[Federal Register Volume 61, Number 62 (Friday, March 29, 1996)]
[Notices]
[Pages 14064-14073]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7636]



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DEPARTMENT OF COMMERCE
[A-583-824]


Notice of Final Determination of Sales at Less Than Fair Value: 
Polyvinyl Alcohol From Taiwan

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

EFFECTIVE DATE: March 29, 1996.

FOR FURTHER INFORMATION CONTACT: Barbara Wojcik-Betancourt or David J. 
Goldberger, Office of Antidumping Investigations, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue NW., Washington, D.C. 
20230; telephone: (202) 482-0629 or (202) 482-4136, respectively.

THE APPLICABLE STATUTE: Unless otherwise indicated, all citations to 
the statute are references to the provisions effective January 1, 1995, 
the effective date of the amendments made to the

[[Page 14065]]
Tariff Act of 1930 (the Act) by the Uruguay Round Agreements Act 
(URAA).

FINAL DETERMINATION: As explained in the memoranda from the Assistant 
Secretary for Import Administration dated November 22, 1995, and 
January 11, 1996, the Department of Commerce (the Department) has 
exercised its discretion to toll all deadlines for the duration of the 
partial shutdowns of the Federal Government from November 15 through 
November 21, 1995, and December 16, 1995, through January 6, 1996. 
Thus, the deadline for the final determination in this investigation 
has been extended by 28 days, i.e., one day for each day (or partial 
day) the Department was closed. As such, the deadline for this final 
determination is no later than March 21, 1996.
    We determine that polyvinyl alcohol (PVA) from Taiwan is being sold 
in the United States at less than fair value (LTFV), as provided in 
section 735 of the Act. The estimated margins are shown in the 
``Suspension of Liquidation'' section of this notice.

Case History

    Since the preliminary determination of sales at less than fair 
value in this investigation on October 2, 1995, (60 FR 52651, October 
10, 1995), the following events have occurred:
    On October 10, 1995, Chang Chun Petrochemical Co., Ltd. (Chang 
Chun), the sole Taiwan producer of the subject merchandise, and the 
respondent in this investigation, timely requested a postponement of 
the final determination until not later than 135 days after publication 
of the preliminary determination in the Federal Register. The notice 
postponing the final determination was published on October 25, 1995 
(60 FR 54667). The Department has determined that such requests contain 
an implied request to extend the provisional measures period, during 
which liquidation is suspended, to six months (see Extension of 
Provisional Measures memorandum dated February 7, 1996.).
    We conducted verification of Chang Chun's sales and cost 
questionnaire responses in Taiwan during October.
    On November 20, 1995, the petitioner, Air Products and Chemicals, 
Inc., stated that polyvinyl alcohol fiber was not intended to be within 
the scope of this investigation.
    Monsanto Company (Monsanto), a party to the proceeding in this 
investigation, submitted comments on the cost of production 
verification report on December 18, 1995. National Starch and Chemical 
Company, Perry Chemical Corp., and Rhone-Poulenc, importers of the 
subject merchandise, submitted comments on the sales verification 
report on January 11, 1996.
    Chang Chun and the petitioner, Air Products and Chemicals, Inc., 
submitted case briefs on January 16, 1996, and rebuttal briefs on 
January 24, 1996. Monsanto also submitted a rebuttal brief on January 
24, 1996. At the request of both the petitioner and Chang Chun, a 
public hearing was held on February 26, 1996.

Scope of Investigation

    The merchandise under investigation is polyvinyl alcohol. Polyvinyl 
alcohol is a dry, white to cream-colored, water-soluble synthetic 
polymer. This product consists of polyvinyl alcohols hydrolyzed in 
excess of 85 percent, whether or not mixed or diluted with defoamer or 
boric acid. Excluded from this investigation are polyvinyl alcohols 
covalently bonded with acetoacetylate, carboxylic acid, or sulfonic 
acid uniformly present on all polymer chains in a concentration equal 
to or greater than two mole percent, and polyvinyl alcohols covalently 
bonded with silane uniformly present on all polymer chains in a 
concentration equal to or greater than one-tenth of one mole percent. 
Polyvinyl alcohol in fiber form is not included in the scope of this 
investigation.
    The merchandise under investigation is currently classifiable under 
subheading 3905.30.00 of the Harmonized Tariff Schedule of the United 
States (HTSUS). Although the HTSUS subheading is provided for 
convenience and customs purposes, the written description of the 
merchandise under investigation is dispositive.

Period of Investigation

    The period of investigation (POI) is April 1, 1994, through March 
31, 1995.

Product Comparisons

    For purposes of determining appropriate product comparisons to U.S. 
sales, we compared identical merchandise, or where there were no sales 
of identical merchandise in the home market to compare to U.S. sales, 
we made comparisons based on the characteristics listed in the 
Department's antidumping questionnaire, as had been applied in the 
preliminary determination, and in accordance with section 771(16) of 
the Act.
    In its case brief, petitioner claimed that the Department should 
determine that ``targeted dumping'' exists under section 777A(d)(1)(B) 
because of a pattern of export prices, which petitioner alleged 
differed significantly across time. Pursuant to section 777A(d)(1)(B), 
the Department may compare weighted-average normal values (NV) to 
transaction-specific export prices, if there is a pattern of export 
prices (EP) for comparable merchandise that differ significantly among 
purchases, regions, or periods of time (see section 777A(d)(1)(B)(i)) 
(emphasis added) when these differences cannot be taken into account by 
using an average to average or transaction to transaction comparison 
(see section 777A(d)(1)(B)(ii)). Petitioner requested that the 
Department compare monthly average NV to monthly EP averages to 
alleviate the significant price distortions occurring in the home 
market at the end of the POI. Petitioner, however, failed to provide 
any evidence or argument as to why the alleged pattern of export prices 
constitute targeted dumping. Consequently, we have rejected 
petitioner's allegation of targeted dumping. However, the Department 
has found significant differences over time in home market pricing. 
Those differences have been taken into account in price averaging. For 
discussion of the price averaging issue, see Comment 3 in the 
Interested Party Comments section of this notice below.

