[Federal Register Volume 60, Number 159 (Thursday, August 17, 1995)]
[Notices]
[Pages 42835-42845]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20436]



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DEPARTMENT OF COMMERCE
International Trade Administration
[A-580-807]


Polyethylene Terephthalate Film, Sheet, and Strip From the 
Republic of Korea; Final Results of Antidumping Duty Administrative 
Review

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative 
Review.

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SUMMARY: On July 8, 1994, the Department of Commerce (the Department) 
published the preliminary results of administrative review of the 
antidumping duty order on polyethylene terephthalate film, sheet, and 
strip from the Republic of Korea. The review covers four manufacturers/
exporters of the subject merchandise to the United States for the 
period November 30, 1990 through May 31, 1992.
    As a result of comments we received, the antidumping margins have 
changed from those we presented in our preliminary results.

EFFECTIVE DATE: August 17, 1995.

FOR FURTHER INFORMATION CONTACT: Roy F. Unger, Jr., or Thomas F. 
Futtner, Office of Antidumping Compliance, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230, 
telephone: (202) 482-0651/3814.

SUPPLEMENTARY INFORMATION:

Background

    On July 8, 1994, the Department published the preliminary results 
(59 FR 35098) of administrative review of the antidumping duty order on 
polyethylene terephthalate (PET) film from the Republic of Korea (56 FR 
25660, June 5, 1991). At the request of petitioners and one respondent, 
we held a hearing on September 2, 1994.

Scope of the Review

    Imports covered by the review are shipments of all gauges of raw, 
pretreated, or primed polyethylene terephthalate film, sheet, and 
strip, whether extruded or coextruded. The films excluded from this 
review are metallized films and other finished films that have had at 
least one of their surfaces modified by the application of a 
performance-enhancing resinous or inorganic layer of more than 0.00001 
inches (0.254 micrometers) thick. Roller transport cleaning film which 
has at least one of its surfaces modified by the application of 0.5 
micrometers of SBR latex has also been ruled as not within the scope of 
the order.
    PET film is currently classifiable under Harmonized Tariff Schedule 
(HTS) subheading 3920.62.00.00. The HTS subheading is provided for 
convenience and for U.S. Customs purposes. The written description 
remains dispositive as to the scope of the product coverage. For most 
of the respondents the period of review (POR) covers November 30, 1990 
through May 31, 1992. Because Cheil was determined to have a de minimis 
margin in the Preliminary Determination of Sales at Less Than Fair 
Value (56 FR 16305) (LTFV), Cheil's POR begins on April 22, 1991, when 
suspension of its merchandise was first ordered, and runs through May 
31, 1992. The Department has conducted this review in accordance with 
section 751 of the Tariff Act of 1930, as amended (the Act).

Analysis of Comments Received

    We invited interested parties to comment on the preliminary results 
of this administrative review. At the request of petitioners and one 
respondent, we held a public hearing on September 2, 1994. We received 
timely comments from petitioners and all respondents.

General Comments

Comment 1

    Petitioners argue that respondents' reported costs for recycled PET 
film chip or pellet are not accurate and understate the true costs of 
producing PET film from recycled or reclaimed chip. Petitioners argue 
that respondents' cost accounting methodologies for recycled PET pellet 
are inconsistent with the Federal Circuit decision in IPSCO v. United 
States, 965 F.2d 1056, 1059-1061 (Fed. Cir. 1992) (Ipsco Appeal).
    Petitioners have also argued that respondents' cost methodology for 
recycled PET chips permits possible manipulation of product costs to 
the advantage of respondents. Petitioners allege that this could occur 
by respondents' use of fewer recycled chips to produce film types that 
are not comparison candidates in the administrative review and more 
recycled chips to produce film types destined for the U.S. market and 
those comparable to the U.S.-destined merchandise. Under this scenario, 
according to petitioners, the low cost of recycled PET chips relative 
to virgin chips would reduce the cost of the U.S. product and its home 
market comparator. Petitioners allege that such cost shifting would 
reduce the probability of finding sales in the home market at prices 
below the cost of production (COP) and, where no contemporaneous sales 
of such or similar merchandise are available for comparison, use of 
lower constructed values.
    In addition, petitioners allege that Cheil's use of the net 
realizable value for recycled PET chips is inaccurate because the 
market for recycled PET chips is not a real or significant market. 
Petitioners contend that very little recycled PET chip is sold on the 
open market and that it is not sold for use in PET film production.
    Petitioners argue that respondents violated the Ipsco Appeal 
decision which requires that the total actual cost of merchandise 
subject to an antidumping duty order be included in the reported cost 
of such merchandise. Specifically, petitioners claim that respondents' 
reported costs do not capture the costs of production using recycled 
chip for the following reasons:
    Cheil: Petitioners assert that Cheil's reported cost of recycled 
chip on the net realizable value (NRV) of PET pellets is inconsistent 
with Korean GAAP. Moreover, petitioners argue, this method results in 
the understatement of the true cost of recycled chip. Petitioners argue 
that Cheil should base 

[[Page 42836]]
the cost of recycled chip on the cost of purchase of replacement virgin 
PET chip.
    Cheil states that the Department has consistently permitted value-
based costing methodologies for by-products. Cheil argues that its use 
of NRV to cost recycled PET chips is consistent with both Korean and 
U.S. GAAP. Cheil also argues that the Department is already on record 
with the Court of International Trade (CIT) as supporting Cheil's NRV 
methodology for costing recycled pellets. Cheil also argues that the 
Ipsco Appeal decision deals solely with the questions of how to 
allocate costs between joint products, one made to specification and 
one which is off-specification, when both products are under 
investigation. Respondent claims that recycled pellets are by-products 
that are not subject to the COP investigation, and have nothing to do 
with the Ipsco Appeal decision.
    SKC: Petitioners argue that SKC has understated the cost of 
recycled PET pellet by undervaluing the cost of these chips. 
Petitioners argue that the Department should require SKC to base 
material costs of recycled pellet on the market value of equivalent 
volumes of raw, virgin PET chip.
    SKC argues that its cost accounting methodology for recycled chip 
fully captures all costs associated with recycled chip by valuing 
recycled chip based on its actual COP. Respondent states that the 
finished film bears the cost of all raw materials consumed in the film 
production process, including the cost of raw materials later reclaimed 
to produce recycled chip. SKC also argues that its costing of recycled 
chip has been found to be reasonable and acceptable by both the 
Department and the CIT.
    Kolon: Petitioners argue that Kolon has undervalued the cost of 
recycled PET film chip by improperly accounting for the fabrication 
costs of these chips.
    Kolon argues that its methodology for costing recycled chip 
properly assigns the full amount of fabrication costs through a work-
in-progress system which captures all costs associated with reclaimed 
PET chip. Kolon also argues that the Department's normal practice is to 
accept a respondent's cost accounting methodology if the system is 
reasonable and does not distort production costs.

