Background
The Commission instituted this investigation effective May 25, 1994, following a preliminary
determination by the Department of Commerce that imports of phthalic anhydride from Venezuela
were being sold at LTFV within the meaning of section 733(b) of the Act. Notice of the institution
of the Commission's investigation and of a public hearing to be held in connection therewith was
given by posting copies of the notice in the Office of the Secretary, U.S. International Trade
Commission, Washington, DC, and by publishing the notice in the Federal Register of June 22,
1994. The hearing was held in Washington, DC, on August 9, 1994, and all persons who requested
the opportunity were permitted to appear in person or by counsel.
VIEWS OF THE COMMISSION
Based on the record in this final investigation, we determine that an industry in the United
States is neither materially injured nor threatened with material injury by reason of imports of phthalic
anhydride ("PA") from Venezuela that the U.S. Department of Commerce ("Commerce") has
determined are being sold in the United States at less than fair value ("LTFV").
I. Like Product
A. In General
In determining whether an industry in the United States is materially injured or is threatened
with material injury by reason of the subject imports, the Commission must first define the "like
product" and the "industry." Section 771(4)(A) of the Tariff Act of 1930, as amended ("the Act"),
defines the relevant industry as the "domestic producers as a whole of a like product, or those
producers whose collective output of the like product constitutes a major proportion of the total
domestic production of that product . . . ." In turn, the statute defines "like product" as "a product
which is like, or in the absence of like, most similar in characteristics and uses with, the article
subject to an investigation . . . ."
The Department of Commerce ("Commerce") has defined the scope of this investigation as:
PA [phthalic anhydride], an aromatic synthetic organic chemical usually produced from a primary petrochemical called orthoxylene, although it is sometimes produced from napthalene. PA is predominately used in the production of plasticizers, unsaturated polyester resins, and alkyd resins, which in turn are generally used to produce plastics and paints. This investigation covers PA sold in either flaked or molten form. Phthalic anhydride ("PA") is produced in two forms, molten (or liquid) and flake. PA is made by the oxidation of orthoxylene over a vanadium oxide/titanium oxide catalyst at temperatures of 380-400 degrees C. (716-752 degrees Fahrenheit) in a multitubular fixed-bed reactor. As it emerges from the reactor, the crude PA is solidified on cooling fins, then heated, and distilled under a vacuum to a purified chemical. The chemical is molten at or above a temperature of 131 degrees C.(286 degrees Fahrenheit). Flake PA, chemically identical to the molten PA, is produced by cooling molten PA and then flaking the resultant solid.
B. Commission's Preliminary Determination and Like Product Issue
In the preliminary investigations, the Commission defined a single like product, consisting of
molten and flake PA, based on the similarities in chemical composition, uses, customer and producer
perceptions, primary manufacturing process, and actual interchangeability. No new evidence has
been gathered that provides a basis to reach a different conclusion in this final investigation.
In the final investigation, however, petitioners, comprising four of the five U.S. producers of PA, reversed their position from the preliminary investigation and opposed a finding of a single like product consisting of both molten and flake PA. Petitioners argued that limited commercial substitutability supported a finding of two like products. Respondent continued to support the Commission's definition of one like product.
Petitioners argued that purchasers' substitution of flake for molten PA is not economically feasible; petitioners did not argue that the products are not technically interchangeable. The fact that flake and molten PA may have limited interchangeability does not require a finding that they are distinct like products, particularly in light of their many similarities. In any event, interchangeability is merely one of several factors the Commission considers in defining the like product.
