Elemental Sulphur From Canada: Preliminary Results of Antidumping Duty Administrative Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Notice of preliminary results of antidumping duty administrative review of elemental sulphur from Canada.

SUMMARY:

The Department of Commerce (“the Department”) is conducting an administrative review of the antidumping duty order on elemental sulphur from Canada in response to a request from the petitioner, Freeport-McMoRan Sulphur, Inc. (“Freeport”). This review covers imports of subject merchandise from Husky Oil Limited (“Husky”), a producer, and Petrosul International (”Petrosul”), a reseller. The period of review (“POR”) for Husky and Petrosul is from December 1, 1998 through December 31, 1999. The POR for all other entries is December 1, 1998 through November 30, 1999.

We preliminarily determine that respondent Husky has sold subject merchandise at less than normal value (“NV”) during the POR. For the reasons provided in the “Facts Available” section of this notice, we preliminarily determine that respondent Petrosul's antidumping rate be based on total adverse facts available, and have applied the highest rate calculated for Petrosul in prior reviews. If these preliminary results are adopted in our final results of this administrative review, we will instruct the U.S. Customs Service to assess antidumping duties on suspended entries for Petrosul and Husky.

We invite interested parties to comment on these preliminary results. Parties who submit arguments in this segment of the proceeding should also submit with each argument (1) a statement of the issue and (2) a brief summary of the argument.

EFFECTIVE DATE:

September 8, 2000.

FOR FURTHER INFORMATION CONTACT:

Brandon Farlander or Rick Johnson, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th and Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 482-0182 or (202) 482-3818, respectively.

SUPPLEMENTARY INFORMATION:

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the Tariff Act of 1930, as amended (“the Act”), are references to the provisions effective January 1, 1995, the effective date of the amendments made to the Act by the Uruguay Round Agreements Act (“URAA”). In addition, unless otherwise indicated, all citations to the Department's regulations are to the regulations codified at 19 CFR Part 351 (April 1, 1999).

Background

The antidumping dumping duty order for elemental sulphur from Canada was revoked, pursuant to the sunset procedures established by statute, effective January 1, 2000. See Revocation of Antidumping Finding: Elemental Sulphur From Canada, 64 FR 40553 (July 27, 1999). However, we are conducting this review to cover sales of the subject merchandise made in the United States made by Husky and Petrosul during the 13-month period from December 1, 1998 until the effective date of the revocation.

On December 14, 1999, the Department published in the Federal Register a notice of “Opportunity to Request Administrative Review” of the antidumping duty order on elemental sulphur from Canada (64 FR 69693). In accordance with 19 CFR 351.213(b)(1), on December 30, 1999, the petitioner, Freeport, requested an administrative review of the antidumping order covering the period December 1, 1998, through November 30, 1999, for Husky and Petrosul. On January 26, 2000, the Department published in the Federal Register a notice of initiation of administrative review of this order (65 FR 4228). On March 1, 2000, Husky requested that the Department extend the POR by one month to include sales from the end of the POR until the date that the revocation of the order was in effect. On April 11, 2000, the Department informed Husky and Petrosul that we were extending the POR for one month to include December 1999; thus, we would review all sales of the subject merchandise made by Husky and Petrosul in the United States between December 1, 1998 and the effective revocation date of the order.

On February 14, 2000, the Department sent Petrosul a questionnaire (Sections A, B, C, and D). On March 6, 2000, the Department received a letter from Petrosul, stating that Petrosul did not produce or export sulphur to the United States during the POR. The Department reviewed record evidence that indicated Petrosul exported subject merchandise or had knowledge that its sales of subject merchandise in Canada were ultimately destined for the United States. The details of this information are proprietary. See Analysis for the Preliminary Results in the Administrative Review of Elemental Sulphur from Canada for the period December 1, 1998 through December 31, 1999 (“Preliminary Analysis Memo”), dated September 1, 2000. On April 12, 2000, the Department sent a supplemental questionnaire to Petrosul with additional questions regarding Petrosul's statement that it did not produce or export sulphur to the United States during the POR. On May 3, 2000, Petrosul reported, via a telephone conversation, that it would not respond to the Department's April 12, 2000 supplemental questionnaire. See Memorandum for the file, dated May 3, 2000. Thus, Petrosul only submitted a letter to the Department stating that it did not produce or export sulphur to the United States during the POR and did not respond to either the Department's February 14, 2000, questionnaire or the April 12, 2000, supplemental questionnaire.