DOC Position

    While petitioners' argument may have merit, there is no indication 
on the record that such cost shifting has occurred. Based on the 
evidence in the record, the Department has determined that the Ipsco 
Appeal decision does not apply because recycled PET chips are not ``co-
products'' because they do not have a relatively high sales value 
compared to the prime product. Nonetheless, because cost shifting is 
possible, we will examine this issue in future reviews of PET film from 
Korea. On a company-specific basis, we disagree with petitioners for 
the following reasons:
    Cheil: The above notwithstanding, we believe in this review segment 
that Cheil's use of NRV to cost recycled PET film pellets is a 
reasonable costing methodology. We agree at this time with Cheil's 
characterization of recycled PET film pellets as by-products, 
identifiable by their relatively insignificant sales value (see 
Preliminary Determination of Sales at Less Than Fair Value and 
Postponement of Final Determination: Sebacic Acid from the People's 
Republic of China, 59 FR 565, January 5, 1994). The Department has, in 
the past, permitted the use of NRV to value recycled material inputs to 
the production process (see Final Determination of Sales at Less Than 
Fair Value, Polyethylene Terepthalate Film, Sheet, and Strip from the 
Republic of Korea, 56 FR 16305, June 5, 1991). Finally, the Department 
is satisfied that Cheil's use of NRV reasonably reflects the cost of 
producing subject merchandise and is in accordance with Korean and U.S. 
GAAP.
    SKC: The above notwithstanding, we agree in this review segment 
with SKC's costing methodology to account for the cost of recycled PET 
film pellets. SKC used its normal cost accounting system for purposes 
of this review. This system accounts for the actual cost of recycled 
chips by aggregating all direct and indirect costs associated with the 
production of recycled chips. Raw materials are used exclusively for 
the production of virgin chips; the recycled chips are produced 
entirely from scrap film without input of additional raw materials. 
Therefore, we are satisfied that the costs of producing the recycled 
chip have been fully captured in the cost accounting for the production 
of virgin PET film chip.
    Kolon: Notwithstanding the above, we agree in this review segment 
with Kolon that the costing methodology it reported for reclaimed PET 
film pellets is reasonable and not distortive of production costs. 
Petitioners themselves have argued in support of Kolon's classification 
of reclaimed chips as work-in-process inventory. Petitioners' argument 
that reclaimed chips should bear the entire cost of all the stages of 
the production process is erroneous; the reclaimed chips do not 
normally pass through all phases of the production process (e.g., final 
packaging), and thus should not bear the full cost of virgin chips in 
the film production process.
    In conclusion, for these results of review, we have accepted all 
four respondents' costing methodology. In future reviews, however, we 
will examine specifically the issue of cost shifting.

Comment 2

    Respondents argue that the Department should add home market value-
added taxes (VAT) only to U.S. price (USP), asserting that legislative 
history supports the proposition that taxes should not be added to 
Foreign Market Value (FMV). Consequently, respondents maintain, the 
Department must follow the language of the statute which does not 
explicitly require the addition of taxes to home market price, third-
country price, or CV, but does require the addition of these taxes to 
USP. Alternatively, respondents argue the Department should adopt the 
tax-neutral methodology authorized by the Federal Circuit in Zenith 
Electronics Corp. v. United States, 988 F 2nd 1573, 1580-82 
(Fed.Cir.1993), and add the actual amount of the VAT to USP.

DOC Position

    We disagree with respondents. In Federal-Mogul Corporation and The 
Torrington Company v. United States, 834 F. Supp. 1391 (CIT 1993) 
(Federal-Mogul), the CIT rejected the Department's past methodology for 
calculating an addition to USP under section 772(d)(1)(C) of the Act to 
account for taxes that the exporting country would have assessed on the 
merchandise had it been sold in the home market. The CIT held that the 
addition to USP under section 772(d)(1)(C) of the Act should be the 
result of applying the foreign market tax rate to the price of the 
United States merchandise at the same point in the chain of commerce 
that the foreign market tax was applied to the foreign market sales 
(Federal-Mogul, 834 F. Supp. at 1397).
    The Department has changed its methodology in accordance with the 
Federal-Mogul decision and has applied the new methodology in the final 
results of this review. The Department has added to USP the result of 
multiplying the foreign market tax rate by the price of the merchandise 
sold in the United States at the same point in the chain of commerce 
that the foreign market tax was applied to foreign market sales. The 
Department has also adjusted the USP tax adjustments and the amount of 
tax included in FMV. These adjustments deduct the portions of the 
foreign market tax and the USP tax adjustment 

[[Page 42837]]
that are the result of expenses that are included in the foreign market 
price used to calculate foreign market tax and are included in the 
United States merchandise price used to calculate the USP tax 
adjustment and that are later deducted to calculate FMV and USP. These 
adjustments to the amount of the foreign market tax and the USP tax 
adjustment are necessary to prevent our present methodology for 
calculating the USP tax adjustment from creating antidumping duty 
margins where no margins would exist if no taxes were levied upon 
foreign market sales.
    This margin-creation effect is due to the fact that the bases for 
calculating both the amount of tax included in the price of the foreign 
market merchandise and the amount of the USP tax adjustment include 
many expenses that are later deducted when calculating USP and FMV. 
After making these deductions, the amount of tax included in FMV and 
the USP tax adjustment still reflects the amounts of these expenses. 
Thus, a margin may be created that is not dependent upon a difference 
between adjusted USP and FMV, but is the result of differences between 
the expenses in the United States and the home market that were 
deducted through adjustments. The Department's policy to avoid the 
margin-creation effect is in accordance with the United States Court of 
Appeals' holding that the application of the USP tax adjustment under 
section 772(d)(1)(C) (19 U.S.C., section 1677a(d)(1)(c)) of the Act 
should not create an antidumping duty margin if pre-tax FMV does not 
exceed USP (Zenith Electronics Corp. v. United States, 988 F.2d 1573, 
1581 (Fed. Cir. 1993)). In addition, the CIT has specifically held that 
an adjustment should be made to mitigate the impact of expenses that 
are deducted from FMV and USP upon the USP tax adjustment and the 
amount of tax included in FMV (Daewoo Electronics Co., Ltd. v. United 
States, 760 F. Supp. 200, 208 (CIT, 1991)). However, the mechanics of 
the Department's adjustments to the USP tax adjustment and the foreign 
market tax amount as described above are not identical to those 
suggested in Daewoo.

Comment 3

    Petitioners argue that the Department should postpone the final 
results of this administrative review until the CIT issues its final 
decision in the remand determination of the investigation of PET film 
from Korea, which is currently pending before the court (Final Remand 
Determination Pursuant to Court Remand, E.I. DuPont de Nemours & Co., 
Inc. v. United States, Court No. 91-07-00487 (December 6, 1993)).

DOC Position

    We disagree with petitioners. The Department has a longstanding 
practice of issuing final results of administrative review in cases 
where litigation is pending in the court system. Delaying the 
publication of final results in reviews in which earlier, separate and 
distinct segments of the proceeding are subject to pending litigation 
would create an unacceptable backlog of administrative reviews and 
frustrate efforts to complete reviews on an annual basis.

Comment 4

    Petitioners allege that respondents may have improperly avoided 
suspension of liquidation on quantities of subject merchandise in 
possible circumvention of the antidumping duty order on PET film from 
Korea. Petitioners cite an alleged discrepancy between U.S. Customs 
Service data on antidumping cash deposits collected in 1993 and the 
total sales value reported by respondents for the POR as evidence that 
some portion of Korean PET film imports into the United States have not 
been entered properly. Respondents deny any evasion of antidumping 
duties on subject merchandise.
DOC Position

    We disagree with petitioners that there is any credible evidence 
that respondents have improperly avoided suspension of liquidation of 
entries of subject merchandise. We have confirmed that the sales 
information reported by all respondents in this review closely 
approximates entry data we have obtained from the U.S. Customs Service. 
In addition, petitioners' allegation appears to be based upon a 
clerical error in the Department's preliminary calculations for STC 
Corporation, which petitioners themselves brought to the Department's 
attention. We corrected this clerical error in our final calculations 
which resolves the discrepancy between the U.S. Customs data and the 
total value of sales reported by respondents for this review.

Company-Specific Comments

Cheil

Comment 5

    Petitioners argue that, because Cheil notified the Department that 
a commercial dispute regarding one U.S. sale of PET film had been 
resolved which required revisions to respondent's U.S. sales database 
for that sale, the Department should require respondent to certify that 
no other reported U.S. sale is now or has been the subject of a 
commercial dispute. Furthermore, petitioners urge the Department to 
seek additional information on the one disputed transaction reported to 
the Department.
    Cheil argues that its candor in reporting the disputed transaction 
to the Department indicates respondent's good faith and should not 
result in respondent being penalized with burdensome additional 
reporting requirements.