While each investigation is sui generis, in several cases, the Commission has found the liquid and solid forms of a material to be one like product, particularly when the liquid and solid forms have been at least somewhat interchangeable. In the present investigation, while molten and flake PA are not identical in terms of their physical form, their chemical composition is identical. Both forms may be used interchangeably for all principal applications as raw materials in the manufacture of plasticizers, unsaturated polyester resins and alkyd resins. The precise degree of interchangeability is a function of the end-user's production system. The molten form generally is used by large-volume customers that have installed expensive liquid-handling systems. Small- volume manufacturers use flake PA exclusively, while large-volume consumers typically purchase and inventory the flake form to use in the event their liquid handling systems become disabled. Therefore, while the degree of interchangeability may vary due to an end-user's production facility, there is actual interchangeability between the two forms of PA.
Accordingly, due to the similarities in chemical composition, uses, primary manufacturing process, customer and producer perceptions, as well as some degree of actual interchangeability, we find a single like product, consisting of molten and flake PA.
II. Domestic Industry
A. In General
Section 771(4)(A) of the Act defines the relevant industry as the "domestic producers as a whole
of a like product, or those producers whose collective output of the like product constitutes a major
proportion of the total domestic production of that product . . . ." In defining the domestic
industry, the Commission's general practice has been to include in the industry producers of all
domestic production of the like product, whether toll-produced, captively consumed or sold in the
domestic merchant market. In 1993, the domestic producers captively consumed *** of their total
shipments of PA (molten and flake) to produce derivative products such as plasticizers and
unsaturated polyester resins. In addition, the domestic industry consumed *** of U.S. producers'
total shipments of molten PA to produce flake in 1993. Therefore, in 1993 slightly less than half
of U.S. producers' total shipments of the molten product was sold in the merchant market.
In light of our like product determination, we find that there is a single domestic industry comprised of the domestic producers of all molten and flake PA.
B. Related Party
The related party provision, 19 U.S.C. 1677(4)(B), allows for the exclusion of certain
domestic producers from the domestic industry for the purposes of an injury determination. Applying
the provision involves two steps. First, the Commission must determine whether a domestic
producer meets the definition of a related party. The statute defines a related party as a domestic
producer that is either related to exporters or importers of the product under investigation, or is itself
an importer of that product.
Second, if a producer is a related party, the Commission may exclude such producer from the domestic industry if "appropriate circumstances" exist. Exclusion of a related party is within the Commission's discretion based upon the facts presented in each case. The rationale for the related parties provision is the concern that domestic producers who are related parties may be in a position that shields them from any injury that might be caused by the subject imports. Thus, including these parties within the domestic industry would distort the analysis of the condition of the domestic industry.
In the preliminary determination, the Commission concluded that Koppers was a related party, but that appropriate circumstances did not exist to exclude it from the domestic industry. While the parties did not address this issue in the final investigation, the fact that Koppers imported the subject product from Venezuela during the period of investigation again raises the question whether it should be excluded as a related party. However, there is no new evidence in the final investigation to justify a conclusion different from that reached in the preliminary determination. Therefore, we again find that appropriate circumstances do not exist to exclude Koppers from the domestic industry.
III. CONDITION OF THE DOMESTIC INDUSTRY
In assessing whether the domestic industry is materially injured by reason of LTFV imports, the
Commission considers all relevant economic factors which have a bearing on the state of the industry
in the United States. These factors include output, sales, inventories, capacity utilization, market
share, employment, wages, productivity, profits, cash flow, return on investment, ability to raise
capital, and research and development. No single factor is dispositive, and all relevant factors are
considered "within the context of the business cycle and conditions of competition that are distinctive
to the affected industry."
In examining the condition of the domestic PA industry, we note that PA is used to produce a variety of intermediate products that are then used in the production of end-use products such as paints and other coatings, and an array of plastic products used in the manufacturing and construction sectors. Therefore, demand for PA is influenced primarily by activity in the construction industry, as well as changes in consumer demand for products such as automobiles, boats, and other durable and non-durable goods. In addition, demand for PA tends to be seasonal, with stronger growth during the second and third quarters of the year due, in part, to fluctuations in the construction and motor vehicle industries. The domestic PA industry involves both the production of molten PA and the further processing of some molten PA into flake PA. The majority of domestic producers' total PA shipments, however, is of molten PA. Moreover, as discussed earlier, although both molten and flake PA may be used for all applications, the end-user's production system determines which form of the product a particular customer can use. For example, in order to use molten PA, a customer must invest in capital-intensive liquid-handling systems. Large volume customers generally purchase molten PA, but also purchase some flake PA for inventory to use in the event their liquid-handling systems become disabled. End-users operating smaller production facilities or manufacturing products in batches generally use PA in its flake form. In assessing the condition of the domestic industry, it is necessary to discuss some data separately for molten and flake PA production operations.
