Purified Carboxymethylcellulose From the Netherlands; Preliminary Results of Antidumping Duty Administrative Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

In response to requests from petitioner Aqualon Company (Aqualon), a division of Hercules Incorporated and a U.S. manufacturer of purified carboxymethylcellulose (CMC), Akzo Nobel Functional Chemicals B.V. (ANFC) and its U.S. affiliate, Akzo Nobel Functional Chemicals LLC (AN-US), and CP Kelco B.V. (CP Kelco) and its U.S. affiliates, CP Kelco U.S. Inc. (CP Kelco US) and J.M. Huber Corporation, the Department of Commerce (the Department) is conducting an administrative review of the antidumping duty order on purified CMC from the Netherlands. This administrative review covers imports of subject merchandise produced and exported by ANFC and CP Kelco during the period of review (POR) beginning July 1, 2008, through June 30, 2009.

We preliminarily determine that ANFC is the successor-in-interest to Akzo Nobel Surface Chemistry B.V. and that sales of subject merchandise by ANFC and CP Kelco were made at less than normal value during the POR. If these preliminary results are adopted in our final results, we will instruct U.S. Customs and Border Protection (CBP) to assess antidumping duties on appropriate entries based on the difference between the export price and normal value or the constructed-export-price (CEP) and normal value. All interested parties are invited to comment on these preliminary results.

DATES:

Effective Date: August 10, 2010.

FOR FURTHER INFORMATION CONTACT:

Edythe Artman or Olga Carter, AD/CVD Operations, Office 7, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-3931 or (202) 482-8221, respectively.

SUPPLEMENTARY INFORMATION:

Background

On July 11, 2005, the Department published the antidumping duty order on purified CMC from the Netherlands. See Notice of Antidumping Duty Orders: Purified Carboxymethylcellulose from Finland, Mexico, the Netherlands, and Sweden, 70 FR 39734 (July 11, 2005) (CMC Order). On July 1, 2009, the Department published an opportunity to request an administrative review of this order for the period July 1, 2008, through June 30, 2009. See Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity To Request Administrative Review, 74 FR 31406 (July 1, 2009).

Pursuant to 19 CFR 351.213(b)(1), Aqualon filed a July 20, 2009, request that the Department conduct an administrative review of the sales of subject merchandise made by ANFC and CP Kelco during the POR. On July 29, 2009, CP Kelco and its U.S. affiliates, CP Kelco US and J.M. Huber Corporation, requested a review of CP Kelco's sales of subject merchandise and, on July 31, 2009, ANFC and its U.S. affiliate, AN-US, similarly requested a review of ANFC's sales of subject merchandise made during the POR.

On August 25, 2009, the Department published a notice of initiation of this administrative review, covering sales, entries and/or shipments of purified CMC from ANFC and CP Kelco, in the Federal Register. See Initiation of Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in Part, 74 FR 42873 (August 25, 2009).

The Department issued its antidumping duty questionnaire to the respondent parties on September 4, 2009. ANFC responded to the questionnaire on October 13, 2009 (response to section A), and on October 27, 2009 (sections B and C responses). CP Kelco filed its questionnaire responses on September 28, 2009 (section A) and October 26, 2009 (sections B-D).

On November 12, 2009, Aqualon filed comments on CP Kelco's questionnaire responses, as well as a request for a sales-below-cost investigation of ANFC, in which the petitioner alleged that ANFC had made home-market sales of purified CMC at prices below the cost of production (COP) during the POR. After reviewing the allegation, the Department initiated a cost investigation of ANFC on January 8, 2010, and requested that the company respond to section D of the questionnaire. ANFC filed its section D response on February 19, 2010. Aqualon submitted comments to this response on March 3, 2010, and, in response to these comments and to clarify portions of ANFC's section D response, the Department issued supplemental questionnaires, to which ANFC responded on June 1, 2010, June 23, 2010, and July 15, 2010.

In the meanwhile, ANFC responded to supplemental questionnaires concerning sections A-C on March 11, 2010, and April 29, 2010. Aqualon provided additional comments on CP Kelco's section D response on March 18, 2010, and CP Kelco filed responses to supplemental questionnaires concerning sections A-D on the following dates: February 17, 2010; March 15, 2010; April 26, 2010; May 5, 2010; July 2, 2010; and July 21, 2010. On July 1, 2010, Aqualon provided comments on ANFC's June 23, 2010 response to the Section D supplemental questionnaire.

On March 22, 2010, the Department extended the deadline for the preliminary results of review from April 2, 2010, until August 2, 2010. See Certain Purified Carboxymethylcellulose from the Netherlands; Extension of Time Limit for Preliminary Results of Antidumping Duty Administrative Review, 75 FR 15678 (March 30, 2010).

As described in the “Verification” section below, we conducted sales verifications of ANFC's questionnaire responses at the company's production and sales facility in the Netherlands from May 17, 2010, through May 21, 2010, and at its U.S. affiliate's CMC sales office from June 22, 2010, through June 24, 2010. As a result of minor corrections and findings at the verifications, ANFC submitted revised databases for sections B and C on July 6, 2010 per the Department's request.

Period of Review

The POR is July 1, 2008, through June 30, 2009.

Scope of the Order

The merchandise covered by this order is all purified CMC, sometimes also referred to as purified sodium CMC, polyanionic cellulose, or cellulose gum, which is a white to off-white, non-toxic, odorless, biodegradable powder, comprising sodium CMC that has been refined and purified to a minimum assay of 90 percent. Purified CMC does not include unpurified or crude CMC, CMC Fluidized Polymer Suspensions, and CMC that is cross-linked through heat treatment. Purified CMC is CMC that has undergone one or more purification operations, which, at a minimum, reduce the remaining salt and other by-product portion of the product to less than ten percent. The merchandise subject to this order is currently classified in the Harmonized Tariff Schedule of the United States at subheading 3912.31.00. This tariff classification is provided for convenience and Customs purposes; however, the written description of the scope of this order is dispositive.