DOC Position

    We agree with Cheil. It made its timely submission to the 
Department of the revisions for the one disputed U.S. sale without 
urging from either the Department or petitioners. These data appear 
complete. Therefore, we see no need to require Cheil to provide any 
additional information on this transaction or to provide any type of 
certification that other reported U.S. sales have not been the subject 
of commercial disputes.

Comment 6

    Petitioners argue that the Department improperly included the 
Korean VAT in Cheil's net home market price before conducting the COP 
test. Petitioners argue that the Department should have subtracted the 
VAT from the net home market price prior to the COP test.
    Cheil agrees with petitioners that the Department should deduct 
Korean VAT before conducting the COP test. Additionally, Cheil argues 
that the Department mistakenly subtracted respondent's home market 
credit expense and home market packing expense from the reported net 
home market price. Cheil contends that this distorted the COP test, 
because the net home market price without packing and credit expense 
was compared to a COP which included these expenses.

DOC Position

    We agree with petitioners and Cheil. Accordingly, we have revised 
the calculations for Cheil to ensure that, in conducting the COP test, 
we compared home market prices which did not include Korean VAT, home 
market credit, and home market packing expenses with COPs which were 
also net of these expenses.

Comment 7

    Petitioners assert that the Department may not have analyzed all of 
Cheil's U.S. purchase price sales, contending that the number of 
transactions in the calculations were fewer than Cheil reported. Cheil 
also contends that the Department's analysis of U.S. purchase price 
sales may be incomplete. 

[[Page 42838]]


DOC Position

    We agree with petitioners and respondent. We have ensured that our 
calculations include all of Cheil's purchase price transactions during 
the POR.

Comment 8

    Cheil contends that the Department included direct selling expenses 
in total general expenses for purposes of calculating constructed value 
(CV) while deducting direct selling expenses to derive USP. Cheil 
argues that an adjustment should be made to ensure ``apples-to-apples'' 
comparisons when calculating FMV based upon CV.

DOC Position

    We agree with Cheil that, in cases where we used CV as the basis of 
comparison, we did not accurately adjust CV to ensure an apples-to-
apples comparison. In these final results we have adjusted CV by 
deducting direct selling expenses to ensure proper comparisons with USP 
when FMV is based upon CV in accordance with section 773(a)(1) of the 
Act.

Comment 9

    Cheil argues that the Department should deduct home market 
inventory carrying costs from net home market price calculations 
because the Department deducted U.S. inventory costs from USP.

DOC Position

    We agree with respondent. Because Cheil incurred inventory carrying 
costs in the home market appropriate for deduction, and the Department 
had deducted U.S. inventory carrying costs from USP, we have deducted 
home market inventory carrying costs from the net home market price 
calculations.

Comment 10

    Petitioners argue that Cheil incurred post-sale warehouse expenses 
for U.S. sales which it did not report. Cheil responds that it has 
reported all post-sale warehousing expenses and inventory carrying 
costs which it incurred during the POR.

DOC Position

    We agree with Cheil. There is no evidence that there are additional 
post-sale warehousing expenses or inventory carrying costs which Cheil 
did not report.

SKC

Comment 11

    SKC contends that the Department should offset interest income it 
earned on sales of PET film pursuant to a written arrangement with 
Anacomp, Inc. (Anacomp) against imputed credit expenses because the 
interest income reduces SKC's cost of extending credit to its 
customers. Citing Certain Hot-Rolled Carbon Steel, Certain Cold-Rolled 
Carbon Steel Flat Products from Japan, 58 FR 37154 (July 9, 1993) 
(Certain Hot-Rolled Carbon Steel), SKC asserts that this has been the 
Department's practice. Petitioners argue that the precedent SKC cites 
is not relevant to SKC's relationship with Anacomp and that the 
Department was correct in rejecting SKC's interest income offset.
DOC Position

    We believe that the situation in Certain Hot-Rolled Carbon Steel 
was different from the situation existing between SKC and Anacomp. In 
Certain Hot-Rolled Carbon Steel the situation involved ``opportunity 
benefits'' derived from pre-payments, while Anacomp's payments to SKC 
are deferred. However, we agree with respondent that interest income 
which SKC received from Anacomp reduces SKC's cost of extending credit 
to its U.S. customers and should be offset against SKC's U.S. credit 
expense (see Certain Internal-Combustion, Industrial Forklift Trucks 
from Japan, 57 FR 3167 (January 28, 1992)(Forklifts from Japan)). 
Consistent with our practice in Forklifts from Japan, failure to adjust 
SKC's imputed U.S. credit expense for interest income received from 
Anacomp would overstate SKC's U.S. credit expense and distort our 
dumping analysis.

Comment 12

    Petitioners argue that SKC's reporting methodology concerning sales 
to one of its U.S. customers, Anacomp, was incorrect in several 
respects. First, petitioners assert that SKC reported the wrong date of 
sale for these sales.
    Second, petitioners contend that SKC's sales to Anacomp may not be 
at arm's-length prices. If these sales are not at arm's-length prices, 
petitioners argue that respondent reported USP incorrectly.
    Third, petitioners assert that SKC's reported imputed credit 
expense was incorrect because it was based on wrong dates of payment 
and on an inaccurate short-term borrowing rate. Petitioners argue that 
the reported payment date is incorrect because of certain invoices on 
which payment was outstanding. Petitioners argue that, because SKC 
based its reported short-term borrowing rate in part on the Euro-dollar 
rate, it is inappropriate for use in calculating U.S. interest expense.
    Petitioners also allege that SKC may have inaccurately reported the 
actual sale price of subject merchandise to Anacomp. Petitioners allege 
that respondent overstated USP for these sales by calculating USP on 
rolls of PET film based on nominal weight instead of actual weight.
    Finally, petitioners argue that SKC may have classified certain 
models of PET film sold in the home market as identical which are not 
truly identical. As evidence for this assertion, petitioners note that 
certain models of prime- and off-grade film are priced the same.
    SKC argues that petitioners' allegations regarding its U.S. sales 
to Anacomp are unfounded for the following reasons: (1) it reported the 
proper date of sale for these transactions, (2) it has a commercial, 
arm's-length relationship with Anacomp, (3) it properly reported credit 
expenses and interest revenues associated with these sales, (4) it 
reported accurate, actual prices for these sales, and (5) it correctly 
identified home market sales of comparable merchandise.

DOC Position:

    Regarding the date of sale for Anacomp sales, we disagree with 
petitioners. It is our long-standing policy for our date-of-sale 
analysis to set the ``date of sale'' as the date upon which price and 
quantity terms are established as set forth in our questionnaire 
instructions (see Certain Forged Steel Crankshafts from the United 
Kingdom, Final Determination of Sales Below Fair Value, 52 FR 32951 
(September 1, 1987)). In the case of purchase agreements or contracts, 
that date is routinely the date of execution of the sales agreement 
(see Comment 3 (Date of Sale) in Antifriction Bearings (Other Than 
Tapered Roller Bearings) and Parts Thereof from the Federal Republic of 
Germany, 54 FR 18992 (May 3, 1989)). In this case, the date SKC 
reported was the first date the basic terms of the sale, such as price 
and quantity, were determined. Thus, we are satisfied that the date of 
sale SKC reported is correct and needs no modification.
    Regarding SKC's relationship with Anacomp, we disagree with 
petitioners. There is nothing on the record in this review which 
indicates any relationship between Anacomp and respondent other than a 
commercial, arm's-length relationship. Indeed, the agreement between 
Anacomp and SKC which SKC included in its April 19, 1993, supplemental 
sales questionnaire response clearly indicates that the 