Apparent U.S. consumption of PA by quantity increased by 5.5 percent from 1991 to 1993, with an increase of 7.7 percent from 1991 to 1992 and a slight decline from 1992 to 1993. Consumption of PA was two percent higher in interim period (January-June) 1994 than in interim period (January-June) 1993. Consumption by value increased by less than one percent from 1991 to 1993, with a 10.2 percent increase from 1991 to 1992 and a 8.5 percent decrease from 1992 to 1993. Apparent U.S. consumption by value was 9.7 percent lower in interim period 1994 than in the same period in 1993.
Domestic production of molten PA declined overall by 2.4 percent from 1991 to 1993, with an increase of 2.8 percent from 1991 to 1992 and a decrease of 5.1 percent from 1992 to 1993. However, domestic production of molten PA was 3.4 percent higher in interim 1994 than in the comparable 1993 period. Domestic capacity to produce molten PA increased by 2.1 percent from 1991 to 1992 and remained constant from 1992 to 1993 and in the interim periods. Capacity utilization rates for molten PA declined overall from 1991 to 1993, but were higher in interim 1994 than in interim 1993. The industry's capacity utilization rate for molten PA fluctuated from 89.5 percent in 1991, to 90.1 percent in 1992, to 85.5 percent in 1993, and was 85.3 percent in interim period 1993 and 88.3 percent in interim period 1994.
Domestic production of flake PA declined by *** from 1991 to 1992, with a *** increase from 1992 to 1993. Domestic production of flake PA was *** higher in interim 1994 compared with interim 1993. Capacity to produce flake PA remained constant from 1991 to 1993, and was lower in interim period 1994 compared with interim period 1993 due to the closure of a domestic flaking facility in March 1994. As production of flake PA declined from 1991 to 1992, capacity utilization likewise declined during that period.
The domestic industry's U.S. shipments of all PA by quantity increased by 5 percent from 1991 to 1992, and then declined by 3.3 percent from 1992 to 1993, for an overall increase of 1.5 percent from 1991 to 1993. U.S. shipments of PA by value followed a similar pattern, but declined overall by 2.5 percent from 1991 to 1993. While U.S. shipments of PA by quantity were 6 percent higher in interim period 1994 compared with the similar period in 1993, U.S. shipments by value were 7 percent lower in interim period 1994 than in the comparable 1993 period. Exports of PA by the domestic industry as a share of total shipments declined from 4.4 percent in 1991 to 2 percent in 1993, and were 1.6 percent in interim period 1993 and 0.8 percent in interim period 1994. The domestic industry reported an increase of 4.1 percent in year-end inventories of PA for the 1991-1993 period, with significant fluctuations between years. End-of-period inventories of PA were 43 percent lower in interim period 1994 compared with interim period 1993. Inventories as a share of U.S. shipments fluctuated between years, increasing from 4.2 percent in 1991 to 4.3 percent in 1993, but were 4.2 percent in interim period 1993 compared with 2.3 percent in interim period 1994. Employment in the domestic PA industry declined overall by 6.4 percent from 1991 to 1993 and was 3.4 percent lower in interim period 1994 than in interim period 1993. Hours worked declined by 4.6 percent from 1991 to 1993 and were 4.2 percent lower in interim 1994 than in interim 1993. From 1991 to 1993, total compensation fluctuated, but remained constant overall, while hourly total compensation fluctuated, but increased by 5.1 percent. Total compensation was 0.8 percent higher and hourly total compensation was 6 percent higher in interim period 1994 compared with interim period 1993.