Verification

As provided in section 782(i) of the Act, and 19 CFR 351.307, we conducted a sales verification of the questionnaire responses provided by ANFC from May 17, 2010, through May 21, 2010, in the Netherlands. We further verified ANFC's U.S. affiliates' sales information from June 22, 2010, through June 24, 2010 at AN-US' sales office located in Brewster, New York. We used standard verification procedures, including on-site inspection of ANFC's production facility in the Netherlands. Because there was insufficient time to complete the verification memoranda for the preliminary results of review, these memoranda will be forthcoming. However, ANFC submitted sales data on July 6, 2010, based on revisions discussed at the verifications and we have used this data in our margin calculations for ANFC. Interested parties will have an opportunity to comment on the verification memoranda in their case briefs (see “Disclosure and Public Comment” section below).

Successor-in-Interest

In this review, ANFC requests to be treated as the successor-in-interest to Akzo Nobel Surface Chemistry B.V. (ANSC), a company for which the Department calculated an antidumping duty margin in the less-than-fair-value investigation of the order on purified CMC from the Netherlands. See Notice of Final Determination of Sales at Less Than Fair Value: Purified Carboxymethylcellulose from the Netherlands, 70 FR 28275 (May 17, 2005). We have not completed a review of sales of subject merchandise of an Akzo Nobel group company since the investigation.

As ANFC explained in its submissions, all CMC activities are embedded in the sub-business unit Cellulosic Specialties (CS), which, until November 1, 2005, was part of the business unit Akzo Nobel Surface Chemistry—a business unit that was associated with ANSC within the Netherlands. See ANFC's section A questionnaire response, date-stamped October 13, 2009 (ANFC's section A response), at 7; ANFC's supplemental questionnaire response, dated-stamped March 11, 2010, at 4-5. In November 2005, the CS sub-business unit was moved from the ANSC business unit to the ANFC business unit. See ANFC's section A response at 7. Thus, activities of the CS sub-business unit became associated through its new business unit with the ANFC legal entity. This portfolio realignment was part of a global restructuring of Akzo Nobel N.V., the parent of ANFC and ANSC. See ANFC's supplemental questionnaire response at 5. As an additional part of the restructuring, the Netherlands branch of ANSC was legally merged into ANFC in the Netherlands in December 2005. Id. at 4-5. ANFC provided a copy of the merger documents in exhibit 7 of its March 11, 2010, supplemental response. It also stated that the realignment of the CS sub-business unit had not resulted in any changes to CMC production facilities, sales services, or the customer base for CMC sales. See ANFC's section A response at 7; ANFC's supplemental response at 5.

Thus, the Department is conducting a successor-in-interest analysis to determine whether ANFC is the successor-in-interest to ANSC for purposes of treatment under the antidumping law. In making such a determination, the Department examines a number of factors including, but not limited to, changes in: (1) Management, (2) production facilities, (3) suppliers, and (4) customer base. See, e.g., Certain Hot-Rolled Carbon Steel Flat Products from Thailand: Preliminary Results of Antidumping Duty Administrative Review, 74 FR 39047, 39051 (August 5, 2009), unchanged in final, Certain Hot-Rolled Carbon Steel Flat Products from Thailand: Final Results of Antidumping Duty Administrative Review, 74 FR 65518 (December 10, 2009). While examining these factors alone will not necessarily provide a dispositive indication of succession, the Department will generally consider one company to have succeeded another if that company's operations are not materially dissimilar to the predecessor's operations. See Stainless Steel Bar from France: Preliminary Results of Antidumping Duty Administrative Review, 70 FR 17411 (April 6, 2005) (unchanged in final, Stainless Steel Bar from France: Final Results of Antidumping Duty Administrative Review, 70 FR 46492 (August 10, 2005)). Thus, if the evidence demonstrates, with respect to the production and sale of the subject merchandise, that the new company is essentially the same business operation as the former company, the Department will assign the new company the cash deposit rate of its predecessor.

The record shows that the sub-business unit responsible for the production and sales of CMC in the Netherlands remains unchanged as a result of the corporate restructuring. It was moved from an organizational standpoint, as it is now aligned under a different business unit. However, the physical attributes and operations of the CS sub-business unit remain the same—it continues to produce purified CMC at its facility in Arnhem, the Netherlands, and to sell the subject merchandise through its U.S. affiliate located in Brewster, New York. See ANFC's section A response at 10. Furthermore, ANFC has stated that there were no changes to CMC production facilities, its sales services, or its customer base as a result of the re-alignment. It clarified that there had been no changes to the production capacity or product lines of CMC due to the re-alignment and that, administratively, the sub-business unit performed the same services at the same facilities as before the merger of ANSC with ANFC. See ANFC's March 11, 2010, supplemental response at 5.

In light of these findings, we conclude that, from an operational standpoint, there have been no changes to the CS sub-business unit as a result of the corporate restructuring. Hence, we preliminarily find that ANFC's operations are not materially dissimilar from ANSC's operations and that, for purposes of this review and the antidumping duty proceeding, we find that ANFC is the successor-in-interest to ANSC.

Date of Sale

For its home-market sales, ANFC reported its date of sale to be the invoice date, which coincided with the loading and shipment date of the merchandise. It stated that, until the time that the merchandise is loaded, changes can occur in the material terms of sale. See ANFC's section B questionnaire response, date-stamped October 27, 2010 (ANFC's section B response), at 11. Similarly, for its warehouse sales in the United States, ANFC reported the date of sale to be the invoice date, which is the date that merchandise is loaded for shipment from the warehouse and, because material changes can take place prior to loading, the invoice date is the date on which the terms of sale are set. See ANFC's section C questionnaire response, date-stamped October 27, 2010 (ANFC's section C response), at 11. However, for sales in which the product was shipped directly from the Netherlands to the United States, ANFC reported the date of shipment as the date of sale as this date preceded the invoice date. See ANFC's section C response at 11-12. In its description of the sales process for these sales, ANFC stated that material terms, such as the quantity or price of the merchandise, could change prior to invoicing. See ANFC's section A response, at 29. But the description further shows that the unaffiliated customer is not invoiced by AN-US until the customer receives the merchandise from the Netherlands.