[[Page 42839]]
relationship is at arm's-length. Lacking any credible evidence to the 
contrary, we consider Anacomp to be an unrelated U.S. customer in 
accordance with section 771(13) of the Act. This section of the Act 
defines a related party as (1) an agent of the manufacturer, (2) a 
party which owns or controls interest in the manufacturer, (3) a party 
which is owned or controlled by the manufacturer, or (4) a party which 
owns or controls 20 percent or more of the manufacturer. There is 
nothing on the record which indicates that these conditions apply to 
the relationship between Anacomp and SKC.
    We agree with petitioners that SKC's reported date of payment for 
unpaid invoices should be changed. SKC reported an arbitrary date as 
the date of payment for certain invoices in calculating imputed credit 
expense on U.S. sales to Anacomp. The date which SKC reported as the 
date of payment was not the actual payment date for these sales because 
these sales had still not been paid. The dates of payment SKC reported 
for these sales were the last dates of payment on the record prior to 
responding to our supplemental questionnaire. Because these data were 
incomplete, we have determined for these final results, in accordance 
with section 776(c) of the Act, that the application of best 
information available to the payment date of these sales is warranted. 
Based upon the record in this review, we have identified the date we 
received SKC's response to our supplemental questionnaire, April 19, 
1993, as the last day we can determine with any certainty that these 
sales were still unpaid. Therefore, we have used SKC's supplemental 
questionnaire response date as the date of payment for these sales (see 
Brass Sheet and Strip from Sweden, Final Results of Antidumping Review, 
60 FR 3617, 3620-21, Comment 4 (January 18, 1995)).
    We disagree with petitioners' allegation that SKC's reported short-
term interest rate for sales to Anacomp was incorrect. The loans SKC 
classified as ``Eurodollar loans'' used to calculate its short-term 
borrowing rate were short-term loans from U.S. banks denominated in 
U.S. dollars, the interest rate of which is set by the bank using the 
Eurodollar market as a benchmark. In essence, therefore, these loans 
are U.S. loans from a U.S. bank used to finance U.S. operations. Thus, 
we do not believe that they are distortive of short-term borrowing 
rates in the United States.
    Regarding the sale price of merchandise SKC sold to Anacomp, we 
disagree with petitioners. There is no evidence on the record to 
support petitioners' allegation that SKC's reported prices on sales to 
Anacomp may be overstated based on the formula used to determine the 
weight of particular rolls of PET film. Petitioners' calculations 
purporting an inaccurate weight for certain rolls of subject 
merchandise are apparently based upon incorrect roll lengths. Once the 
proper roll lengths are substituted for the inaccurate lengths, the 
petitioners' alleged discrepancy disappears. In addition, petitioners' 
allegation that SKC sold film to Anacomp at widths different from those 
reported to the Department is without any supporting evidence.
    We disagree with petitioners on the identification of identical 
merchandise sold in the home market. Petitioners' argument that 
respondent sold off-specification PET film to home market customers as 
prime-grade film is without any supporting evidence on the record of 
this review. Although petitioners cite as evidence that the price of 
one particular prime-grade film is the same as the price of a certain 
off-grade film, the Department finds this comparison to be meaningless 
unless one takes into consideration the relative thickness of the film 
in question. In general, the thinner the film, whether prime- or off-
grade, the more expensive it is. The two models of film petitioners 
used in their argument are not of comparable thickness. When films of 
comparable thickness are compared, SKC's price for prime-grade film is 
significantly higher than its price for off-grade film.

Comment 13

    Petitioners argue that SKC's reported costs for producing subject 
merchandise are not reliable. Petitioners contend that respondent 
incorrectly used product-specific costs instead of the average costs in 
SKC's own cost accounting system. Petitioners urge the Department to 
reject SKC's reported product-specific costs and use average costs 
until the Department is able to verify the accuracy of the reported 
product-specific costs.
    SKC argues that its reported costs are accurate and it has not 
changed its cost methodology since the Department verified its COP data 
in the original LTFV investigation.
DOC Position

    We disagree with petitioners. SKC's normal cost accounting system 
calculates a single, average COP for all models of PET film. SKC 
derived the reported product-specific costs in order to comply with the 
Department's instructions in the COP/CV questionnaire. When petitioners 
challenged the Department's acceptance in the LTFV investigation of 
SKC's cost methodology before the CIT, the Department explained its 
acceptance of respondent's methodology, stating that ``there is no 
basis to doubt the reliability of SKC's product specific cost 
accounting methodology'' (Defendant's Memorandum In Opposition to 
Plaintiffs' Motion for Judgement Upon the Administrative Record, April 
2, 1992, at 58, E.I. DuPont de Nemours & Co., Inc. v. United States, 
Court No. 91-07-00487). Moreover, petitioners' contention that the 
Department must verify respondent's cost data is erroneous. The 
Department determined, pursuant to 19 C.F.R. section 353.36(a)(v), that 
no verification of SKC was necessary in this present administrative 
review because SKC was verified in the original investigation. 
Furthermore, we considered the following factors in evaluating SKC's 
costing methodology: (1) SKC's methodology is unchanged from the 
original investigation, (2) the Department thoroughly verified the 
accuracy of SKC's information in the original investigation, and (3) 
there is no evidence on the record of this review which would indicate 
that SKC's reported product-specific costs are inaccurate. Thus, we 
have accepted SKC's product-specific costs.

Comment 14

    Petitioners argue that SKC's cost methodology undervalues the costs 
of off-specification PET film. Petitioners assert that SKC has 
manipulated the allocation of materials cost for PET film in such a way 
that assigns a lower cost for off-grade film than for prime-grade film. 
They argue that such manipulation of costs contravenes the Federal 
Circuit's decision in Ipsco Appeal, which reversed a lower court ruling 
requiring the Department to allocate shared processing costs between 
prime and off-grade merchandise based on the relative sales value. 
Petitioners contend that the Federal Circuit ruling means that the 
costs for prime and off-grade PET film must be the same. As evidence 
for the allegation of SKC's manipulation of costs, petitioners allege 
that SKC's cost of one particular model of off-grade PET film is lower 
than the average cost of manufacture for all types of film, whether 
prime- or off-grade.
    SKC argues that it has applied a cost methodology that assigns 
equal costs to the prime- and off-grade PET film in accordance with the 
Ipsco Appeal. 

[[Page 42840]]


DOC Position

    We disagree with petitioners. SKC changed its cost methodology for 
purposes of this administrative review, reportedly to conform to the 
Federal Circuit's ruling in the Ipsco Appeal. Evidence on the record 
indicates that SKC properly reported the full cost of manufacturing 
off-grade PET film without any allocation of costs between prime- and 
off-grade PET film.
    According to its questionnaire response, SKC does not allocate 
shared processing costs between prime- and off-grade film at any point. 
Petitioners' example of one model of off-grade film is not helpful 
because there are numerous models of prime- and off-grade film which 
SKC sold during the POR. Due to the numerous models of PET film SKC 
sold of both grades, other models exist with costs above the average, 
as well as models with costs below the average. Thus, we believe that 
SKC's one off-grade film model with costs below the average cited by 
petitioners is not indicative of SKC's undervaluation of other off-
grade film models. Therefore, we have accepted SKC's cost methodology.

Comment 15

    SKC contends that the Department erred in deducting direct U.S. 
selling expenses directly from USP on exporter's sale price (ESP) 
sales. Respondent argues that the Department should treat these 
expenses as circumstance-of-sale adjustments to the FMV, citing Koyo 
Seiko Co. v. United States, 819 F. Supp. 1096 (CIT 1993), NTN Bearing 
Corp. of America v. United States, 747 F. Supp. 726 (CIT 1990), and 
Timken Co. v. United States, 673 F. Supp. 495 (CIT 1987).

DOC Position

    We disagree with SKC. Our deduction of direct selling expenses from 
USP in an ESP situation is consistent with our longstanding 
administrative practice, is in accordance with section 353.41(e)(2) of 
our regulations, and has been upheld by the Court of Appeals for the 
Federal Circuit in Koyo Seiko Co., Ltd. v. United States, 36 F. 3d 1565 
(Fed. Cir. 1994) (Koyo Seiko).