The financial performance indicators for the domestic PA industry were mixed but positive throughout the period of investigation. There were increases in most indicators in the period 1991- 1992, with some indicators showing declines from 1992 to 1993. From 1991 to 1992, the domestic industry experienced increases of 1.8 percent and 4.9 percent in net sales by quantity and by value, respectively. Net sales decreased by both quantity and value from 1992 to 1993, resulting in an overall decline from 1991 to 1993 of 1.1 percent by quantity and 4.4 percent by value.
Gross profits were positive throughout the period of investigation and increased by 21.7 percent from 1991 to 1993. The domestic industry experienced an increase in gross profits of 32.9 percent from 1991 to 1992, followed by a decline of 8.5 percent from 1992 to 1993, while gross profits were 28.7 percent lower in interim period 1994 compared with interim period 1993. Operating income, which also was positive for each year during the period of investigation, increased by 41.8 percent from 1991 to 1992, then declined by 19.1 percent from 1992 to 1993, for an overall increase of 14.7 percent. Operating income was 41.9 percent lower in interim period 1994 than in interim period 1993. The operating income margin (ratio of operating income to net sales) followed a similar trend, increasing from an 11.3 percent ratio in 1991 to a 15.3 percent ratio in 1992, and then declining to a 13.6 percent ratio in 1993. The industry's operating income margin was a 9.8 percent ratio in interim period 1994 compared to a 15.4 percent ratio in interim period 1993.
An important factor affecting financial performance was a 9.1 percent decline in the domestic industry's cost of goods sold from 1991 to 1993. Costs of goods sold also was 3.2 percent lower in interim period 1994 compared with interim period 1993. As a share of net sales, the cost of goods sold declined from 1991 to 1993, but was larger in interim period 1994 compared with interim period 1993. The unit cost of goods sold decreased by 8.2 percent from 1991 to 1993 and was 8.0 percent lower in interim 1994 than in interim 1993. At the same time, selling, general, and administrative (SG&A) expenses for the industry increased by 40.9 percent from 1991 to 1993, with most of the increase reported for the 1992-1993 period. SG&A expenses were 4.5 percent higher in interim period 1994 compared with interim period 1993.
Finally, the domestic industry's capital expenditures declined from 1991 to 1993, and were lower in interim period 1994 compared with interim period 1993. Research and development expenditures steadily decreased over the period of investigation.
IV. NO MATERIAL INJURY BY REASON OF LTFV IMPORTS
In final antidumping duty investigations, the Commission determines whether an industry in the
United States is materially injured by reason of the imports that Commerce has determined are sold at
LTFV. The Commission must consider the volume of imports, their effect on prices for the like
product, and their impact on domestic producers of the like product, but only in the context of U.S.
production operations.
Although the Commission may consider alternative causes of injury to the industry other than the LTFV imports, it is not to weigh causes. For the reasons discussed below, we find that the domestic PA industry is not materially injured by reason of LTFV imports from Venezuela.
A. Volume of Imports
The volume and market share of subject imports were small throughout the period of
investigation. Although LTFV imports increased for most of the period of investigation, the
increase was from a very small base. LTFV imports never captured more than a 1.8 percent share
of the U.S. market by quantity and 1.6 percent by value in any of the three years from 1991 to
1993. Moreover, the market share held by LTFV imports was lower in interim 1994 than in
interim 1993. Domestic producers held over 90 percent of the market in terms of quantity and
value throughout the period of investigation, while non-subject imports of PA accounted for most
of the remaining U.S. market share. Non-subject imports also increased their share of the U.S.
market between 1991 and 1993.
Based on the foregoing, we conclude that the volume of LTFV imports and their market share, as well as the increases in those imports that did occur, are not significant.
