[Federal Register Volume 61, Number 221 (Thursday, November 14, 1996)]
[Notices]
[Pages 58374-58377]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29091]


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DEPARTMENT OF COMMERCE
[A-580-807]


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

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

ACTION: Notice of final results of antidumping duty administrative 
review and notice of revocation in part.

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SUMMARY: On July 9, 1996, the Department of Commerce (the Department) 
published the preliminary results of administrative review, intent to 
revoke in part, and termination in part of the antidumping duty order 
on polyethylene terephthalate (PET) film, sheet, and strip from the 
Republic of Korea. The review covers three manufacturers/exporters of 
the subject merchandise to the United States and the period June 1, 
1994 through May 31, 1995.
    As a result of comments we received, the dumping margins have 
changed from those we presented in our preliminary results.

EFFECTIVE DATE: November 14, 1996.

FOR FURTHER INFORMATION CONTACT: Michael J. Heaney or John Kugelman, 
AD/CVD Enforcement Group III, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230, telephone: (202) 482-
4475 or 0649, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On July 9, 1996 (61 FR 36032), the Department published the 
preliminary results of administrative review, notice of intent to 
revoke in part, and termination in part of the antidumping duty order 
on PET film from the Republic of Korea (56 FR 25669, June 5, 1991).
    Also, on July 9, 1996, we terminated the review with respect to 
Cheil Synthetics Inc. (Cheil) because we revoked the order with respect 
to Cheil on June 25, 1996.
    This review covers three manufacturers/exporters of the subject 
merchandise to the United States: Kolon Industries (Kolon), SKC Limited 
(SKC), and STC Corporation (STC), and the period June 1, 1994 through 
May 31, 1995.
    We are revoking the order for Kolon because Kolon has sold the 
subject merchandise at not less than normal value (NV) in this review 
and for at least three consecutive periods.
    On the basis of no sales at less than NV for a period of three 
consecutive years, and the lack of any indication that such sales are 
likely in the future, the Department concludes that Kolan is not likely 
to sell the merchandise at less than NV in the future. Kolon has also 
submitted a certification that it will not sell at less than NV in the 
future and an agreement for immediate reinstatement, in accordance with 
19 CFR 353.25(b). Therefore, the Department is revoking the order with 
respect to Kolon.
    The Department has concluded this review in accordance with section 
751 of the Tariff Act of 1930, as amended.

Scope of the Review

    Imports covered by this review are shipments of all gauges of raw, 
pretreated, or primed polyethylene terephthalate film, sheet, and 
strip, whether extruded or coextruded. The films excluded from this 
review are metallized films and other finished films that have had at 
least one of their surfaces modified by the application of a 
performance-enhancing resinous or inorganic layer or 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 review covers the period June 1, 1994 through May 31, 1995

Applicable Statute and Regulations

    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 Tariff Act of 1930 (the Tariff Act) 
by the Uruguay Round Agreements Act (URAA). In addition, unless

[[Page 58375]]

otherwise indicated, all citations to the Department's regulations are 
to the current regulations, as amended by the interim regulations 
published in the Federal Register on May 11, 1995 (60 FR 25130).

Analysis of Comments Received

    We invited interested parties to comment on the preliminary results 
of this administrative review. We received timely comments from each of 
the three respondents.

Comment 1

    Kolon contends that the Department should revoke the order with 
respect to Kolon based on the company having three consecutive years of 
de minimis margins. Kolon notes that it has provided a statement 
agreeing to immediate reinstatement of the order if the Department 
determines that Kolon sells merchandise at less than value (HV) 
subsequent to revocation.
    Kolon further contends that in litigation involving the first 
review period (November 30, 1990-May 31, 1992) the Department has 
agreed to recalculate margins for Kolon using its current tax-
adjustment methodology. Kolon argues that if the recalculated margins 
for the first review period de minimis, the Department should neither 
require nor rely upon a statement from Kolon agreeing to possible 
reinstatements in the order, since Kolon would never have been found to 
have sold the subject merchandise at less than NV.