Comment 16

    SKC argues that the Department made several clerical errors in the 
difference-in-merchandise adjustment and model match sections of the 
calculations.

DOC Position

    The Department agrees with SKC's allegations and has revised the 
calculations accordingly for the final results of review.

Comment 17

    SKC argues that the Department improperly compared a COP which 
includes home market packing and interest expenses to home market sales 
prices which were net of these expenses.

DOC Position

    We agree with respondent and have revised our calculations 
accordingly.

Comment 18

    SKC comments that the Department failed to subtract U.S. movement 
costs, packing, and selling expenses from the calculation of profit for 
further-manufactured sales. According to SKC, this failure resulted in 
overstated total profit and profit attributable to further 
manufacturing.

DOC Position

    We agree with respondent and have revised our calculations 
accordingly.

Comment 19

    SKC argues that the Department failed to adjust CV for direct and 
indirect selling expenses, imputed credit, and commissions.

DOC Position

    We agree with respondent and have adjusted the calculations 
accordingly.

Kolon

Comment 20

    Petitioners argue that the Department's methodology failed to 
capture all costs associated with Kolon's inventory carrying costs and 
warehousing costs for ESP sales. Petitioners allege that Kolon's 
reported inventory carrying costs and warehousing costs are not 
accurate, due, in part, to an improper accounting of these costs 
associated with merchandise which entered the United States prior to 
the POR. Petitioners also allege that Kolon did not report warehousing 
expense and inventory carrying costs for some ESP sales. Kolon counters 
that its reported inventory and warehousing cost figures accurately 
capture all costs associated with its ESP sales.
DOC Position

    We disagree with petitioner. Kolon reported inventory carrying 
costs and warehousing costs based on the total costs its U.S. 
subsidiary incurred during the POR. Kolon reported these costs based on 
POR expenses and allocated the total POR expenses over the total value 
of sales during the POR. Because Kolon based its methodology on the 
total expenses and invoices during the POR, its calculations were not 
affected by the inclusion or exclusion of merchandise that entered the 
United States prior to the POR.

Comment 21

    Petitioners argue that Kolon should have reported warehousing costs 
for certain ESP sales as direct selling expenses instead of labeling 
them as indirect selling expenses. Petitioners maintain that Kolon 
incurred ``after-sale'' warehousing expenses on those ESP sales where 
the date of sale preceded the date of shipment. Kolon argues that it 
properly reported its warehousing expenses as indirect selling expenses 
because it did not necessarily incur post-sale warehousing expenses on 
these types of sales and it could not link directly any additional 
warehousing costs to specific sales.

DOC Position

    We disagree with petitioners. Petitioners have not demonstrated 
that Kolon incurred post-sale warehousing expenses for ESP sales whose 
date of sale preceded the date of shipment. In addition, Kolon 
maintained a general inventory during the POR. Therefore, in cases 
where Kolon stored subject merchandise in public warehouses, its 
warehousing costs were fixed and could not be identified with specific 
sales or invoices. We are satisfied that Kolon reported these expenses 
properly as indirect selling expenses.

Comment 22

    Petitioners maintain that the Department may have used a database 
with the incorrect number of Kolon's home market sales during the POR.

DOC Position

    We agree with petitioners. We have ensured that our calculations 
for Kolon rely on the correct number of transactions.

Comment 23

    Petitioners argue that the Department incorrectly performed its 
sales-below-cost test by comparing the COP for each model of PET film 
which excluded VAT to a net home market sales price which included VAT.
    Kolon agrees with petitioners and also maintains that the 
Department incorrectly subtracted home market credit expense from the 
home market price prior to the COP test.

DOC Position

    We agree with petitioners and Kolon. We have revised our 
calculations accordingly. 

[[Page 42841]]


Comment 24

    Petitioners argue that Kolon impermissibly, and without the consent 
of the Department, limited its reported home market sales to only those 
which it claimed were identical to U.S. sales. Petitioners argue that 
this contravenes the Department's questionnaire instructions and 
interferes with the Department's ability to conduct its own product 
comparisons.
    Kolon argues that it consulted with Department officials with 
regard to reporting only identical home market sales and received 
permission to do so. Kolon also notes that the revised home market 
sales listing it submitted to the Department included both identical 
and similar merchandise.

DOC Position

    We disagree with petitioners. The questionnaire instructions in 
this review stated clearly that respondents may not be required to 
report all home market sales if they made contemporaneous sales of 
identical merchandise in the home market during the POR. Kolon properly 
requested permission from the Department to report only home market 
sales of identical merchandise, and the Department granted permission 
to do so in a letter dated July 15, 1993. Furthermore, petitioners' 
arguments ignore the fact that the Department ultimately required 
respondent to revise the submitted home market database to include all 
home market sales of identical and similar merchandise.

Comment 25

    Petitioners argue that the Department erroneously accepted Kolon's 
reported eight percent statutory minimum profit for purposes of 
calculating CV. Petitioners maintain that Kolon's profit percentage was 
higher than the statutory minimum and that the Department should use 
petitioners' estimate of Kolon's profit as best information available 
(BIA).
    Kolon argues that it properly reported the statutory eight percent 
profit in accordance with the Department's regulations because its 
profit listed on its audited financial statements, and verified by the 
Department, was less than eight percent.

DOC Position

    We disagree with petitioners. During verification of respondent's 
COP/CV data in Korea, we checked that Kolon had properly reported the 
statutory minimum for profit, in accordance with section 
773(e)(1)(B)(ii) of the Act and 19 CFR 353.50(a)(2), given the 
company's records on profit from sales of subject merchandise. We 
believe that petitioners' assertion that Kolon's profit is higher than 
the statutory minimum is based on insufficient evidence.
    Furthermore, Kolon had contemporaneous home market matches for all 
of its U.S. sales during the POR and none of Kolon's home market sales 
were found to have been made below the COP. Thus, in our analysis of 
respondent's response, there was no need to use CV (see section 
773(b)(2) of the Act).

Comment 26

    Petitioners argue that Kolon reported its direct and indirect 
selling expenses for CV/COP in a manner contradictory to the provisions 
of 19 CFR 353.50. Petitioners maintain that Kolon's reporting of 
average home market selling expenses does not conform to the 
regulation's requirement that such information be based on the selling 
expenses for the class or kind of subject merchandise sold in the home 
market.
    Kolon argues that it complied with the Department's regulations by 
basing its reported selling expenses on the home market sales of each 
model of PET film sold during the POR.

DOC Position

    We disagree with petitioners. The section of the Department's 
regulations petitioners cite states that CV shall include general 
expenses ``. . . usually reflected in the sales of merchandise of the 
same class or kind . . .'' (emphasis added). See 19 CFR 353.50(a)(2). 
It is clear that the wording of this regulatory provision leaves some 
discretion to the Department in determining whether a respondent's 
reported selling expenses for CV are reasonable. Based upon a 
successful and thorough verification of Kolon's selling expenses in 
Korea, we are satisfied that the general, selling, and administrative 
expenses reflect the expenses for the class or kind of merchandise.
    Moreover, we note that this section of the regulations pertains 
only to CV, not COP. The questionnaire instructions in this review 
clearly indicated that selling expenses reported for COP should be 
based on the actual expenses for each model of subject merchandise.
    Finally, Kolon based its reported selling expense for each sale on 
the average expense rate of the home market sales departments involved 
in the sales. Thus, we are satisfied that the selling expenses Kolon 
reported represent average expenses for all home market sales of 
subject merchandise.