CP Kelco reported the date of invoice as the date of sale for its comparison-market and U.S. sales. It explained that, in most instances, invoicing occurred on the “post goods issue” date, i.e., the date on which the merchandise was removed from the finished-goods inventory, its removal was posted in the SAP accounting system, and the goods were prepared for shipment. See CP Kelco's section B questionnaire response, dated October 26, 2009 (section B response), at 15-16; its section C questionnaire response, dated October 26, 2009 (section C response), at 16-17. It reported the “post goods issue” date as the shipment date for all sales and explained that, because invoicing should have been triggered within SAP by this date, the invoice date should have been the same as the shipment date except in instances of manual override of the SAP system. Id. at 16. In a later response, CP Kelco acknowledged that, for one sale, the date of shipment preceded the reported sale date because the merchandise had been shipped prior to a holiday weekend and the warehouse did not post the “goods issue” until after the weekend. See CP Kelco's February 17, 2010, supplemental questionnaire response, at 5-6.

Normally, the Department considers invoice date as the date of sale in accordance with 19 CFR 351.401(i). However, it is the Department's practice to use shipment date as the date of sale when shipment date precedes invoice date. See Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products From Korea: Final Results of Antidumping Duty Administrative Reviews, 63 FR 13170, 13172-73 (March 18, 1998); see also Stainless Steel Sheet and Strip in Coils from the Republic of Korea; Final Results and Rescission of Antidumping Duty Administrative Review in Part, 72 FR 4486 (January 31, 2007), and the accompanying Issues and Decision Memorandum at Comments 4 and 5.

Although ANFC asserts that material terms of sale for its direct sales may change between the time of shipment of the goods from the Netherlands and the issuance of an invoice by AN-US, we find that the quantity and price for these sales are established at the time the merchandise was shipped from the Netherlands. See ANFC's section C response, at 11. Therefore, we preliminarily determine that the shipment date is the appropriate date of sale for these sales and that, for all other ANFC sales, the invoice date is the appropriate date of sale.

For CP Kelco, we preliminarily determine that it is appropriate to use invoice date as the date of sale except in instances where the shipment date precedes the invoice date. In those instances, we will use the shipment date as the date of sale, in keeping with our past practice.

Fair Value Comparisons

To determine whether sales of purified CMC from the Netherlands to the United States were made at less than fair value, we compared the export price or CEP of each sale to the normal value, as described in the “Export Price and Constructed Export Price” and “Normal Value” sections of this notice below. In accordance with section 777A(d)(2) of the Act, we compared the export prices and the CEPs of individual U.S. transactions to monthly weighted-average normal values.

Product Comparisons

In accordance with section 771(16) of the Act, we considered all purified CMC, that fit the description in the “Scope of the Order” section above and that was either produced and sold by ANFC in the Netherlands during the POR or produced by CP Kelco in the Netherlands and sold by that company in the comparison market of Taiwan during the POR, to be foreign like product for the purpose of determining appropriate product comparisons to purified CMC sold by respondents in the United States. For our discussion of market viability and the selection of comparison markets, see the “Normal Value” section of this notice below. We compared the U.S. sales with the sales of the foreign like products in the appropriate comparison markets.

Specifically, in making our comparisons, we used the following methodology. If sales of an identical comparison-market model were reported, we compared the export prices or CEPs of the U.S. sales to the weighted-average, comparison-market prices of all sales that passed the COP test of the identical product during the relevant or contemporary month. See sections 771(16) and (35) of the Act; see also 773(b)(1) of the Act. If there were no contemporaneous sales of an identical model, we identified sales of the most similar comparison-market model. See section 771(16) of the Act. To determine the most similar model, we matched the physical characteristics of the foreign like products, as reported by the respondents, to the characteristics of the subject merchandise in the following order of importance: (1) Grade, (2) viscosity, (3) degree of substitution, (4) particle size, and (5) solution characteristics. Where there were no sales of identical or similar foreign like product in the ordinary course of trade with which to compare to a U.S. sale, we made product comparisons using constructed value.

CP Kelco reported that it sold material which was suitable for pharmaceutical grade applications and for other regulated applications as well (i.e., food, cosmetic, personal care). See CP Kelco's section B response at 9-10; see also CP Kelco's section A Response at exhibit A-31. In its responses to sections B, C, and D of our antidumping duty questionnaire, CP Kelco reported these sales as sales of grade “2” material, “regulated-other (food).” However, CP Kelco clarified in a supplemental questionnaire response that all of the purified CMC products it produced met the standards of the U.S. Pharmacopeia and that, therefore, any of the products that can be used in food, personal care, or cosmetic applications can also be used in pharmaceutical applications, and vice versa. See CP Kelco's Supplemental Questionnaire Response, dated February 17, 2010, at 4-5. In other words, all of the company's products are manufactured to meet grade “1” requirements.

It has been the Department's past practice to consider a product, which meets multiple specifications, to be identified according to the strictest requirements of subject merchandise. In this case, all of the relevant commercial products were manufactured to be suitable both for the strictest specifications, that of regulated pharmaceutical-grade CMC, and for a less-strict specification, that of regulated-other (food) grade CMC. In accordance with our past practice, we treated these sales as sales of products which met the strictest specification to which the material was manufactured: regulated pharmaceutical grade material. See Memorandum to the File, through Angelica Mendoza, Program Manager, Office 7, regarding “CP Kelco B.V.—Analysis Memorandum for the Preliminary Results of the 2008/2009 Antidumping Duty Administrative Review of Purified Carboxymethylcellulose from the Netherlands” (CP Kelco's Preliminary Analysis Memorandum), dated August 2, 2010, at 2-3.

Export Price and Constructed Export Price

In accordance with section 772 of the Act, we calculate either an export price or a CEP, depending on the nature of each sale. Section 772(a) of the Act defines export price as the price at which the subject merchandise is first sold (or agreed to be sold) before the date of importation by the foreign producer or exporter to an unaffiliated purchaser in the United States or to an unaffiliated purchaser for exportation to the United States. Section 772(b) of the Act defines CEP as the price at which the subject merchandise is first sold (or agreed to be sold) in the United States before or after the date of importation by or for the account of the producer or exporter of such merchandise, or by a seller affiliated with the producer or exporter, to a purchaser not affiliated with the producer or exporter.

