[Federal Register Volume 61, Number 130 (Friday, July 5, 1996)]
[Notices]
[Pages 35177-35188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17159]
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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
Reviews and Notice of Revocation in Part
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Final Results of Antidumping Duty Administrative
Reviews and Notice of Revocation in Part.
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SUMMARY: On September 29, 1995, the Department of Commerce (the
Department) published the preliminary results of administrative reviews
and notice of intent to revoke in part the antidumping duty order on
polyethylene terephythalate (PET) film, sheet, and strip from the
Republic of Korea. The reviews cover four manufacturers/exporters of
the subject merchandise to the United States and the periods June 1,
1992 through May 31, 1993 and June 1, 1993 through May 31, 1994.
As a result of comments we received, the antidumping margins have
changed from those we presented in our preliminary results.
EFFECTIVE DATES: July 5, 1996.
FOR FURTHER INFORMATION CONTACT:
Michael J. Heaney, or John Kugelman, Office of Antidumping Compliance,
Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue NW.,
Washington, DC 20230, telephone: (202) 482-4475/0649.
SUPPLEMENTARY INFORMATION:
Background
On September 29, 1995 (59 FR 50547), the Department published the
preliminary results of administrative reviews and notice of intent to
revoke in part the antidumping duty order on PET film from the Republic
of Korea (56 FR 25669, June 5, 1991). At the request of petitioners and
three respondents, we held a hearing on April 9, 1996.
These reviews cover four manufacturer/exporters: Cheil Synthetics,
Inc. (Cheil), Kolon Industries (Kolon), SKC Limited (SKC), and STC
Corporation (STC).
We are revoking the order for Cheil because Cheil has sold the
subject merchandise at not less than foreign market value (FMV) in
these reviews and for at least three consecutive periods. Cheil has
also submitted certification that it will not sell at less than FMV in
the future.
Scope of the Review
Imports covered by these reviews 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.
The reviews cover the periods June 1, 1992 through May 31, 1993
(second review period) and June 1, 1993 through May 31, 1994 (third
review period). The Department has conducted these reviews in
accordance with section 751 of the Tariff Act of 1930, as amended (the
Act).
Applicable Statute and Regulations
Unless otherwise stated, all citations to the statute and to the
Department's regulations are references to the provisions as they
existed on December 31, 1994.
Analysis of Comments Received
We invited interested parties to comment on the preliminary results
of this administrative review. We received timely comments from the
petitioners and all four respondents. At the request of the petitioners
and three respondents, we held a public hearing on April 9, 1996.
Comment 1: Petitioners argue generally that the methodologies
employed by SKC and Cheil to value recycled chip (RC) assign an
unreasonably low cost to recycled resin. Petitioners contend that the
cost of processing recycled film is directly associated with the cost
of the chemicals which are reclaimed. Petitioners assert that to
properly account for the cost of producing PET film, the Department
must include both the cost of the materials content of the recycled
film and the cost of the recycling. Petitioners also argue that both
virgin resin and recycled resin contain the same basic chemicals in the
same quantities, and that recycled resin is a nearly ``one for one''
substitute for virgin resin. Petitioners assert that the differences
between virgin resin and recycled resin are ``minimal.'' While limits
exist on the amount of recycled resin that can be used in PET film
production, petitioners note that in many instances recycled resin
accounts for more than 50 percent of the raw material inputs.
Petitioners further note that the bill of materials (``recipes'') for
PET films can be adjusted to tolerate a greater or lesser volume of
recycled resin, and that producers can adjust the molecular weight of
virgin chip (VC) to accommodate varying usage of recycled resin.
Petitioners also assert that producers can modify the production
process to minimize problems related to discoloration caused by using
recycled resin.
Petitioners contend that, in general, the methodologies used by
Cheil and SKC to value recycled resin do not reflect the actual cost of
that material. Petitioners assert that the Statement of
[[Page 35178]]
Administrative Action (SAA), Congressional Reports on the Uruguay Round
Agreements Act, and the Court of Appeals for the Federal Circuit (CAFC)
decision in Ipsco Inc. v. the United States, 965 F. 2d 1056, 1059-1061
(Fed. Cir. 1992) (Ipsco Appeal), preclude the Department from using
cost calculations which substitute assigned values for actual costs.
Even if the methodologies employed by Cheil and SKC to account for
recycled film are consisted with Korean Generally Accepted Accounting
Principles (GAAP), petitioners argue that Cheil's and SKC's
methodologies are unacceptable because they fail to reasonably reflect
the costs associated with recycled material. Petitioners contend that
the Department has accepted from Cheil and SKC different, contradictory
accounting treatments of the cost of RC.
Cheil: Specifically with regard to Cheil, petitioners assert that
the number of sales used by Cheil to establish the net realizable value
(NRV) of recycled resin is too small to be representative of the actual
cost of the material. Petitioners further argue that the customers who
purchase resin from Cheil are using the resin in a less demanding
process. These customers, petitioners assert, do not require recycled
resin of the same quality as PET film producers. Petitioners argue that
there is no indication that the grades of PET film sold by Cheil on the
open market are the same as that which Cheil uses internally.
Petitioners contend that most PET films can be made within a broad
range of virgin resin/recycled resin ratios. petitioners argue that
given the flexibility to increase or reduce the usage of recycled
resin, Cheil's decision to sell a small amount of PET resin at a price
that is much lower than the price of virgin resin makes little economic
sense. Petitioners suggest that Cheil's rationale for selling a small
amount of recycled chip on the open market could be to establish an
artificially low value for the recycled chip used in PET film exports
to the United States.
In response, Cheil argues that the appropriate accounting treatment
for valuing its recycled resin (pellets) is the NRV that Cheil assigns
to these pellets. Cheil notes that the NRV methodology is consistent
with both Korean and U.S. GAAP. Cheil contends that Departmental
review, analysis, and verification of the cost data submitted by Cheil
uncovered no evidence that Cheil's NRV methodology is manipulative, or
that Cheil substituted increasing quantities of pellets for VCs in an
attempt to minimize its dumping liability.
Cheil contends that the NRV established for recycled pellet
represents a market price for that merchandise. Cheil argues that the
Department has no basis to exclude these sales because such sales are
``too small'' to constitute a valid market. Cheil further contends that
its NRV methodology was in place before the onset of the Department's
less-than-fair-value (LTFV) investigation in 1991, and that the
Department accepted and used that methodology during the fair value
investigation and the first administrative review. Cheil also argues
that precedent obligates the Department to accept Cheil's practice of
valuing RC at its NRV. Cheil cites to thirteen separate cases in which
NRV methodologies have been applied. Moreover, Cheil argues that the
Court of International Trade (CIT) has approved the use of NRV for
valuing by-products in Asociacion Colombiana de Exportadores de Flores
v. United States, 704 F. Supp. 1114, 1125 (CIT 1989). Cheil contends
that there is nothing on the record that distinguishes the instant
facts from the numerous other cases in which the Department has used an
NRV methodology to value by-products.
Cheil also asserts that VCs and the resin it recycles as pellets
are not physically one-for-one substitutes, and, thus, its practice of
valuing pellets at an NRV below that of VC is economically sound. Cheil
argues that pellets and VCs have different molecular structures and
chemical compositions. Cheil contends that a mixture of pellet and VC
can create blending problems. Because of differences in the molecular
structure of pellets and VCs, Cheil contends that VCs and pellets melt
at different temperatures. Cheil also claims that additional production
problems (such as contamination) will result if too many pellets are
employed in the production process.
Cheil argues that waste film production has a direct costs impact
on PET film through lower yields, and that higher pellet usage
increases fabrication costs. Cheil contends that the Department has no
basis to assume that historical production yields would remain constant
if the production process utilizes 100 percent VCs. Based on these
factors, Cheil argues that pellets should be assigned a lower cost than
VCs.
Cheil contends that, contrary to petitioners' assertion, its usage
of VC relative to pellets has actually increased from the second to the
third review. Cheil asserts that the true value of pellets (because of
the lack of substitutability between VC and pellet) is actually lower
than their NRV.
Cheil argues that the NRVs that it assigned to pellets reflect the
same set of assumptions and market behavior as the NRVs that it
assigned to off-grade chip production. Cheil thus concludes that if the
Department decides to back out the NRVs at the virgin and chip level,
it must also back out the NRVs at the chip production cost level.