Comment 27

    Petitioners argue that the Department should reexamine Kolon's 
characterization and reporting of U.S. sample sales. Petitioners allege 
that Kolon has not demonstrated that samples it gave to U.S. customers 
free of charge are properly exempted from being reported in the U.S. 
sales listings. Petitioners also questioned the appropriateness of 
Kolon's reporting the cost of free samples as indirect selling 
expenses.
    Kolon argues that its treatment of sample sales was consistent with 
past Department practice and that it properly excluded samples it gave 
to U.S. customers at no charge from its sales listing, and included 
their costs in Kolon's reported indirect selling expenses in accordance 
with Departmental practice set forth in Granular Polytetrafluroethylene 
Resin from Japan, 58 FR 50343, 50345 (September 27, 1993) (Granular 
PTFE from Japan).
DOC Position

    We agree with petitioners. As set forth in Antifriction Bearings 
(Other Than Tapered Roller Bearings) and Parts Thereof From France, et. 
al; Final Results of Antidumping Duty Administrative Reviews, Partial 
Termination of Administrative Reviews, and Revocation in Part of 
Antidumping Duty Orders, 60 FR 10900 (February 28, 1995), there is 
neither a statutory nor a regulatory basis for excluding any U.S. sales 
from review. The statute requires the Department to analyze all U.S. 
sales within the POR (see 19 U.S.C. 1675(a)(2)(A)).
    The Department does, however, have the authority to omit certain 
zero-price samples from our analysis if it can be determined that these 
samples were not used for commercial consumption (see Granular PTFE 
from Japan). We believe that Granular PTFE from Japan is not applicable 
in this case. In that case the sample goods were provided for testing. 
Due to the nature of the product, once tested, the sample could not be 
returned. Although a transfer of ownership had occurred, the product 
had not been used for commercial consumption, and thus could not be 
said to have been ``sold.'' In this case, there is no evidence on the 
record that Kolon's U.S. samples are destroyed or rendered unusable, as 
in Granular PTFE from Japan. In addition, based upon the evidence on 
the record, we are not convinced that these zero-priced samples were 
commercially insignificant. Accordingly, we have deducted the cost of 
these samples from Kolon's indirect selling expenses and included the 
sample rates in our analysis for the final results of review (see also 
Tapered Roller Bearings, Four 

[[Page 42842]]
Inches or Less in Diameter, and Components Thereof from Japan, 59 FR 
56035).

Comment 28

    Petitioners note a typographical error in the Department's computer 
program which affected the calculation of Kolon's COP for home market 
sales. Petitioners note clerical errors in the computer program for 
Kolon's ESP sales. As a result, petitioners assert that the Department 
did not analyze a small number of respondent's ESP sales properly and 
the Department did not deduct Kolon's export selling expenses from USP. 
Finally, Kolon notes that the Department used the incorrect variable 
for interest expense in calculating CV.

DOC Position

    We agree with petitioners and Kolon. The variable name for Kolon's 
total cost of manufacture in our purchase price computer program should 
be ``TOTCOM'' instead of ``OTCOM.'' We have corrected this 
typographical error for these final results. We have also corrected the 
ESP calculations and ensured that all of Kolon's ESP sales were 
analyzed for the final results of review. Finally, we have revised our 
calculations using Kolon's correct interest expense variable in 
calculating CV.

STC

Comment 29

    STC argues that the Department should exclude U.S. sales of 
damaged, obsolete and B-grade merchandise from its margin analysis 
because they are unrepresentative of STC's usual PET film sales and 
arbitrarily distort the margin analysis.
    In support of its claim that the Department should exclude one sale 
of damaged merchandise from analysis, STC cites past Department 
practice where sales of secondary quality, scrap, or damaged 
merchandise have been excluded from the margin analysis. STC also notes 
that the Department determined, at verification, that STC's sale of 
damaged film was aberrant in nature. Alternatively, STC argues the 
Department should exclude this sale as outside the scope of the 
antidumping duty order, because the film was damaged in transit and 
entered into the United States as PET film scrap, and not as A-grade 
film subject to the antidumping duty order. STC also argues that if the 
Department does not exclude the sale from the scope of the order or 
from its analysis, the Department should adjust expenses upward to 
reflect insurance reimbursement for in-transit damage. In addition, STC 
argues that the damaged film should not be compared to CV, as was done 
in the preliminary results, but instead to the home market model which 
is identical in all respects except for the damage.
    Similarly, STC maintains that the Department should exclude STC's 
U.S. sale of obsolete merchandise from its margin analysis. STC claims 
that because this pre-production lot of PET film had quality problems 
and was, as a result, warehoused for three years, STC was ultimately 
forced to sell this film as scrap. Accordingly, STC argues that this 
sale is unrepresentative of its sales in the United States. STC also 
notes that this sale in the United States constituted only a small 
percentage of its U.S. sales and cites previous Department practice 
where sales which account for a very small percentage of U.S. sales by 
volume have been disregarded. Alternatively, STC argues that the 
Department should exclude this sale because this merchandise entered 
the United States before the antidumping duty order went into effect.
    Finally, STC argues that its three U.S. sales of B-grade film 
should also be excluded from the margin analysis for several reasons: 
(1) they constitute only a small percentage of STC's total sales 
(excluding value-added sales); (2) B-grade film is not normally sold in 
the U.S. market; and (3) these sales were made only at the customers' 
request.

DOC Position

    We disagree with STC. There is no provision in the antidumping 
statute or regulations which provides for the exclusion of sales when 
determining dumping margins. The CIT, in IPSCO v. United States, 687 F. 
Supp. 633, 640 (CIT 1988), stated that ``. . . if Congress intended to 
require the administering authority to exclude all sales made outside 
the `ordinary course of trade' from its determination of the United 
States price it could have provided for such an exclusion in the 
definition of United States price, as it has in the definition of 
foreign market value. It has not done so.''
    Additionally, it is longstanding Department practice to include all 
U.S. sales in its dumping calculations except in instances where title 
does not transfer or in the case of statistical sampling (see Color 
Television Receivers from the Republic of Korea, 58 FR 50333 (1993)).
    We also disagree with STC's request that, in the event we do not 
exclude the sale of damaged film, we adjust its USP to reflect 
insurance reimbursement. The antidumping statute clearly permits 
additions to USP in only four instances, none of which apply to the 
insurance reimbursement additions sought by STC (see section 772(d)(1) 
of the Act). These four instances set forth in the statute allow 
additions to USP for U.S. packing/shipping expenses, rebated or 
uncollected import duties, rebated or uncollected taxes, and 
countervailing duties imposed on the merchandise. The Department has a 
consistent practice of strictly interpreting these provisions and 
denying requests for upward adjustments to USP (see Oil Country Tubular 
Goods from Israel, 52 FR 1511 (1987)).
    Finally, we disagree with STC's assertion that the sale of obsolete 
films should not be included in our dumping analysis because the 
merchandise entered prior to the POR. In accordance with our 
questionnaire instructions and longstanding practice, the Department 
bases its ESP calculations on sales of subject merchandise, regardless 
of entry date. The sale in question occurred in May 1992, during the 
POR. In addition, there is nothing on the record which proves that this 
sale entered before the effective date of the antidumping duty order or 
as anything other than PET film. Therefore, we have included this sale 
in our dumping analysis.

Comment 30

    STC claims that the Department substantially overstated STC's COP 
and CV. First, STC claims that the Department failed to revise STC's 
1992 fixed overhead costs based on verified data. According to STC, 
this revision was necessary due to the result of a change in the method 
by which STC computed depreciation. STC explains that, in 1992, it 
switched from an accelerated (i.e., declining balance) to a straight-
line method of depreciation. Although documentation supporting this 
change was included in STC's COP questionnaire response, STC 
acknowledges that it failed to report its fixed overhead costs using 
the straight-line method. STC argues that it identified this clerical 
error and the Department verified it on the first day of verification.
    Second, STC argues that the Department's decision to adjust labor 
cannot be reconciled with the evidence it verified. STC claims that the 
Department successfully verified the completeness and accuracy of STC's 
reporting and allocation of labor expenses incurred by a wholly-owned 
subsidiary in the production of PET film. However, STC asserts, the 
Department readjusted reported labor costs to include labor costs 
actually reported in STC's general ledger in the preliminary results 
with no explanation. 