Level of Trade

    As set forth in section 773(a)(1)(B)(i) of the Act and in the 
Statement of Administrative Action (SAA) accompanying the URAA, to the 
extent practicable, the Department will calculate normal values based 
on sales at the same level of trade as U.S. sales.
    Pursuant to 773(a)(7)(A)(i), level of trade involves the 
performance of different selling activities by the producer/exporter. 
On September 22, 1995, we sent Chang Chun supplemental questions 
requesting that Chang Chun establish any claimed levels of trade based 
on selling functions performed and services offered by Chang Chun to 
each customer or customer class, and to document and explain any claims 
for a level of trade adjustment. Chang Chun provided no additional 
information regarding its selling functions and continued to claim 
that, pursuant to section 773(a)(7) (A) and (B), levels of trade are 
based on customer classification.
    We examined the record evidence on the selling functions performed 
by Chang Chun on sales in each market and found that Chang Chun 
provides nearly all of the same or very similar selling functions to 
all customers including: packing and freight services, warranty claims, 
advertising, technical services, and inventory maintenance. As a 
result,

[[Page 14066]]
we rejected the level of trade claim because, pursuant to section 
773(a)(7)(A)(i), differences in level of trade must involve the 
performance of different selling activities by the seller (i.e. the 
respondent producer/exporter) (see Comment 4). Therefore, we determine 
that the selling functions performed among home market sales are 
sufficiently similar for us to consider the home market to be one level 
of trade.
    For the U.S. market, Chang Chun reported payment of commissions on 
certain U.S. sales. It reported, and we verified, that the commissions 
paid did not reflect payments for any services provided by the 
commissionaire. Apart from tolled sales, which are not used in our 
final determination (see Comment 7), we also found that the selling 
functions performed by the respondent in the U.S. are sufficiently 
similar for all sales for us to consider the U.S. market to be one 
level of trade.

Fair Value Comparisons

    In accordance with section 772(a) of the Act, to determine whether 
Chang Chun's sales of PVA to the United States were made at less than 
fair value, we used EP because the subject merchandise was sold to the 
first unaffiliated purchaser in the United States prior to importation 
and because constructed export price (CEP) under section 772(b) is not 
otherwise warranted based on the facts of this investigation.

Export Price

    We calculated EP based on the same methodology used in the 
preliminary determination. Furthermore, as in the preliminary 
determination, we did not include tolled sales.

Normal Value

    In accordance with section 773(a)(1)(B) of the Act, we have based 
NV on sales in Taiwan, or, where appropriate, on constructed value 
(CV). We compared all home market sales to the cost of production 
(COP), as described below. Where home market prices were above COP, we 
calculated NV based on the same methodology used in the preliminary 
determination, with the following exceptions: (1) we recalculated 
reported quantity discounts and special discounts on certain sales (see 
Comment 5); and (2) we made an additional circumstance of sale 
adjustment for bank charges made on certain U.S.sales, based on 
information obtained at verification.

Cost of Production Analysis

    As discussed in the preliminary determination notice, the 
Department conducted an investigation to determine whether Chang Chun 
made home market sales during the POI at prices below COP within the 
meaning of section 773(b) of the Act. Before making any fair value 
comparisons, we conducted the COP analysis described below.

A. Calculation of COP

    We calculated the COP based on the sum of Chang Chun's cost of 
materials and fabrication for the foreign like product, plus amounts 
for home market general, and administrative expenses (G&A) and packing 
costs in accordance with section 773(b)(3) of the Act. We relied on the 
reported COP amounts with the following exceptions: (1) we allocated 
joint production costs to PVA and acetic acid (AA) based upon relative 
sales values (see comment 8); (2) we adjusted the reported cost of 
manufacturing (COM) to account for the difference in the COM per Chang 
Chun's internal records examined at the verification; (3) we adjusted 
the COM to include PVA's share of the difference between Chang Chun's 
depreciation expense for tax purposes (the amount that Chang Chun 
reported in its response to section D of our questionnaire), and its 
depreciation expense for financial statement purposes; and (4) we 
recalculated general and administrative expenses based on the revised 
COM.

B. Test of Home Market Prices

    We compared the adjusted weighted-average COP figures to home 
market sales of the foreign like product on a product-specific basis, 
in order to determine whether these sales had been made at below-cost 
prices within an extended period of time in substantial quantities, and 
at prices that did not permit recovery of all costs within a reasonable 
period of time. The home market prices compared were exclusive of any 
applicable movement charges, discounts, rebates, packing, and direct 
and indirect selling expenses.

C. Results of COP Test

    Pursuant to section 773(b)(2)(c), where less than 20 percent of 
sales during the POI of a given product are at prices less than the 
COP, we do not disregard any below-cost sales of that product because 
the below-cost sales are not made in substantial quantities within an 
extended period of time. Where 20 percent or more of sales of a given 
product are at prices less than the COP, we disregard only the below-
cost sales because such sales are found to be made within an extended 
period of time, in accordance with section 773(b)(2)(B) of the Act, and 
at prices which would not permit recovery of all costs within a 
reasonable period of time, in accordance with section 773(b)(2)(D) of 
the Act. Where all sales of a specific product are at prices below the 
COP, we disregard all sales of that product, and calculate NV based on 
CV, in accordance with section 773(a)(4) of the Act.
    We found that, for certain PVA products, more than 20 percent of 
Chang Chun's home market sales were sold at below COP prices within the 
POI. Further, no evidence was presented indicating that these sales 
provided for the recovery of costs within a reasonable period of time. 
We therefore determined that these below cost sales were made in 
substantial quantities within an extended period of time and we 
excluded these sales and considered the remaining above-cost sales in 
determining NV, if such sales existed, in accordance with section 
773(b). For those U.S. sales of PVA products for which there were no 
above-cost sales, we compared export prices to CV.

D. Calculation of CV

    In accordance with section 773(e)(1) of the Act, we calculated CV 
based on the sum of Chang Chun's cost of materials, fabrication, 
selling, general and administrative expenses (SG&A) and U.S. packing 
costs as reported in the U.S. sales database. In accordance with 
sections 773(e)(2)(A), we based SG&A and profit on the amounts incurred 
and realized by the respondent in connection with the production and 
sale of the foreign like product in the ordinary course of trade for 
consumption in the foreign country. Where appropriate, we calculated CV 
based on the methodology described above in the calculation of COP and 
added an amount for profit. For selling expenses, we used the weighted-
average home market selling expenses.

Comparison Methodology

    In accordance with section 777A(d)(1)(A)(i) of the Act, we 
calculated weighted-average EPs for comparison to weighted average NVs 
or, as discussed above, to CV, where appropriate. The weighted averages 
were calculated and compared by the time period of the sale, product 
characteristics, and the class of the customer involved.
    Chang Chun classified one of its U.S. customers as both an end-user 
and a distributor. Based on information in the questionnaire response, 
we considered

[[Page 14067]]
this customer as an end-user for purposes of price averaging because 
Chang Chun reported that it sold the majority of its PVA sales to this 
customer for the customer's internal consumption.
    The bases for establishing averaging groups according to time 
period and class of customer are discussed in detail below under 
Comments 3 and 4, respectively.

Currency Conversion

    We made currency conversions into U.S. dollars based on the 
official exchange rates in effect on the dates of the U.S. sales as 
certified by the Federal Reserve Bank. Section 773A(a) of the Act 
directs the Department to use a daily exchange rate in order to convert 
foreign currencies into U.S. dollars. Further, section 773A(b) directs 
the Department to allow a 60-day adjustment period when a currency has 
undergone a sustained movement. A sustained movement has occurred when 
the weekly average of actual daily rates exceeds the weekly average of 
benchmark rates by more than five percent for eight consecutive weeks. 
The benchmark is defined as the moving average of rates for the past 40 
business days. (For an explanation of this method, see Policy Bulletin 
96-1: Currency Conversions, 61 FR 9434, March 8, 1996). Such an 
adjustment period is required only when a foreign currency is 
appreciating against the U.S. dollar. The use of an adjustment period 
was not warranted in this case because the Taiwan dollar did not 
undergo a sustained movement, nor were there currency fluctuations 
during the POI.

