[Federal Register Volume 61, Number 88 (Monday, May 6, 1996)]
[Notices]
[Pages 20227-20230]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-11117]



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DEPARTMENT OF COMMERCE
[A-423-602]


Industrial Phosphoric Acid From Belgium; Final Results of 
Antidumping Duty Administrative Review

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

ACTION: Notice of final results of antidumping duty administrative 
review.

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[[Page 20228]]

SUMMARY: On November 15, 1995, the Department of Commerce (the 
Department) published the preliminary results of review of the 
antidumping duty order on industrial phosphoric acid (IPA) from Belgium 
(52 FR 31439; August 20, 1987). The review covers one manufacturer, 
Societe Chimique Prayon-Rupel (Prayon), and exports of the subject 
merchandise to the United States during the period August 1, 1993, 
through July 31, 1994.
    We gave interested parties an opportunity to comment on the 
preliminary results of review. Based on our analysis of the comments 
received, we have changed our analysis for the final results from that 
presented in the preliminary results of review.

EFFECTIVE DATE: May 6, 1996.

FOR FURTHER INFORMATION CONTACT: David Genovese or Joseph Hanley, 
Office of Antidumping Compliance, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue NW., Washington, D.C. 20230, telephone: (202) 482-
5254.

SUPPLEMENTARY INFORMATION:

Background

    On August 31, 1994, Prayon requested an administrative review of 
the antidumping duty order on IPA from Belgium. The Department 
initiated the review on September 16, 1994 (59 FR 47609), covering the 
period August 1, 1993, through July 31, 1994. On November 15, 1995, the 
Department published the preliminary results of review (60 FR 57398). 
The Department has now completed this review in accordance with section 
751 of the Tariff Act of 1930, as amended (the Act). Unless otherwise 
indicated, all citations to the statute and to the Department's 
regulations are references to the provisions as they existed on 
December 31, 1994.

Scope of the Review

    The products covered by this review include shipments of IPA from 
Belgium. This merchandise is currently classifiable under the 
Harmonized Tariff Schedule (HTS) item number 2809.20. The HTS item 
numbers are provided for convenience and U.S. Customs purposes. The 
written description remains dispositive.

Analysis of Comments Received

    We gave interested parties an opportunity to comment on the 
preliminary results of review. We received comments from Prayon and 
from FMC Corporation and Monsanto Company, two domestic producers of 
industrial phosphoric acid.

Comment 1

    Prayon argues that for purchase price (PP) sales, when there are 
commissions in the U.S. market but not in the home market, it is the 
Department's practice to make a circumstance-of-sale (COS) adjustment 
by first adding U.S. commissions to the weighted-average foreign market 
value (FMV). Prayon asserts that FMV is then reduced (offset) by the 
lesser of the home market indirect selling expenses or U.S. 
commissions. Prayon argues that in the preliminary results of review, 
the Department deducted U.S. commissions from the United States price 
rather than add those commissions to the FMV. Prayon asserts that in 
its final determination, the Department should add U.S. commission to 
the weighted-average FMV and then reduce FMV by Prayon's home market 
indirect selling expenses capped by U.S. commissions.

Department's Position

    We agree with Prayon. As Prayon states, in PP situations, when 
there are commissions in the U.S. market but not in the home market, it 
is the Department's practice to add U.S. commissions to FMV and then 
subtract from FMV home market indirect selling expenses capped by U.S. 
commission expense. See, e.g., Certain Internal-Combustion Industrial 
Forklift Trucks from Japan; Final Results of Antidumping Duty 
Administrative Review, 59 FR 1,374 (January 10, 1994). Accordingly, for 
these final results, we did not subtract U.S. commissions from U.S. 
price. Rather, we added U.S. commissions to FMV and then subtracted 
from FMV home market indirect selling expenses capped by U.S. 
commission expense.

Comment 2

    Prayon argues that in calculating the FMV offset for U.S. 
commissions, the Department should have included inventory carrying 
costs in its pool of home market indirect selling expenses since such 
costs are indirect selling expenses.