B. Price Effects of Imports
The degree of substitutability between the subject imports and the like product is limited by a
variety of factors. First, there is relatively limited competition between the subject imports and the
domestic like product, because all LTFV imports of PA are in the flake form, while *** of U.S.
shipments of PA are in the molten form. Indeed, only five purchasers out of 25, accounting for
approximately 13 percent of U.S. shipments, reported in responses to the Commission's questionnaire
that they used both forms of PA to produce a particular product or line of products. In short, the
record establishes that there is very limited substitutability between subject imports and the domestic
like product, which consists of both molten and flake PA. The subject imports competed primarily
with the small flake PA segment of the domestic market, which accounted for *** of U.S. shipments
of PA in 1993.
Second, several non-price factors, including quality, delivery lead times, and supply concerns, also limit the substitutability of the subject imports with domestic flake. Purchasers responding to the Commission's questionnaire reported that, despite the lower price of the Venezuelan product, they continued to purchase U.S.-produced flake PA due to quality or delivery considerations. Of the 16 purchasers out of 25 responding to the Commission's questionnaire that were able to compare the Venezuelan and U.S. flake products, 56 percent reported that the Venezuelan product was inferior. Moreover, firms indicated that they were willing to pay a price premium for the domestic product in order to minimize the risk of supply shortfalls. The majority of these firms indicated that it viewed U.S. suppliers as being more reliable than suppliers of the Venezuelan material. In short, the record establishes that there is very limited substitutability between subject imports and all domestic PA, and even between subject imports of flake and domestic flake.
While the Venezuelan PA consistently undersold the comparable domestic product during the period of investigation, the evidence in the record does not support a finding of significant adverse effects on U.S. prices for the like product by reason of subject imports. Import and domestic flake PA prices appeared to follow similar trends, particularly for spot sales, where the margin of underselling remained at a consistent level throughout the period of investigation. The price trends for domestic molten PA also were very similar to the trends for imported and domestic flake PA throughout the period of investigation.
Further, although underselling by the subject imports was both fairly consistent and widespread throughout the period of investigation, this underselling did not appear to significantly affect domestic flake PA prices or significantly increase the market share held by subject imports. As described in the preceding section, market penetration by LTFV imports never exceeded 1.8 percent of U.S. apparent consumption by quantity in any full-year period examined by the Commission.
In fact, domestic prices for all PA, both imported Venezuelan flake and domestic molten and flake, appear to have declined over the period of investigation at least partially as a result of a decline in raw material prices and consequently in overall costs of goods sold. Orthoxylene prices have declined by as much as 20 percent during the period of investigation. U.S. producers frequently tie the price of molten PA to the price of orthoxylene, the primary raw material used in the production of PA, plus some margin that accounts for value-added and changing market conditions, i.e., orthoxylene-plus basis. Pricing for flake PA is also influenced by the price of orthoxylene, although it is not clear whether flake PA prices directly track orthoxylene prices. Moreover, the ratio of PA prices to orthoxylene prices appears to have increased over time, which indicates that domestic PA prices declined less than raw material prices. This provides further support for our conclusion that domestic prices have not been depressed or suppressed to a significant degree by the LTFV imports.
Purchasers responding to the Commission's questionnaire reported that PA accounted for a significant share of the total cost of production of their respective end products -- generally ranging from 15 to 40 percent. Although PA accounts for a relatively high share of the cost of production of the end products in which it is used -- a factor that suggests that purchases of PA are price- sensitive -- non-price factors, particularly quality and supply concerns, limit the substitutability of the low-priced imported flake PA for both domestic flake and molten PA. Moreover, the lack of technical or commercial substitutes for PA, as well as for the products in which PA is used, makes purchasers less likely to change their overall consumption of PA in response to a change in price.
Finally, evidence on the record generally does not confirm the lost sales and revenue allegations and, in fact, provides some evidence that U.S. producers appeared to be competing with each other and to some extent with non-subject imports.