Verification

    As provided in section 788(i) of the Act, we verified information 
provided by Chang Chun using standard verification procedures, 
including the examination of relevant sales and financial records, and 
selection of original source documentation containing relevant 
information.

Interested Party Comments

    Comment: Date of Sale for Home Market Long-Term Purchase Orders.
    Petitioner argues that the date of sale for home market sales made 
according to long-term purchase orders should not be the purchase order 
date, but rather the purchase order log date as used for other home 
market sales. Petitioner claims that the verification demonstrated that 
the long-term purchase orders did not constitute a binding agreement on 
quantity. Thus, petitioner contends, these purchase orders failed to 
satisfy the requirement that both price and quantity be agreed upon by 
the buyer and the seller for purposes of establishing date of sale. 
Petitioner alleges that: (1) significant amounts of purchase order 
quantities were unfulfilled as of the time of the Department's 
verification; (2) the purchase orders resemble ``blanket purchase 
orders'', which set sales terms and conditions over a time period for a 
maximum quantity of merchandise, but involve no commitment to purchase 
a fixed quantity and still require further communication to specify the 
quantity to be delivered; and (3) the purchase orders did not set 
quantities because Chang Chun did not meet the specified delivery 
period.
    Chang Chun argues that the long-term purchase orders set the key 
terms of sale--price and quantity--and, therefore, the date of sale for 
these transactions should be the purchase order date. Chang Chun states 
that delivery terms are material only if the parties treat them as 
such--which the parties did not in this case. Further, Chang Chun 
maintains that even if purchase order quantities were not fully shipped 
in accordance with the delivery schedule, it does not mean that the 
terms of the purchase order were not met. Chang Chun cites Final 
Determination of Sales at Less Than Fair Value: Stainless Steel Bar 
from India (59 FR 66915, December 28, 1994), where the purchase order 
date was used as the date of sale even though part of the purchase 
order quantity was canceled; and Final Determination of Sales at Less 
Than Fair Value: Crankshafts from Germany (52 FR 28170, July 28, 1987) 
(Crankshafts), where price and quantity changes after the POI did not 
affect the sale date for those sales shipped under the original terms.
    Monsanto and U.S. importers Rhone-Poulenc, Perry Chemical, and 
National Starch also contend that the delivery date is not an essential 
term of sale, and that delays in meeting delivery date do not affect 
the establishment of price and quantity as of the purchase order date.
    DOC Position: We agree with respondent Chang Chun that the sales 
made under what Chang Chun describes as ``long term purchase orders'' 
were made pursuant to valid contracts, and thus we are treating the 
date of the purchase order as the date of sale.
    Neither the statute nor the Department's regulations detail how the 
Department is to determine the date of sale of a transaction. 
Therefore, under principles of administrative law, the agency is 
obliged to fill in the statutory gaps, either by regulation or through 
developing a practice. In determining the date of sale, the Department 
has a well-established and long-standing practice that a sale is 
completed within the meaning of the Act when the essential terms, i.e., 
usually price and quantity, are definite and firm (see ,e.g., Final 
Results of Antidumping Administrative Review: Antifriction Bearings 
(Other Than Tapered Roller Bearings) and Parts Thereof from the Federal 
Republic of Germany, (56 FR 31692, July 11, 1991) (Department's 
established practice to use date when price and quantity terms are set 
as the date of sale); see also Mitsubishi Elec. Corp. v. United States, 
700 F. Supp. 538, 561 (CIT 1988), aff'd. 898 F.2d 1577 (Fed. Cir. 
1990)). The essential terms of price and quantity are firm when they 
are no longer within the control of the parties to alter (see, e.g., 
Final Determination of Sales at Less Than Fair Value: Brass Sheet and 
Strip From France, (52 FR 812, January 9, 1987) (price term pegged to 
publicly quoted metal prices considered definite and fixed); Voss 
International v. United States, 628 F.2d 1328 (CCPA 1980) (price set in 
dollars was definite despite provision for adjustment for currency 
fluctuations because the parties had nothing more to negotiate 
regarding price); Final Results of Antidumping Administrative Review: 
Titanium Sponge From Japan, (54 FR 13403, April 3, 1989) (absolute 
quantity was fixed and definite because contract required customer to 
purchase all that customer required)). Additionally, the Department 
often looks to the course of conduct between the parties in evaluating 
whether a written document represents a binding agreement (see, e.g., 
Final Determination of Sales at Less Than Fair Value: Grey Portland 
Cement and Clinker from Mexico, 55 FR 29244, July 18, 1990) (parties 
had begun performance pursuant to a letter agreement that Department 
found established a definite price and quantity); Crankshafts, at 28175 
(the parties clearly acted in a manner consistent with a meeting of the 
minds that there was a binding agreement because production, acceptance 
of delivery and payment were in accord with the price and quantity of 
the written purchase order)).
    Evidence on the record demonstrates that each of the contracts 
Chang Chun entered into during mid-February 1995 were binding 
agreements for purposes of establishing date of sale. Each of these 
written agreements, referred to by respondent as long-term purchase 
orders, set definite price and quantity terms and were signed by the 
seller Chang Chun and by each purchaser.