Department's Position

    We agree with Prayon. For these final results, we have included 
inventory carrying costs in the pool of home market indirect selling 
expenses when calculating the FMV offset for U.S. commissions.

Comment 3

    Petitioners argue that by accepting Prayon's reported credit 
expense, the Department has based the date of payment on the date that 
Prayon received a transfer of funds from its wholly-owned subsidiary, 
Prayon Services et Finance S.A. (Prayon Services). Petitioners contend 
that this approach treats a transfer of funds between a parent company 
and its wholly-owned subsidiary as the equivalent of an independent 
payment for the merchandise in question.
    Petitioners assert that in accepting the discounted transaction 
between Prayon and Prayon Services, the Department appears to rely on 
Prayon's allegation that the Belgian tax law required Prayon Services 
to use a market-based discount rate. Petitioners assert that the issue 
of whether Prayon Services' discount rate is acceptable under Belgian 
tax law is irrelevant. Rather, the central issue is when payment is 
received on the sale of the merchandise in question. Petitioner argues 
that a transfer of funds between a wholly-owned subsidiary and its 
parent is simply not, as a matter of economic reality, a payment in the 
context of the sale of this merchandise.
    Petitioner further contends that for these final results, the 
Department, when calculating credit expense, should measure the time 
period in which credit is extended in a particular transaction from the 
date of shipment of the merchandise to the date payment is received 
from the purchaser of such merchandise.
    Prayon argues that the amount by which accounts receivables are 
discounted in factoring transactions is an appropriate measure of 
credit cost since the discount accepted by Prayon is Prayon's cost of 
financing.<SUP>1 Prayon asserts that there is no merit in Petitioners' 
argument that credit costs must always be calculated as the cost of 
financing the resulting accounts receivable from the date of shipment 
of the merchandise until payment is received from the purchaser of such 
merchandise. Moreover, asserts Prayon, where a factoring transaction 
has taken place and payment is received from a third party, 
Petitioners' calculation of

[[Page 20229]]

credit cost does not measure the seller's cost of financing the sale, 
and consequently its use would be inappropriate.
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    \1\  Prayon's accounts receivable are discounted through a 
factoring transaction with Prayon Services, a wholly-owned 
subsidiary established in compliance with Belgian law. ``Factoring 
is a type of financial service whereby a firm {in this case Prayon} 
sells or transfers title to its accounts receivable to a factoring 
company {i.e., the factor, Prayon Services}, which then acts as 
principal, not as an agent. The receivables are sold without 
recourse, meaning that the factor {Prayon Services} cannot turn to 
the seller in the event accounts prove uncollectible.'' Barron's 
Financial Guides, Dictionary of Finance and Investment Terms, Third 
Edition, 1991, at page 136. Prayon engages in discount factoring 
meaning that it sells its accounts receivables at a discount from 
face value and obtains immediate payment from Prayon services.
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    Furthermore, Prayon asserts that the anticipated date of payment of 
the receivable is taken into account in determining the amount of the 
discount. Accordingly, the actual date on which Prayon Services 
ultimately receives payment from the purchaser has no effect on 
Prayon's return. Prayon argues that the Department has expressly 
recognized this in an analogous circumstance where a seller is given a 
promissory note in exchange for merchandise and, prior to the 
stipulated payment date, sells the note at a discount to a financial 
institution. Prayon cites Lightweight Polyester Filament Fabrics from 
the Republic of Korea, 48 FR 49,679 (1983), in which the Department 
stated that:

    By imputing an interest expense from the date of delivery to the 
date of payment, the expense incurred for granting credit is 
recognized. Further, when a note received for payment of a sale is 
discounted prior to its maturity, this amount represents the credit 
cost and we recognize this.