Department's Position

    We agree with Kolon that its tentative revocation should be made 
final based upon its having three consecutive years of zero or de 
minimis margins, and our determination that it is not likely that Kolon 
will in the future sell the merchandise at less than NV. Since we are 
issuing these final results prior to completion of litigation of the 
first review, a statement from Kolon, pursuant to 19 CFR 353.25(b)(2), 
is required.

Comment 2

    SKC argues that B-grade film is a by-product of PET film rather 
than a co-product, and, therefore, the Department's reallocation of 
manufacturing costs between A-grade and B-grade film is contrary to 
Department practice and unreasonably overstates SKC's B-grade film 
costs. SKC asserts that as a by-product, B-grade film should not bear 
the same cost as A-grade film because B-grade film cannot be used by 
SKC's normal PET film customers. SKC contends that the Department's 
allocation of costs to B-grade film should reflect the economic value 
of the products manufactured.
    SKC also claims that the Department's reallocation of manufacturing 
costs based on physical measures is inconsistent with the Department's 
treatment of jointly produced products in other cases. SKC notes that 
in the Final Determination of Sales at Less Than Fair Value: Canned 
Pineapple Fruit from Thailand, 60 FR 29533, 29560 (June 5, 1995) 
(Pineapple Fruit 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. SKC also 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), OCTG from Argentina, as two additional 
cases where the Department did not use physical measures to allocate 
costs.
    SKC contends that these cases demonstrate 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. Based on the dissimilarity of A-grade and 
B-grade film, SKC asserts that the Department's joint allocation of 
costs between these two products is economically unreasonable. SKC 
contends that it reported costs for A-grade and B-grade film in 
accordance with widely accepted accounting principles; therefore, the 
Department should follow its well-established practice of using 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 an B-grade film produces absurd 
results because that methodology allocates expenses associated with one 
type of scrap (B-grade film) to another type of scrap (PET film that is 
not saleable). 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. Moreover, 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 this review. 
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 decision in Ipsco Inc. v. United 
States, 965 F. 2d. 1056 (Fed. Cir. 1992) (Ipsco Appeal), because unlike 
the allocation methodology reversed in Ipsco Appeal, SKC does not rely 
upon sales value to allocate costs.

Department's Position

    We disagree with SKC. As we explained in the final results for the 
second and third reviews of this order, we determine that A-grade and 
B-grade PET film have identical production costs, and accordingly, we 
continue to rely on an equal cost methodology for A-grade and B-grade 
film in this final determination. (See Polyethylene Terephthalate Film, 
Sheet, and Strip from the Republic of Korea; Final Results of Review 
and Tentative Revocation in Part, 61 FR 35177, 35182-83, July 5, 1996) 
(Final Results of Second and Third Reviews). Moreover, as noted in the 
Final Results of Second and Third Reviews, the Court of International 
Trade (CIT) has determined that our allocation of SKC's production 
costs between A-grade and B-grade film is reasonable. (See E.I. DuPont 
de Nemours & Co., Inc. et al. v. United States, 932 F. Supp. 296 (CIT 
1996).)
    As explained in the Final Results of Second and Third Reviews, we 
do not consider B-grade film to be a by-product because A-grade and B-
grade film undergo an identical production process that involves an 
equal amount of material and fabrication expenses. The only difference 
in the resulting A-grade 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. Accounting 
literature identifies by-products as separate and distinct products, 
not grades of the same product. (See Final Results of Second and Third 
Reviews, 35182.)
    We continue to maintain that SKC's reliance on Sulphur, Pineapple 
Fruit from Thailand, and OCTG from Argentina is misplaced. Those cases

