[Federal Register Volume 59, Number 153 (Wednesday, August 10, 1994)] [Unknown Section] [Page 0] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 94-19541] [[Page Unknown]] [Federal Register: August 10, 1994] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE [C-307-810] Final Negative Countervailing Duty Determination: Phthalic Anhydride From Venezuela AGENCY: Import Administration, International Trade Administration, Department of Commerce. EFFECTIVE DATE: August 10, 1994. FOR FURTHER INFORMATION CONTACT: Kristin M. Heim, Office of Countervailing Investigations, Import Administration, U.S. Department of Commerce, Room B099, 14th Street and Constitution Avenue NW., Washington, DC 10130; telephone (202) 482- 3798. Final Determination Case History Since the publication of the preliminary negative determination in the Federal Register (59 FR 3842, January 27, 1994) the following events have occurred. On March 4, 1994, we published a notice aligning this investigation with the companion antidumping duty investigation in the Federal Register (59 FR 10372). We conducted verification from March 22 through 25, 1994. A case brief was filed by petitioners on June 1, 1994, and a rebuttal brief was filed by Oxidor on June 10, 1994. A public hearing was not requested. Scope of Investigation For purposes of this investigation, phthalic anhydride (``PA'') is an aromatic synthetic organic chemical usually produced from a primary petrochemical called orthoxylene, although sometimes it is produced from naphthalene. PA is predominately used in the production of plasticizers, unsaturated polyester resins, and alkyd resins, which in turn are generally used to produced plastics and paints. The subject PA is produced in two physical forms, molten and flaked. The PA subject to this investigation is currently classified under subheading 2917.35.00 of the Harmonized Tariff Schedule of the United States (HTSUS). The HTSUS subheading is provided for convenience and customs purposes. Our written description of the scope of this investigation is dispositive. Injury Test On August 31, 1990, Venezuela became a contracting party to the General Agreement on Tariffs and Trade (GATT). Since a country cannot qualify as a ``country under the Agreement'' under section 701(b)(3) of the Tariff Act of 1930, as amended (``the Act'') if it is a contracting party to the GATT, Venezuela is no longer eligible for treatment as a ``country under the Agreement'' within the meaning of section 701(b)(3) of the Act. However, because Venezuela is a GATT contracting party and the merchandise under investigation is non-dutiable, the ITC is required to determine whether, pursuant to section 303(a)(2) of the Act, imports of the merchandise from Venezuela materially injure, or threaten material injury to, a U.S. industry. On December 1, 1993, the ITC preliminary determined that there is a reasonable indication that an industry in the United States is threatened with material injury by reason of imports of PA from Venezuela. Petitioners Petitioners are Aristech Chemical Corporation, BASF Corporation, Koppers Industries, Inc. and Stepan Company. Petitioners state that they represent 75 percent of the domestic PA industry. Respondents The Government of Venezuela (``GOV'') and Oxidaciones Organicas, C.A. (``Oxidor'') are respondents. While there are two producers of PA in Venezuela, Oxidor accounted for over 85 percent of exports to the United States during the POI and, hence, was selected as the sole respondent. Analysis of Programs For purposes of this determination, the period of investigation (``the POI'') is April 1, 1992 to March 30, 1993, which corresponds to Oxidor's fiscal year. Based upon our analysis of the petition and the responses to our questionnaires, we determine the following: I. Program Determined Not To Be Countervailable Preferential Pricing of Orthoxylene Feedstock Petitioners alleged that the government-owned petrochemical company, Petroquimica de Venezuela, C.A. (``Pequiven''), is selling orthoxylene (an input product to PA) to Venezuelan producers of PA at preferential prices, thus providing a subsidy under section 771(5)(A)(ii)(II) of the Act. In order to measure the preferential provision of goods, the Department has developed a hierarchy of benchmarks to compare with the government's price for the good. The Department's preferred benchmark is non-selective prices the government charges to the same or other users (See, Notice of Proposed Rulemaking and Request for Public Comments, 54 FR 23366 (May 31, 1989), Section 355.44(f)(1)) (``Proposed Regulations''). If there is no non-selective benchmark price, the Department normally looks to the alternative benchmarks listed in section 355.44(f)(2) of the Proposed Regulations. The alternative benchmarks are as follows: (1) The price charged by the same seller for a similar or related good, (2) the price charged by other sellers in the same jurisdiction for an identical good, (3) the same seller's cost of producing the good, and (4) the price paid outside the jurisdiction for an identical good. For the preliminary determination, the Department had no information to indicate that there was a non-specific