ANFC classified all of its sales to the United States as sales made through its U.S. affiliate, AN-US, to end-users and distributors (i.e., CEP sales). CP Kelco classified its sales to the United States as: (1) Direct sales to end-users and distributors (i.e., export-price sales); and (2) sales via its U.S. affiliate, CP Kelco US, to end-users and distributors (i.e., CEP sales). For purposes of these preliminary results, we have accepted these classifications.

We calculated export price based on prices charged to the first unaffiliated U.S. customer. As described in the “Date of Sale” section above, we used invoice date as the date of sale for export-price sales except where CP Kelco reported a date of shipment that preceded the invoice date. We based export price on the packed, delivered prices to unaffiliated purchasers in the United States, making adjustments where necessary for billing adjustments. See 19 CFR 351.401(c). We made deductions for movement expenses in accordance with section 772(c)(2)(A) of the Act, which included deductions for foreign inland freight, international freight, marine insurance, brokerage and handling expenses incurred in the United States, U.S. inland freight (offset by reported freight revenue), and U.S. customs duties.

In accordance with our practice, we capped the amount of freight revenue permitted to offset gross unit price at no greater than the amount of corresponding inland freight expenses incurred by CP Kelco and its U.S. affiliate. See Certain Orange Juice From Brazil: Final Results of Antidumping Duty Administrative Review, 74 FR 40167 (Aug. 11, 2009), and accompanying Issues and Decision Memorandum at Comment 3; Certain Orange Juice From Brazil: Final Results and Partial Rescission of Antidumping Duty Administrative Review, 74 FR 46584 (Aug. 11, 2008), and accompanying Issues and Decision Memorandum at Comment 7; Polyethylene Retail Carrier Bags From the People's Republic of China: Final Results of Antidumping Duty Administrative Review, 74 FR 6857 (February 11, 2009), and the accompanying Issues and Decision Memorandum at Comment 6.

We did not adjust export price for certain “factoring” expenses that CP Kelco reported to have incurred on U.S. sales. Although we have accepted this adjustment in prior reviews, we found it inappropriate to include this adjustment in this review because CP Kelco could not provide us with sufficient evidence that its factoring activity, which involves affiliated parties, was of an arm's-length nature. For a detailed discussion of this matter, see CP Kelco's Preliminary Analysis Memorandum at 6-7.

We calculated CEP based on prices charged to the first unaffiliated U.S. customer after importation. As discussed in the “Date of Sale” section above, we used invoice date as the date of sale for CEP sales, except in instances where the date of shipment preceded the invoice date. We based CEP on the gross unit price to the first unaffiliated U.S. customer, making adjustments where necessary for billing adjustments and rebates. See 19 CFR 351.401(c). Where applicable, and pursuant to sections 772(c)(2)(A) and (d)(1) of the Act, the Department made deductions for movement expenses, including deductions for domestic foreign inland freight and warehousing expenses, domestic insurance, domestic brokerage and handling expenses, international freight, marine insurance, U.S. insurance, brokerage and handling expenses incurred in the United States, U.S. warehousing expenses, U.S. inland freight (offset by reported freight revenue), and U.S. customs duties.

In accordance with section 772(d)(1) of the Act, we also deducted, where applicable, U.S. direct selling expenses (including credit expenses) and indirect selling expenses and inventory carrying costs incurred in the Netherlands and the United States and associated with economic activities in the United States. As noted for the calculation of export price above, we did not made an adjustment to CEP for factoring expenses that CP Kelco reported to have incurred on U.S. sales, since we could not establish the arm's-length nature of the affiliated factoring transactions.

We deducted an amount for CEP profit in accordance with section 772(d)(3) of the Act.

Normal Value

A. Home Market Viability and Comparison Market Selection

In order to determine whether there is a sufficient volume of sales in the home market to serve as a viable basis for calculating normal value (i.e., whether the aggregate volume of home-market sales of the foreign like product is equal to or greater than five percent of the aggregate volume of U.S. sales), we compared respondent's volume of home-market sales of the foreign like product to the volume of U.S. sales of the subject merchandise, in accordance with section 773(a)(1)(C) of the Act.

Section 773(a)(1)(C)(ii) of the Act provides that the Department may determine that home-market sales are inappropriate as a basis for determining normal value if the Department determines that the aggregate quantity of the foreign like product sold in the exporting country is insufficient to permit a proper comparison with the sales of the subject merchandise to the United States. When sales in the home market are not viable, section 773(a)(1)(B)(ii) of the Act provides that sales to a particular third-country market may be utilized if: (1) The prices in such market are representative; (2) the aggregate quantity of the foreign like product sold by the producer or exporter in that third-country market is five percent or more of the aggregate quantity of the subject merchandise sold in or to the United States; and (3) the Department does not determine that a particular market situation in the third-country market prevents a proper comparison with the U.S. price.

A review of the record shows that ANFC's home-market sales were viable, for purposes of comparing them to U.S. sales. See ANFC's Section A response at 4. Thus, we based normal value on this company's home-market sales made in the usual commercial quantities and in the ordinary course of trade.

CP Kelco reported, and we have preliminary determined, that its aggregate volume of home-market sales of the foreign like product was not greater than five percent of the aggregate volume of U.S. sales of subject merchandise and, thus, its home-market sales did not provide a viable basis for calculating normal value. See CP Kelco's section A response at A2-A3. Accordingly, CP Kelco reported the POR sales of foreign like product to its three largest third-country markets—Taiwan, Germany, and South Africa. Id. In reviewing this information of these three markets, the Department found that exports of the foreign like product to Taiwan were similar to those exported to the United States, that the aggregate quantity of the exports of the foreign like product to Taiwan was five percent or more of the subject merchandise sold in the United States, and that there was no evidence of a particular market situation in Taiwan that prevented a proper comparison between sales prices in that market and the U.S. price. For a detailed discussion of these findings, see CP Kelco's Preliminary Analysis Memorandum at 7-8. Therefore, based on our findings and pursuant to section 773(a)(1)(B)(ii) of the Act, we selected Taiwan as the appropriate third-country market on which to base our calculation of normal value for CP Kelco in these preliminary results.