Cheil further contends that any methodology which assigns an equal
value to VCs and RCs would not properly account for the valuation of
beginning and ending inventory. Cheil contends that this is because VCs
and recycled pellets would be valued according to one cost methodology,
while period-of-review costs would be valued according to a completely
different methodology.
SKC: With regard to SKC, petitioners contend that its methodology
for costing recycled resin is economically unreasonable and was
concocted especially for the Department's fair value investigation.
Petitioners assert that prior to the fair value investigation of this
case, SKC calculated an average materials cost without distinguishing
between virgin and recycled resin. Petitioners assert that the
methodology used by SKC in these reviews ignores the costs of the
material content of the recycled resin. Petitioners argue that the true
cost of the recycled resin is much higher than the value assigned to it
by SKC.
Petitioners argue that SKC's normal method of accounting for
recycled resin correctly accounts for the processing costs (i.e.,
labor, overhead, etc.) of recycling, but fails to address the cost of
the chemicals which are reclaimed as the recycled resin. Petitioners
maintain that SKC must recognize the presence of valuable PET resin in
the chips that SKC recycles. By omitting material costs in determining
the cost of RC, petitioners assert that SKC understates the cost of
films that use a higher proportion of recycled materials.
In response, SKC maintains that its cost accounting methodology
does not exclude the cost of the raw materials of recycled resin from
PET film cost of production (COP). SKC argues that the PET film
production process is a closed cycle, and that all costs are fully
accounted for in the system. SKC explains that both VCs and RCs are
released into the production line to form PET film as follows: at the
end of the film production line scrap film is recovered; the recovered
scrap is then reprocessed to produce recycled resin, and the recycled
material is then used together with VC to produce more PET film, a
portion of which will again be reclaimed. According to SKC raw
[[Page 35179]]
materials (ethylene glycol (EG) and dimethyl terephthalate (DMT) or
terephthalic acid (TPA)) are used exclusively for the production of VC;
the recycled material is produced entirely from scrap film without
input of additional raw materials. In other words, all recycled resin
is produced from VCs that were released into the film production line
during a previous production cycle. SKC states that it does not take a
credit for the scrap which it recycles. Therefore, SKC argues that the
finished film bears the cost of all raw materials consumed in the film
production process, including the cost of raw materials that are later
reclaimed to produce RCs.
SKC argues that the Department should continue to value recycled
resin according to the methodology employed by SKC in its internal cost
accounting system. SKC contends that its cost methodology is reasonable
and consistent with accepted accounting concepts. SKC contends that
recycled resin has a ``lower intrinsic viscosity, lower molecular
weight, and increased discoloration'' than do VCs. SKC notes that the
Department determined that there is no evidence on the record
suggesting that SKC has manipulated its chip blends to alter production
costs. Finally, SKC asserts that its blending ratios have been stable
over time.
Department's Position: We believe that Cheil's and SKC's methods of
accounting for their recycled raw materials are reasonable and have
relied on them for these final determinations. The legislative history
of section 773(b) states that ``in determining whether merchandise has
been sold at less than cost [the Department] will employ accounting
principles generally accepted in the home market of the country of
exportation if [the Department] is satisfied that such principles
reasonably reflect the variable and fixed costs of producing the
merchandise.'' H.R. Rep. No. 571, 93d Cong., 1st Sess. 71 (1973)
(emphasis added). The CIT has upheld the Department's use of expenses
recorded in the company's financial statements, when those statements
are prepared in accordance with the home country's GAAP and do not
significantly distort the company's actual costs. See, e.g., Leclede
Steel Co. v. United States, Slip Op. 94-160 at 22 (CIT 1994).
Accordingly, our practice is to adhere to an individual firm's
recording of costs, if we are satisfied that such principles reasonably
reflect the costs of producing the subject merchandise, and are in
accordance with the GAAP of its home country. See, e.g., Canned
Pineapple Fruit from Thailand: Final Determination of Sales at Less
Than Fair Value (Canned Pineapple from Thailand), 60 FR 29553, 29559
(June 5, 1995); Certain Stainless Steel Welded Pipe from the Republic
of Korea; Final Determination of Sales at Less Than Fair Value, 57 FR
53693, 53705 (November 12, 1992); and Furfuryl Alcohol from South
Africa: Final Determination of Sales at Less Than Fair Value, 60 FR
22550, 22556 (May 8, 1995) (``The Department normally relies on the
respondent's books and records prepared in accordance with the home
country GAAP unless these accounting principles do not reasonably
reflect the COP of the merchandise''). Normal accounting practices
provide an objective standard by which to measure costs, while allowing
respondents a predictable basis on which to compute those costs.
However, in those instances where it is determined that normal
accounting practices result in an unreasonable allocation of production
costs, the Department will make certain adjustments or may use
alternative methodologies that more accurately capture the costs
incurred. See, e.g., New Minivans from Japan; Final Determination of
Sales at Less Than Fair Value, 57 FR 21937, 21952 (May 26, 1992).
In the instant proceeding, therefore, the Department examined
whether the respondents' normal recycled resin accounting methodology
results in costs of producing the subject merchandise (finished PET
film) that reasonably reflect its cost of production. Notably, we found
that a characteristic of the PET film production process is that a
substantial amount of film becomes unusable during production. The PET
film production process generally takes place in two stages. In the
first stage, a mixture of basic chemicals and special additives are
used to crate VCs. Both Cheil and SKC produce several different types
of VCs, each from a specific chemical recipe designed to promote
certain physical attributes in the finished PET film product.
In the second production stage, one or more VC types are measured
and mixed with recycled material. The mixture of VC and recycled
material is then melted. The molten polymer is extruded onto a chilled
casting drum, where it spreads into a continuous polymer film. From the
casting drum the film passes through a series of stretching machines.
As the finished film cools, it is wound onto a master roll. The master
rolls of finished film undergo quality inspection for various physical
characteristics. Films that fail this inspection are either sold as
off-quality PET film or recycled.
As previously stated, the PET film manufacturing process and
finished film quality standards are such that substantial quantities of
recyclable waste film are generated. This film is recycled as a raw
material input to the production process for PET film. Each type of PET
film has a maximum amount of recycled materials that can be added while
still allowing the film to meet its quality requirements. We note that
the respondents use different processes for recycling the waste film
and different methods of accounting for the recycled materials. (See
recycled raw materials accounting memorandum, August 17, 1995).
However, each company's method is similar in that they assign
significantly less cost to the recycled material than they do to the
original VC.
Under its normal cost accounting system, SKC attributes to its
recycled film only the costs related to recycling. SKC assigns no costs
to the waste film used in the recycling process. Thus, SKC records as
the cost of recycled material, only the labor and overhead costs
incurred for shredding the film and reprocessing it.
Cheil recycled film is treated as a by-product of the film
production process and valued at its NRV. Cheil's NRV represents the
revenues received (less disposal costs) for recycled material sold as
filler for mattresses and toys. Cheil deducts the pellets' NRV from the
cost of producing the good PET film output.
On March 20, 1996, the CIT issued its decision in the appeal of the
underlying investigation in this proceeding, E.I. Dupont de Nemours &
Co., et al. versus United States, Slip. Op. 96-56, Court No. 91-07-
00487 (March 20, 1996) (Dupont II). The CIT's decision recognized the
above facts with respect to the production of PET film and each
respondent's accounting for recycled materials. In light of those
facts, the CIT found that:
[petitioners'] argument that pellets should be costed like
virgin chip because they are functionally equivalent defies common
sense and arithmetic logic. The reason that PET film production
utilizes recycled material is that it is cheaper to recycle scrap
film than to manufacture virgin chip; this being the case, assigning
pellets the cost of virgin chip would overstate the actual costs of
PET film production. Dupont II, at 9.
The CIT further noted that the record did not support the
allegation that Cheil manipulated the usage rate of pellet in order to
shift costs away from PET film exported to the United States.
The CIT also rejected petitioners' arguments concerning SKC's
accounting practices. The Court noted that the
[[Page 35180]]
reason SKC uses a ``zero value'' for the material cost of RC is that
``SKC did not subtract the value of pellets resulting from PET film
production runs from the accounting cost of producing PET film;
therefore, there was no basis for adding any pellet value back into the
accounting cost of PET film manufactured with pellet material input.''