[[Page 14068]]
Moreover, for each agreement, the parties' later course of conduct 
evidenced that there was a meeting of the minds as to the essential 
terms, the price and quantity, because neither price nor quantity were 
altered in the course of performance.
    Petitioner argues that Chang Chun had not fully delivered all of 
the quantity to any of the purchasers within the stated delivery 
period, and points to this fact as evidence that none of the long-term 
contracts had set firm quantities, hence, none were binding agreements. 
However, each long-term contract merely set out a delivery schedule 
wherein deliveries were to be made in installments which Chang Chun was 
to deliver when inventory was sufficient and its capacity to transport 
was available. Such language demonstrates that delivery was not 
intended by either party to be an essential term in the agreement. 
Unlike a circumstance where the parties intentionally make time of the 
essence, these long-term contracts did not provide that delivery within 
a date certain was material (see, e.g., Final Determination of Sales at 
Less Than Fair Value: Oil Country Tubular Goods From Argentina, 60 FR 
33539, June 28, 1995)(OCTG from Argentina) (where the Department found 
that a change in delivery terms did not alter the date of sale because 
the parties themselves did not treat the delivery terms as material to 
the long-term contract)). The fact that at the end of the delivery time 
period Chang Chun sent out written extensions of delivery to each 
purchaser, and that each purchaser accepted deliveries of PVA pursuant 
to the delivery extension, is consistent with the conclusion that 
delivery terms were not essential to the contract. The Department has 
often found that changes in non-essential terms do not alter the date 
of sale. See Final Determination of Sales at Less Than Fair Value: 
Aramid Fiber Formed of Poly-Phenylene Terephthalamide From the 
Netherlands, (59 FR 23684, May 6, 1994); see also General Electric Co. 
v. United States, Slip. Op. 93-55 (CIT 1993)).
    Moreover, record evidence demonstrates that Chang Chun had 
substantially performed on each long-term contract within the time set 
out in the delivery schedule and that every purchaser had accepted late 
delivery of remaining quantities at the price set out in the contracts. 
This course of conduct indicates that the parties acted in a manner 
consistent with their respective obligations under these agreements, 
even though all quantities were not delivered in strict accordance with 
the delivery schedule.
    Lastly, we do not view the fact that respondent continued to record 
shipments made pursuant to the long-term contracts as it had recorded 
shipments made pursuant to spot sales as evidence that the long-term 
contracts were not binding agreements. The record-keeping was not 
inconsistent with the long-term contracts. For these reasons, we find 
that the purchase orders at issue are binding contracts. Therefore, we 
have used the date of the purchase orders as the date of sale.
    Comment 2: Long-term Purchase Orders in the Ordinary Course of 
Trade.
    Petitioner argues that, if the Department accepts the home market 
long-term purchase orders as POI sales, shipments made pursuant to 
these orders should be considered outside the ordinary course of trade. 
According to petitioner, these sales represent a significant deviation 
from Chang Chun's prior sales practice in terms of the manner in which 
sales are negotiated, and in the large volume covered. In addition, 
petitioner notes that these long-term orders are the first and only 
ones in the home market during the POI.
    Chang Chun, supported by Monsanto, contends that the sales are in 
the ordinary course of trade because: (1) the purchase orders covered 
all standard grades of PVA and involved a large percentage of POI 
sales; (2) additional purchase orders were issued subsequent to the 
original ones; (3) the products were sold through Chang Chun's major 
channel of distribution; and (4) the sales were not unrepresentative or 
aberrational in nature. Furthermore, Chang Chun states that, although 
these purchase orders were part of a new sales and marketing strategy 
in response to growing competition, they are not uncommon in this 
industry.
    DOC Position: We disagree with petitioner. It is the Department's 
established practice to include home market sales of such or similar 
merchandise unless it can be established that such sales were not made 
in the ordinary course of trade (see Final Determination of Sales at 
Less Than Fair Value: Stainless Steel Angles from Japan, 60 FR 16608, 
March 31, 1995). Section 773(a)(1)(B)(i) of the Act provides that NV 
shall be based on the price at which the foreign like product is sold 
in the exporting country in the ordinary course of trade for home 
market consumption. Section 771(15) of the Act states that ``* * * 
`ordinary course of trade' means the conditions and practices which, 
for a reasonable time prior to the exportation of the subject 
merchandise, have been normal in the trade under consideration with 
respect to the merchandise of the same class or kind * * *''.
    In determining whether sales are made outside the ordinary course 
of trade, the Department typically examines several factors taken 
together with no one factor dispositive. Further, the SAA at 842-843 
states that sales are outside the ordinary course of trade when the ``* 
* * sales or transactions have characteristics that are not ordinary as 
compared to sales or transactions generally made in the same market.'' 
This statement also provides guidance to the Department in considering 
unusual product specifications, aberrational prices, unusual terms of 
sale, or other factors that may make sales extraordinary for the market 
in question. None of these sales involved unusual product 
specifications, rather, the contracts covered all standard grades of 
PVA. The purchasers were established PVA customers that Chang Chun had 
dealt with in the past. Although the prices under these contracts 
differed from spot-sale prices offered previously, we do not consider 
such prices to be unusual given the nature of a long-term contract.
    Although the long-term purchase orders may have been new to Chang 
Chun, there is no evidence that such long-term contracts are unusual or 
extraordinary for the Taiwan PVA market. Further, we found that, 
following the institution of the purchase order system, Chang Chun 
consistently conducted business according to this system.
    While the volume of these long-term contract sales was much greater 
than what Chang Chun had been selling previously on a spot sale basis, 
there is no evidence on the record that indicates that high volume 
sales were not part of the normal course of trade in the Taiwan market 
for a reasonble time prior to the exportation of the subject 
merchandise. In the past, the Department has said that the number of 
sales or the volume sold are not, in and of themselves, dispositive 
(see Final Results of Antidumping Administrative Review: Certain Welded 
Carbon Steel Standard Pipes and Tubes From India, 56 FR 64753, December 
12, 1991). Therefore, we have determined that these sales were made in 
the ordinary course of trade and included these sales in our normal 
value calculation.
    Comment 3: Price Averaging and Time Periods.
    Petitioner argues that calculating a single POI weighted- average 
price for each product results in distortive comparisons between EP and 
NV due to the high volume of home market sales