We also used constructed value as the basis for calculating normal value, in accordance with section 773(a)(4) of the Act, for U.S. sales by CP Kelco that did not have identical or similar product matches where appropriate.

B. Cost of Production Analysis

Based on Aqualon's cost allegation, the Department had reasonable grounds to believe or suspect that ANFC had made below-cost sales of foreign like product. See Section 773(b)(2)(A)(i) of the Act. Therefore, the Department initiated a cost investigation of ANFC on January 8, 2010, and requested that ANFC file a response to section D of the antidumping duty questionnaire on that date. Also, pursuant to section 773(b)(2)(A)(ii) of the Act, we had reasonable grounds to believe or suspect that CP Kelco sold the foreign like product below the COP in this review because, in the most recently completed review of the company, we had disregarded sales found to be made below the cost of production. See Purified Carboxymethylcellulose From the Netherlands; Preliminary Results of Antidumping Duty Administrative Review, 74 FR at 24823 (May 26, 2009) (unchanged in final, Purified Carboxymethylcellulose from the Netherlands: Final Results of Antidumping Duty Administrative Review, 74 FR 52742 (Oct. 14, 2009)). Thus, the Department also requested that CP Kelco respond to section D of the questionnaire.

C. Calculation of Cost of Production

We have preliminarily relied upon the COP information provided by ANFC and CP Kelco in their section D submissions, except as noted below. In accordance with section 773(b)(3) of the Act, we calculated the weighted-average COP for each foreign like product based on the sum of the respondents' material and fabrication costs for the product, plus amounts for selling, general, and administrative (SG&A) expenses, as well as packing costs. For ANFC, we relied on the COP data provided in its June 22, 2010, submission, except for the following instances:

a. We subtracted the reported research and development (R&D) expenses from fixed overhead and we reclassified them as general and administrative (G&A).

b. We added amortization of intangible assets, certain non-operating expenses, and certain R&D expenses net of the technical service component reported as an indirect selling expense to the general and administrative (G&A) expense calculation in accordance with the Department's practice of including non-operating accounts which relate to the general operations of the company as a whole. See Magnesium Metal From the Russian Federation: Notice of Final Determination at Less than Fair Value, 70 FR 9041 (February 24, 2005), and accompanying I&D Memo at Comment 10.

c. We subtracted net exchange losses from ANFC's reported G&A expense calculation. Exchange gains and losses (G&L) are included by the Department as part of financial expense, which is calculated at the parent level.

For further discussion of these adjustments, see the memorandum from Frederick W. Mines, Accountant, to Neal M. Halper, Director, Office of Accounting, regarding “Cost of Production and Constructed Value Calculation Adjustments for the Preliminary Results—Akzo Nobel Functional Chemicals B.V.,” dated August 2, 2010.

For CP Kelco, we relied on the COP data provided in its July 27, 2010 submission, except for two changes. First, we made a downward adjustment to the cost of manufacturing to reflect an adjustment made by the auditor to CP Kelco's books for the 2008 fiscal year. The auditor found that certain incentive plan wages had been overstated and, because these wages were paid to CMC plant personnel, we found that they directly related to the cost of manufacturing and we thus applied an adjustment, reflecting overstated costs for the POR, to this cost. For a discussion and calculation of this adjustment, see CP Kelco's Preliminary Analysis Memorandum at 15-16. Second, we included certain factoring expenses in CP Kelco's financial expense calculation, since we did not adjust the third-country market or U.S. sales prices for these expenses. For a more detailed discussion of this matter, see CP Kelco's Preliminary Analysis Memorandum at 6-7.

D. Test of Comparison Market Prices

As required under section 773(b) of the Act, we compared the respondents' weighted-average COP figures to their comparison-market sales prices (net of billing adjustments, any applicable movement expenses, direct and indirect selling expenses, and packing) of the foreign like product in order to determine whether sales in the comparison market had been made at prices below COP. In determining whether to disregard such sales, we examined, in accordance with sections 773(b)(1)(A) and (B) of the Act, whether such sales were made within an extended period of time in substantial quantities and whether the sales were made at prices which would not permit the recovery of all costs within a reasonable period of time.

E. Results of Cost Test

Pursuant to section 773(b)(2)(C) of the Act, where less than 20 percent of the sales of a given product were at prices less than the COP, we did not disregard any of the below-cost sales of that product because they were not made in substantial quantities. However, where 20 percent or more of the respondents' comparison-market sales of a model were made at prices below the COP, we disregarded these sales because they were made: (1) In substantial quantities within the POR (i.e., within an extended period of time), in accordance with sections 773(b)(2)(B) and (C) of the Act; and (2) at prices which would not permit recovery of all costs within a reasonable period of time, in accordance with section 773(b)(2)(D) of the Act. We used the remaining comparison-market sales, if such sales existed and were made in the ordinary course of trade, as the basis for determining normal value, in accordance with section 773(b)(1) of the Act.

In the current review, we found sales by ANFC made below the COP for 20 percent or more of certain models and, therefore, we disregarded these below-cost sales from our margin calculations. See ANFC's Preliminary Analysis Memorandum at 8.

