Initiation of Antidumping Duty Investigation: Solid Agricultural Grade Ammonium Nitrate From Ukraine

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

EFFECTIVE DATE:

November 8, 2000.

FOR FURTHER INFORMATION CONTACT:

Melani Miller or Jarrod Goldfeder, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-0116 and (202) 482-0189, respectively.

Initiation of Investigation

The Applicable Statute and Regulations

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

The Petition

On October 13, 2000, the Department of Commerce (“the Department”) received a petition filed in proper form by the Committee for Fair Ammonium Nitrate Trade (“the petitioner”), whose members are domestic producers of solid agricultural grade ammonium nitrate. The Department received supplemental information to the petition on October 27, 2000.

In accordance with section 732(b) of the Act, the petitioner alleges that imports of solid agricultural (or fertilizer) grade ammonium nitrate from Ukraine are being, or are likely to be, sold in the United States at less than fair value within the meaning of section 731 of the Act, and that such imports are materially injuring an industry in the United States.

The Department finds that the petitioner filed this petition on behalf of the domestic industry because it is an interested party as defined in section 771(9)(C) of the Act and it has demonstrated sufficient industry support with respect to the antidumping investigation that it is requesting the Department initiate (see Determination of Industry Support for the Petition section below).

Scope of Investigation

For purposes of this investigation, the products covered are solid, fertilizer grade ammonium nitrate products, whether prilled, granular or in other solid form, with or without additives or coating, and with a bulk density equal to or greater than 53 pounds per cubic foot. Specifically excluded from this scope is solid ammonium nitrate with a bulk density less than 53 pounds per cubic foot (commonly referred to as industrial or explosive grade ammonium nitrate). The merchandise subject to this investigation is classified in the Harmonized Tariff Schedule of the United States (“HTSUS”) at subheading 3102.30.00.00. Although the HTSUS subheadings are provided for convenience and for purposes of the U.S. Customs Service, the written description of the merchandise under investigation is dispositive.

This scope is identical to the scope used in the Department's investigation of solid fertilizer grade ammonium nitrate from the Russian Federation. See Notice of Final Determination of Sales at Less Than Fair Value; Solid Fertilizer Grade Ammonium Nitrate from the Russian Federation, 65 FR 42669 (July 11, 2000) (“Ammonium Nitrate from Russia”). Nevertheless, during our review of the petition, we discussed the scope with the petitioner to ensure that it accurately reflects the product for which the domestic industry is seeking relief. Moreover, as discussed in the preamble to the Department's regulations (62 FR 27296, 27323), we are setting aside a period for parties to raise issues regarding product coverage. The Department encourages all parties to submit such comments within 20 days of publication of this notice. Comments should be addressed to Import Administration's Central Records Unit (“CRU”) at Room 1870, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230. The period of scope consultations is intended to provide the Department with ample opportunity to consider all comments and consult with parties prior to the issuance of our preliminary determination.

Period of Investigation

Section 351.204(b) of the Department's regulations states that, in the case of a nonmarket economy country, in an investigation, the Department normally will examine merchandise sold during the two most recently completed fiscal quarters as of the month preceding the month in which the petition was filed. The regulations further state that the Department may examine merchandise sold during any additional or alternate period it concludes is appropriate.

Following the above noted guidelines from section 351.204(b) of the Department's regulations, the two most recently completed fiscal quarters as of the month preceding the month in which the petition was filed would be the second and third fiscal quarters of 2000, April through September 2000.

For this investigation, the petitioner has requested that the Department either modify or expand the period of investigation (“POI”) to include the first fiscal quarter of 2000, January through March 2000. The petitioner argues that the ammonium nitrate industry is highly seasonal and that the volume of ammonium nitrate shipments is directly linked to agricultural cycles; specifically, demand and imports are higher during the spring planting season which runs from February through June. The petitioner notes that the Department has recognized the seasonality of the ammonium nitrate market in Ammonium Nitrate from Russia. Moreover, the petitioner points out that calendar year 2000 import data for Ukraine supports the conclusion that the first quarter 2000 should be included in the POI. According to the petitioner, the data shows that imports of ammonium nitrate from Ukraine have increased dramatically in the first two quarters of 2000 as compared to prior years. If only the second and third quarters were examined, the petitioner alleges that the Department would have a much more limited number of sales on which to make its determination.