Dupont II, at 10. While the CIT determined that the Department's
refusal to address SKC's methodology for valuing pellet was proper
under the scope of the remand, it indicated that even if such
instructions ``had been part of the remand order, SKC's methodology is
reasonable and fully accounts for the value of'' its recycled resin.
Dupont II, at 11.
In this review, we continue to find that Cheil and SKC have
reasonably valued RC. We determined that although differing in
approach, both methodologies reasonably capture the cost of producing
PET film. As previously noted, every PET film production run uses both
virgin chip and recycled material. The scrap film resulting from each
production run is recycled into subsequent production passes. Each
respondent's method of accounting for the recycled material is used in
the normal course of business and is GAAP-consistent.
We examined Cheil's and SKC's books and records and found that each
company relies on its recycled resin methodology in the normal course
of business and has done so for at least the last several years. We
further found that each respondent's allocation methodology is
consistent with GAAP practiced in Korea.
We disagree with petitioners' argument that the cost basis for
recycled materials should be the purchase price of the raw material.
The record in this case demonstrates that recycled resin is not the
functional equivalent of VC, since the production process degrades the
chemicals and introduces contaminants into the process. Thus, while
recycled material can be used in place of VC within certain limits,
recycled resin and VC are not completely equivalent.
We also do not accept petitioners' contention that SKC's
methodology is economically unreasonable. SKC's methodology fully
accounts for all costs because each type of film is charged with the
cost of the material consumed in its production (as well as the
material which will be reused in later production runs). Thus, all
production costs are fully charged to the subject merchandise.
We also disagree with petitioners' arguments that Cheil's NRV
should be disallowed because it is not representative of a market
value. Despite the fact that Cheil's recycled film purchasers use the
pellets in less demanding processes, there is no evidence that these
transactions do not represent a fair valuation for this material.
Moreover, we note that a petitioner also makes sales of recycled film
chips or pellets to manufacturers of pillows and carpet. This company
indicated that it sells the recycled chip at a price significantly less
than the cost to manufacture VC. In addition, the company explained
that it had recently adopted a costing methodology based on the
relative sales value of RC that is similar to that used by Cheil. (See
plant tour memorandum, April 5, 1995.)
Comment 2: Petitioners contend that Cheil and SKC have understated
their costs and overstated their U.S. selling prices by misrepresenting
the quantities of film that they produce and sell, and that the
quantity of films actually shipped are not the quantities of film
actually billed. Petitioners assert that since producers will be
penalized if they include too little film on a roll, producers will
generally include more film on a roll than they actually invoice.
Petitioners assert that exhibits collected as part of the verifications
for the second and third reviews of Cheil and SKC support their
assertion that SKC and Cheil are providing more film on a roll than
they have actually reported to the Department. Petitioners additionally
contend that the verification exhibits collected in these reviews
provide further evidence that reported costs are incorrect because the
sales and production quantities used to derive those costs and prices
are either ``conceptionally inappropriate'' or ``simply wrong.''
Petitioners assert that the production quantities reported by Cheil
fail to account for losses occurring in the second slitting process.
Petitioners suggest that SKC's shifting of the reporting period form 1/
1/93-12/31/93 to 7/1/93-6/30/94 for the third administrative review
distorted the valuation of RCs and scrap. Petitioners assert that Cheil
may have distorted its costs through a similar shifting of the
reporting period.
SKC and Cheil contend that the Department verified reported
production quantities. SKC and Cheil assert that there is no evidence
on the record supporting petitioners' assertion that production
quantities were understated or that either company shipped more film on
a roll than was reported in SKC's or Cheil's responses.
Department's Position: We disagree with petitioners because there
is no evidence on the record to support their claim that either Cheil
or SKC understated their production quantities, or that either company
shipped more PET film on a roll than the customer ordered. During these
verifications, we traced reported production of PET film to the PET
film production records of Cheil and SKC. Our trace of production
quantities for Cheil accounted for the amount of film (sold exclusively
to third countries) that underwent second slitting. (See Cheil July 28,
1995 second review period verification report at page 5; Cheil January
26, 1996 third review period verification report at page 3.) The
Department also verified the production quantities reported by SKC.
(See SKC July 28, 1995 second review period verification report at page
15; SKC February 27, 1996 third review period verification report at
page 10.)
Moreover, we disagree with the petitioners' assertion that Cheil's
and SKC's valuation of RC and scrap was distorted because they shifted
the reporting period. The Department directed Cheil and SKC to report
costs for the third review period from July 1, 1993 through June 30,
1994, rather than for the calendar year January 1, 1993 through
December 31, 1993, so that the period for reporting COP/CV information
would more closely correspond to the time frame covered by the third
review. We have not allowed either Cheil or SKC to manipulate to their
advantage the period for reporting cost information.
Comment 3: Petitioners note that the language used to determine
whether below-cost sales were made over an extended period of time for
Cheil and Kolon fails to identify such sales of merchandise that were
sold in less than three months of each period of review. Petitioners
contend that this programming error exists for each of the respondents
included in these reviews.
Department's Position: We agree. For each of the respondents
included in these reviews, we have amended our computer programs to
exclude from FMV below-cost sales that were sold in less than three
months of the PORs and that made over an extended period of time.
Comment 4: Petitioners contend that the Department erred in
adjusting Cheil's home market price for pre-sale inland freight from
its factory to its warehouse. Petitioners contend that this deduction
contravenes Ad Hoc Comm. of AZ-NM-TX-FL Producers of Gray Portland
Cement v. United States, 13 F.3d 398, 401 (Fed. Cir. 1994).
Cheil contends that Departmental practice is to treat pre-sale
inland freight as a direct expense in instances where
[[Page 35181]]
products are channeled or customized for certain buyers.
Department's Position: We disagree with petitioners. As noted in
Canned Pineapple Fruit from Thailand, in Ad Hoc Committee, the Court
ruled that the Department could not use its inherent authority to
deduct home market pre-sale movement expenses. Instead, we will adjust
for these expenses under the circumstance-of-sale provision as long as
we determine that these expenses are directly related to the sales
under investigation. The Department generally treats pre-sale movement
expenses as direct where those expenses ``involve products channeled or
customized'' for certain buyers (Id. at 29563). Because Cheil knew the
identity of its customer and the product specifications of that
customer prior to the shipment of film from the factory to the
warehouse, we have treated Cheil's pre-sale inland freight as a direct
selling expense. This is consistent with our position in past segments
of this proceeding. (See Polyethylene Terephthalate Film, Sheet, and
Strip from the Republic of Korea; Final Determination of Sales at Less
than Fair Value 56 FR 16300, 16303 (April 21, 1991) (Final
Determination)).
Comment 5: Petitioners contend that certain sales that Cheil has
characterized as ``samples'' were sold in significant volume and should
be included in the Department's calculations. Petitioners contend that
Cheil's failure to report these sales mandates use of the best
information available for Cheil.
Cheil contends that the Department verified that its zero-priced
samples were not commercially valued. Cheil contends that the
Department's decision to exclude there sales was consistent with past
Departmental practice.
Department's Position: We do not consider Cheil's zero-priced
samples to be sales within the meaning of the antidumping law. This is
consistent with the position taken in Granular Polytetrafluoroethylene
Resin from Japan; Final Results of Antidumping Duty Administrative
Review (PTFE from Japan) 58 FR 50343, 50345 (September 27, 1993), in
which we did not include zero-priced samples in our calculations
because the samples were used for product evaluation purposes rather
than for commercial consumption.
During the PORs Cheil provided a limited number of zero-priced
samples to the United States. Cheil provided full documentation that
the shipments were not commercially valued, and were for product
evaluation purposes only. Accordingly, we did not include these zero-
priced samples in our analysis.
Comment 6: Petitioners assert that Cheil has failed to report
related-party commissions associated with its U.S. sales. Petitioners
assert that these expenses are directly related to U.S. price.
Cheil contends that the mark-up between the price charged by Cheil
to its U.S. subsidiary and the price charged by Cheil's U.S. subsidiary
to Cheil's U.S. customer is not a ``commission.'' Cheil notes that a
commission is ``a sum or percentage allowed to agents, sales
representatives, etc., for their services.'' (See Timken Co. v. United
States, 37 F.3d 1470, 1478 (Fed. Cir. 1994).) To receive a commission,
Cheil argues that a commissionaire must make a sale on another party's
behalf. Because there is no evidence on the record suggesting that
Cheil's U.S. subsidiary solicits sales for Cheil, or engages in any
activity to generate sales on Cheil's behalf, Cheil argues that the
mark-up between the price charged by Cheil to its U.S. subsidiary and
the price charged by Cheil's U.S. subsidiary to Cheil's U.S. customer
is not a ``commission'' within the meaning of the antidumpting law.