F. Price-to-Price Comparisons

We calculated normal value based on prices to unaffiliated customers in the comparison markets. In these markets, we used invoice date as the date of sale. See 19 CFR 351.401(i). We increased or decreased price, as appropriate, for certain billing adjustments and rebates. We made deductions, where appropriate, for foreign inland freight and international freight pursuant to section 773(a)(6)(B) of the Act. We did not deduct certain factoring expenses from normal value that CP Kelco reported to have incurred on third-country sales, as we found did not find sufficient evidence of the arm's-length nature of the affiliated factoring transactions. See CP Kelco's Preliminary Analysis Memorandum at 6-7. In addition, when comparing sales of similar merchandise to U.S. sales, we made adjustments in normal value for differences in cost attributable to differences in physical characteristics of the merchandise, pursuant to section 773(a)(6)(C)(ii) of the Act and 19 CFR 351.411, as well as for differences in circumstances of sale, as appropriate (i.e., commissions and credit), in accordance with section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410. We also made an adjustment, where appropriate, for a CEP offset, in accordance with section 773(a)(7)(B) of the Act. See the “Level of Trade” section below. Finally, we deducted comparison-market packing costs and added U.S. packing costs to normal value, in accordance with sections 773(a)(6)(A) and (B) of the Act.

G. Price-to-Constructed-Value Comparisons

Section 773(a)(4) of the Act provides that, if we are unable to find a contemporaneous comparison-market match of identical or similar merchandise for a U.S. sale, then we base normal value on constructed value. Section 773(e) of the Act provides that constructed value shall be based on the sum of the cost of materials and fabrication employed in producing the merchandise, SG&A expenses, and profit. We calculated the cost of materials and fabrication based on the methodology described above in the “Calculation of Cost of Production” section. In accordance with section 773(e)(2)(A) of the Act, we based SG&A expenses and profit on the amounts incurred and realized by CP Kelco in connection with the production and sale of the foreign like product, in the ordinary course of trade, for consumption in the foreign country (i.e., Taiwan). See 19 CFR 351.405(b)(1).

Level of Trade

In accordance with section 773(a)(1)(B)(i) of the Act, to the extent practicable, we determine normal value based on sales in the comparison market at the same level of trade as the export price or CEP transaction. The level of trade in the comparison market is the level of trade of the starting-price sales in the comparison market or, when normal value is based on constructed value, the level of trade of the sales from which we derive SG&A expenses and profit. See 19 CFR 351.412(c). With respect to U.S. price for export-price transactions, the level of trade is also that of the starting-price sale, which is usually from the exporter to the importer. Id. For CEP, the level of trade is that of the constructed sale from the exporter to the importer. Id.

To determine whether comparison market sales are at a different level of trade from U.S. 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 different levels of trade, and the difference affects price comparability, as manifested in a pattern of consistent price differences between the sales on which normal value is based and comparison market sales at the level of trade of the export transaction, the Department makes a level-of-trade adjustment in accordance with section 773(a)(7)(A) of the Act. For CEP sales, we examine stages in the marketing process and selling functions along the chain of distribution between the producer and the customer. We analyze whether different selling activities are performed, and whether any price differences (other than those for which other allowances are made under the Act) are shown to be wholly or partly due to a difference in level of trade between the CEP and normal value. See 773(a)(7)(A) of the Act.

Under section 773(a)(7)(A) of the Act, we make an upward or downward adjustment to normal value for level of trade if the difference in level of trade involves the performance of different selling activities and is demonstrated to affect price comparability, based on a pattern of consistent price differences between sales at different levels of trade in the country in which normal value is determined. Finally, if the normal-value level of trade is at a more advanced stage of distribution than the level of trade of the CEP, but the data available do not provide an appropriate basis to determine a level-of-trade adjustment, we reduce normal value by the amount of indirect selling expenses incurred in the comparison market on sales of the foreign like product, but by no more than the amount of the indirect selling expenses incurred for CEP sales. See section 773(a)(7)(B) of the Act (the CEP-offset provision).

In analyzing differences in selling functions, we determine whether the levels of trade identified by the respondent are meaningful. See Antidumping Duties: Countervailing Duties, 62 FR 27296, 27371 (May 19, 1997). If the claimed levels of trade are the same, we expect that the functions and activities of the seller should be similar. Conversely, if a party claims that levels of trade are different for different groups of sales, the functions and activities of the seller should be dissimilar. See Porcelain-on-Steel Cookware from Mexico: Final Results of Antidumping Duty Administrative Review, 65 FR 30068 (May 10, 2000), and accompanying Issues and Decision Memorandum at Comment 6.

In the present review, both ANFC and CP Kelco claimed that a CEP offset was required because the CEP level of trade was less advanced than levels of trade in the comparison markets. See ANFC's section C questionnaire response at 52 and CP Kelco's section A questionnaire response at 33-34. In order to determine whether the comparison market sales were at different stages in the marketing process than the U.S. sales, we reviewed the distribution system in each market (i.e., the “chain of distribution”), including selling functions, class of customer (customer category), and the level of selling functions for each type of sale.

ANFC reported one level of trade in the home market, the Netherlands, with one channel of distribution to two classes of customers: (1) Direct sales from the warehouse located near the ANFC manufacturing plant to end users, and (2) direct sales from the warehouse located near the ANFC manufacturing plant to distributors. See ANFC's section B questionnaire response at 10.

ANFC reported one level of trade in the home market, the Netherlands, with one channel of distribution to two classes of customers: (1) Direct sales from the warehouse located near the ANFC manufacturing plant to end users, and (2) direct sales from the warehouse located near the ANFC manufacturing plant to distributors. See ANFC's section B questionnaire response at 10.

Based on our review of evidence on the record, we find that the home-market sales to both customer categories through the one channel of distribution were substantially similar with respect to selling functions and stages of marketing. ANFC performed the same selling functions for sales in a single home-market channel of distribution, including sales forecasting, strategic planning, advertising, distributor training, packing, warehousing, inventory management, order processing, direct sales crew, market research, providing guarantees, after sales services, freight and delivery, and invoicing. See ANFC's section A questionnaire response at 17-25. Each of these selling functions was identical in the intensity of their provision or only differed minimally, the exception being that ANFC provided competitive discounts and technical assistance to a different degree of involvement to different customers' types. See ANFC's section A questionnaire response at exhibit 8. See also Preliminary Analysis Memorandum—ANFC at 4. Thus, after considering all of the above, we preliminarily find that ANFC had only one LOT for its home market sales.