[[Page 14069]]
at the end of the POI pursuant to the long-term purchase orders. 
Petitioner submitted a number of statistical analyses to demonstrate 
the relationship between time and U.S. prices. Based on these analyses, 
petitioner contends that the price changes over the POI are significant 
and warrant the use of monthly, rather than POI, weighted-averages for 
price comparisions. In support of its position, petitioner argues that 
there is no statutory preference for using POI price averages, and that 
the monthly average methodology will satisfy the requirement of the 
URAA regarding contemporaneous sales comparisons.
    Chang Chun, supported by Monsanto, responds that POI averages 
should be used in this case. Both parties contend that the Department 
was correct in the preliminary determination by establishing POI 
averages as the normal methodology for investigations. Based on its own 
statistical analyses, Monsanto asserts that the petitioner's analyses 
are faulty and that the relationship between time and price is 
relatively weak. Monsanto also contends that the petitioner's 
application of a statistical analysis methodology used in adminstrative 
reviews is inappropriate for this investigation, because petitioner 
limited the analysis to certain sales and based its results on criteria 
applicable to administrative reviews, but not investigations. Based on 
all of these factors, Monsanto contends that there is no basis to 
conclude that the price changes over the POI are significant, and thus 
no reason for the Department to abandon POI averages in favor of 
monthly averages.
    DOC Position: Section 777A(d)(1)(A) gives the Department the 
explicit authority to use certain methods for comparing prices in 
determining whether sales at less than fair value exist. The Department 
may employ an average-to-average comparison of U.S. sales to the 
relevant home market or third country sales or rely on individual sales 
transactions for comparisons in both markets (see section 
777A(d)(1)(A)(i) & (ii)). In applying an averaging approach, the SAA 
states that, in determining sales comparability for purposes of 
inclusion in a particular average, time is a factor which may affect 
the comparability of sales (SAA at 842-843).
    As stated in our Notice of Proposed Rulemaking and Requests for 
Public Comment, 61 FR 7308, 7349 (February 27, 1996) (Proposed 
Regulations), the Department proposes that normally we will calculate 
an average to average comparison by weight-averaging sales during the 
entire POI. However, the Deparment may resort to shorter time periods 
where the normal values, export prices, or constructed export prices 
for sales included in an averaging group differ significantly over the 
course of the POI.
    We agree with petitioner that time significantly influences price 
comparability in this case. An analysis of the record evidence 
indicates that price trends in the United States and Taiwan were 
essentially moving in tandem, i.e., steadily rising over the POI, as 
were cost trends (see Price Analysis Memorandum dated March 20, 1996). 
This data tends to support the fact that prices of PVA and costs for 
its main input, vinyl acetate monomer (VAM), were influenced to a 
significant extent by world market prices. Notwithstanding this fact, 
and in the face of an upwardly moving cost trend during the POI, in the 
last six weeks of the POI Chang Chun departed from its normal spot sale 
selling practice and entered into several long-term contracts at prices 
which diverged significantly from the price trends in the first ten and 
a half months, and for considerably different quantities than what 
respondent had been selling previously through spot sales over a 
comparable time period.
    The record evidence shows a distinct dividing line between price 
trends in the home market prior to February 15, 1995, when the first of 
the long-term contracts was entered into. While the price trend in the 
United States did not significantly differ in the last month and a half 
from the price trend evident throughout the first ten and a half months 
of the POI, the price trend in Taiwan in the last month and a half of 
the POI changed significantly from that of the first ten and a half 
months. Therefore, we find that price trends for NV differed 
significantly over time. This approach is consistent with the 
Department's past practice in such cases as Final Determination of 
Sales at Less Than Fair Value: Nitrocellulose From Brazil, 55 FR 23120 
(June 6, 1990) (influence of time on home market sales in 
hyperinflationary economy), and Final Determination of Sales at Less 
Than Fair Value: Fresh Kiwi Fruit From New Zealand, 57 FR 13695 (April 
17, 1992) (influence of time on home market sales of perishable 
agricultural products).
    Moreover, the change in the home market price trends was 
accompanied by a change in selling practice from selling PVA on a spot 
sale basis to entering into long-term contracts for quantities to be 
delivered over a substantially longer time period. Thus, the change in 
selling practice enhanced the effect of time on price comparability. 
Because time affects price comparability, we have used two averaging 
periods: period 1, encompassing sales from April 1, 1994 to February 
14, 1995, and period 2, covering sales from February 15, 1995 to March 
31, 1995. These averages calculated by the Department effectively take 
into account the effect of time on price comparability.
    The monthly averaging proposed by petitioner is unnecessary. 
Because price trends in both markets closely tracked each other except 
in the last 6 weeks of the POI, as described above, the evidence 
indicates that price comparability is unaffected by time in the first 
ten and half months of the POI. We reviewed the data submitted by 
petitioner and found insufficient information concerning the 
assumptions petitiioner relied upon to perform its statistical tests. 
As a result, we have concluded that the monthly averages proposed by 
petitioner are unwarranted (see Price Analysis Memorandum).
    Comment 4: Level of Trade.
    Chang Chun and Monsanto argue that comparisons should be made at 
the same level of trade, which they define as the position of the 
customer within the channels of distribution. Both parties contend 
that, pursuant to section 773(a)(7)(A), the ``functions of the seller'' 
analysis is only relevant when examining whether a level of trade 
adjustment should be applied. Accordingly, these parties contend that 
comparisons should be made at the same level of trade, defining 
``distributors'', ``end-users'', and ``retailers'' as distinct levels 
of trade. These parties further assert that a ``retailer'' level of 
trade exists as a separate level of trade in the home market. In 
support of this argument, Monsanto adds that a pattern of consistent 
price differences supports consideration of customer groups as a 
separate level of trade and, in this regard, sales to retailers qualify 
as a distinct level of trade.
    Petitioner claims that a ``retail'' level of trade does not exist 
for this industry and therefore sales to such customers should not be 
considered to be at a separate level of trade.
    DOC Position: Levels of trade are defined by the functions of the 
seller, not the class of customer. Level of trade is defined as the ``. 
. . difference between the actual functions performed by the sellers at 
the different levels of trade in the two markets'' (section 
773(a)(7)(A)(i) of the Act; see also Preliminary Determination of Sales 
at Less Than Fair Value: Certain Pasta from Italy (61 FR 7472, February 
28,