Department's Position: We agree with Cheil. Because Cheil's U.S.
subsidiary did not solicit sales for Cheil, we do not consider the
mark-up between the price charged by Cheil to its U.S. subsidiary and
the price charged by Cheil to Cheil's U.S. customer to be a commission
within the meaning of the antidumping law.
Comment 7: Petitioners assert that the Department should use
quality control criteria values (QCCVs) rather than product codes to
match Cheil's home market and U.S. sales. Petitioners contend that
matching sales through QCCVs would be less susceptible to manipulation.
Cheil asserts that use of QCCVs instead of product codes would
result in comparisons of home market merchandise that is less similar
to the merchandise sold in the United States.
Department's Position: We disagree with petitioners. As noted in
Antifriction Bearings (Other than Tapered Roller Bearings) and Parts
Thereof from France, et. al., 57 FR 28360, 28366, (June 24, 1992) our
policy is to ``maintain a stable, normal and predictable approach''
with regards to model match, and not to alter that methodology unless
compelling reasons exist. In these reviews we have used the same
methodology for matching Cheil's home market sales that we employed in
the less than fair value (LTFV) investigation and in the first review.
There is no evidence on the record to suggest that use of product codes
has enabled Cheil to manipulate the matching of home market sales.
Finally, we note that use of QCCVs would in several instances
result in the matching of merchandise that is less similar to the U.S.
merchandise than would the product codes submitted by Cheil. In one
instance this dissimilarity would result in the comparison of a product
that is coated with a product that is non-coated, and in another
instance this would result in comparison of merchandise that is of
different chemical compositions.
Comment 8: Petitioners contend that the Department should calculate
the credit period for Cheil's U.S. sales from the date of shipment from
Cheil's factory to the U.S. customer rather than from the date of
export shipment from Korea. Petitioners also assert that the Department
should require Cheil to provide the actual date of payment for those
U.S. sales for which Cheil had not received payment at the time that
Cheil prepared its U.S. response.
Cheil contends that the Department should recalculate Cheil's
inventory carrying cost expenses, if it decides to recalculate the
credit period from the date of shipment from Cheil's factory.
Department's Position: In these final results we have followed our
normal policy and calculated the U.S. credit period beginning with the
date that the merchandise leaves the factory. (See Antifriction
Bearings (Other than Tapered Roller Bearings) and Parts Thereof from
France, et. al., 60 FR 10900, 10916, (February 28, 1995).) We have also
recalculated Cheil's inventory carrying costs to avoid double counting
of Cheil's credit expenses. Because we noted no significant
discrepancies between payment term and the date that Cheil actually
received payment, we used payment terms to calculate Cheil's U.S.
credit expense for those U.S. sales for which Cheil had not received
payment at the time that it prepared its response.
Comment 9: Petitioners contend that the Department should adjust
U.S. sales for advertising and promotion expenses that Cheil incurred
on its U.S. sales.
Cheil contends that it had no direct advertising or sales promotion
expenses during the PORs.
Department's Position: We disagree with petitioners. In response to
our questionnaire and our request for supplemental information, Cheil
indicated that it had no direct promotion or advertising expenses
during the periods of review, and there is no contrary evidence on the
record. Since all of Cheil's sales were PP transactions and there were
no commissions incurred for home market
[[Page 35182]]
sales, the issue of whether Cheil had indirect advertising or sales
promotion expenses is moot because in PP transactions we do not adjust
for indirect selling expenses, absent commissions in the other market.
Comment 10: SKC contends that the Department's reallocation of its
manufacturing costs between A- and B-grade film is contrary to
Department practice and unreasonably overstates SKC's B- grade film
costs. SKC asserts that B-grade film cannot be used by its normal PET
film customers, and should not bear the same cost as A-grade film. SKC
contends that the Department's allocation of cost to B-grade film
should reflect the economic value of the products manufactured. SKC
argues that B-grade film is a by-product of PET film rather than a co-
product, and that B-grade film is an unavoidable consequence of
manufacturing A-grade film. SKC contends that it seeks to minimize the
production of B-grade film, and that B-grade film does not undergo
significant processing prior to sale. SKC asserts that sales of B-grade
film constitute a small (less than 10 percent) and declining portion of
its PET film revenues.
SKC notes that in Canned Pineapple from Thailand, The Department
did not use physical measures to allocate joint products but rather
used an allocation methodology that recognized the significantly
different economic values of the products. Based on the dissimilarity
of A-grade and B-grade film, SKC contends that the Department's joint
allocation of costs between these two products is economically
unreasonable.
SKC further asserts that it valued B-grade film in accordance with
its longstanding practice. SKC contends that the Department has
consistently rejected the use of physical allocation methodologies in
cases where the one joint product has a significantly lower economic
value than the other product. SKC cites to Elemental Sulphur from
Canada: Final Results of Antidumping Finding Administrative Review, 61
FR 8239, 8241-8243 (March 4, 1996) (Sulphur), and Oil Country Tubular
Goods from Argentina, Final Determination of Sales at Less than Fair
Value, 60 FR 33539, 33547 (June 28, 1995), as two such cases where the
Department did not use physical measures to allocate costs. SKC
contends that the Department's general practice is to use a company's
normal accounting system unless that system results in an unreasonable
allocation of costs. SKC further argues that the Department's
methodology of allocating yield losses equally between A-grade and B-
grade film produces absurd results because the methodology allocates
expenses associated with one type of scrap to another part of scrap.
SKC also contends that the physical defects inherent in B-grade film
compel SKC to (1) sell B-grade film for non-PET film applications, and
(2) assign B-grade film a lower value than A-grade film.
SKC asserts that the Department's decision to allocate yield losses
equally between A-grade and B-grade film conflicts with the model-match
and cost test methodologies employed in these reviews. SKC notes that
for model-match purposes, the Department restricted comparisons of U.S.
B-grade film to home market sales of B-grade film. SKC asserts that the
Department cannot ignore differences between A-grade and B-grade film
for purposes of its cost analysis.
Finally, SKC asserts that the Department should accept its cost
methodology even if the Department determines that B-grade film is a
co-product rather than a by-product of A-grade film. SKC asserts that
its cost system is consistent with the Ipsco Appeal decision, since,
unlike Ipsco, SKC does not rely upon sales value to allocate costs. SKC
asserts that this is consistent with the methodology employed by the
Department in Polyvinyl Alcohol from Taiwan, 61 FR 14064 (March 29,
1996). (See Memorandum to Chris Marsh from Art Stein, September 27,
1995.)
Petitioners argue that the Department was correct in equalizing the
yield loss that SKC experienced between A-grade and B-grade films.
Petitioners contend that allocating all yield loss to A-grade film
would result in a misallocation of SKC's costs, an improper use of
below-cost sales in the Department's margin calculations, and an
understatement of margins for SKC's sales of slitted B-grade film.
Petitioners point out that in various submissions filed in the
course of the initial investigation, respondents as a group (including
SKC) stated that the essential facts in the administrative proceedings
underlying the Ipsco Appeal are indistinguishable from the facts in
this case.
Petitioners contend that the Department's reallocation reflects the
mandate of the Ipsco Appeal, and also the realities of PET film
production. Petitioners explain that from a batch of resin, a single
production run will generate a given amount of A-grade film and a given
amount of B-grade film. Regardless of the quality of film, the actual
costs of producing a run of film are borne equally. Petitioners
maintain that it takes the same volume of raw materials and the same
processing effort to make A-grade film as B-grade film.
Petitioners argue that the fact that the Ipsco Appeal involved oil
country tubular goods instead of PET film is irrelevant. Petitioners
maintain that B-grade PET film is not a by-product of the PET film
production process, but is PET film. B-grade PET film is used in PET
film applications, and is generated from the same production run as A-
grade film using the same materials and processes. Petitioners
therefore conclude that SKC's A-grade and B-grade film must bear the
same costs.