ANFC reported one CEP LOT, with two separate channels of distribution in the United States. CEP Channel 1 sales were made to two classes of customers, i.e., end users and distributors, either from inventory or made to order and CEP Channel 2 sales were also made to two classes of customers, i.e., end users and distributors from inventory. For CEP Channel 1 sales, the U.S. customer orders merchandise from AN-US and the merchandise is shipped directly to the U.S. customer from ANFC's warehouse. These sales are classified as CEP Channel 1 sales because the agreement to sell occurred in the United States, the sale contract was executed in the United States, and the title passed directly from the AN-US to the unaffiliated customer in the United States. For the CEP Channel 2 sales, the U.S. customer orders merchandise from AN-US, which is shipped out of stock of materials maintained at AN-US's unaffiliated warehouses. Upon examining ANFC's questionnaire responses, we preliminarily find that it has two channels of distribution for its CEP sales in the United States. See ANFC's supplemental questionnaire response, dated March 11, 2010 at 22 through 26. See also ANFC's section C questionnaire response at 10 through 11.

For CEP sales, we consider only the selling activities reflected in the price after the deduction of expenses and CEP profit under section 772(d) of the Act. See Micron Tech. Inc. v. United States, 243 F.3d 1301, 1314-15 (Fed. Cir. 2001). We reviewed the selling functions and services performed by ANFC on CEP sales as described in its questionnaire responses, after these deductions. We found that selling functions performed by ANFC to its U.S. affiliate in support of the CEP sales were almost identical regardless of class of customers or channel of trade. ANFC reported that the only services it provided for the CEP Channel 1 sales, to a different degree of performance comparatively to a degree of performance provided for Channel 2 sales, were logistics for freight and delivery, warehousing, and inventory management. See ANFC's section A questionnaire response at exhibit 8. Therefore, we found that selling functions performed by ANFC for both channels are at the same level.

Next, we compared the stages in the marketing process and selling functions along the chain of distribution for home-market and CEP sales. ANFC's home-market and CEP sales were both made to end users and distributors. We found that ANFC performs an additional layer of selling functions at a greater degree of involvement in the home market than it provided on CEP Channel 1 and Channel 2 sales (e.g., sales forecasting, advertising, distributor training, market research, sales and marketing support and competitive discounts). See ANFC supplemental questionnaire response at 10 through 16. Because these additional selling functions are significant, we find that ANFC's CEP sales are at a different level of trade than its home-market sales.

According to section 773(a)(7)(B) of the Act, a CEP offset is appropriate when the level of trade in the home market is at a more advanced stage than the level of trade of the CEP sales and there is no basis for determining whether the difference in levels of trade between normal value and CEP affects price comparability. ANFC reported that it provided minimal selling functions and services for the CEP level of trade and that, therefore, the home-market level of trade is more advanced than the CEP level of trade. Based on our analysis of the channels of distribution and selling functions performed by ANFC for sales in the home market and CEP sales in the U.S. market (i.e., sales support and activities provided by ANFC for sales to its U.S. affiliate), we preliminarily find that the home market level of trade is at a more advanced stage when compared to CEP sales because ANFC provides many selling functions in the home market at a different level of service (i.e., sales forecasting, advertising, distributor training, market research, sales and marketing support and competitive discounts, etc.) as compared to selling functions performed for its CEP sales (i.e., ANFC reported that the only services it provided for the CEP sales were logistics for freight and delivery, packing, warehousing, limited strategic planning, inventory maintenance and technical assistance). See ANFC's supplemental questionnaire response, dated March 11, 2010 at 10-18 and its second supplemental questionnaire response, dated April 29, 2010 at 3. Thus, we find that ANFC's home-market sales are at a more advanced level of trade than its CEP sales. As there was only one level of trade in the home market, there were no data available to determine the existence of a pattern of price differences, and we do not have any other information that provides an appropriate basis for determining a level-of-trade adjustment; therefore, we applied a CEP offset to normal value for CEP comparisons.

CP Kelco reported sales through two channels of distribution in the third-country market, identified as: (1) Channel 1—sales to an unaffiliated end user; and (2) Channel 2—sales to an unaffiliated distributor. A review of the record shows that CP Kelco continues to perform substantially similar selling functions and activities for the two channels of distribution and customer categories. Specifically, it performed activities relating to customer service, logistics, inventory maintenance, packing, freight/delivery, sales promotion, and guarantees to the same degree for each channel. See CP Kelco's section A response at A18-A30; CP Kelco's supplemental questionnaire response, dated April 23, 2010, at exhibit A-51. The company also provided, to slightly differing degrees, sales negotiations, credit risk management, direct sales personnel and technical support functions in both channels. Id. Consequently, we conclude that, as in prior reviews, CP Kelco only made sales at one level of trade in the Taiwanese market.

In the U.S. market, CP Kelco reported two channels of distribution, identified as: (1) Channel 1—CEP sales to unaffiliated end users and distributors; and (2) Channel 2—EP sales to unaffiliated end users and distributors. Turning to a review of the selling functions the company performed for U.S. sales, we considered only those reflected in the price after the deduction of expenses and CEP profit under section 772(d) of the Act. For its CEP sales, we found that CP Kelco performed functions related to logistics, inventory maintenance, packing, and freight/delivery to a high degree. See supplemental questionnaire response, dated April 26, 2010, at exhibit A-51. For its EP sales, we found that it performed logistics, packing and freight/delivery functions to a high degree but also assisted the U.S. affiliate with customer service, inventory maintenance, sales promotion, direct sales personnel and guarantees activities to lesser degrees. Id. Because of the significant differences in selling functions performed for the two types of sales, we concluded that CP Kelco's EP sales were made at a different level of trade than its CEP sales.

We next examined the third-country sales compared to the EP sales. CP Kelco's Taiwanese sales and EP sales were both made to end users and distributors and the selling functions performed by CP Kelco for these two groups of sales were almost identical. It performed functions relating to sales negotiations, credit-risk management, inventory maintenance, packing, freight/delivery, collection, sales promotion, direct sales personnel, technical support, and guarantees to nearly the same degrees in both markets. Id. Because the selling functions and channels of distribution were substantially similar, we preliminarily determined that the Taiwanese sales were made at the same level of trade as the EP sales in the U.S. market. Therefore, it was not necessary to make a level-of-trade adjustment for the EP sales.