[[Page 14070]]
1996) and Preliminary Results of Antidumping Administrative Review: 
Stainless Steel Wire Rod from France (61 FR 8915, March 6, 1996). As 
discussed above, we found no differences in selling functions between 
the customer categories defined by Chang Chun, nor did Chang Chun claim 
any differences in selling functions between these categories.
    Accordingly, we find no basis for considering any of these 
categories to be separate levels of trade.
    Although we have rejected the contention that the class of the 
customer forms the basis for level of trade, in composing an averaging 
group, customer classification is a factor the Department may take into 
account (see SAA). The record establishes that there are distinct 
customer classifications in both markets, and that Chang Chun offered 
significantly different prices, depending on the customer category 
(including different prices to home market retailers). Therefore, we 
have made comparisons of average prices within the same customer class 
wherever possible. Where such comparisons were not possible, we made 
comparisons without regard to customer class.
    Comment 5: Discounts and Rebates on Home Market Sales.
    Petitioner contends that, because the Department was unable to 
verify reported per-unit amounts of ``quantity discounts'' and 
``special discounts'' on home market sales, all such discount claims 
should be rejected. Further, petitioner notes that some of these 
``discounts'', which we considered as rebates in the preliminary 
determination, were granted after the filing of the petition and 
therefore should be rejected in accordance with Department practice 
(see Final Determination of Sales at Less Than Fair Value: Color 
Negative Photographic Paper and Chemical Components Thereof from Japan, 
59 FR 16177, April 6, 1994).
    Chang Chun responds that, although the classification of a discount 
as a ``quantity'' or ``special'' discount may have been incorrect, the 
Department was able to verify that the customer received discounts 
equal to the amount claimed on each transaction. Chang Chun adds that 
its discount policy was consistent between the period prior to the 
filing of the petition, and the period subsequent to it. Thus, Chang 
Chun contends that there is no relationship between its discount 
programs and the filing of the petition and, therefore, Chang Chun's 
discount claims should be accepted as claimed.
    DOC Position: We were unable to verify the specific discount 
amounts claimed for individual home market transactions. Therefore, we 
cannot accept the transaction-specific amounts claimed for these 
transactions. We were able to verify, however, that certain customers 
received credits after sales that equalled the total amounts of 
``quantity'' or ``special'' discounts claimed for sales to that 
customer. Further, we verified that Chang Chun's normal practice was to 
grant its customers periodic discounts in the form of credits, or 
rebates, based on the volume of PVA purchases (see Chang Chun Sales 
Verification Report at pages 10 and 11).
    While Chang Chun may have granted some of these discounts after the 
filing of the petition, in most cases, the discounts were granted for 
sales made prior to the petition filing on the same basis, and in the 
same manner as such payments had been made, and credits had been 
granted prior to the filing of the petition. We found no evidence to 
conclude that post-petition discounts were granted for programs 
established after the filing of the petition. Thus, we find no basis to 
reject these discount claims solely because the customer received them 
after the petition was filed.
    Because Chang Chun's revenues from PVA sales were reduced by these 
discounts amounts, we have revised the ``quantity'' and ``special'' 
discount amounts in the calculation of normal value by allocating the 
total of these discounts equally among eligible sales to each eligible 
customer on the basis of the respective total discount amounts and 
sales value to that customer.
    Comment 6: Quantity Discount Claim.
    Chang Chun argues that, because it granted quantity discounts on at 
least 20% of its sales, NV should be calculated based on sales with 
quantity discounts, as provided for under 19 CFR 353.55(b)(1) of the 
Department's pre-URAA regulations. Accordingly, Chang Chun states that 
EP should be adjusted to reflect the quantity discount granted to 
comparable sales in the home market.
    Petitioner contends that the quantity discounts claimed on home 
market sales should be rejected because the Department was unable to 
verify that quantity discounts were actually granted on a unified basis 
to substantially all of Chang Chun's home market customers. Petitioner 
also argues that the Department was unable to verify that such 
discounts actually applied to 20% of home market sales.
    DOC Position: We agree with petitioner. To be eligible for a 
quantity-based discount, a respondent must demonstrate that the 
discounts reflect savings specifically attributable to the production 
of the different quantities, or that the respondent granted quantity 
discounts of at least the same magnitude on 20% or more of sales of 
such or similar merchandise (see 19 CFR 353.55(b)). If either of these 
tests is met, the Department applies a discount adjustment equal to the 
minimum discount given.
    As discussed in Comment 5, Chang Chun could not demonstrate that 
the specific amounts claimed as ``quantity discounts'' on specific 
transactions had any connection to the quantity sold, but rather, as 
described above, these discounts were in the nature of volume rebates. 
Moreover, the Department also requires a respondent to establish that 
it gave discounts on a uniform basis, which were made available to 
substantially all home market customers (see, e.g., Final Determination 
of Sales at Less Than Fair Value: Brass Sheet and Strip from the 
Netherlands, 53 FR 23431, June 22, 1988). This requirement was 
expressed in the Department's antidumping questionnaire at pages B-15 
and B-16. However, Chang Chun made no attempt to demonstrate this; 
indeed, Chang Chun specifically stated that only customers classified 
as ``distributors'' were eligible for the ``home market quantity 
discount program'' (see, e.g., letter from Ablondi, Foster, Sobin & 
Davidow to Ronald Brown of September 19, 1995, at page 3). Accordingly, 
we have disallowed this claimed adjustment.
    Comment 7: Treatment of U.S. Tolled Sales.
    Chang Chun argues that the Department should follow its ``long 
established past practice'' and estimate a separate dumping margin for 
its tolled sales (i.e., vinyl acetate monomer owned by a U.S. customer 
but further processed into PVA by Chang Chun) by comparing Chang Chun's 
price for tolling to Chang Chun's tolling cost.
    Petitioner states that the Department should not analyze these 
tolled transactions because the U.S. customer withdrew its request that 
a separate margin be calculated for these sales, and the Department has 
already determined not to analyze these sales (See Memorandum to 
Barbara Stafford dated August 8, 1995).
    DOC Position: We agree with petitioner. As stated in the memorandum 
cited by the petitioner, as a result of the customer's withdrawal of 
its request for a separate rate in the investigation, and that the 
customer's participation is not otherwise essential to this 
investigation, we have not included tolled transactions in our