On February 14, 2000, the Department sent Husky a questionnaire (Sections A, B, C, and D). On March 20, 2000, Husky provided its Section A questionnaire response and on April 20, 2000, Husky provided its Sections B, C, and D response. On May 17, 2000, we issued a supplemental questionnaire to Husky. On June 1, 2000, Husky provided its supplemental questionnaire response.

The Department is conducting this administrative review in accordance with section 751 of the Act.

Verification

As provided in section 782(i) of the Act, from July 17, 2000 to July 20, 2000, we verified sales information provided by Husky, using standard verification procedures, including an examination of relevant sales and financial records, and selection of original documentation containing relevant information. Our verification results are outlined in the public version of the verification report and are on file in the Central Records Unit (“CRU”) located in room B-099 of the main Department of Commerce Building, 14th Street and Constitution Avenue, NW., Washington, DC.

Scope of the Review

Imports covered by this review are shipments of elemental sulphur from Canada. This merchandise is classifiable under Harmonized Tariff Schedule (“HTS”) subheadings 2503.10.00, 2503.90.00, and 2802.00.00. Although the HTS subheadings are provided for convenience and for U.S. Customs purposes, the Department's written description of the scope of this order remains dispositive.

Facts Available

In accordance with sections 776(a)(2)(A) and 776(a)(2)(B) of the Act, we preliminarily determine that the use of facts available is appropriate as the basis for Petrosul's dumping margin. Section 776(a)(2) of the Act provides that if an interested party: (A) withholds information that has been requested by the Department; (B) fails to provide such information in a timely manner or in the form or manner requested, subject to subsections 782(c)(1) and (e) of the Act; (C) significantly impedes a determination under the antidumping statute; or (D) provides such information but the information cannot be verified, the Department shall, subject to subsection 782(d) of the Act, use facts otherwise available in reaching the applicable determination. In this case, section 776(a)(2)(A) of the Act applies because Petrosul withheld information. Petrosul failed to respond to sections A, B, C, and D of the Department's February 14, 2000 questionnaire and to the Department's April 12, 2000 supplemental questionnaire regarding whether it had entries during the POR. Furthermore, subsections 782(c)(1) and (e) of the Act cannot be applied in this case because Petrosul notified the Department that it would not participate in this review. Petrosul at no time notified the Department that it would be unable to submit requested information, nor did Petrosul provide any explanation or alternate form by which to submit the requested information. Section 782(e) of the Act is likewise not applicable because Petrosul provided no information for the Department to consider.

Because Petrosul failed to respond to the Department's questionnaires, we preliminarily determine that, in accordance with sections 776(a) and 782(e) of the Act, Petrosul has not cooperated to the best of its ability, and the use of total facts available is therefore appropriate. See, e.g., Certain Grain-Oriented Electrical Steel from Italy: Final Results of Antidumping Duty Administrative Review, 62 FR 2655 (January 17, 1997).

Section 776(b) of the Act provides that adverse inferences may be used with respect to a party that has failed to cooperate by not acting to the best of its ability to comply with requests for information. See Statement of Administrative Action (“SAA”) accompanying the URAA, H.R. Rep. No. 103-316, at 870. Petrosul's failure to participate in this review, especially in light of evidence that it in fact sold subject merchandise into the United States, demonstrates that it has failed to act to the best of its ability and, therefore, an adverse inference is warranted. See, e.g., Extruded Rubber Thread from Malaysia; Final Results of Antidumping Duty Administrative Review, 63 FR 12752 (March 16, 1998). Petrosul has demonstrated that it has the ability to provide sales information for administrative reviews in the past and it provided the Department with no plausible explanation of why it would not participate this time. See Elemental Sulphur from Canada; Preliminary Results of Antidumping Duty Administrative Reviews, 61 FR 45937, 45938. Thus, based on proprietary record evidence, see, e.g., the Preliminary Analysis Memo, we are making the adverse inference that had Petrosul cooperated and responded to the Department's questionnaire, Petrosul would have acknowledged its sales of elemental sulphur that were exported by Petrosul to the United States or acknowledged that its sales within Canada were ultimately destined for the United States. However, we must also reach a determination as to what the dumping margin on these sales would have been.

Section 776(b) of the Act authorizes the Department to use as adverse facts available secondary information, that is, information derived from the petition, the final determination, a previous administrative review, or any other information placed on the record. The SAA further provides that “[i]n employing adverse inferences, one factor the [Department] will consider is the extent to which a party may benefit from its own lack of cooperation.” SAA at 870. It is the Department's normal practice, in situations involving non-responding respondents such as Petrosul, to select as adverse facts available the highest margin from the current or any prior segment of the same proceeding. Therefore, as total adverse facts available, we have applied the rate of 40.38 percent, which was Husky's calculated final margin in the 1992/93 administrative review. See Final Elemental Sulphur from Canada; Final Results of Antidumping Duty Administrative Reviews 62 FR 37970, 37990 (July 15, 1997). The Department previously applied this rate as a total adverse facts available rate for Petrosul and Husky in the 1997/98 administrative review. See Elemental Sulphur from Canada: Final Results of Antidumping Duty Administrative Review, 65 FR 11980 (March 7, 2000).