[[Page 42843]]
STC requests that the Department use STC's labor costs as reported in 
its questionnaire response in its calculations without adjustment.
DOC Position

    We agree with STC concerning its revisions to STC's reported fixed 
overhead costs. STC submitted corrected data at the beginning of 
verification for its reported fixed overhead costs resulting from STC's 
change in methodology in calculating its depreciation costs from a 
declining balance to a straight-line method in 1992. Accordingly, we 
have revised our calculations to include the correct amount for 
depreciation costs in our calculations.
    We disagree with STC concerning our decision to adjust STC's 
reported labor costs. STC's wholly-owned subsidiary produces only PET 
film subject to this review. We verified that labor expenses were 
incurred by the subsidiary. However, in its questionnaire response, STC 
allocated a portion of these expenses away from the production of PET 
film, claiming that some of the subsidiary's workers performed other 
work for STC. We could not verify that any of these allocated labor 
expenses were billed by the subsidiary to STC. Nor could we verify that 
any of the subsidiary's laborers performed production tasks for STC. We 
used the labor expenses as incurred by the subsidiary and recorded in 
its financial statements. Therefore, we used in our calculations only 
those labor costs we were able to verify.

Comment 31

    STC argues that the Department's test for sales made at prices 
below the COP is fundamentally flawed. First, STC claims that, in 
accordance with the Department's practice and judicial precedent, the 
Department should have allowed an adjustment for start-up costs. STC 
cites previous Departmental practice in Fresh Kiwifruit from New 
Zealand; Preliminary Results of Antidumping Administrative Review, 59 
FR 23691 (May 6, 1994) (Kiwifruit), where the Department accounted for 
start-up costs because they were justified, supported, and quantified. 
STC disputes the Department's decision in the preliminary results of 
review to deny this adjustment because these costs were not actually 
reflected in STC's financial records. STC notes that cost data reported 
to the Department often differs from the type of data maintained in the 
ordinary course of trade, citing product-specific, as opposed to 
average costs and adjustments, for imputed credit costs as examples. 
STC also notes that its start-up cost allocation is consistent with 
GAAP in that only costs incurred above expected per unit overhead costs 
were capitalized up to the point that STC was able to reach its normal 
production volume. Finally, STC notes the Department's past practice, 
which has been upheld by the courts, of amortizing start-up costs even 
where the respondent companies have expensed their pre-production 
costs.
    STC also argues that the Department's decision to apply its 
standard test for sales made at below-cost prices for an extended 
period of time is arbitrary and unjustified in light of STC's 
protracted start-up difficulties. STC claims its only option was to 
sell at the prevailing market price despite its high start-up costs 
until its costs decreased and sales increased to a point where it could 
recover earlier start-up costs. STC maintains that using the 
Department's standard measure for an extended period of time in a 
competitive market is patently unfair to new entrants, particularly to 
one facing the unusual circumstances that confronted STC.
    Finally, STC argues that the Department failed to consider whether 
STC could recover all costs of production over a ``reasonable period of 
time,'' in spite of recent court decisions requiring the Department to 
consider factors such as: (1) How far below cost the sales are; (2) how 
much, if at all, costs of production are expected to decline; (3) the 
period of time over which they are expected to decline; and (4) the 
reasons why, based on record evidence, these costs will not be 
recovered over time. In light of STC's claim that it expects to recover 
all of its costs within one year, STC urges the Department to 
reconsider its determination in the preliminary results and allow STC 
an adjustment to COP for start-up costs.

DOC Position

    We disagree that an adjustment for STC's start-up costs must be 
allowed for the final results and believe that STC's cite in its 
comments to the preliminary results in Kiwifruit is misplaced. In the 
case of Kiwifruit we adjusted for set-up rather than start-up costs. 
The set-up cost adjustment accounted for the historical development 
cost of the kiwifruit orchard which had been expensed as incurred. We 
captured these costs so that they could be properly amortized over the 
productive life of the orchard. Adjusting for start-up costs refers to 
capitalizing excessive current costs and amortizing them over future 
production. Further, STC's cites to judicial precedent do not refer to 
start-up costs, specifically, but to the basis of certain adjustments. 
In addition, STC's reported start-up costs could not be documented by 
actual company records because the calculations for these costs were 
based upon a theoretical one-hundred percent capacity utilization rate. 
Therefore, we have not accepted STC's claim for a start-up cost 
adjustment.
    With regard to our test for sales made below cost for an extended 
period of time, we disagree with STC. It is our longstanding practice 
to define an extended period of time as three months. However, due to a 
clerical error, the number of months in our preliminary calculations 
was incorrect. For the final results, we have corrected the test to 
consider three months to be an extended period of time, as is our 
standard practice.
    We also disagree with STC's assertion that, because STC maintains 
that it will recover all costs within one year, the Department should 
include home market sales of subject merchandise found to have been 
made below the COP. The CIT, in Toho Titanium v. United States, 670 F. 
Supp. 1019, 1021 (1987), clearly stated that the Department must be 
able to demonstrate that the prices which are below cost during the POR 
are at such a level that those prices would permit not only sufficient 
revenue to cover future costs, but also exceed future costs to a degree 
which permits the recovery of past losses. The simple line graphs STC 
submitted in its questionnaire response, purporting to show increasing 
capacity utilization and decreasing costs, are not adequate in detail 
or documentation to make a definite conclusion which satisfies the 
statute. In addition, we were unable to test the validity of the charts 
STC submitted, because STC did not clarity the assumptions on which the 
graphs were based. This evidence does not justify including STC's 
below-cost sales in our dumping analysis. Therefore, we excluded STC's 
below-cost sales for the final results of review.

Comment 32

    STC argues that the Department must apply the provisional measures 
deposit cap and, if STC's dumping margin is greater than the cash 
deposit or bond rate for entries between the Department's preliminary 
and final determinations in the LTFV investigation, the Department must 
instruct the Customs Service to disregard the difference.

DOC Position

    We agree. Although we changed our policy concerning the provisional 


[[Page 42844]]
measures deposit cap in October 1992 to apply only to cash deposits 
associated with antidumping duty orders, our policy affected only those 
entries which were subject to a preliminary determination of sales-at-
less-than-fair-value published after July 29, 1991. Therefore, because 
the preliminary determination in this case was published on November 
30, 1990, and in accordance with 19 CFR 353.23, if the cash deposit or 
bond required between the affirmative preliminary and final 
determination is different from the dumping margin in the 
administrative review, we will instruct the Customs Service to 
disregard the difference to the extent that the cash deposit or bond is 
less than the dumping margin, and to assess antidumping duties equal to 
the dumping margin calculated in this administrative review if the cash 
deposit or bond is more than the dumping margin for entries during the 
period between the preliminary and final determination in the original 
investigation.

Comment 33

    STC argues that the Department should adhere to the court's 
numerous rulings and add U.S. direct selling expenses to FMV, not 
deduct U.S. direct selling expenses from USP, as was done in the 
preliminary results of review.

DOC Position

    We disagree with respondent. See our response to Comment 15.

Comment 34

    Petitioners argue that the Department overstated the value of U.S. 
sales for STC's further-processed imports which results in an 
understatement of the percentage margin of dumping as published in the 
preliminary results.

