[Federal Register Volume 62, Number 136 (Wednesday, July 16, 1997)]
[Notices]
[Pages 38064-38067]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-18731]


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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

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

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

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SUMMARY: On March 7, 1997, the Department of Commerce (the Department) 
published the preliminary results of administrative review of the 
antidumping duty order on polyethylene terephthalate film sheet, and 
strip (PET film) from the Republic of Korea. The review covers two 
manufacturers/exporters of the subject merchandise to the United States 
and the period June 1, 1995 through May 31, 1996.
    As a result of comments we received, the dumping margin for one 
respondent, SKC Limited (SKC) has changed from the one presented in our 
preliminary results. The margin for STC Corporation (STC) remains the 
same as the one published in our preliminary results.

EFFECTIVE DATE: July 16, 1997.

FOR FURTHER INFORMATION CONTACT:
Michael J. Heaney, Maureen McPhillips, or Linda Ludwig, 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, 3019, or 3833, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On March 7, 1997 (62 FR 10527), the Department published the 
preliminary results of administrative review and termination in part of 
the antidumping duty order on PET film from the Republic of Korea, 56 
FR 25669 (June 5, 1991).
    This review covers two manufacturers/exporters of the subject 
merchandise to the United States: SKC and STC, and the period June 1, 
1995 through May 31, 1996.
    The Department has concluded this review in accordance with section 
751 of the Tariff Act of 1930, as amended (the Tariff Act).

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 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 review covers the period June 1, 1995 through May 31, 1996.

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (the Tariff Act), are references to the provisions 
effective January 1, 1995, the effective date of the amendments made to 
the Tariff Act by the Uruguay Round Agreements Act. In addition, unless 
otherwise indicated, all references to the Department's regulations are 
to 19 CFR part 353, as amended by the regulations published in the 
Federal Register on May 19, 1997 (62 FR 27296).

[[Page 38065]]

Analysis of Comments Received

    We invited interested parties to comment on the preliminary results 
of this administrative review. We received timely comments from the 
respondent, SKC on April 7, 1997. On April 14, 1997, we received a 
reply to SKC's brief from the petitioners, E.I. DuPont de Nemours & 
Company, Hoechst Celanese Corporation, and ICI Americas Inc.
    Comment 1: SKC objects to the Department's allocation of the cost 
of scrap equally to A-grade and B-grade films, stating that SKC's cost 
allocation methodology is reasonable and consistent with widely 
recognized cost accounting concepts. SKC references its March 8, 1996 
case brief filed in the second and third reviews, wherein its arguments 
in support of its allocation methodology are set forth more fully (see, 
Attachment I of SKC's April 7, 1997 case brief).
    SKC states that allocating the cost of scrap film equally to A-
grade and B-grade films improperly overstates the cost of B-grade films 
while understating the cost of A-grade films. SKC contends that its 
methodology of initially allocating costs equally among A-grade film, 
B-grade film, and scrap, and then reallocating the cost of scrap to the 
cost of A-grade film is consistent with accepted cost accounting 
methodologies.
    SKC also asserts that its methodology is consistent with the 
Department's treatment of jointly produced in numerous other 
antidumping proceedings, wherein the Department recognized that a pure 
quantitative, or physical measures approach to cost allocation is 
unreasonable where there is a significant difference in the value of 
the jointly produced products. SKC cities Elemental Sulphur from 
Canada, 61 FR 8239, 8241-8243 (March 4, 1996) (Sulphur from Canada); 
Oil Country Tubular Goods from Argentina, 60 FR 33539, 33547 (June 28, 