Department's Position: We believe that A-grade and B-grade PET film
have identical production costs and we have relied on equal costing for
this final determination. The CIT's decision in the remand of the
underlying investigation (Dupont II) affirmed the Department's remand
calculation of the cost of production for prime and off-grade film
(i.e., A-grade and B-grade film). Dupont II, at 6-7. The CIT determined
that our recalculation of Cheil's and SKC's production costs was
reasonable. As we explained in the remand, we recalculated the cost of
off-grade film to reflect actual costs by allocating production costs
based on actual production quantities.
Moreover, our use of an equal costing methodology in this
proceeding is based on substantial evidence and is otherwise in
accordance with law. In the instant reviews, the A-grade and B-grade
film undergo an identical production process, involving an equal amount
of material and fabrication expenses. The only difference in the
resulting A- and B-grade film is that at the end of the manufacturing
process a quality inspection is performed during which some of the film
is classified as high quality A-grade product, while other film is
classified as lower quality B-grade film. The identification of
different grades of merchandise does not transform the manufacturing
process into a joint production process which would require the
allocation of costs.
SKC mischaracterizes the continuous production process of PET film
as joint processing. A joint production process occurs when ``two or
more products result simultaneously from the use of one raw material as
production takes place.'' (See Management Accountants' Handbook,
Keeler, et. al., Fourth Edition at 11:1.) The essential point of a
joint production process is that ``the raw material, labor, and
overhead costs prior to the initial split-off can be allocated to the
final product only in some arbitrary, although necessary, manner,'' Id.
In this case, the costs attributable to PET film yield losses can
clearly be allocated to
[[Page 35183]]
the production of specific types of PET film.
SKC argues incorrectly that its method of accounting for lesser
quality product is consistent with the Ipsco Appeal. Ipsco Appeal
involved the Department's use of an appropriate methodology for
allocating costs between two grades of steel pipe. These two grades of
steel pipe were distinguished on the basis of quality. Ipsco Appeal,
965 F.2d at 1058. The same production inputs for materials, labor, and
overhead went into the manufacturing lot that yielded both grades of
pipe. Id. Given these facts, in our final determination we allocated
production costs equally between those two grades of pipe. We reasoned
that because they were produced at the same time, on the same
production lines, and following the identical manufacturing process,
the two grades of pipe in fact had identical production costs. Id.
SKC's reliance on Sulphur, Canned Pineapple Fruit from Thailand,
and Polyvinyl Alcohol from Taiwan is misplaced. Those cases relate
primarily to by-product/co-product costing methodologies. In none of
the cases cited by SKC were both products within the scope of the same
antidumping order. The PET film production process produces two
finished products, both of which are salable, and both of which are PET
film products. B-grade PET film (like A-grade film) is sold as PET film
and consumed as PET film. By contrast, the resulting joint products or
by-products in the cases cited by SKC were of a different class or kind
of merchandise than the products that the manufacturer set out to
produce. Pineapple shells, cores, and ends are made into pineapple
juice. Natural gas is not of the same class or kind as elemental
sulphur, nor are polyvinyl alcohol and methyl acetate. Moreover, we
note that in the ordinary course of business SKC treats methanol, and
not B-grade film, as the by-product of the PET film production process.
Accounting literature identifies by-products as separate and distinct
products, not grades of the same product. Unlike the chemical reaction
that occurs in the production of polyvinyl alcohol resulting in the by-
product methyl acetate, B-grade film is not a by-product. Theoretically
the production of B-grade film is avoidable since the PET film
manufacturing process need not result in poor quality product.
Finally, SKC's argument that matching A- and B-grade film to
identical merchandise necessitates that each of these models have a
unique cost is without merit. Two products that are not ``identical''
for model-match purposes may indeed have the same costs. For purposes
of determining COP/CV, however, we must account for all of the costs
associated with the production of the merchandise.
Comment 11: Petitioners contend that SKC understated the cost of
extending credit to Anacomp on its U.S. sales. Petitioners contend that
the credit terms offered to Anacomp by SKC do not constitute a normal
extension of credit between buyer and seller, but rather involve an
``incentive to finance Anacomp's film purchases at below market
rates.'' Further, petitioners argue that the antidumping statute does
not contemplate a circumstance-of-sale adjustment to U.S. price for
interest payments that offset credit risk. Finally, petitioners argue
that if the Department accepts the Anacomp payments as interest income,
it should ``impute SKC's interest expense'' using an interest rate that
is the ``equivalent of the market rate sales to Anacomp.''
SKC contends that petitioners have offered no grounds for reversing
the Department's previous decision to offset interest income against
SKC's imputed credit expense.
Department's Position: We disagree with petitioners because, as
noted in the first review of this order, ``* * * failure to adjust for
SKC's interest income received from Anacomp would overstate SKC's U.S.
credit expense, and distort our dumping analysis.'' (See Polyethylene
Terephthalate Film, Sheet, and Strip from the Republic of Korea, Final
Results of Antidumping Administrative Review (Final Results of the
First Review), 60 FR 42835, 42838 (August 17, 1995). During our
verification of SKC we determined that SKC and Anacomp adhered to all
of the terms of the ``Master Supply Agreement'' which governed the
payment of interest income to SKC. We also verified the amount of
interest income received by SKC. Accordingly, in these final results we
have continued to make an offset for interest income as we did in the
preliminary results of this review.
Comment 12: Petitioners note that Kolon Industries (Kolon) did not
include home market sales of scrap film in its sales listing because
``this scrap is not PET film.'' Petitioners contend that Kolon has
failed to substantiate its claim that these scrap sales were not of PET
film.
Kolon asserts that the scrap material is not PET film. Kolon
contends that the material consists of (1) molten PET material that is
deposited in the filters of the extruder before the molten PET material
is extruded onto the cooling drum and formed into sheet and film, and
(2) shredded trimmings from the film production process. Because the
scrap material is not PET film, Kolon argues that it is not within the
scope of the order.
Department's Position: We agree with Kolon. Because the scope of
the antidumping order is limited to PET ``film, sheet and strip,'' and
this material is not PET film, we have not included these scrap sales
in our calculations.
Comment 13: Petitioners contend that the Department should include
Kolon's U.S. sample sales in its margin calculations. Petitioners
contend that while the Department has the authority to omit zero-price
samples if the samples were not used for commercial consumption, that
exception does not apply for Kolon since those sales were consumed
commercially. Petitioners note that the Department included Kolon's
zero-price samples in its calculations for the first review.
Kolon contends that the Department should exclude these zero-price
samples from its analysis. Kolon notes that in PTFE from Japan, the
Department excluded such transactions even though the merchandise was
not returned to the manufacturer. Kolon contends that the Department's
decision to include zero-price sales in its first period analysis was
based upon ``the incorrect belief that there is no evidence on the
record that Kolon's U.S. sample sales are destroyed or rendered
unusable.'' Kolon contends that the nature of PET film requires the
tester to unwind the film, and to usually coat the film, stamp it, or
use it on a machine. Kolon contends that such testing, by its nature,
renders the PET film unusable.
Department's Position: As noted in response to Comment 5, in PTFE
from Japan we determined that zero-priced transactions were not
``sales'' within the meaning of the antidumping law because the zero-
priced samples were used for product evaluation purposes rather than
commercial consumption. In the Final Results of the First Review, we
indicated that PTFE from Japan was not applicable because there was no
evidence on the record that Kolon's U.S. samples were destroyed or
rendered unusable. (See Final Results of First Review, at 42841.)
However, the record in these reviews demonstrates that Kolon
provided the zero-priced samples for product evaluation and testing
purposes rather than commercial consumption. Kolon stated that its one
shipment of zero-priced samples during the third review was used for
product testing. Moreover, we find that record evidence shows that like
PTFE resin, the nature of PET film
[[Page 35184]]
is such that once it has been tested, it cannot be re-used. Therefore,
consistent with PTFE from Japan, we did not include Kolon's zero priced
samples in our analysis.
Comment 14: Petitioners contend that Kolon incorrectly used home
market adjustments applicable to other reviews in compiling its second
and third review responses. Petitioners contend that such a methodology
results in inconsistencies.
Kolon contends that it did not revise sales data that it had
reported in previous questionnaires in order to avoid inconsistencies
from one review to the next.
Department's Position: We disagree with petitioners. It is the
Department's longstanding practice to base USP and FMV price
comparisons on reasonably contemporaneous sales of similar merchandise.