Thus, despite consistent underselling by subject imports as compared with the prices for the domestic product, the evidence of record does not support the conclusion that the prices of the subject imports have had a significant depressing or suppressing effect on the prices of the domestic PA product.
C. Impact of Imports on the Domestic Industry
Finally, we consider the impact of subject imports on the domestic industry producing PA. In
this case, we find that the very small volume and market share of the subject imports have not had an
adverse impact on the domestic industry. As discussed earlier, domestic producers of PA continually
held more than a 90 percent market share throughout the period of investigation, and subject imports
never held a market share of more than 1.8 percent in any full year period examined by the
Commission. Moreover, the slight decline in the domestic industry's total shipments by quantity from
1991 to 1993 appears to be the result of a substantial decline in its export shipments for that
period. The domestic industry's U.S. shipments of PA increased from 1991 to 1993 and between
interim periods.
Although there were declines in several industry factors, the financial performance indicators for the industry as a whole were generally positive between 1991 and 1993. Gross profit increased by 32.9 percent between 1991 and 1992, and then decreased by 8.5 percent from 1992 to 1993, for an overall increase of 21.7 percent over the entire period of investigation. Operating income increased by 41.8 percent between 1991 and 1992, and declined by 19.1 percent from 1992 to 1993, for an overall increase of 14.1 percent over the same period. Considerable gains in both of these factors were obtained over the same period that imports from Venezuela increased in both quantity and value. By quantity, Venezuelan imports increased by 34.1 percent between 1991 and 1992, and by 8.4 percent between 1992 and 1993, for an overall increase of 45.4 percent over the three year period. By value, imports from Venezuela increased by 41.3 percent between 1991 and 1992, and decreased by 4.8 percent between 1992 and 1993, for an overall increase of 34.5 percent between 1991 and 1993.
Finally, we have considered whether injury to the domestic PA industry might have resulted from adverse effects of Venezuelan imports on the flake segment of the U.S. PA market. Although the class or kind of subject merchandise covered by this investigation includes both molten and flake PA, actual imports of PA from Venezuela are only in the flake form. As previously noted, there is limited substitutability between the LTFV imports and domestic PA -- whether in molten or flake form. To the extent that competition exists between subject imports and domestic PA, however, it would be most apparent between subject imported flake and domestic flake. Thus, one might expect to see adverse effects, if any, from LTFV imports manifested in the flake segment of the market.
Given the limited substitutability of LTFV imports for domestic flake, however, we find no significant adverse effects by reason of the LTFV imports in the flake segment of the U.S. market. Moreover, the domestic industry's U.S. flake shipments account for only a small proportion -- less than 10% in 1993 -- of U.S. producers' total U.S. shipments of PA. Thus, in this case we find that the impact of LTFV sales on domestic production of flake PA is insignificant, and does not constitute material injury to the domestic PA industry.
We also note that the economic analysis indicates minimal revenue-, output-, and price- suppressive effects of the LTFV imports on the domestic industry. Even assuming that the domestic industry would have captured the entire market share of subject imports, the result would have been only a very minor increase in domestic market share. This increase in market share would be so small that the impact on the domestic industry's output and revenues would not be significant. In sum, we conclude that the evidence fails to establish a causal connection between the condition of the domestic industry and the dumped imports. We therefore determine that the U.S. industry producing PA is not materially injured by reason of the LTFV imports of PA from Venezuela.
V. NO THREAT OF MATERIAL INJURY BY REASON OF THE SUBJECT IMPORTS
Section 771(7)(F) of the Act directs the Commission to consider whether a U.S. industry is
threatened with material injury by reason of the subject imports "on the basis of evidence that the
threat of material injury is real and that actual injury is imminent." The Commission may not
make such a determination "on the basis of mere conjecture or supposition." In making our
determination, we have considered all of the statutory factors that are relevant to this
investigation.