The Department is considering the petitioner's arguments on this matter and will make a determination on whether to expand the normal POI as established by section 351.204(b) of the Department's regulations, April 1 through September 30, 2000, as the investigation proceeds.

Determination of Industry Support for the Petition

Section 732(b)(1) of the Act requires that a petition be filed on behalf of the domestic industry. Section 732(c)(4)(A) of the Act provides that a petition meets this requirement if the domestic producers or workers who support the petition account for: (1) At least 25 percent of the total production of the domestic like product; and (2) more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the petition.

Section 771(4)(A) of the Act defines the “industry” as the producers of a domestic like product. Thus, to determine whether the petition has the requisite industry support, the Act directs the Department to look to producers and workers who account for production of the domestic like product. The International Trade Commission (“ITC”), which is responsible for determining whether “the domestic industry,” has been injured, must also determine what constitutes a domestic like product in order to define the industry. While both the Department and the ITC must apply the same statutory definition regarding the domestic like product (section 771(10) of the Act), they do so for different purposes and pursuant to separate and distinct authority. In addition, the Department's determination is subject to limitations of time and information. Although this may result in different definitions of the domestic like product, such differences do not render the decision of either agency contrary to the law.

Section 771(10) of the Act defines the domestic like product as “a product that is like, or in the absence of like, most similar in characteristics and uses with, the article subject to an investigation under this title.” Thus, the reference point from which the domestic like product analysis begins in “the article subject to an investigation,” i.e., the class or kind of merchandise to be investigated, which normally will be the scope as defined in the petition.

The domestic like product referred to in the petition is the single domestic like product defined in the Scope of Investigation section above. The Department has no basis on the record to find this definition of the domestic like product to be inaccurate. The Department, therefore, has adopted this dometsic like product definition.

The Department has determined that the petition contains adequate evidence of industry support; therefore, polling is unnecessary. See Initiation Checklist at Industry Support. To the best of the Department's knowledge, the producers who support the petition account for more than 50 percent of the production of the domestic like product. Additionally, no interested party pursuant to section 771(b)(A), (C), (D), (E) or (F) of the Act has expressed opposition on the record to the petition. Accordingly, the Department determines that this petition is filed on behalf of the domestic industry within the meaning of section 732(b)(1) of the Act.

Export Price and Normal Value

The following is a description of the allegation of sales at less than fair value upon which our decision to initiate this investigation is based. Should the need arise to use any of this information in our preliminary or final determination for purposes of facts available under section 776 of the Act, we may re-examine the information and revise the margin calculations, if appropriate.

The petitioner identified four potential Ukrainian exporters and producers of solid agricultural grade ammonium nitrate. The petitioner based export price on official U.S. import statistics for the period January through June 2000. From these starting prices, the petitioner deducted foreign inland freight and foreign brokerage and handling. The petitioner based foreign inland freight on Indian rail rates as referenced by the Department at its online Document Library (Index of Factor Values). The foreign brokerage and handling charges were also based on the Department's Index of Factor Values. Both the inland freight and brokerage and handling rates were adjusted for inflation using the Indian Wholesale Price Index (“WPI”) as published in the International Financial Statistics of the International Monetary Fund.

The petitioner asserts that the Department considers Ukraine to be a nonmarket economy country (“NME”) and, therefore, constructed normal value based on the factors of production (“FOP”) methodology pursuant to section 773(c) of the Act. In previous cases, the Department has determined that Ukraine is an NME. See, e.g., Certain Cut-to-Length Carbon Steel Plate from Ukraine, 62 FR 61754 (November 19 1997) and Steel Concrete Reinforcing Bars from Austria, Belarus, Indonesia, Japan, Latvia, Moldova, the People's Republic of China, Poland, the Republic of Korea, the Russian Federation, Ukraine, and Venezuela, 65 FR 45754 (July 25, 2000). In accordance with section 771(18)(C)(i) of the Act, the NME status remains in effect until revoked by the Department. As of the date of initiation of this proceeding, the NME status of Ukraine has not been revoked by the Department and, therefore, remains in effect. Accordingly, the normal value of the product appropriately is based on FOP valued in a surrogate market economy country in accordance with section 773(c) of the Act. In the course of this investigation, all parties will have the opportunity to provide relevant information related to the issues of Ukraine's NME status and the granting of separate rates to individual exporters.