(See Certain Forged Steel Crankshafts from the United Kingdom, 56 FR
5975, 5976 (February 14, 1991).) In compliance with our instructions,
during the second review Kolon reported data for its sales for the
period from December 1991 through July 1993. For the third review, in
order to ensure contemporaneous matches, we requested data on sales for
the period December 1992 through July 1994. Kolon complied with our
request and did not make any revisions to the sales and adjustment data
that is had previously reported in prior reviews. Because revising
these data previously submitted would result in inconsistencies for
identical sales, we determine that Kolon's approach is a reasonable
methodology to avoid such inconsistencies.
Comment 15: Petitioners content that Kolon has incorrectly omitted
labor and overhead expenses from its calculation of home market packing
expenses. Petitioners contend that this error results in an
understatement of FMV.
Kolon contends that its cost accounting system does not permit it
to retrieve the labor and overhead costs attributable to packing.
Department's Position: We disagree with the petitioners. In Kolon's
cost accounting system, because packing and labor costs for PET film
are recorded in a single cost center, Kolon cannot separate the
specific amount of labor and overhead expenses that are attributable to
packing from the labor and overhead expenses that are attributable to
the production of PET film. Moreover, since the merchandise that Kolon
sold in the home market and the United States is identical, the labor
and overhead expenses attributable to packing (were Kolon able to
isolate them) would have no effect upon the calculations.
Comment 16: Petitioners contend that expenses associated with
replacing defective film for Kolon's home market customers do not
qualify as indirect selling expenses. Furthermore, rather than
directly-related selling expenses, petitioners argue that these
replacement shipments should be included in Kolon's home market sales
listing.
Kolon argues that, consistent with past practice, the Department
properly treated the costs associated with defective film as indirect
selling expenses.
Kolon contents that it reported the movement expenses incurred on
its ESP transactions with as much specificity as possible.
Department's Position: We disagree with the petitioners. The cost
of replacing defective film is properly classified as a warranty cost
rather than as new sale since these expenses are associated with
replacing defective merchandise that had previously been sold. Kolon's
accounting records do not separately record the costs for replacing
defective film. Because the warranty expenses can not be isolated to
specific sales, Kolon properly treated these expenses as indirect
selling expenses. (See, e.g., Color Television Receivers from Korea;
Final Results of Antidumping Duty Administrative Review, 51 FR 41365,
41377 (November 14, 1986).)
Comment 17: Petitioners argue that Kolon should be required to
report Korean inland freight on a transaction-specific basis where
Kolon's accounting records would permit such reporting. Petitioners
contend that for certain exporter's sales price (ESP) transactions,
Kolon could provide transaction-specific movement expenses.
Kolon contents that it reported the movement expenses incurred on
its ESP transactions with as much specificity as possible.
Department's Position: We disagree with the petitioners. We accept
Kolon's approach of allocating movement expenses as reasonable.
Generally, the Department will accept a party's alternative methodology
for allocating expenses if the party's normal accounting records do not
permit it to provide data in the format requested and the party
provides data in a manner that approaches the Department's preferred
methodology as close as its records will allow. We have stated that we
will allow this alternative methodology as long as we determine that it
is reasonable. (See Antifriction Bearings (Other than Tapered Roller
Bearings) and Parts Thereof from the Federal Republic of Germany, 56 FR
31692, 31715 (July 11, 1991). In calculating its U.S. movement expenses
Kolon did not use a single average expense for inland freight. Kolon
attempted to match each ESP sale to the particular entry. Since ESP
merchandise was sold from inventory, however, Kolon could not normally
tie a particular ESP sale to an individual entry. Therefore, Kolon
allocated movement expenses to the particular group of entries on which
that merchandise could have entered. We verified Kolon's data and have
no evidence that Kolon's methodology is unreasonable.
Comment 18: Petitioners argue that to the extent that the lower
U.S. interest rate was available to the borrower, the Department should
use that rate to calculate Kolon's home market credit expense.
Petitioners assert that the Department should follow the precedent
established in LMI La Metalli Industriale, S.p.A. v. United States, 912
F.2d 455 (Fed. Cir. 1990), (LMI) wherein the Department applied the
lowest rate available to the borrower to calculate U.S. and home market
interest expenses.
Kolon contends that U.S. dollar interest rates only measure the
time value of money for dollars. Kolon argues that the U.S. interest
rate cannot be used to determine the opportunity cost of a delayed
payment in another currency, such as Korean won.
Department's Position: We disagree with the petitioners. We have
used Kolon's calculation of U.S. and Home market credit expenses in
these final results because Kolon's calculation of credit expenses is
consistent with `reasonable business behavior' and because we find that
Kolon's actual borrowing experience is the best indicator of Kolon's
cost of extending credit. LMI requires us to use `usual and reasonable
business behavior' to calculate credit expenses. Kolon based its
calculation of both home market and U.S. credit expenses on its actual
borrowings in the home market and the United States. In the home
market, Kolon used the interest expenses incurred in Korea to represent
its interest expense. In the United States, Kolon used the interest
rate charged on borrowings by its U.S. subsidiary because the U.S.
subsidiary was the entity that bore the cost of delayed payment from
the customer.
Comment 19: Petitioners argue that Kolon should be required to
provide customer- or transaction-specific U.S. rebates where such
information is available in Kolon's accounting records. Petitioners
contend that the Department should apply second-tier best
[[Page 35185]]
information available to those sales for which Kolon has reported
rebates, but did not quantify the rebate on a transaction- or customer-
specific basis.
Kolon contends that it did not provide transaction-specific rebates
because such a methodology would not capture rebates that were granted
after the preparation of the response. Kolon contends that its
methodology of dividing total rebate expense during the POR by total
PET film sales is not distortive, and was adopted so that Kolon would
not understate its rebate expense.
Department's Position: We agree with petitioners that our normal
policy is to calculate discounts or rebates on a transaction- or
customer-specific basis. (See Antifriction Bearings (Other than Tapered
Roller Bearings) and Parts Thereof from France, et. al., 58 FR 39729,
39762 (July 26, 1993). In reporting its rebate expense for the first
review of this order, however, Kolon discovered that a number of
rebates were paid several months after Kolon filed its questionnaire
response for that review. To avoid understating its rebate expenses in
these reviews, Kolon divided the total rebate amount granted on PET
film sold during the POR by the total U.S. sales of PET film during the
period. Because we did not ask Kolon to provide customer-specific
rebates, and because there is no evidence on the record suggesting that
Kolon's allocation of rebates is manipulative, we have used Kolon's
calculation of rebate expense in these reviews.
Comment 20: Petitioners contend that the Department should make an
adjustment to PP for post-sale warehousing expenses incurred on Kolon's
PP sales.
Kolon contends that the Department's normal practice is to treat
post-sale warehousing expense as direct only if the expense can be tied
to particular sales. Kolon asserts that in this case, the after-sale
expense does not vary with specific sales. Consistent with past
practice, Kolon argues that the Department should treat these
warehousing expenses as indirect.
Department's Position: We disagree with the petitioners. During the
PORs Kolon maintained a warehouse as its Korean factory. The expenses
associated with maintaining that warehouse were fixed and did not vary
with individual sales. Accordingly, we properly treated these expenses
as indirect selling expenses. See Professional Electric Cutting Tools
and Professional Electric Standing/Grinding Tools from Japan: Final
Determination of Sales at Less Than Fair Value, 58 FR 30144, 30147-
30148 (May 26, 1993).
Comment 21: Petitioners contend that in its margin calculations the
Department overstated the value of STS Corporation's (STC) further-
processed sales by using the wrong variable to represent the quantity
sold.
Department's Position: We agree and have adjusted our calculations
accordingly.
Comment 22: Cheil contends that the Department should use the
transfer price paid to a related supplier to represent the material
cost of EG in the Department's second record period calculations. Cheil
contends that Departmental practice is to accept transfer prices where
direct or indirect ownership is less than 50 percent between buyer and
seller. Cheil notes that the equity interest between Cheil and its
supplier of EG was much less than 50 percent, and asserts that there is
no evidence that Cheil had control over its suppliers.
Petitioners claim that the Department was correct in its
determination that Cheil is related to one of its suppliers of EG and
that the Department correctly adjusted Cheil's COP/CV calculations to
reflect its supplier's cost of producing EG.