Section 776(c) of the Act provides that the Department shall, to the extent practicable, corroborate secondary information by reviewing independent sources reasonably at its disposal. The SAA provides that “corroborate” means that the Department will satisfy itself that the secondary information to be used has probative value, that is, that it is both reliable and relevant. See SAA at 870. The 40.38 percent rate we selected meets these corroboration criteria.

Regarding the reliability of the selected rate, because there are no independent sources for calculated dumping margins, unlike other types of information, such as input costs or selling expenses, the only source for margins is administrative determinations. Thus, in an administrative review, if the Department chooses as total adverse facts available a calculated dumping margin from a prior segment of the proceeding, it is not necessary to question the reliability of that earlier calculated margin. See, e.g., Elemental Sulphur from Canada: Preliminary Results of Antidumping Duty Administrative Review, 62 FR 971 (January 7, 1997); Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof from France, et al.: Final Results of Administrative Review, 62 FR 2081, 2088 (January 15, 1997); and Final Results of Antidumping Duty Administrative Review: Brass Sheet and Strip from Germany, 64 FR 43342, 43343 (August 10, 1999). Thus, because we have selected a calculated margin from a prior administrative review, we do not need to question its reliability.

With respect to the relevance aspect of corroboration, however, the Department will consider information reasonably at its disposal as to whether there are circumstances that would render a margin inappropriate. Where circumstances indicate that the selected margin is not appropriate as adverse facts available, the Department will disregard the margin and determine an appropriate margin. See, e.g., Fresh Cut Flowers from Mexico; Final Results of Antidumping Duty Administrative Review, 61 FR 6812, 6814 (February 22, 1996) (where the Department disregarded the highest margin for use as adverse facts available because the margin was based on another company's uncharacteristic business expense, resulting in an unusually high margin). Because we know that Petrosul has been supplied by Husky (see Issues and Decision Memorandum for the Administrative Review of Elemental Sulphur from Canada—12/01/97 through 11/30/98, Comment 3, (see ia.ita.doc.gov/frn), which corresponds to Elemental Sulphur From Canada; Final Results of Antidumping Duty Administrative Review, 65 FR 11980 (March 7, 2000)), as facts available, we continue to operate under the presumption that Petrosul is being supplied by Husky in the absence of any other information. Thus, this rate is relevant for Petrosul because it was recently applied to Petrosul in the prior administrative review under the same circumstances, and we are not aware of any circumstances that would render this rate inappropriate.

Normal Value Comparisons

To determine whether sales of subject merchandise to the United States were made at less than fair value, we compared the EP to the NV. In accordance with section 777A(d)(2), we calculated monthly weighted-average prices for NV and compared these to individual EP transactions.

Transactions Reviewed

We compared the aggregate volume of Husky's home market sales of the foreign like product and U.S. sales of the subject merchandise to determine whether the volume of the foreign like product Husky sold in Canada was sufficient, pursuant to section 773(a)(1)(C) of the Act, to form a basis for NV. Because Husky's volume of home market sales of the foreign like product was greater than five percent of its U.S. sales of subject merchandise, in accordance with section 773(a)(1)(B)(i) of the Act, we have based the determination of NV upon Husky's home market sales of the foreign like product. Moreover, there is no evidence on the record indicating a particular market situation in the exporting country that would not permit a proper comparison of home market and U.S. prices. See section 773(a)(1)(C)(iii) of the Act. Thus, we based NV on the prices at which the foreign like product was first sold for consumption in Canada, in the usual commercial quantities, in the ordinary course of trade, and at the same LOT as the EP sales.

Product Comparisons

In accordance with section 771(16) of the Act, we considered all products covered by the Scope of the Review section above, which were produced and sold by the Husky in the home market during the extended POR, to be foreign like products for purposes of determining appropriate product comparisons to U.S. sales. For all of Husky's U.S. sales, there were identical sales in the home market on which to base comparisons.