1995) (OCTG from Argentina); Canned Pineapple Fruit from Thailand, 60 
FR 29553, 29560 (June 5, 1995) (Pineapple from Thailand) in support of 
its position.
    SKC maintains that it is the Department's well-established practice 
to calculate costs in accordance with a respondent's normal cost 
accounting system unless the system results in an unreasonable 
allocation of costs. SKC states that its reported cost of manufacturing 
(COM) data were calculated in accordance with its normal and long-
established management cost accounting system. Therefore, SKC concludes 
that the Department should use its COM data as originally reported.
    The petitioners argue that there is no change in fact or 
circumstance in this review with would warrant the Department to 
reverse its position established in the investigation and earlier 
reviews of this case, requiring SKC to assign the same costs to A-grade 
and B-grade PET film. The petitioners note that in the second and third 
administrative reviews of this order, the Department thoroughly 
discussed the basis for its conclusion that yield losses should be 
allocated to A- and B-grade films on the basis of weight, instead of 
assigning all yield loss to A-grade films (see, Attachment A, Comment 
10 of the petitioners April 14, 1997 reply to SKC's case brief). 
Moreover, the petitioners state that SKC admits that A- and B-grade 
films ``are produced simultaneously in a single process'' (SKC Case 
Brief at 3). The fact that SKC sells B-grade products at low prices in 
the United States does not, in the petitioners' view, justify the 
assignment of a lower cost of production to B-grade films.
    In conclusion, the petitioners challenge SKC's characterization of 
its proposed allocation methodology as ``normal and long-established.'' 
The petitioners state that in determining the reasonableness and 
accuracy of an allocation methodology, the Department must consider 
``whether the producer historically used its submitted cost allocation 
methods to compute the cost of the subject merchandise prior to the 
investigation or review and in the normal course of its business 
operation,'' citing the Statement of Administrative Action Accompanying 
the URAA, at 835). According to the petitioners, at the time of the 
original investigation, SKC's ``normal'' accounting system assigned an 
equal cost per-unit weight to all film types, and SKC created its 
proposed accounting system specifically for the Department's 
investigation.
    Department's Position: As we explained in the final results of 
previous reviews of this order, we determined that A-grade and B-grade 
PET film have identical production costs, and accordingly, we continue 
to rely on an equal cost methodology for both grades of PET film in 
these final results; (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) (Second and 
Third Reviews); and Polyethylene Terephthalate Film, Sheet, and Strip 
from the Republic of Korea; Final Results of Review and Notice of 
Revocation in Part, 61 FR 58375-76, (November 14, 1996) (Fourth 
Review).
    Moreover, as noted in the final results of the second through the 
fourth reviews, the Court of International Trade (CIT) has ruled 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 previous reviews of PET film, 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- 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 (see Fourth Review, 61 FR 
58375).
    We continue to maintain that SKC's reliance on Sulphur from Canada, 
Pineapple from Thailand, and OCTG from Argentina is misplaced. Those 
cases 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, Keller, 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, our allocation of 
yield losses to the films bearing those losses is reasonable, not 
arbitrary (Fourth Review at 58575-76).
    SKC is correct in its statement that it is the Department's 
practice to calculate costs in accordance with a respondent's 
management accounting system, unless that system results in an 
unreasonable allocation of costs. Management accounting deals with 
providing information that managers inside an organization will use. 
Managerial accounting reports typically provide more detailed 
information about product costs, revenue and profits. They