Department's Position: We agree with petitioners that Cheil is
related to one of its suppliers of EG. Section 773(e)(4)(F) of the
Tariff Act of 1930, as amended, defines ``related parties'' as ``two or
more persons directly or indirectly controlling, controlled by, or
under common control with, any person'' (emphasis added). Cheil has
stated that it was a member of the Samsung Group, which is a group of
companies under common management control. (See Cheil September 27,
1993 Questionnaire Response at Exhibit 1, E.I. Dupont de Nemours, et.
al. v. United States, 841 F. Supp. 1237, 1247-48 (CIT 1993).) The
Samsung Group owns more than 50 percent of Cheil's supplier of EG. By
virtue of these relationships, we consider that both Cheil and its
supplier are under common control by the Samsung Group. Therefore, they
are related parties within the meaning of Sec. 773(e)(4)(F).
Based on this relationship, we tested the transactions between
Cheil and its related supplier of EG. During verification we collected
a schedule that reported the production costs of the related supplier.
The schedule indicated that the product cost of EG exceeded the average
price paid by Cheil. (See Memorandum to Chris Marsh from Art Stein,
p.3, September 7, 1995.) Accordingly, consistent with our general
practice, we relied on the supplier's cost as the value for EG in PET
film production.
Comment 23: Cheil contends that the Department should subtract its
short-term interest income from its interest expense to derive Cheil's
net interest expense. Cheil asserts that the record indicates that its
interest income was clearly short-term in nature. Cheil contends that
the methodology which it employed in these reviews to derive net
interest expense is identical to that which was accepted by the
Department in the fair value investigation and the first review of this
case. Cheil contends that the Department may not depart from its
established practice without explaining its basis for so long. Finally,
Cheil asserts that there is no statutory or regulatory basis for
denying interest income as an offset to interest expense because that
interest income is restricted.
Petitioners claim that the Department correctly denied Cheil's
claimed short-term interest income offset because the income generating
assets were pledged as collateral for loans. Petitioners note that the
Department's standard questionnaire allows the respondent to reduce its
interest expense by any interest income earned on short-term
investments of its working capital. Petitioner contends that the assets
that were collateralized have, in effect, been transformed from short-
term to long-term assets.
Department's Position: We have disallowed Cheil's claimed offset of
short-term interest income against interest expense. We allow an offset
for interest expense only with interest income from short-term
investments. (See Certain Corrosion-Resistant Carbon Steel Flat
Products and Certain Cut-to-Length Carbon Steel Plat from Canada, 61 FR
13815, 13819 (March 28, 1996).) While this interest income was
classified as ``short-term'' in Cheil's financial statements, the
financial statements indicate that the assets are ``pledged for
collateral for borrowings,'' and ``are restricted as to use and are not
subject to immediate withdrawal.'' (See notes (3) and (5) to Cheil's
1992 audited financial statements, Section A Questionnaire Response,
September 27, 1993). Because these assets are not readily available to
Cheil, we consider it inappropriate to treat them as short-term
investments of working capital.
Comment 24: Cheil, Kolon, and STC contend that the Department
should make a tax-neutral adjustment to U.S. price for home market
taxes which were forgiven by virtue of export of the product to the
United States.
Department's Position: We agree. In light of the CAFC's decision in
Federal Mogul Corp. v. United States, 63 F. 3d 1572 (Fed. Cir. 1995)
the Department
[[Page 35186]]
has changed its treatment of home market consumption taxes. Where
merchandise exported to the United States is exempt from the
consumption tax, the Department will add to the U.S. price the absolute
amount of such taxes charged on the comparison sales in the home
market. We have adjusted our calculations accordingly.
Comment 25: Cheil contends that the Department should include
indirect selling expenses in its calculation of COP.
Department's Position: We agree. Since indirect selling expenses
were included in the price compared to COP, we have included indirect
selling expenses in our calculation of COP.
Comment 26: Cheil contends that the Department should include duty
drawback in the home market price that is compared to COP.
Department's Position: We agree. Duty drawback was applicable to
Cheil's local export sales. Accordingly, when comparing the home market
price to COP, we have included the duty drawback incurred on Cheil's
``local export'' sales.
Comment 27: Cheil contends that in calculating profit the
Department should not use net price rather than gross price.
Department's Position: We agree. Because profit represents the
arithmetic difference between sales revenue and the expenses incurred
in realizing that revenue, we have used Cheil's home market price net
of adjustments to calculate home market profit.
Comment 28: Cheil contends that in its second review period
calculations, the Department used an incorrect amount for differences
in merchandise (difmer). Cheil further contends that the Department
erroneously added rather than subtracted difmer from FMV in the second
review period. Finally, Cheil contends that since its difmer claim is
denominated in Korean won, the Department should convert difmer into
U.S. dollars prior to adding this amount to an FMV stated in dollars.
Department's Position: We agree and have adjusted our calculations
accordingly.
Comment 29: Cheil contends that the Department should exclude
direct selling expenses from its CV calculations because they are
comprised exclusively of movement expenses.
Department's Position: We agree and have excluded these expenses
from our calculation of CV.
Comment 30: Cheil and SKC contend that the Department double-
counted packing in its CV calculations.
Department's Position: We agree and have revised our CV
calculations to eliminate the double-counting of packing expenses.
Comment 31: Cheil, SKC, and STC contend that for U.S. sales which
were compared to CV, the Department should make an addition to U.S.
price for duty drawback. Cheil, SKC, and STC contend that this
adjustment is necessary because they included these duties in the cost
of manufacture (COM) component of CV.
Department's Position: We agree. Because Cheil, SKC, and STC
included import duties in their calculation of COM, we have made an
addition to U.S. price in these final results for duty drawback.
Comment 32: Kolon contends that for comparisons to CV, home market
inventory carrying costs would be included in the pool of indirect
selling expenses.
Department's Position: We agree. In these final results we included
inventory carrying costs in the pool of indirect selling expenses.
Comment 33: SLC argues that the Department should accept the price
charged to SKC by its related supplier of DMT and TPA. SKC notes that
the equity interest between SKC and its supplier of DMT and TPA was
much less than 50 percent, and asserts that there is no evidence that
SKC has control over its supplier. SKC asserts that it demonstrated
that its purchases of DMT and TPA were at arms-length. SKC also asserts
that it purchased DMT and TPA at ``market prices.'' SKC further
contends that a proper analysis of the cost of producing DMT and TPA
provides no evidence that prices for these materials were below cost.
Petitioners contend that the Department correctly adjusted SKC's
COP/CV calculations to reflect the supplier's cost of producing DMT and
TPA. Petitioners contend that SKC and its supplier are related within
the meaning of the antidumping law because an equity relationship
exists between SKC and that supplier.
Department's Position: We agree with petitioners that SKC is
related to one of its suppliers of DMT and TPA. During the PORS, SKC
owned more than a 5 percent interest in its supplier. (See SKC October
12, 1993 questionnaire response at Sec. VIII at 18, and SKC October 11,
1994 questionnaire response Sec. VIII at 21.) Thus, pursuant to
Sec. 773(e)(4)(E) of the statute, these parties are related.
Based on this relationship, we tested the transactions between SKC
and its related supplier. Analysis of these prices indicated that the
transfer price between SKC and its supplier was less than the
supplier's cost of producing DMT and TPA. During our verification of
SKC, we met with the supplier, who furnished us with a copy of the
detailed inventory statement from its financial statement. The
inventory statement listed the total and per-unit cost of goods sold in
the supplier's finished inventory.
SKC's supplier suggested that selling, general and administrative
expenses, and interest expense should be based on the cost of goods
sold (COGS) from the supplier's income statement. We calculated the
full cost of producing DMT and TPA based on that methodology. We then
compared these costs to the average monthly transfer prices reported on
attachments 4 and 5 of SKC's March 13, 1995 submission, and determined
that the supplier's cost for TPA exceeded the average transfer price
charged to SKC. We also determined that the supplier's cost for DMT
exceeded the average transfer price charged to SKC. (See Memorandum to
Chris Marsh from Paul McEnrue, August 18, 1995, at page 3.)
Accordingly, consistent with our general practice, we relied on the
supplier's cost as the value for TPA and DMT purchased from related
suppliers.