For the factors of production, the petitioner used publicly available factor information from a Russian ammonium nitrate producer taken from Ammonium Nitrate from Russia. The petitioner stated that it was unable to gain access to any specific information regarding the factors of production for any Ukrainian ammonium nitrate producer and was, thus, unable to furnish information on Ukrainian FOP.

According to the petitioner, the use of the Russian producer's public factors provides a sound basis for estimation of Ukrainian factors because (1) both the Ukrainian and Russian ammonium nitrate plants use the same type of production process, and (2) Ukrainian and Russian ammonium nitrate plants use the same types of production technology. Thus, the petitioner has taken the position that, for purposes of the petition, the producers in Ukraine use the same inputs in the same quantities as do producers in Russia. Because data regarding the quantities of inputs used by Ukrainian producers was not reasonably available to the petitioner, and because the petitioner has provided information showing that the Russian and Ukrainian ammonium nitrate industries are substantially similar, we have accepted the use of the Russian factor information.

The petitioner selected India as the most appropriate surrogate market economy. In accordance with section 773(c)(4) of the Act, the petitioner valued factors of production, where possible, using Indian data. Labor was valued using the regression-based wage rate for Ukraine provided by the Department in accordance with section 351.408(c)(3) of the Department's regulations. Natural gas and electricity were valued using values from a 1998-1999 public annual report of an Indian producer of merchandise similar to the subject merchandise. Pursuant to the Department's past practice, the petitioner valued synthetic gas, purge gas, and hydrogen using “natural gas equivalents” (see Ammonium Nitrate from Russia) Catalysts and other auxiliary materials were valued using United Nations import data for India. One auxiliary material, lilamine, for which the petitioner could not find a public Indian surrogate value was valued using information from a domestic ammonium nitrate producer. For factory overhead, selling, general and administrative expenses, and profit, the petitioner applied ratios derived from information gathered from the same 1998-1999 public annual report that it used to value natural gas and electricity. Where no contemporaneous values could be found, the non-contemporaneous values used were adjusted to the comparison period to take inflation into account.

Based on a comparison of export price to normal value, as adjusted by the Department, the information in the petition and other information reasonably available to the Department indicates weighted-average dumping margins of between 222 and 285 percent. A description of the adjustments which the Department made to petitioner's calculations are contained in the Initiation Checklist.

Fair Value Comparisons

Based on the data provided by the petitioner, there is reason to believe that imports of solid agricultural grade ammonium nitrate from Ukraine are being, or are likely to be, sold at less than fair value.

Allegations and Evidence of Material Injury and Causation

The petition alleges that the U.S. industry producing the domestic like product is being materially injured, and is threatened with material injury, by reason of the imports of the subject merchandise sold at less than normal value. The allegations of injury and causation are supported by relevant evidence including U.S. Customs import data, ITC data and information gathered during Ammonium Nitrate from Russia, lost sales, and pricing information. The Department assessed the allegations and supporting evidence regarding material injury and causation and determined that these allegations are supported by accurate and adequate evidence and meet the statutory requirements for initiation. See Initiation Checklist at 4 and 5.

Allegation of Critical Circumstances

The petitioner has alleged that critical circumstances exist with regard to imports of solid, agricultural grade ammonium nitrate from Ukraine. To support its allegation, the petitioner provided evidence in the petition showing, among other things, a trend of increased imports of the subject merchandise during the period January to June 2000. Specifically, the petitioner contends that ammonium nitrate imports from Ukraine surged from no imports in 1999 to 155,398 short tons during the time period from January through June 2000.