Export Price

For calculation of the price to the United States, we used EP, in accordance with section 772(a) of the Act, because Husky's subject merchandise was sold to the first unaffiliated purchaser located in either Canada (shipped directly from the producer to the U.S. purchaser) or the United States prior to importation, and use of the CEP methodology was not otherwise warranted. We calculated EP based on free on board (f.o.b.) plant or delivered prices to unrelated customers. We made deductions to the starting price for movement expenses (inland freight, brokerage and handling, and tank car leasing expenses) pursuant to section 772(c)(2) of the Act. For a further explanation of how we calculated EP, see Preliminary Analysis Memo. We have used Husky's invoice date as the date of sale, in accordance with 19 CFR 351.401(i), except for shipments made prior to the invoice. Husky often invoices its customers after shipment and, therefore, in accordance with the Department's practice, we have used the shipment date as the date of sale in those instances.

Normal Value

After testing home market viability and whether home market sales were at below-cost prices, we calculated NV as noted in the “Price-to-Price Comparisons” and “Price-to-CV Comparison” sections of this notice.

Cost of Production (“COP”) Analysis

Because the Department determined that Husky made sales in the home market at prices below the cost of producing the subject merchandise in its most recently completed administrative review (see, e.g., Elemental Sulphur From Canada; Final Results of Antidumping Duty Administrative Review, 65 FR 11980 (March 7, 2000)), the Department determined that there are reasonable grounds to believe or suspect that Husky made sales in the home market at prices below the cost of producing the merchandise in this review. See section 773(b)(2)(A)(ii) of the Act. As a result, the Department initiated a cost of production inquiry in this case on February 14, 2000, to determine whether Husky made home market sales during the POR at prices below their respective COPs within the meaning of section 773(b) of the Act.

We conducted the COP analysis described below.

A. Calculation of COP

In accordance with section 773(b)(3) of the Act, we calculated COP based on the sum of Husky's cost of materials and fabrication for the foreign like product, plus amounts for home market selling, general and administrative expenses (“SG&A”), interest expenses, and packing costs. We used home market sales and COP information provided by Husky in its questionnaire responses, with no cost adjustments.

B. Test of Home Market Prices

We compared the POR-long weighted-average COP for Husky, adjusted where appropriate (see above), to its home market sales of the foreign like product as required under section 773(b) of the Act. In determining whether to disregard home market sales made at prices less than the COP, we examined whether: (1) within an extended period of time, such sales were made in substantial quantities; and (2) such sales were made at prices which permitted the recovery of all costs within a reasonable period of time.

C. Results of the COP Test

Pursuant to section 773(b)(2)(C) of the Act, where less than 20 percent of a respondent's sales of a given product within an extended period of time are at prices less than the COP, we do not disregard any below-cost sales of that product because the below-cost sales are not made in “substantial quantities.” Where 20 percent or more of a respondent's sales of a given product during the extended period are at prices less than the COP, we determine such sales to have been made in “substantial quantities.” See section 773(b)(2)(C)(i) of the Act. The extended period of time for this analysis is the POR. See section 773(b)(2)(B) of the Act. Because each individual price was compared against the POR-long weighted average COP, any sales that were below cost were also at prices which did not permit cost recovery within a reasonable period of time. See section 773(b)(2)(D). We compared the COP for liquid sulphur to the reported home market prices less any applicable movement charges. Based on this test, we did not exclude any sales from our analysis because the volume of these sales represented less than 20 percent of the volume of sales under consideration for the determination of NV.

D. Calculation of CV

In accordance with section 773(e)(1) of the Act, we calculated Husky's CV based on the sum of Husky's cost of materials, fabrication, SG&A, interest expenses and profit. We calculated the COPs included in the calculation of CV as noted above in the “Calculation of COP” section of this notice. In accordance with section 773(e)(2)(A) of the Act, we based SG&A and profit on the amounts incurred and realized by Husky in connection with the production and sale of the foreign like product in the ordinary course of trade, for consumption in Canada.

Price-to-Price Comparisons

We based NV on the home market prices to unaffiliated purchasers (Husky made no sales to affiliated parties). Home market prices were based on ex-factory or delivered prices. We made adjustments, where applicable, for movement expenses in accordance with section 773(a)(6)(B) of the Act. We also made adjustments for differences in circumstances of sale (“COS”) in accordance with 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410 by deducting home market direct selling expenses (credit) and adding U.S. direct selling expenses (credit).

Price-to-CV Comparisons

In accordance with section 773(a)(4) of the Act, we base NV on CV if we are unable to find suitable home market sales of the foreign like product. Where applicable, we would make adjustments to CV in accordance with section 773(a)(8) of the Act. For comparisons to EP, we made COS adjustments by deducting home market direct selling expenses and adding U.S. direct selling expenses. We did not use CV for Husky for these preliminary results of review.