We do not find that the information concerning Venezuelan production capacity and capacity utilization shows that a significant increase in subject imports of PA into the United States is likely. Although production capacity increased, it did not result in additional unused capacity. In fact, capacity utilization levels in Venezuela were high, and have increased, in spite of the substantial increase in production capacity from 1991 to 1993. Moreover, the increased capacity directly corresponds to substantial increases in exports to other markets and home-market shipments. From 1991 to 1993, Venezuelan flake exports to countries other than the United States increased at a much greater rate than exports to the United States. Indeed, in 1993, Venezuelan flake exports to markets other than the United States were more than *** times larger than exports to the United States. For these reasons, we find that the *** is not likely to result in significantly increased exports of PA to the United States.
We also do not find evidence of any rapid increase in United States market penetration of PA from Venezuela, or of a likelihood that the penetration will increase to an injurious level. The volume of PA imports from Venezuela into the United States has been small during the period of investigation. Market penetration by LTFV imports has not been significant, and there is no indication that it will be in the future. The most substantial increase in market penetration by LTFV imports occurred in the 1991-1992 period, with only a moderate increase from 1992 to 1993, and market penetration was substantially lower in interim 1994 compared with interim 1993. Venezuelan exports of PA to the U.S. market accounted for a declining share of total Venezuelan shipments of PA during the period of investigation and, as previously noted, exports to third countries account for the *** share of Venezuelan shipments of PA, with a significant share also held by home-market shipments. There is no evidence to suggest an imminent change in these circumstances. For these reasons, we do not find that market penetration is likely to increase to an injurious level.
The record does not support a finding that the inventories of subject imports in the United States will have an injurious effect on the U.S. industry in light of our assessment of other threat factors. Although import inventories increased by volume from 1991 to 1993, they remained relatively stable as a share of U.S. shipments of subject imports from 1991 to 1993, and were significantly lower in interim period 1994 compared with interim period 1993. Moreover, in this investigation subject import inventories in the United States as a share of apparent consumption in the U.S. PA market were 0.3 percent in 1993, an amount too small to support a finding of threat of material injury to the domestic industry. In the most recent period, import inventories declined, and there is no evidence in the record to suggest any likely increase in the future.
We also do not find that subject imports will enter the United States at prices that will have a depressing or suppressing effect on domestic prices. As discussed above, the Commission found no significant price- depressing or -suppressing effects from subject imports during the period of investigation. There is virtually no direct competition between LTFV imports of flake PA and domestic molten PA, which accounted for the vast majority of domestic producers' shipments of all PA. Furthermore, there is limited substitutability between imported flake PA and domestic flake PA due to such non-price factors as quality and supply requirements. There is no indication that these circumstances will change in the near future. We find no other evidence to indicate that subject imports are likely to have any greater impact on domestic prices in the near future than was the case during the period of investigation.
In addition, the Commission must consider whether dumping findings or antidumping remedies in markets of foreign countries against the same class or kind of merchandise suggest a threat of material injury to the domestic industry. There is an outstanding Chilean antidumping order against phthalic anhydride that covers imports from Venezuela. We have considered this order in making our determination and find that it will not result in significant increases in Venezuelan exports to the United States. Venezuelan exports of PA to the Chilean market accounted for only a *** of total Venezuelan PA shipments in 1993. Moreover, as previously discussed, other third country markets, *** account for the major share of Venezuelan exports of PA, and there is no evidence that any Venezuelan flake PA will be diverted to the U.S. market due to the Chilean order.
We find no "other demonstrable adverse trends" that indicate that subject imports will be the cause of actual injury, or any "actual and potential negative effects on existing development and production efforts of the domestic industry." We therefore determine that the domestic industry producing PA is not threatened with material injury by reason of the LTFV imports from Venezuela.
CONCLUSION
For the reasons discussed above, we find that the domestic industry producing phthalic
anhydride is neither materially injured nor threatened with material injury by reason of LTFV imports
from Venezuela.