The petitioner also provided evidence suggesting a history of dumping, and, alternatively, that the person by whom, or for whose account, the merchandise was imported knew, or should have known, that the merchandise was being sold at less than fair value and that there was likely to be material injury as a result. The petitioner contends that, though there is not currently an existing antidumping order on Ukrainian ammonium nitrate, the European Union has made a preliminary determination that dumping is taking place in the European Union of ammonium nitrate from Ukraine. This, in the petitioner's view, provides evidence of a history of dumping.

Additionally, consistent with the Department's practice of reviewing the margins supported in the petition as evidence of importer knowledge, the petitioner notes that the petition margin of 285% is well above the standard 25% threshold. Finally, the petitioner argues that the timing of Ukraine's entrance into the U.S. ammonium nitrate market (immediately following the Department's January 7, 2000, preliminary determination that Russian ammonium nitrate was sold in the United States at less than normal value and the rapid decline of imports of ammonium nitrate from Russia), along with the significant increase in volume of imports and the adverse pricing effects these imports had, provides evidence that importers knew, or should have known, that Ukrainian ammonium nitrate imports were likely to cause injury to the domestic industry.

Based on these allegations, we will investigate this matter further and will make a preliminary critical circumstances determination based on available information at the appropriate time in accordance with section 351.206 of the Department's regulations. See Initiation Checklist at 9.

Request for an Expedited Preliminary Determination

The petitioner has requested that, in accordance with the Department's June 8, 2000, policy bulletin regarding expedited antidumping duty investigations, the Department issue an expedited preliminary determination in this investigation. See Department Policy Bulletin No. 00.1 “Expedited Antidumping Duty Allegations” ( “policy bulletin”, which can be found on the Department's web page at http://ia.ita.doc.gov. The policy bulletin lays out specific criteria that the Department will consider in deciding whether to expedite an investigation, including evidence of an extraordinary surge in imports prior to the filing of the petition, evidence of significant import penetration, evidence of an unusually high dumping margin or recent declines in import prices, whether there are prior determinations of dumping against the same product (or class of product) from the subject country in the United States or in other countries, and whether the Department's resources permit it to expedite the preliminary determination.

The petitioner alleges that there has been a surge of “unfairly traded imports” of ammonium nitrate from Ukraine at “unprecedented levels” and that Ukrainian producers have captured U.S. market share through “aggressive and persistent underselling.” The petitioner further alleges that, after the U.S. industry received relief in June 2000 via a suspension agreement in Ammonium Nitrate from Russia, U.S. importers simply made Ukraine a “replacement” source for Russian ammonium nitrate. The petitioner claims that the product is highly seasonal and that early relief is needed to avoid losing sales during the critical spring 2001 growing season.

We are setting aside a period for parties to comment on the petitioner's request for an expedited preliminary determination. The Department encourages all parties to submit such comments no later than November 13, 2000. Comments should be addressed to the Import Administration's Central Records Unit at Room 1870, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230. We intend to make a determination on the petitioner's request for an expedited preliminary determination by November 16, 2000.

Initiation of Antidumping Investigation

Based on our examination of the petition, we have found that the petition meets the requirements of section 732 of the Act. Therefore, we are initiating an antidumping duty investigation to determine whether imports of solid agricultural grade ammonium nitrate from Ukraine are being, or are likely to be, sold in the United States at less than fair value. Unless this deadline is extended, we will make our preliminary determination no later than 140 days after the date of this initiation.

Distribution of Copies of the Petition

In accordance with section 732(b)(3)(A) of the Act, a copy of the public version of the petition has been provided to the representatives of the government of Ukraine.

International Trade Commission Notification

We have notified the ITC of our initiation, as required by section 732(d) of the Act.

Preliminary Determination by the ITC

The ITC will determine by November 27, 2000, whether there is a reasonable indication that an industry in the United States is materially injured, or is threatened with material injury, by reason of imports of solid fertilizer grade ammonium nitrate from Ukraine. A negative ITC determination will result in the investigation being terminated; otherwise, this investigation will proceed according to statutory and regulatory time limits.

This notice is published in accordance with section 777(i) of the Act.