    Prayon asserts that it is clear that, where the seller of 
merchandise concerned engages in a bona fide sale of a purchaser's debt 
to a factor or other financing entity, the seller's credit cost for the 
merchandise sales transaction is the discount taken by the purchaser of 
the receivable.
    With regard to Prayon's relationship to Prayon Services, Prayon 
argues that the amount of discount taken in the sale of the accounts 
receivable can be used since the record shows that transactions between 
the two companies were conducted on an arm's-length basis. Prayon 
states that it sold all of its receivables at a discount to Prayon 
Services, which is an official coordination center certified under 
Belgian law. Prayon, citing to its supplemental questionnaire response 
of April 27, 1995 (at page 12), states that under Belgian law:

    The statutory requirement is that the factoring of accounts by 
the coordination center be conducted on arm's-length terms. As part 
of the certification process and on an ongoing basis, Prayon must 
demonstrate that the rates negotiated between Prayon and Prayon 
Services et Finance do not exceed those charged between independent 
parties and are in fact comparable to those charged by independent 
banks and other financial institutions.

    Prayon argues that the antidumping law does not contemplate, and it 
is not the Department's practice, that all related party transactions 
are to be disregarded regardless of their terms and circumstances. As 
an example, Prayon cites to the antidumping regulations' related party 
provision (19 C.F.R. Sec. 353.45(a)) which states that the Department 
will calculate foreign market value based on a sale by a producer or 
reseller to a related party if the Department is satisfied that ``the 
price is comparable to the price at which the producer or reseller sold 
such or similar merchandise to a person not related to the seller.'' 
Prayon also cites to 19 U.S.C. Sec. 1677b(e)(2) which provides that the 
Department may disregard related party transactions in determining any 
element of value in constructed value calculations, if ``the amount 
representing that element does not fairly reflect the amount usually 
reflected in sales in the market under consideration of merchandise 
under consideration.''
    Prayon, citing to Certain Cold-Rolled Carbon Steel Flat Products 
from Germany, 60 FR 65,264 (December 19, 1995) (hereinafter Steel Flat 
Products from Germany), states that the Department squarely held that 
it would use related party transactions in calculating the credit cost 
adjustment where ``information on the record indicates that the 
intracompany loans in question were made at what could be considered 
market rates.'' Similarly, in Fresh Kiwifruit from New Zealand, 57 FR 
13,695 (April 17, 1992), the Department rejected an effort by a 
respondent to disregard a related-party loan on the ground that ``there 
was no evidence that the interest rate on the related party loan did 
not reflect market interest rates.''
    Prayon concludes by stating that the record in this proceeding 
affirmatively shows that the sales of Prayon's accounts receivable to 
the coordination center are conducted on arm's-length terms and, 
specifically, that the discount rates negotiated between the parties 
are comparable to those charged by independent banks and other 
financial institutions in Belgium. Accordingly, Prayon argues, the 
Department's preliminary determination that the amount of discount 
taken represents Prayon's actual cost of financing is appropriate and 
consistent with the law and the Department's practice.

Department's Position

    When determining credit expense in the home market, the Department 
is concerned with the expense, real or imputed, incurred by a 
respondent when it sells its merchandise on account. Accordingly, we 
agree with Prayon that since factoring is a recognized method of 
financing receivables, the discount from face value can be used to 
establish credit expense if the factoring transactions are at arm's-
length (i.e., the discount is representative of market rates). 
Moreover, if the payment between Prayon and Prayon Services (i.e., 
between a parent and its wholly-owned subsidiary) is determined to be 
at arm's-length, it is the Department's policy to recognize this 
payment as payment for the collection services in question rather than 
as an intra-company transfer of funds. See, e.g., Steel Flat Products 
from Germany cited by the respondent. However, upon a further 
examination of the record in this review, the Department is not 
satisfied that the discount rate ``charged'' by Prayon Services, when 
factoring Prayon's accounts receivables, is representative of market 
rates.
    In its supplemental questionnaire response of April 27, 1995 (at 
page 14-15), Prayon calculated a weighted-average credit expense for 
its home market sales to each customer for each month during the POR 
using two different methods, one which calculates Prayon's actual cost 
of discounting the invoices to the coordination center and one which 
calculates an imputed credit expense based on the date of payment by 
the customer and the short-term interest rate for loans denominated in 
Belgian francs. In almost all home market observations, the credit 
expense calculated using the discount rate method is substantially 
higher than the imputed credit expense (i.e., the market rate) Prayon 
would have incurred had it not sold its accounts receivable to Prayon 
Services.
    Due to the substantial difference between the two methodologies, 
the Department is not satisfied that the discount rate ``charged'' by 
Prayon Service is representative of market rates. Moreover, since 
Prayon sold all of its accounts receivable to Prayon Services, the 
Department is unable to compare the discount rate charged by Prayon 
Services with a discount rate charged by an unrelated party to insure 
that the rate is comparable to market rates.
    Additionally, we are not convinced that Prayon Service's legal 
obligation under Belgian law is sufficient proof that Prayon Services 
actually charged an arm's-length discount rate to Prayon. Prayon states 
that Prayon Services was established under Belgian law, which provides 
certain tax benefits for companies organized and operated according to 
certain specified requirements. However, the requirement that the 
factoring of accounts meet Belgian law requirements in order to capture 
certain tax benefits may not be