The domestic market for phthalic anhydride ("PA") comprises two submarkets: molten and flake. These submarkets exist largely because of equipment constraints among end-users. Large- volume purchasers generally purchase the molten form of PA because they have molten handling systems. A few of these large-volume purchasers have some degree of flexibility to use either the flake or molten form. Small-volume purchasers, by contrast, purchase the flake form of the product exclusively because that is the only form their equipment can use. Thus, given the equipment constraints that require most purchasers to choose one form of PA or the other, there is relatively limited substitutability between the molten and flake forms, even though both forms are used for exactly the same purposes.
The vast majority of domestic shipments of PA are in the molten form. In 1993, molten PA accounted for more than 85 percent of U.S. shipments. Hence, much of the domestic industry's operations do not compete directly with LTFV imports, which consist entirely of flake PA.
Consumption patterns for molten and flake followed different trends during the period examined. Domestic consumption of molten increased from 1991 to 1992 before declining from 1992 to 1993. Consumption of molten recovered during the interim period. Flake consumption increased throughout the full three years of the period, but then declined during the interim period. Notwithstanding the increases in flake consumption during 1991-93, domestic producers' production, shipments, and net sales of flake PA all declined fairly substantially during that period. Since domestic producers held 100 percent of the market for molten PA throughout the entire period of investigation, their production, shipments and net sales of molten PA tracked consumption patterns for molten PA.
Both segments of the domestic industry saw gains in their financial performance during 1991- 92 and then declines in 1992-93. The molten segment's financial performance, however, was higher in 1993 as compared to 1991; for the flake PA segment, 1993 financial indicators were below 1991 levels. Both segments saw declines in their financial performance during the interim period, although the molten PA segment's performance continued to be fairly strong.
Petitioners contend that the flake segment's declines were due to the subject imports, and that these declines constitute material injury to the domestic PA industry. The record does not establish, however, a clear causal link between the subject imports and the flake segment's performance. Analysis of the pricing data, based on direct comparisons of subject imports of flake and domestic flake PA, demonstrates the lack of any significant price depressing or suppressing effects on prices of domestic flake PA. Examining the changes in subject import volumes in the context of the domestic flake PA submarket likewise do not reveal a clear causal connection between the subject imports and domestic performance in the flake segment of the industry.
Although subject imports increased 34.1 percent by volume from 1991 to 1992, this translates into only a small increase in terms of market share for flake -- from *** to *** percent by volume. Moreover, while domestic market share in the flake segment declined from *** percent in 1991 to *** percent in 1992, financial performance for domestic flake production improved.
From 1992 to 1993, subject imports increased 8.4 percent by volume, but rose only slightly in terms of market share to *** percent. Domestic market share for flake PA fell from *** percent to *** percentþfar less than occurred during 1991-92. Financial performance in the domestic flake segment, however, declined significantly during this period.
Subject imports were 31.7 percent lower in volume in interim 1994 as compared to interim 1993. The market share held by subject imports was *** percent in interim 1994, down from *** percent in interim 1993. Domestic flake shipments were significantly higher in interim 1994 compared to interim 1993, as was domestic market share for flake. Yet, financial performance for flake again worsened in interim 1994 as compared to interim 1993. In short, the domestic flake PA segment's financial performance appears to be quite disparate from its production, shipments and market share. I am not persuaded that subject imports contributed to the domestic flake segment's declines, particularly since the largest increase in subject imports in 1991-92 coincided with improvement in the flake segment's profitability.
In any event, the negative trends in the domestic flake PA segment did not significantly affect the trends in domestic PA overall. Comparing the molten PA segment's performance with overall PA industry performance does not establish significant differences between the subset and the whole.
Whatever impact LTFV imports may have had on the flake segment of the domestic industry, if any, that impact was too small to constitute material injury to the domestic industry as a whole.