According to section 773(a)(7)(B) of the Act, a CEP offset is appropriate when the level of trade in the home- or third-country market is at a more advanced stage than the level of trade of the CEP sales and there is no basis for determining whether the difference in these levels effects price comparability. CP Kelco reported that it provided few selling functions and activities for the CEP level of trade; consequently, the Taiwanese level of trade is more advanced than the CEP level of trade. Furthermore, because there was only one level of trade in the third-country market and no data were available to determine the existence of a pattern of price differences within that market, and because we do not have any other information that provides an appropriate basis for determining a level-of-trade adjustment, we applied a CEP offset to normal value for CEP comparisons pursuant to section 773(a)(7)(B) of the Act.

To calculate a CEP offset for ANFC and CP Kelco, we deducted the comparison-market indirect selling expenses from normal value for sales that were compared to U.S. CEP sales. We limited the deduction by the amount of the indirect selling expenses deducted in calculating the CEP under section 772(d)(1)(D) of the Act. See section 773(a)(7)(B) of the Act.

Currency Conversion

We made foreign-currency conversions into U.S. dollars in accordance with section 773A(a) of the Act and 19 CFR 351.415 based on exchange rates in effect on the dates of the U.S. sales, as certified by the Federal Reserve Bank. See Import Administration Web site at: http://ia.ita.doc.gov/exchange/index.html.

Preliminary Results of Review

We preliminarily determine that, for the period July 1, 2008, through June 30, 2009, the following dumping margins exist:

Disclosure and Public Comment

Pursuant to 19 CFR 351.224(b) of the Department's regulations, the Department will disclose to parties to the proceeding any calculations performed in connection with these preliminary results within five days after the date of publication of this notice. Pursuant to 19 CFR 351.309(c)(1)(ii), interested parties may submit written comments in response to these preliminary results. As stated in the “Verification” section above, the Department will release the sales verification memoranda to parties for comment after the publication of these preliminary results in the Federal Register. Therefore, interested parties may submit case briefs to the Department no later than 30 days after the publication of the preliminary results of review or, if later, seven days after the date of the issuance of the last verification report in this proceeding. See 19 CFR 351.309(c)(1)(ii). Rebuttal briefs, the content of which is limited to the issues raised in the case briefs, must be filed within five days from the deadline date for the submission of case briefs. See 19 CFR 351.309(d)(1) and (2).

Parties who submit arguments in this proceeding are requested to submit with the argument: (1) A statement of the issues; (2) a brief summary of the argument; and (3) a table of authorities. See 19 CFR 351.309(c)(2). Case and rebuttal briefs must be served on interested parties in accordance with 19 CFR 351.303(f). Executive summaries should be limited to five pages total, including footnotes. Furthermore, we request that parties, when submitting briefs and rebuttal briefs, provide the Department with a copy of the public versions of the briefs on diskette.

Within 30 days of the date of publication of this notice, interested parties may request a public hearing on arguments raised in the case and rebuttal briefs, pursuant to 19 CFR 351.310(c). Unless the Department specifies otherwise, the hearing, if requested, will be held two days after the date for submission of rebuttal briefs. See 19 CFR 351.310(d)(1). Parties will be notified of the time and location of the hearing.

The Department will publish the final results of the administrative review, including the results of its analysis of issues addressed in any case or rebuttal brief, no later than 120 days after publication of the preliminary results, unless extended. See section 751(a)(3)(A) of the Act; 19 CFR 351.213(h).

Assessment Rates

The Department shall determine, and CBP shall assess, antidumping duties on all appropriate entries. In accordance with 19 CFR 351.212(b)(1), we have calculated, whenever possible, an exporter/importer (or customer)-specific assessment rate or value for merchandise subject to this review as described below.

With respect to export-price sales, for these preliminary results, we divided the total dumping margins (calculated as the difference between normal value and export price) for each exporter's importer or customer by the total number of units the exporter sold to that importer or customer. We will direct CBP to assess the resulting per-unit dollar amount against each unit of merchandise in each of that importer's/customer's POR entries.

For CEP sales, we divided the total dumping margins for the reviewed sales by the total entered value of those reviewed sales for each importer. We will direct CBP to assess the resulting percentage margin against the entered customs values for the subject merchandise on each of that importer's POR entries. See 19 CFR 351.212(b).

The Department clarified its “automatic assessment” regulation on May 6, 2003. This clarification will apply to entries of subject merchandise during the POR produced by companies in these preliminary results of review for which the reviewed companies did not know their merchandise was destined for the United States. In such instances, we will instruct CBP to liquidate unreviewed entries at the all-others rate if there is no rate for the intermediate company(ies) involved in the transaction. For a full discussion of this clarification, see Antidumping and Countervailing Duty Proceedings: Assessment of Antidumping Duties, 68 FR 23954 (May 6, 2003).

We intend to issue liquidation instructions to CBP 15 days after publication of the final results of this review.

Cash Deposit Requirements

The following cash-deposit requirements will be effective upon publication of the final results of this administrative review for all shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of this administrative review, as provided by section 751(a)(2)(C) of the Act: (1) The cash deposit rate for the companies covered by this review will be the rate established in the final results of review; (2) for previously reviewed or investigated companies not listed above, the cash deposit rate will continue to be the company-specific rate published for the most recent period; (3) if the exporter is not a firm covered in this review or in the investigation but the manufacturer is, the cash-deposit rate will be the rate established for the most recent period for the manufacturer of the merchandise; and (4) the cash-deposit rate for all other manufacturers or exporters will continue to be the all-others rate of 14.57 percent, which is the all-others rate established in the investigation. See CMC Order, 70 FR at 39735. These deposit requirements, when imposed, shall remain in effect until further notice.

Notification to Importers

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 Department's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.

We are issuing and publishing this notice in accordance with sections 751(a)(1) and 777(i)(1) of the Act.