price for orthoxylene. Pequiven reported that within Venezuela it sold orthoxylene only to the two PA producers, Oxidor and Anhiven, who were charged the same price. However, we discovered at verification that Pequiven also made one sale during the POI to a non-PA producer who was charged a different price. The Department has faced a similar situation in the past. In the Final Countervailing Duty Determination: Aluminum Sulfate from Venezuela 54 FR 43440 (October 25, 1989) (``Aluminum Sulfate''), the Department examined a government-owned company which sold to two producers of the subject merchandise, SULFORCA and FERRALCA. These two producers were charged different prices for the input product. One factor we evaluated in Aluminum Sulfate to determine whether the price charged to FERRALCA could be used as a benchmark for SULFORCA, was to compare the quantity and other terms of sale to the two companies. ``After comparing the quantities and terms of SULFORCA's contract to the quantities and terms of FERRALCA's purchase orders, we determined that these [the quantities and terms] did not provide a basis for justifying the price difference involved.'' (Aluminum Sulfate, at 43441). Because the difference in price could not be attributed to the difference in quantity and terms, the price charged to FERRALCA was determined to be a reliable benchmark. Consistent with the analysis performed in Aluminum Sulfate, we have examined the quantities and terms of Pequiven's sales to the non-PA producer and compared them to the quantities and terms of Pequiven's sales to Oxidor. We have concluded that Pequiven's price to the non-PA producer would not be a reliable benchmark price because there was only one sale in the POI and the sale involved too small a quantity to be comparable to the sales made to Oxidor and Anhiven. In addition, there is no other evidence on the record indicating that this price could serve as a proper benchmark. Therefore, we have determined that the price charged to the non-PA producer cannot serve as an appropriate benchmark. Due to the proprietary nature of the quantities and terms of these sales, we cannot address them in this notice; however there is a proprietary concurrence memorandum on the record that explains the basis of our determination (see, Concurrence Memorandum, August 3, 1994). Since we have concluded that we cannot use the government's price for the same good as our benchmark, we have evaluated the alternative benchmarks in our hierarchy. The first alternative in the hierarchy is the price charged by the same seller for a similar or related good. Consistent with our preliminary determination, we have determined that we cannot use the first alternative benchmark because Pequiven does not sell any of the products identified on the record as being similar to orthoxylene (i.e., paraxylene, metaxylene and mixed-xylene). The second alternative listed in the Proposed Regulations is the price charged within the jurisdiction by other sellers for an identical good or service. As stated in Carbon Black from Mexico: Preliminary Results of Countervailing Duty Administrative Review (51 FR 13269, April 18, 1986), ``[t]hese other sellers may include private sellers within the jurisdiction or foreign sellers selling into the jurisdiction * * *'' Pequiven is the only domestic producer/seller of orthoxylene in Venezuela. However, orthoxylene was imported into Venezuela during the POI. In the preliminary determination, we used U.S. export statistics on shipments of orthoxylene to Venezuela during the period 1992-1993. From these statistics, we used the information on the one entry that occurred during the POI to calculate a benchmark price, since this was ``a price charged within the jurisdiction by other sellers for an identical good.'' Based on our comparison of Pequiven's price for orthoxylene with the U.S. export price (adjusted for freight and insurance), we preliminarily determined that the Pequiven's price to Oxidor was non-preferential. We have examined this transaction carefully for purposes of our final determination to determine whether it can serve as a proper benchmark for sales of orthoxylene by Pequiven. First, we have considered the quantity involved and the terms of sale. Based on a comparison of the U.S. export to Pequiven's monthly sales to the two PA producers, we have determined that this sale is within the range of quantities purchased from Pequiven each month and, therefore, involves sufficiently large quantities to serve as an appropriate benchmark. Second, with respect to the terms of sale, petitioners argued that the prices reported in the U.S. export statistics are spot prices, whereas Pequiven's prices are on a contract basis. Petitioners stated that this fact should preclude the Department from using the U.S. export data as a benchmark since they are incomparable to Pequiven's prices. Respondents countered that, while Pequiven did have a contract with its customers, the terms of ``contract'' and ``spot'' sales are different in Venezuela than in the United States. Specifically, they argued that contract needs and obligations of secured quantity are much greater in the U.S. than in