[[Page 38066]]

are used to identify problems, objectives or goals, and possible 
alternatives. In order to respond to the Department's questionnaires, 
SKC officials devised a management accounting methodology for 
allocating costs incurred in the film and chip production costs centers 
to individual products produced during the period of investigation. SKC 
adopted this cost accounting system to reflect a management goal (i.e., 
to respond to the Department). Under this system, SKC assigns the yield 
loss from the production of A- and B-grade films exclusively to the A-
grade films. This methodology helps management to focus on the film 
types with low yields. However, notwithstanding SKC management's 
concern that it accurately portray the cost of their A-grade products, 
this managerial accounting methodology is not appropriate for reporting 
the actual costs of A- and B-grade products. As previously noted, A-
grade and B-grade films undergo an identical production process, B-
grade film is made using the same materials, on the same equipment, at 
the same time as the A-grade film. As such, both A- and B-grade films 
must be allocated the same costs. It is within the Department's mandate 
to accept or reject the allocation methodologies devised by 
respondents. In this instance, we have continued to rely on an equal 
cost allocation methodology which reflects the actual costs incurred 
for both A-grade and B-grade film.
    Comment 2: SKC maintains that the Department erroneously deducted 
indirect selling expenses and inventory carrying costs incurred on its 
export sales in Korea from the U.S. price (USP). SKC points out that 
according to the Department's regulations, in calculating constructed 
export price (CEP), the Department must deduct from the starting price 
only those expenses incurred by the U.S. reseller in selling to its 
unaffiliated U.S. customer, not those incurred by the foreign producer 
in selling to the affiliated U.S. reseller.
    SKC notes that the Department's proposed methodology is consistent 
with the logic of the treatment of CEP profit and level of trade in the 
URAA, because the Department's goal is to construct an export price at 
the level of the sale from the foreign producer to its affiliated 
reseller. SKC cites Dynamic Random Access Memory Semiconductors of One 
Megabit or Above from the Republic of Korea, 62 FR 965,968, (January 7, 
1997); Certain Pasta from Italy, 61 FR 1344, 1348 (January 19, 1996), 
and Bicycles from the People's Republic of China, 61 FR 19062, 19031 
(April 30, 1996) as examples of cases wherein the Department has 
properly implemented this new methodology and has not subtracted 
foreign indirect selling expenses and inventory carrying costs from the 
United States price in calculating CEP.
    The petitioners counter that SKC's citation of prior cases in which 
the Department apparently did not deduct indirect selling expenses and 
inventory carrying costs incurred in the home market is not necessarily 
relevant in the instant case. The petitioners maintain that the 
Statement of Administrative Action (SAA) directs the Department to 
deduct ``any expenses which result from, and bear a direct relationship 
to, selling activities in the United States.'' (SAA at 823)
    The petitioners conclude that (1) this language clearly mandates 
that the Department's treatment of such expenses must be case-specific, 
and (2) SKC is wrong in stating that the deductions are limited to 
``only those expenses incurred by the U.S. reseller.'' The petitioners 
cite the Preliminary Results of Antidumping Administrative Review; 
Aramid Fiber Formed of Poly Para-Phylene Terephthalamide (PPD-T) from 
the Netherlands, 62 FR 10524 (March 7, 1997) in support of their 
position.
    Department's Position: We agree with SKC that, in this instance, it 
is not appropriate to deduct SKC's indirect selling expenses and 
inventory carrying costs incurred in Korea from CEP. It is clear from 
the SAA that under the new statute we should deduct from CEP only those 
expenses associated with economic activities in the United States. The 
SAA also indicates that CEP ``is now calculated to be, as closely as 
possible, a price corresponding to an export price between non-
affiliated exporters and importers.'' See SAA at 823. In establishing 
CEP under section 772(d) of the Tariff Act, the Department's new 
regulations codify this principle, stating that ``the Secretary will 
make adjustments for expenses associated with commercial activities in 
the United States that relate to the sale to an unaffiliated purchaser, 
no matter where or when paid.'' Section 351.402(b), Antidumpting 
Duties, ``Countervailing Duties,'' final rule, 62 FR 27295, 27411 (May 
19, 1997). Therefore, consistent with section 772(d) and the SAA, we 
deduct only those expenses representing activities undertaken by the 
affiliated importer to make the sale to the unaffiliated customers. We 
ordinarily do not deduct indirect expenses incurred in selling to the 
affiliated U.S. importer. See Gray Portland Cement and Clinker from 
Mexico; Final Results of Antidumping Duty Administrative Review, 62 FR 
17148, 17168 (April 9, 1997).
    SKC's reported home market indirect selling expenses represent an 
allocation of selling expenses over sales and cannot be tied with 
specificity to SKC's U.S. sales. Likewise, the cost of carrying 
inventory in the home market for sales to the affiliated importer are 
not incurred ``on behalf of the buyer'' (i.e., the affiliated 
importer), but for the benefit of the exporter in order to complete the 
sale to the affiliated importer. See Antifriction Bearings, Other than 
Tapered Roller Bearings, and Parts Thereof, from France, et al.; Final 
Results of Antidumping Duty Administrative Reviews and Partial 
Termination of Administrative Reviews, 62 FR 2124 (January 15, 1997).
    Evidence on the record in this case indicates that SKC's indirect 
selling expenses and inventory carrying costs, incurred in the home 
market on behalf of sales to the U.S., cannot be directly associated to 
commercial activity in the United States. Moreover, SKC incurs such 
expenses on its own behalf, and for its own benefit in order to 
complete the sale to its affiliated importer. Therefore, we have not 
deducted these expenses from CEP for these final results.
    Comment 3: SKC contends that the Department's computer program (1) 
Fails to accurately read in product matches from SKC's concordance, 
resulting in numerous sales being erroneously compared to constructed 
value, (2) incorrectly calculates cost of production (COP) and net 
price compared with COP, so that many above-cost sales erroneously 
failed the cost test, (3) does not reflect the calculation of a CEP 
offset, as stated in the Department's March 3, 1997 analysis 
memorandum, and (4) contains several clerical errors in the calculation 
of CEP profit that overstate the amount of the CEP profit adjustment.
    Department's Position: For these final results, we have corrected 
the clerical errors SKC noted for the first three items listed above. 
Concerning the fourth item, the allegation of clerical errors in the 
calculation of CEP profit, we agree with SKC that international 
movement expenses and the cost of manufacturing were inadvertently 
omitted from the calculations of CEP profit. See, Memorandum from 
Analyst to File, June 30, 1997, for a more detailed explanation of the 
specific changes that we made in the computer program.
    Comment 4: In its comments on the CEP total profit calculation, SKC 
also contends that the Department failed to include credit expenses and 
inventory carrying costs in the total expenses for U.S. sales. SKC 
notes that these items