[[Page 58376]]

concerned the appropriate cost methodology for products manufactured 
from a joint production process.
    SKC has mischaracterized 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.) A joint production process 
produces two distinct products and 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. 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. In this case, since production records 
clearly identify the amount of yield losses for each specific type of 
PET film, out allocation of yield losses to the films bearing those 
losses is reasonable, not arbitrary.
    Moreover, 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 saleable, and 
both of which are PET film products covered by the order. 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, and included both 
products covered by antidumping duty orders and products not covered by 
orders. Pineapple shells, cores, and ends are made into pineapple 
juice, which is not of the same class or kind as pineapple fruit. 
Natural gas was not of the same class or kind as elemental sulphur, nor 
were secondary OCTG products of the same class or kind as OCTG. In 
addition, 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.
    SKC's reported costs are not consistent with Ipsco Appeal simply 
because SKC has not allocated costs based on sales value. Ipsco Appeal 
involved the Department's use of an appropriate methodology for 
allocating costs between two grades of steel pipe, which were 
distinguishable 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. The Federal 
Circuit ruled that this methodology was consistent with the antidumping 
statute. As discussed above and in the Final Results of Second and 
Third Reviews, the same reasoning applies to A-grade and B-grade films 
and supports our determination that an equal cost methodology is 
appropriate to calculate costs of A-grade and B-grade film.
    Finally, SKC's argument that matching A-grade 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.

Comment 3

    SKC contends that the computer program used to calculate its 
dumping margin contains a flaw in the product matching portion of the 
program. SKC contends that the program erroneously references the U.S. 
product code rather than the home market product code. SKC asserts that 
this error results in matches of U.S. products to dissimilar comparison 
products.

Department's Position

    We agree with SKC. In these final results we have amended our 
calculations, and have used the home market code in the product 
matching portion of the program.

Comment 4

    STC asserts that the Department's computer program failed to match 
certain U.S. sales to normal values in the 90/60-day window period. STC 
asserts that the computer program incorrectly matched these sales to 
constructed value instead of to a contemporaneous home market sale that 
occurred within the 90/60-day window.

Department's Position

    We agree with STC. In these final results, we searched for a 
contemporaneous home market sale within the 90/60-day window before 
using constructed value.

Comment 5

    STC asserts that in its preliminary calculations, the Department 
inconsistently calculated and applied the DV profit rate. STC contends 
that the Department calculated profit across a home market cost of 
production that included the sum of the cost of manufacturing (COM), 
general and administrative expenses (GNA) and interest expenses. STC 
notes that the Department applied profit to a COP that included the 
COM, GNA, indirect selling expenses reported by STC, and direct selling 
expenses reported by STC. STC argues that the Department should apply 
the CV profit rate on the same allocation basis as it was calculated.

Department's Position

    We agree. In these final results we have applied the CV profit rate 
in the same allocation basis as we calculated it, and have allocated 
profit across the sum of COM, GNA and interest expenses.

Final Results of Review and Revocation in Part

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

------------------------------------------------------------------------
                                                                 Margin 
                           Company                             (percent)
------------------------------------------------------------------------
Kolon........................................................       0.14
SKC..........................................................       0.70
STC..........................................................       4.95
------------------------------------------------------------------------

    Based upon the information submitted by Kolon during this review 
and the second and third administrative reviews, we determine that 
Kolon has met the requirements for revocation set forth in 
Sec. 353.25(a)(2) and Sec. 353.25(b) of the Department's regulations. 
Kolon has demonstrated three consecutive years of sales at not less 
than normal value and has submitted the certifications required under 
19 CFR 353.25(b). The Department conducted a verification of Kolon as 
required under 19 CFR 353.25(c)(2)(ii).
    The Customs Service shall assess antidumping duties on all 
appropriate entries. Individual differences between U.S. Price and NV 
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)

[[Page 58377]]

The cash deposit rate for the reviewed firms will be the rates 
indicated above except for Kolon; because we are revoking the order 
with respect to Kolon, no cash deposit will be required for Kolon; (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: November 6, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-29091 Filed 11-13-96; 8:45 am]
BILLING CODE 3510-DS-M