Level of Trade

In accordance with section 773(a)(1)(B) of the Act, to the extent practicable, we determine NV based on sales in the comparison market at the same level of trade (“LOT”) as the EP or CEP transaction. The NV LOT is that of the starting-price sales in the comparison market or, when NV is based on constructed value (“CV”), that of the sales from which we derive selling, general and administrative (“SG&A”) expenses and profit. For EP, the LOT is also the level of the starting-price sale, which is usually from the exporter to the importer. For CEP, it is the level of the constructed sale from the exporter to the affiliated importer.

To determine whether NV sales are at a different LOT than EP or CEP sales, we examine stages in the marketing process and selling functions along the chain of distribution between the producer and the unaffiliated customer. If the comparison market sales are at a different LOT, and the difference affects price comparability, as manifested in a pattern of consistent price differences between the sales on which NV is based and comparison-market sales at the LOT of the export transaction, we make an LOT adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP sales (which we note is not the case for Husky), if the NV level is more remote from the factory than the CEP level and there is no basis for determining whether the differences in the levels between NV and CEP sales affect price comparability, we adjust NV under section 773(A)(7)(B) of the Act (the CEP offset provision). See Notice of Final Determination of Sales at Less Than Fair Value: Certain Carbon Steel Plate from South Africa, 62 FR 61731 (November 19, 1997).

In the present review, Husky did not request a LOT adjustment or a CEP offset. To ensure that no such adjustment was necessary, in accordance with the principles discussed above, we examined information regarding the distribution systems in both the United States and Canadian markets, including the selling functions, classes of customer, and selling expenses.

In the home market, Husky reported that it sold through two sales channels: (1) to end-users; and (2) to resellers. See Husky's March 20, 2000, Section A questionnaire response, at A-9. The selling functions associated with the sales to end-users are credit services. The selling functions associated with the sales to resellers are credit services, and, if requested, freight and delivery arrangements. Because these selling functions are similar for both sales channels, we preliminarily determine that there is one LOT in the home market.

In the U.S. market, Husky reported two sales channels: (1) to end-users; and (2) to resellers. See Husky's March 20, 2000, Section A questionnaire response, at A-9. We examined the selling functions performed for each of the two U.S. sales channels. Both sales channels involved freight and delivery arrangements and credit services. Based on the above information, we preliminarily determine that there is one LOT in the United States.

Based on our analysis of the selling functions performed for sales in the home market and EP sales in the U.S. market, we preliminarily determine that there is not a significant difference in the selling functions performed in the U.S. and home markets and that these sales are made at the same LOT. Therefore, a LOT adjustment is not appropriate.

Preliminary Results of Review

As a result of our review, we preliminarily determine that the following weighted-average dumping margin exists for the period December 1, 1998 through December 31, 1999:

The Department will disclose calculations performed within five days of the date of publication of this notice to the parties of this proceeding in accordance with 19 CFR 351.224(b). An interested party may request a hearing within 30 days of publication of these preliminary results. See 19 CFR 351.310(c). Any hearing, if requested, will be held 37 days after the date of publication, or the first working day thereafter. Interested parties may submit case briefs and/or written comments no later than 30 days after the date of publication of these preliminary results of review. Rebuttal briefs and rebuttals to written comments, limited to issues raised in such briefs or comments, may be filed no later than 35 days after the date of publication. Further, we would appreciate it if parties submitting written comments also provide the Department with an additional copy of those comments on diskette. The Department will issue the final results of this administrative review, which will include the results of its analysis of issues raised in any such comments, within 120 days of publication of these preliminary results.

Assessment

Upon issuance of the final results of this review, the Department shall determine, and the U.S. Customs Service shall assess, antidumping duties on all appropriate entries. In the event these preliminary results are made final, we will assess antidumping duties on all Petrosul entries at the same rate as the dumping margin (i.e., 40.38 percent) since the margin is not a current calculated rate for the respondent, but a rate based upon total facts available pursuant to section 776(a) of the Act. Also, if these preliminary results are made final, we will assess importer-specific antidumping duties on all appropriate Husky entries. Upon completion of this review, the Department will issue appraisement instructions directly to the Customs Service.

Cash Deposit

Because the antidumping duty order on elemental sulphur from Canada has been revoked, effective January 1, 2000, no cash deposits are required for entries of elemental sulphur from Canada for entries on or after January 1, 2000. See Revocation of Antidumping Finding: Elemental Sulphur From Canada, 64 FR 40553 (July 27, 1999).

This notice also serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f)(2) 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 determination is issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act.