[[Page 38067]]

were used in the numerator of the fraction used to allocate total 
profit in determining CEP profit. SKC maintains that the Department 
must account for these imputed expense in the calculation of total 
costs.
    Department's Position: To derive the total costs of U.S. 
merchandise, we compute the unit cost of each observation in the U.S. 
data base by adding the cost of manufacturing, general and 
administrative expense, and net interest expense from the constructed 
value (CV) data base. We then multiply the unit cost by the quantity 
sold to derive the total cost of sales for each U.S. market 
transaction. To calculate total U.S. selling expenses we add all direct 
and indirect selling expenses and any further manufacturing costs 
incurred in the United States. We exclude from this calculation imputed 
amounts for credit expense and inventory carrying costs because in 
calculating the total cost of the U.S. merchandise, we included net 
interest expense from the CV data base. Thus, there is no need to 
include imputed interest amounts in the profit calculation since we 
have already accounted for actual interest in computing ``actual 
profit'' under section 772(f). When allocating a portion of the actual 
profit to each U.S. CEP sale, we will include imputed credit and 
inventory carrying costs as part of the total U.S. expenses allocation 
factor. This is consistent with section 772(f)(10) which defines the 
term ``total U.S. expenses'' as those described under section 772(d) 
(1) and (2).

Final Results of Review

    As a result of our review, we determine that the following 
weighted-average margins exist:

------------------------------------------------------------------------
           Manufacturer/exporter             Period of review    Margin 
------------------------------------------------------------------------
SKC Limited...............................     6/1/95-5/31/96       0.45
STC Corporation...........................     6/1/95-5/31/96       0.37
------------------------------------------------------------------------

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. Individual 
differences between export price and normal value may vary from the 
percentage stated above. The Department will issue appraisement 
instructions directly to the Customs Service.
    Furthermore, the following deposit requirements will be effective 
upon publication of this notice of final results of review for all 
shipments of PET film from the Republic of Korea within the scope of 
the order entered, or withdrawn from warehouse, for consumption on or 
after the publication date, as provided by section 751(a)(1) of the 
Tariff Act: (1) The cash deposit rate for the reviewed companies will 
be the rates listed above; (2) for previously reviewed or investigated 
companies not listed above, the 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 the original 
less-than-fair-value (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) for all other 
producers and/or exporters of this merchandise, the cash deposit rate 
will be 21.50 percent, the ``all others'' rate established in the 
remand redetermination of the LTFV investigation, as explained below. 
These deposit requirements shall remain in effect until publication of 
the final results of the next administrative review.
    On May 20, 1996, pursuant to court remand, the Department 
recalculated the weighted-average dumping margins for the LTFV 
investigation. As a result of the recalculation, the Department 
established an ``all others'' rate of 21.50 percent. Final 
Determination on Remand Pursuant to Court Order, E.I. Dupont de Nemours 
& Co., Inc. v.United States, Court No. 91-07-00487, Slip Op. 96-56 
(March 20, 1996). On February 5, 1997, the CIT affirmed the 
Department's remand redetermination of the LTFV investigation. E.I. 
Dupont de Nemours & Co., Inc., v.United States, Court No. 91-07-00487, 
Slip Op. 97-17 (Gebrary 5, 1997). Accordingly, 21.50 percent is the 
``all others'' rate established in the LTFV investigation. Pursuant to 
the CIT decisions in Floral Trade Council v. United States, 822 F. 
Supp. 766 (CIT 1993) and Federal Mogul Corporation v. United States, 
822 F. Supp. 782 (CIT 19930, this ``all others'' rate can only be 
changed through an administrative review.
    This notice serves as a final reminder to importers of their 
responsibility under 19 CFR Sec. 353.26 to file a certificate regarding 
the reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and subsequent assessment 
of double antidumping duties.

Notification of Interested Parties

    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 Sec. 353.34(d). Timely written 
notification of return/destruction of APO materials or conversion to 
judicial protective order is hereby requested. Failure to comply with 
the regulations and the terms of an APO is a sanctionable violation. 
Timely written notification of the return/destruction of APO materials 
or conversion to judicial protective order is hereby requested.
    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 
Sec. 353.22.

    Dated: July 7, 1997.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-18731 Filed 7-15-97; 8:45 am]
BILLING CODE 3510-DS-M