DOC Position

    We agree. The overstatement of the value for further-manufactured 
sales was due to an improper conversion which we have corrected for the 
final results. See our response to Comment 42 for further information 
on this conversion error.
Comment 35

    STC argues that the Department should not have subtracted imputed 
expenses in conducting its COP test. STC, citing previous Department 
practice, claims that the Department's test for calculating sales made 
at prices below COP does not typically subtract imputed expenses, such 
as credit expenses, in conducting its sales-below-cost comparison of 
home market sales and cost of production.

DOC Position

    We agree and have conducted the COP test without subtracting 
imputed expenses for the final results of review (see Color Television 
Receivers from Taiwan; Final Results of Administrative Review, 56 FR 
65218 (December 16, 1991)).

Comment 36

    STC argues that the Department understated STC's actual home market 
credit expenses by assigning a much shorter average period for 
outstanding credit than that which STC experienced and by using an 
artificially low home market interest rate. STC requests that the 
Department use the payment periods it reported in the questionnaire 
response.

DOC Position

    We disagree with STC. Although STC claimed, in its November 3, 
1992, questionnaire response, that it provided a longer credit period 
to unrelated end-users in the home market of subject merchandise, we 
determined at the home market sales verification that the actual credit 
period was significantly shorter (see Verification Report of the 
Questionnaire Responses of STC Corporation in the First Antidumping 
Administrative Review of Polyethylene Terephthalate (PET) Film from the 
Republic of Korea, at 10-11 (April 21, 1994) (STC Verification 
Report)). We verified the shorter credit period by tracing home market 
sales. Accordingly, we adjusted our calculations to reflect this 
actual, shorter credit period.
    In addition, STC claimed a higher home market interest rate than we 
were able to document during our home market sales verification. STC 
company officials claimed that the higher rate reflected the added 
expense of its lenders' requirements that STC borrow compensatory funds 
deposited at a zero or low rate of interest. However, because STC was 
unable to provide documentation during verification on the calculation 
method it used to arrive at the higher interest rate, we used in our 
calculations the actual interest rates we were able to verify (see STC 
Verification Report at 10-11).

Comment 37

    STC claims that the Department did not use the corrected figures 
for average days in inventory in its calculations of STC's home market 
inventory carrying expense which STC provided to the Department during 
the home market sales verification in Korea.

DOC Position

    We agree with respondent. Accordingly, we have revised our 
calculations for the final results of review to include the correct 
home market inventory carrying costs.

Comment 38

    STC argues that the Department did not adjust the home market price 
for indirect selling expenses incurred in the home market. STC asserts 
that, because further-manufactured sales are ESP sales, the Department 
should make an offset to FMV for STC's home market indirect selling 
expenses up to the amount of STC's U.S. indirect selling expenses and 
commissions on STC's further-manufactured sales as well as regular ESP 
sales.
DOC Position

    We agree with respondent that we should have allowed an ESP offset 
to FMV for U.S. further-manufactured sales (see Certain Internal-
Combustion Forklift Trucks from Japan, 53 FR 12552 (April 15, 1988)) 
and we have revised our calculations accordingly.

Comment 39

    STC argues that the Department mistakenly did not subtract credit 
expenses from FMV when based on CV. STC argues that the Department 
should correct this oversight by deducting credit expenses from CV.

DOC Position

    We disagree with STC. Even though STC did report credit expenses 
separately from its reported total CV in answering the questionnaire 
response, we did not include these expenses in our calculation of CV. 
Therefore, no adjustments to CV are necessary for the final results of 
this review.

Comment 40

    STC requests that the Department correct the following clerical 
errors: (1) STC asserts that the Department neglected to convert STC's 
FMV from a per-kilogram to a per-pound basis for comparisons to its 
purchase price sales, (2) STC discovered, and presented during 
verification, that its duty drawback figures should have been higher 
than previously reported in its U.S. sales listing and requested that 
the Department use the revised duty drawback figures in its analysis, 
(3) STC argues that the Department neglected to use the correct 
interest rate when calculating its U.S. subsidiary's (STCA) interest 
expense (STC claims that the Department used the old reported rate and 
did not use the revised rate presented by STC during verification), 

[[Page 42845]]
and (4) STC maintains that the Department used STC's erroneously 
reported pre-sale warehousing expense instead of the correct expense. 
STC acknowledged that it originally reported a pre-sale warehousing 
expense which was incorrect by one decimal space.

DOC Position

    We agree that clerical errors were made in all four instances and 
have revised our calculations accordingly.

Comment 41

    STC asserts that the Department inappropriately treated STCA's pre-
sale U.S. warehousing expenses as a direct selling expense. Because 
these expenses are incurred prior to the sale of the merchandise to 
unrelated parties and cannot be linked to any particular sale, STC 
maintains that they should be treated as indirect expenses.

DOC Position

    We agree with STC. Because these expenses were incurred prior to 
STC's sale of the merchandise and cannot be directly linked to 
individual sales, we have treated STCA's pre-sale U.S. warehousing 
expense as indirect selling expenses for the final results of review.

Comment 42

    STC argues that the Department incorrectly calculated the net price 
for STC's further-manufactured sales by neglecting to apply the value-
added ratio to the net USP and U.S. price adjustments. STC claims that, 
in calculating the net USP for further-manufactured sales, the 
Department failed to convert USP and U.S. price adjustments from a per-
roll basis to a per-PET film pound equivalent basis. In addition, STC 
asserts that the Department subtracted the entire profit amount from 
the price of the further-manufactured sales, instead of only that 
portion of profit attributable to the further-manufacturing process. 
Finally, STC argues that the Department neglected to add duty drawback 
to USP for further manufactured sales. STC requests that the Department 
modify its calculations accordingly.

DOC Position

    We agree with STC. We have applied the value-added ratio to net USP 
and to the U.S. price adjustments for further-manufactured sales of 
subject merchandise. We also included calculations to convert net USP 
for further-manufactured sales and U.S. price adjustments to a per-
pound basis. We also recalculated profit and deducted only that portion 
attributable to the further-manufacturing process. Finally, we added 
duty drawback to USP for the final results of review.

Final Results of Review

    Upon review of the comments submitted, the Department has 
determined that the following margins exist for the periods indicated:

------------------------------------------------------------------------
                                                                Percent 
                    Manufacturer/exporter                        margin 
------------------------------------------------------------------------
November 30, 1990 through May 31, 1992:                                 
  SKC Limited................................................       0.80
  Kolon Industries...........................................       0.94
  STC Corporation............................................      16.87
April 22, 1991 through May 31, 1992:                                    
  Cheil Synthetics...........................................       0.06
------------------------------------------------------------------------

    The Customs Service shall assess antidumping duties on all 
appropriate entries. Individual differences between USP and FMV may 
vary from the percentages stated above. The Department will issue 
appraisement instructions concerning each respondent directly to the 
U.S. Customs Service.
    Furthermore, the following deposit requirements will be effective 
for all shipments of the subject merchandise, entered, or withdrawn 
from warehouse, for consumption on or after the publication date of 
these final results of administrative review, as provided for by 
section 751(a)(1) of the Tariff Act: (1) The cash deposit rate for the 
reviewed firms will be the rates outlined above, except for Cheil, 
which, because its weighted-average margin is de minimis, the cash 
deposit rate will be zero percent; (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, a 
prior review, or in the original LTFV 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) 
if neither the exporter nor the manufacturer is a firm covered in this 
or any previous review conducted by the Department, the cash deposit 
rate will be 4.82%, the all others rate established in the LTFV 
investigation.
    These deposit requirements shall remain in effect until publication 
of the final results of the next administrative review.
    This notice serves as the final reminder to importers of their 
responsibility under 19 CFR 353.26 to file a certificate regarding the 
reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This notice also serves as a reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 353.34(d). Timely written notification or 
conversion to judicial protective order is hereby requested. Failure to 
comply with the regulations and the terms of the APO is a sanctionable 
violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR 
353.22.

    Dated: August 10, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-20436 Filed 8-16-95; 8:45 am]
BILLING CODE 3510-DS-P