Comment 34: SKC asserts that if the Department does not use the
prices charged to SKC from a related supplier, the Department should
ensure that it relies upon a reasonable estimate of the supplier's
cost. SKC argues that the Department used an erroneous rate for SG&A
expenses in its analysis of the cost of producing DMT and TPA. SKC also
asserts that the Department in its third review calculations
erroneously compared the prices for DMT and TPA charged by all of its
suppliers for these materials, rather than the prices paid by SKC to
its related suppler.
Petitioners argue that the calculation methodology reflects a
reasonable and proper exercise of the Department's discretion.
Petitioners note that the methodology was proposed by SKC's related
supplier in the second review. Petitioners maintain that SKC, unhappy
with the results, proffered an alternative methodology in the third
review to achieve more favorable results. Petitioners argue that the
Department should reject SKC's request for changes since it failed to
substantiate why a change in mehtodology would be appropriate.
Department's Position: For the third review we changed the SG&A
rate used in our analysis of SKC's cost of DMT and TPA. Prior to
verification, we requested supplemental information for the third
review. Specifically; we asked SKC to document that its purchases of
major inputs were at arm's length. Based on the information provided by
SKC,
[[Page 35187]]
and for the reasons noted in response to Comment 33, we have revised
our calculations of the supplier's cost of producing DMT and TPA for
the third review period.
SKC also attempted to supply this information for the second review
period. The information, however, was provided outside the time
constraints of 19 CFR 353.31(a)(1)(ii), and was not provided in
response to our request. Therefore, we did not use this untimely and
unverified information in our second review period calculations.
Comment 35: SKC contends that if the Department does adjust RC
costs, it should calculate a uniform cost for VCs and for RCs. SKC
asserts that such an approach would be preferable to calculating the
cost of RC as the full cost of the scrap film plus the cost of
recycling.
Department's Position: As noted in our response to Comment 1,
because we did not adjust RC costs, this issue is moot.
Comment 36: For the third review SKC argues that the Department
should adjust its COM for certain period costs. SKC asserts that these
period costs could not be determined until the end of its fiscal year.
SKC assets that correction of these period costs is necessary in order
to ensure that the Department's cost calculations reflect the most
complete and accurate data available.
Department's Position: We agree, and for the final results of the
third review we have adjusted the COM of all products to reflect the
final, audited cost results.
Comment 37: SKC asserts that for the second that third reviews, the
Department erroneously used CV for all U.S. sales that had sufficient
home market comparisons. SKC asserts this error resulted from the
Department's erroneous reading of SKC's product concordance.
Department's Position: We agree with SKC that we misread its
product concordance in our preliminary results. In these final results
we amended our calculations to match U.S. sales with home market sales
of identical merchandise according to the concordance data provided by
SKC.
Comment 38: SKC asserts that due to a spreadsheet formula error,
the Department overstated the COM for products SM30/12 and SS01/12 in
the second review.
Department's Position: We agree, and for the final results of the
second review we have recalculated the COMs of these products.
Comment 39: SKC asserts that in these reviews the Department
erroneously overstated home market profit by failing to include selling
expenses in COP.
Department's Position: We agree. In these final results we have
included SKC's selling expenses in our calculation of home market
profit.
Comment 40: SKC contends that the Department erroneously included
inventory carrying costs in CV for purchase price (PP) sales.
Department's Position: We agree with SKC that inventory carrying
costs should be excluded from CV for comparisons with PP sales, and we
have amended our calculations accordingly.
Comment 41: SKC asserts that the Department overstated CV financing
expenses in these reviews by not including notes receivable in the
calculation of the financing expense offset.
Department's Position: We agree and have added notes receivable in
the offset used to calculate net finacning expenses for CV.
Comment 42. SKC asserts that for the third administrative review
the Department erroneously used COMs for the second review for products
SS01/12 and SS01/15.
Department's Position: We agree and have amended these final
results accordingly.
Comment 43: STC asserts that the Department should exclude aberrant
U.S. sales of obsolete merchandise from its margin analysis. STC
contends that the CIT determined in American Permac, Inc. v. the United
States, 783 F. Supp. 1421 (CIT 1992) that the Department had the
discretion to exclude such U.S. sales.
Department's Position: We disagree with STC. As noted in the Final
Results of the First Review, there is no provision in the statute for
the exclusion of U.S. sales based upon those U.S. sales being
``aberrant'' or outside the ordinary course of trade (See Final Results
of First Review, (42842).) Therefore, we have included these sales in
our calculations.
Comment 44: STC asserts that if the Department includes sales of
obsolete merchandise in its margin calculations for the third review,
it should compare them to comparable home market sales, even if such
sales were below cost. STC asserts that the legislative history of the
sales-below-cost provision and the SAA accompanying the Uruguay Round
support the use of below-cost sales of obsolete merchandise in the
calculation of FMV.
Department's Position: We disagree with STC. As explained in our
preliminary determination, all comparable home market sales were
excluded because they were below cost. Section 773(b) of the Act
explicitly mandates the exclusion of below cost sales if such sales
have been made in substantial quantities over an extended period of
time and are not at prices which permit recovery of all costs within a
reasonable period of time in the normal course of trade. Because the
language of the statute unambiguously requires the exclusion of all
below cost sales that have satisfied the listed criteria, it is
unnecessary to resort to the legislative history for further guidance.
See Davis v. Michigan Dep't. of Treasury, 489 U.S. 803, 808, n.3 (1989)
(``Legislative history is irrelevant to the interpretation of an
unambiguous statute.'').
Moreover, it is a primary tenet of statutory construction that, if
possible, legislative history must be read to be consistent with the
meaning of a clear statutory mandate. See Sutherland Stat. Const.
Sec. 48.06 (5th ed. 1992). Therefore, the references to obsolete and
end-of-model year merchandise in the legislative history of the COP
provision merely provide examples of instances when below cost sales
may not satisfy the statute's criteria of being made in substantial
quantities over an extended period of time and at prices which permit
recovery of costs.
Therefore, because we determined that STC's below-cost sales
satisfied the statutory criteria for exclusion, we complied with the
clear statutory mandate to disregard STC's below cost sales, including
these sales of obsolete merchandise. When necessary, we have used CV,
in accordance with section 773(b).
Comment 45: STC contends that the Department should correct its
calculation of profit for value-added sales by adjusting for movement
expenses.
Department's Position: We agree and have adjusted our calculations
accordingly.
Comment 46: STC contends that for third period ESP sales compared
to CV, the Department should include inventory carrying costs in the
pool of indirect selling expenses.
Department's Position: We agree that inventory carrying costs
should be included in the pool of indirect selling expenses for the
calculation of CV when used as the comparison for ESP sales. We have
adjusted our calculations accordingly.
Final Results of Review and Revocation in Part
Upon review of the comments submitted, the Department has
determined that the following margins exist for the periods indicated:
[[Page 35188]]
------------------------------------------------------------------------
Margin
Company Period (percent)
------------------------------------------------------------------------
Cheil............................................. 92-93 0
Cheil............................................. 93-94 0.01
Kolon............................................. 92-93 0.11
Kolon............................................. 92-93 0.12
SKC............................................... 92-93 5.89
SKC............................................... 93-94 0.52
STC............................................... 92-93 0.47
STC............................................... 93-94 0.93
------------------------------------------------------------------------
Based upon the information submitted by Cheil during these reviews
and the first administrative review, we further determine that Cheil
has met the requirements for revocation set forth in Sec. 353.25(a)(2)
and Sec. 353.25(b) of the Department's regulations. Cheil has
demonstrated three consecutive years of sales at not less than fair
value and has submitted the certifications required under 19 CFR
353.25(b)(1). The Department conducted a verification of Cheil as
required under 19 CFR 353.25(c)(2)(ii).
On the basis of no sales at less than FMV for a period of three
consecutive years, and the lack of any indication that such sales are
likely, the Department concludes that Cheil is not likely to sell the
merchandise at less than FMV in the future. Therefore, the Department
is revoking the order with respect to Cheil.
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 for the third review
period except for Cheil and Kolon; because Kolon's weighted-average
margin is de minimis, its cash deposit rate will be zero percent;
because we are revoking Cheil, no cash deposit will be required for
Cheil; (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 percent, 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 these review periods. 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: June 26, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-17159 Filed 7-3-96; 8:45 am]
BILLING CODE 3510-DS-M