Venezuela. Because the Venezuelan market is so small, respondents took the position that a spot price is a more appropriate benchmark. Both parties have submitted world market prices for orthoxylene as reported by the industry publications of several private reporting agencies to support their arguments. Based on the information provided by both parties, we determined that there is a consistent difference between contract and spot prices as reported by the private reporting agencies. Given that the degree of difference is consistent throughout the POI, we believe it is possible to adjust the U.S. export spot price to make it comparable to a contract price. To calculate the adjustment, we averaged the difference between monthly contract and spot prices as reported by the three reporting services, and added the average spread for April, 1992 (the month of the single importation) to the U.S. export price. In addition, because this import into Venezuela was reported on a FAS basis, we added an amount for ocean freight and insurance from the United States to Venezuela. The amount for ocean freight and insurance was obtained from an independent shipping company (see memorandum from case analyst to the file, January 14, 1994). We then compared the adjusted U.S. export price to the price Pequiven charged for orthoxylene in the month that orthoxylene was exported from the United States. Based on this comparison, we found that Pequiven's price was greater than the price of imported U.S. orthoxylene. As a final check on the validity of the single importation as a benchmark, we averaged U.S. export prices (adjusted for freight and insurance as well as the difference between the spot and contract prices) for the three months in which we had data (one within the POI and two outside of the POI). For the two exports occurring outside of the POI, we added the average spread between spot and contract prices for the POI to the export prices because monthly data on the difference between spot and contract prices outside of the POI was not available. We compared the average of the adjusted U.S. export prices to the average price Pequiven charged in the same three months and found that Pequiven's average price was greater than the average price of the imports from the United States. Therefore, we find that the GOV, through Pequiven, did not provide orthoxylene to PA producers at preferential rates. Accordingly, we determine that no benefits which constitute bounties or grants within the meaning of the countervailing duty law are being provided to manufacturers, producers, or exporters of PA from Venezuela. II. Programs Determined not to be Used We determine that producers or exporters in Venezuela of the subject merchandise did not receive benefits during the POI for exports of the subject merchandise to the United States under the following programs: A. FINEXPO Preferential Short-Term Export Loans B. FINEXPO Preferential Long-Term Export Loans C. Excessive Tariff Drawback D. Preferential Tax Exemptions Under the 1966 Income Tax Law Because we find that the GOV did not provide orthoxylene at preferential rates and all other alleged programs were not used, we determine that no benefits which constitute bounties or grants within the meaning of the countervailing duty law are being provided to manufacturers, producers, or exporters of PA from Venezuela. Comments All written comments submitted by the interested parties in this investigation either have been previously addressed in this notice or relate to alternative benchmarks that are lower in the preferentiality hierarchy than the one we used to reach our final determination. Verification In accordance with section 776(b) of the Act, we verified the information used in making our final determination. We followed standard verification procedures, including meeting with government and company officials, examination of relevant accounting records, and examination of original source documents. Our verification results are outlined in detail in the public versions of the verification reports, which are on file in the Central Records Unit (Room B-099 of the Main Commerce Building). ITC Notification In accordance with section 705(d) of the Act, we will notify the ITC of our determination. Since we have determined that no bounties or grants are being provided to manufacturers, producers or exporters of PA in Venezuela, the investigation will be terminated upon publication of this notice in the Federal Register. Hence, the ITC is not required to make a final injury determination with respect to this countervailing duty proceeding. Return or Destruction of Proprietary Information This notice serves as the only reminder to parties subject to Administrative Protective Order (APO) of their responsibility concerning the return or destruction of proprietary information disclosed under APO in accordance with 19 CFR 355.34(d). Failure to comply is a violation of the APO. This determination is published pursuant to section 705(d) of the Act (19 U.S.C. 1671d(d)). Dated: August 3, 1994. Susan G. Esserman, Assistant Secretary for Import Administration. [FR Doc. 94-19541 Filed 8-9-94; 8:45 am] BILLING CODE 3510-DS-P