl alcohol 
costs.

DOC Position

    The Department normally relies on the respondent's books and 
records prepared in accordance with the home country GAAP unless these 
accounting principles do not reasonably reflect the COP of the 
merchandise. ISL's reported overhead costs were based on its normal 
accounting books and records. We have found no evidence on the record 
to indicate ISL's allocation of overhead costs between furfuryl and 
furfuryl alcohol distorts the production costs. Accordingly, we 
accepted ISL's submission methodology for allocating overhead costs.

Comment 18: Steam Costs

    The petitioner asserts the Department should increase ISL's steam 
costs by the amount suggested in the cost verification report. The 
respondent agrees with this adjustment to steam costs.

DOC Position

    We increased ISL's reported steam cost.

Continuation of Suspension of Liquidation

    In accordance with section 735(d) of the Act, we are directing the 
Customs Service to continue to suspend liquidation of all entries of 
furfuryl alcohol from South Africa, as defined in the ``Scope of 
Investigation'' section of this notice, that are entered, or withdrawn 
from warehouse, for consumption on or after December 16, 1994, the date 
of publication of our preliminary determination notice in the Federal 
Register.
    The Customs Service shall require a cash deposit or posting of a 
bond on all entries equal to the estimated dumping margin, as shown 
below. The suspension of liquidation will remain in effect until 
further notice.

                                                                        
[[Page 22557]]                                                          
------------------------------------------------------------------------
                                                                Margin  
               Producer/manufacturer/exporter                 percentage
------------------------------------------------------------------------
Illovo Sugar Limited........................................       15.48
All Others..................................................       15.48
------------------------------------------------------------------------

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
ITC of our determination. The ITC will make its determination whether 
these imports materially injure, or threaten injury to, a U.S. industry 
within 45 days of the publication of this notice. If the ITC determines 
that material injury or threat of material injury does not exist, the 
proceeding will be terminated and all securities posted as a result of 
the suspension of liquidation will be refunded or canceled.
    However, if the ITC determines that such injury does exist, we will 
issue an antidumping duty order directing the Customs Service officers 
to assess an antidumping duty on furfuryl alcohol from South Africa, 
that are entered, or withdrawn from warehouse, for consumption on or 
after the date of suspension of liquidation, equal to the amount by 
which the foreign market value of the merchandise exceeds the United 
States price.
    This determination is published pursuant to section 735(d) of the 
Act (19 U.S.C. 1673(d)) and 19 CFR 353.20.

    Dated: May 1, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-11261 Filed 5-5-95; 8:45 am]
BILLING CODE 3510-DS-P