[[Page 14071]]
investigation. We note that our past practice of analyzing tolling 
transactions has changed. The party contracting for the tolling, rather 
than the processor, will be considered the producer/exporter of the 
merchandise (see Proposed Regulations, section 353.401(h) at 7381, as 
well as discussion at 7330).
    Comment 8: Allocation of Acetic Acid Costs for COP Analysis.
    Petitioner does not object to Chang Chun's treatment of PVA and 
acetic acid as coproducts of a joint production process. Petitioner 
does, however, object to the respondent's allocation of the joint 
production costs on the basis of the two product's relative production 
volumes. Petitioner asserts that because PVA has a significantly higher 
per-unit value than acetic acid, production costs should be allocated 
to the coproducts based upon their relative sales values. Petitioner 
adds, however, that if the Department determines not to apply a value-
based allocation methodology in computing the costs of PVA and acetic 
acid, then it should treat acetic acid as a byproduct by allocating all 
costs to PVA and offsetting such costs by revenues earned from acetic 
acid sales.
    Chang Chun defends its treatment of acetic acid as a coproduct as 
well as its volume-based cost allocation methodology and urges the 
Department to rely on these methodologies in order to compute PVA costs 
for the final determination. According to Chang Chun, acetic acid is a 
coproduct of PVA because it meets each of the Department's criteria for 
identifying and accounting for jointly-produced merchandise as either 
byproducts or coproducts. Chang Chun also maintains that the production 
volume allocation methodology it used to compute PVA costs for COP and 
CV is the same method used by the company to compute both PVA and 
acetic acid costs in its normal books and records. Chang Chun adds that 
its volume-based cost allocation method is acceptable under Taiwan's 
generally accepted accounting principles (GAAP), and it was in place at 
the company for several months prior to the filing of the petition.
    Monsanto supports Chang Chun's accounting treatment of PVA and 
acetic acid as coproducts, and agrees with the respondent that its 
volume-based allocation methodology is appropriate in this case.
    DOC Position: We agree with both petitioner and Chang Chun that 
acetic acid should be treated as a coproduct of PVA production. As 
discussed in our preliminary determination, we analyzed four of the 
five specific factors that the Department relies on in determining 
whether a product should be treated as a coproduct (see Memorandum from 
Art Stein to Chris Marsh, September 29, 1995). Based on our analysis 
and our verification findings, we have now examined all of these 
factors and have concluded that acetic acid is a coproduct in the 
production process of polyvinyl alcohol (see, also, Elemental Sulphur 
from Canada; Final Results of Antidumping Finding Administrative 
Review, 61 FR 8239, March 4, 1996). Having made that determination, 
however, we disagree with Chang Chun's contention that its volume-based 
cost allocation methodology is appropriate in this instance.
    Like other joint production processes, PVA production is 
characterized by certain joint costs which cannot readily be identified 
or traced to the individual products resulting from the joint 
processing performed in the manufacture of PVA. In PVA production, 
chemical inputs are mixed together in a process that results in two 
distinct products: PVA and acetic acid. These products are produced 
simultaneously up to a point, the split-off point, after which they 
become physically separated from one another. This situation presents a 
unique cost allocation issue because prior to the physical split-off 
point, the production costs, like the joint products themselves, are 
commingled. We note that this situation differs from cost allocations 
found in a batch production process which yields two or more grades of 
a single product (e.g., steel bar). In such situations, the individual 
units of production can be identified, apart from one another, 
throughout the production process, thus presenting a readily 
identifiable basis upon which to allocate costs. In contrast, where a 
single process commingles inputs up to a split-off point, allocating 
joint costs to the distinct products becomes more difficult.
    While there are several acceptable methods of allocating joint 
costs among simultaneously produced coproducts, in general, each of 
these acceptable methods is based on either some measure of relative 
value or on the physical units produced (e.g., number of units, weight, 
etc.) (See Cost Accounting: A Managerial Emphasis, Charles T. Horngren, 
5th edition, Prentice-Hall Inc., pp. 531-539). The choice of allocation 
method can have a profound impact on the outcome of relative costs, 
depending on the significance of the joint costs involved and the 
nature of the products resulting from the process.
    This case presents an additional complication because of the 
involvement of Dairen, an affiliated supplier, which produces VAM and 
sells it to Chang Chun. VAM is the major raw material input in PVA 
production. Chang Chun, in turn, uses the VAM (from Dairen) to produce 
PVA and acetic acid. Chang Chun then sells much of its acetic acid 
production back to Dairen which, in turn, uses it as a major input in 
its production of VAM. Because of the nature of this cycle and the 
affiliation between Chang Chun and Dairen, it is important that the 
method used to allocate joint costs not distort the cost of PVA and 
acetic acid.
    Section 773(f)(1)(A) of the Act provides that the Department will 
calculate costs based on the records of the producer of the 
merchandise, if such records are kept in accordance with the GAAP of 
the exporting country and reasonably reflect the costs associated with 
the production and sale of the merchandise (see also Final 
Determination of Sales at Less Than Fair Value: Canned Pineapple Fruit 
From Thailand, (Canned Pineapple), 60 FR 29559, June 5, 1995, where we 
stated that the Department's practice is to adhere to an individual 
firm's recording of costs in accordance with GAAP of its home country 
if the Department is satisfied that such principles reasonably reflect 
the costs of producing the subject merchandise). The Department's 
practice has been sustained by the Court of International Trade (CIT) 
(see, e.g., Laclede Steel Co. v. United States, Slip Op. 94-160 at 21-
25 (CIT October 12, 1994), where the CIT upheld the Department's 
decision to reject respondent's reported depreciation expenses in favor 
of verified information obtained directly from the company's financial 
statements that was consistent with Korean GAAP). In addition, pursuant 
to section 773(f)(1)(A), the Department may only consider evidence from 
an exporter or producer regarding the proper allocation of costs if 
such allocations have been used historically by the exporter or 
producer (emphasis added).
    Under its current accounting system, Chang Chun allocates joint 
production costs based on the relative production volumes of PVA and 
acetic acid. According to the company's financial statements, the 
current allocation methodology is accepted under Taiwan's GAAP. 
Although the company's financial statements indicate that this 
allocation methodology is in accordance with its home country GAAP, we 
note that Taiwan's GAAP does not endorse this methodology as the only 
acceptable cost allocation methodology. In fact, during verification, 
company officials stated

[[Page 14072]]
that they did not know how costs had been allocated under the earlier 
method (see Cost Verification Report at page 2), however, they stated 
that the company's previous allocation methodology was also in 
accordance with Taiwan's GAAP.
    Chang Chun's current cost allocation methodology was adopted in 
1994. Prior to 1994, the company relied upon a different methodology to 
allocate costs between PVA and acetic acid. As noted above, company 
officials could not explain the basis for the earlier methodology. 
Accordingly, based on our verification findings, we cannot conclude 
that a volume-based allocation has been used historically by Chang 
Chun.
    Moreover, we find that in this case, the allocation of costs 
equally to each kilogram produced results in an unreasonable division 
of joint production costs between PVA and acetic acid. Basing the 
allocation of costs solely on production volume ignores the vastly 
different revenue-producing powers of the joint products at issue in 
this case. Specifically, while the relative volumes of Chang Chun's PVA 
and acetic acid output are almost equal, the price commanded by PVA is 
much greater than that of acetic acid. Thus, the company's volume-based 
cost allocation results in large profits accruing to PVA, while 
significant losses result from the sale of acetic acid. The Department, 
therefore, has determined that it is appropriate to reject Chang Chun's 
volume-based allocation methodology because it does not reasonably 
reflect the costs associated with the production and sale of PVA, as 
required by statute (see also Canned Pineapple, where the Department 
rejected respondent's argument for a weight-based joint cost allocation 
for pineapple and used a value-based cost allocation, citing as one of 
its reasons the relationship of the revenue-producing powers of the 
joint products that resulted from the pineapple production process).
    As noted above, the need for an appropriate allocation method for 
joint costs is made all the more important in this case because of the 
unique nature of the transactions between Chang Chun and its affiliated 
supplier, Dairen. Because costs are over-allocated to acetic acid as a 
result of Chang Chun's volume-based methodology, such costs may not be 
fully recovered when the acetic acid is sold to Dairen. In turn, the 
cost of VAM produced from acetic acid may be understated when it is 
resold to Chang Chun for PVA production.
    Given the fact that we cannot rely upon Chang Chun's own allocation 
methodology, the vastly different revenue-producing powers of the two 
joint products, and the fact that the affiliation between Chang Chun 
and Dairen has the potential to result in understatement of certain PVA 
costs, we believe a value-based allocation methodology produces a more 
reasonable and accurate reflection of costs in this case.
    Therefore, we are allocating joint production costs between PVA and 
acetic acid using the relative value of each product calculated on the 
basis of a two-year period prior to the POI (see Canned Pineapple). We 
believe that by using sales of both products over an extended period 
prior to this investigation, prices can reasonably be relied upon to 
form the basis for allocating joint production costs, particularly in 
this case where acetic acid and PVA are commodity products, and their 
selling prices are influenced by world market forces of supply and 
demand.
    Comment 9: Chang Chun's VAM Cost.
    Petitioner claims that Chang Chun incorrectly valued VAM that it 
purchased from Dairen, an affiliated supplier of VAM, at the transfer 
price for those months in which the transfer price was less than 
Dairen's COP. Accordingly, petitioner contends that the Department 
should adjust Chang Chun's VAM cost for the specific purchases of VAM 
that were made at less than Dairen's monthly COP.
    DOC Position: We disagree with petitioner. We verified that, for 
each month of the POI, the transfer price paid by Chang Chun for its 
VAM purchases from Dairen exceeded Dairen's COP. We therefore relied on 
the transfer price between the two affiliated companies as the basis 
for valuing VAM in our calculation of Chang Chun's COP.
    Comment 10:  Unreconciled Differences Between Chang Chun's Records 
and Questionnaire Response.
    Petitioner notes that during verification, the Department found 
unreconciled differences in PVA costs between Chang Chun's internal 
books and the costs as submitted to the Department in its questionnaire 
response. Most of these discrepancies related to the cost of material 
inputs for PVA production. Petitioner maintains that the Department 
should increase Chang Chun's reported PVA costs to reflect the 
additional costs that result from these discrepancies.
    DOC Position: We agree with petitioner. At verification, Chang Chun 
informed the Department that it had detected a clerical error in its 
submission which underreported its material costs. For the final 
determination, we increased material costs to account for this error. 
Our correction of this error resolves the discrepancies noted by 
petitioner.
    Comment 11: Depreciation.
    Petitioner claims that the Department should adjust depreciation 
expense incurred for PVA production to reflect the amount reported in 
Chang Chun's financial statements, rather than the amount reported for 
tax purposes (which Chang Chun reported in its questionnaire response). 
Petitioner contends that the Department's normal methodology is to rely 
on costs recorded for financial statement purposes unless there is 
reason to believe that such costs are distortive.
    Chang Chun claims that petitioner's suggested depreciation 
adjustment relates to the boiler department's cogeneration equipment, 
which produces power and steam used by not only the PVA/acetic acid 
cost center, but also by non-subject product cost centers. Therefore, 
Chang Chun asserts that any depreciation adjustment should be limited 
to PVA/acetic acid's percentage share of the costs of the boiler 
department.
    DOC Position: We agree with petitioner that Chang Chun 
underreported its submitted depreciation expense. The Department 
normally requires that a respondent report depreciation expense 
calculated based on the methods it normally uses for financial 
statement purposes, unless such methods distort production costs. We 
also agree with Chang Chun that PVA/acetic acid production should only 
be allocated with its share of the costs associated with the co-
generation equipment. Based on our review of Chang Chun's fixed asset 
and depreciation records during verification, we found no reason to 
believe that Chang Chun's method of computing depreciation expense for 
financial statement purposes distorts the company's PVA production 
costs. We therefore adjusted the company's submitted tax basis 
depreciation expense to reflect depreciation computed for PVA/acetic 
acid production assets based on Chang Chun's normal financial statement 
depreciation method.
    Comment 12: Over-packing.
    Petitioner asserts that because Chang Chun systematically over-
packs PVA above the nominal weight and the customer pays for only the 
nominal weight, PVA's COP should be adjusted in order to equate the 
cost of the product as packed with the price of the product as sold.
    Chang Chun claims that because sales are recorded on the basis of 
nominal