[[Page 20230]]

a reliable benchmark for U.S. antidumping purposes. This is supported 
by the Department's determination in Certain Hot-Rolled Carbon Steel 
Flat Products, Certain Cold-Rolled Carbon Steel Flat Products, and 
Certain Corrosion-Resistant Carbon Steel Flat Products from Japan, 58 
FR 37154, 37158 (July 9, 1993) (``There is no requirement that U.S. 
antidumping practice conform to Japanese antitrust laws or practices 
which have entirely different purposes and standards'').
    Therefore, because the standard established by Belgian law is not 
sufficiently similar to that established by the Department, as 
evidenced by the substantial difference between Prayon's discount rate 
and the Department's date of payment method, we cannot rely on Prayon's 
compliance with that law as evidence that the rate charged by Prayon 
Services to Prayon is at arm's-length.<SUP>2
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    \2\ Indeed, a review of the translated official certification 
letter and royal decree recognizing Prayon Services (submitted as 
Appendix 6 of Prayon's supplemental questionnaire of April 27, 1995) 
indicates that there are allowable exceptions to the arm's-length 
requirements.
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    Accordingly, for these final results, the Department, when 
determining credit expense incurred by Prayon on its home market sales, 
has relied upon Prayon's reported credit expense based upon the date of 
payment by Prayon's customer to Prayon Services.

Final Results of Review

    Based on our analysis of the comments received, and our changes to 
the final computer program, we have determined, as we did in the 
preliminary determination, that no antidumping margin exists for Prayon 
for the period August 1, 1993 to July 31, 1994. The Department will 
issue appraisement instructions directly to the U.S. Customs Service.
    Furthermore, 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 these 
final results of administrative review, as provided by section 
751(a)(1) of the Act: (1) the cash deposit rate for Prayon will be zero 
percent; (2) for merchandise exported by manufacturers or exporters not 
covered in this review but covered in a previous review or the original 
less-than-fair-value (LTFV) investigation, the cash deposit rate will 
continue to be the rate published in the most recent final results or 
determination for which the manufacturer or exporter received a 
company-specific rate; (3) if the exporter is not a firm covered in 
this review, earlier reviews, or the original investigation, but the 
manufacturer is, the cash deposit rate will be that established for the 
manufacturer of the merchandise in these final results of review, 
earlier reviews, or the original investigation, whichever is the most 
recent; and (4) the ``all others'' rate, as established in the original 
investigation, will be 14.67 percent.
    These deposit requirements, when imposed, shall remain in effect 
until publication of the final results of the next administrative 
review.
    This notice also 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 the subsequent 
assessment of double antidumping duties.
    This notice also serves as a reminder to parties subject to 
administrative protective orders (APOs) 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 U.S.C. 1675(a)(1)) and 19 CFR 353.22.

    Dated: April 26, 1996.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 96-11117 Filed 5-3-96; 8:45 am]
BILLING CODE 3510-DS-P