[[Page 14073]]
quantities rather than the over-packed quantities, in order to be 
consistent, Chang Chun records production based on nominal quantities. 
Thus, Chang Chun asserts that there is no need for the Department to 
adjust the company's costs to reflect the over-packed quantities.
    DOC Position: We verified that both production and sales were 
reported based on nominal weight, therefore, no further adjustment is 
necessary.
    Comment 13: Dairen's VAM Costing Issues.
    Petitioner notes that Dairen shut down its plant in January 1994 
and asserts that the costs of the shutdown should be included as part 
of Dairen's 1994 VAM production costs. Petitioner also claims that 
Dairen's VAM COP should be increased to account for the cost of 
purchased liquid nitrogen. Furthermore, petitioner contends that the 
Department should reject Dairen's allocation of engineering and 
indirect labor costs to non-subject merchandise because it represents a 
deviation from Dairen's 1994 audited financial statements and is merely 
an internal management estimate founded upon no verifiable, objective 
criteria.
    Chang Chun maintains that, since Dairen's plant maintenance 
shutdown occurred prior to the POI, no adjustment to include any 
portion of these costs is necessary. Chang Chun also claims that 
Dairen's purchased nitrogen was sold at a profit and that the cost of 
the nitrogen should not be charged to VAM production because the sales 
revenue was not deducted from the production costs. Furthermore, Chang 
Chun asserts that, because both its engineering and indirect labor 
costs benefit VAM and PVA emulsions production, its allocation of these 
costs to both products is appropriate.
    DOC Position: We agree with petitioner that a portion of Dairen's 
plant shutdown costs should be added to Dairen's reported cost of 
producing VAM because we consider the shutdown costs a form of major 
maintenance which benefits production over the entire POI. Accordingly, 
a pro rata share of the shutdown costs incurred in the one month of 
1994 that is part of the POI should be allocated to the cost of 
producing VAM during the POI.
    Because the cost of VAM used in the production of PVA is based upon 
the transfer price, no adjustment is required. Dairen's transfer price 
to Chang Chun exceeds its COP for VAM (including the cost of purchased 
liquid nitrogen). Therefore there would be no impact on Chang Chun's 
COP for PVA.
    Lastly, we disagree with petitioner that Dairen's allocation of 
engineering and indirect labor costs to non-subject merchandise should 
be rejected. During verification, we found that these engineering and 
indirect labor costs do benefit certain non-subject products. 
Accordingly, we consider it reasonable to allocate these costs to non-
subject merchandise.

Continuation of Suspension of Liquidation

    In accordance with section 733(d) of the Act, we are directing the 
Customs Service to continue to suspend liquidation of all entries of 
PVA from Taiwan, as defined in the ``Scope of Investigation'' section 
of this notice, that are entered, or withdrawn from warehouse for 
consumption, on or after October 10, 1995, the date of publication of 
our preliminary determination in the Federal Register. The Customs 
Service shall require a cash deposit or posting of a bond equal to the 
estimated amount by which the normal value exceeds the export price, as 
shown below. This suspension of liquidation will remain in effect until 
April 7, 1996 (i.e., six months after the effective date of these 
instructions), in accordance with section 733(d) of the Act.
    The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                               Weighted-
                                                                average 
                    Exporter/manufacturer                       margin  
                                                              percentage
------------------------------------------------------------------------
Chang Chun Petrochemical Co., Ltd...........................      19.21 
All others..................................................      19.21 
------------------------------------------------------------------------

    The all others rate applies to all entries of subject merchandise 
except for entries of merchandise produced by Chang Chun.

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
ITC of our determination. As our final determination is affirmative, 
the ITC will determine whether these imports are causing material 
injury, or threat of material injury, to the industry within 45 days. 
If the ITC determines that material injury, or threat of material 
injury, does not exist, the proceeding will be terminated and all 
securities posted will be refunded or cancelled. If the ITC determines 
that such injury does exist, the Department will issue an antidumping 
duty order directing Customs officials to assess antidumping duties on 
all imports of the subject merchandise entered, or withdrawn from 
warehouse, for consumption on or after the effective date of the 
suspension of liquidation.
    This determination is published pursuant to section 735(d) of the 
Act.

    Dated: March 21, 1996.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 96-7636 Filed 3-28-96; 8:45 am]
BILLING CODE 3510-DS-P