[Federal Register Volume 63, Number 115 (Tuesday, June 16, 1998)]
[Notices]
[Pages 32810-32820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15876]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-583-824]


Polyvinyl Alcohol From Taiwan: Final Results of Antidumping Duty 
Administrative Review

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

SUMMARY: On February 9, 1998, the Department of Commerce published in 
the Federal Register the preliminary results of the administrative 
review of the antidumping duty order on polyvinyl alcohol from Taiwan. 
The review covers two manufacturers/exporters of the subject 
merchandise to the United States, Chang Chun

[[Page 32811]]

Petrochemical and E.I. duPont de Nemours & Co. The period of review is 
May 15, 1996, through April 30, 1997.
    We gave interested parties an opportunity to comment on our 
preliminary results. Based on our analysis of the comments received and 
the correction of certain clerical and computer programming errors, we 
have changed our results from those presented in our preliminary 
results, as described below in the comment section of this notice. The 
final results are listed below in the section ``Final Results of 
Review.''

EFFECTIVE DATE: June 16, 1998.

FOR FURTHER INFORMATION CONTACT: Everett Kelly at (202) 482-4194, or 
Sunkyu Kim at (202) 482-2613, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230.

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 Act'') by 
the Uruguay Round Agreements Act (``URAA''). In addition, unless 
otherwise indicated, all citations to the Department of Commerce's 
regulations are to 19 CFR Part 353 (April 1, 1997). Although the 
Department's new regulations, codified at 19 CFR Part 351, 62 FR 27296 
(May 19, 1997) (``Final Regulations''), do not govern this review, 
citations to those regulations are provided, where appropriate, as a 
statement of current departmental practice.

SUPPLEMENTARY INFORMATION:

Background

    On February 9, 1998, the Department of Commerce (``the 
Department'') published in the Federal Register its preliminary results 
of the 1996-1997 administrative review of the antidumping duty order on 
polyvinyl alcohol from Taiwan (63 FR 6526) (``Preliminary Results''). 
We gave interested parties an opportunity to comment on our preliminary 
results. Air Products and Chemicals Inc. (``the petitioner''), E.I. du 
Pont de Nemours & Co. (``DuPont''), Chang Chun Petrochemical Co., Ltd. 
(``Chang Chun''), and Perry Chemical Corporation (``Perry'') submitted 
case briefs on March 11, 1998, and rebuttal briefs on March 18, 1998. 
Pursuant to a timely request from the petitioner, we held a public 
hearing on March 25, 1998. On April 23, 1998, the Department requested 
Chang Chun to provide supplemental information concerning its sales to 
the United States which were used in our preliminary results 
calculation (see ``Treatment of Sales of Tolled Merchandise'' section 
below for further discussion). Chang Chun provided this data on April 
30, 1998. Additionally, Chang Chun provided data on additional 
shipments made during the POR which were not included in our 
preliminary results (see Memorandum to File from Everett Kelly, Case 
Analyst, dated May 20, 1998). In May 1998, the Department verified the 
data provided by Chang Chun (see Verification Report dated May 28, 
1998).
    On May 11, 1998, the petitioner filed a submission objecting to 
certain information provided by Chang Chun in its April 30, 1998, 
submission. Chang Chun submitted its response to the petitioner's 
comments on May 22, 1998 (see Comment 7 for Chang Chun for further 
discussion).
    The Department has now completed this administrative review, in 
accordance with section 751(a) of the Act.

Scope of Review

    The product covered by this review is polyvinyl alcohol (``PVA''). 
PVA is a dry, white to cream-colored, water-soluble synthetic polymer. 
Excluded from this review are PVAs covalently bonded with 
acetoacetylate, carboxylic acid, or sulfonic acid uniformly present on 
all polymer chains in a concentration equal to or greater than two mole 
percent, and PVAs covalently bonded with silane uniformly present on 
all polymer chains in a concentration equal to or greater than one-
tenth of one mole percent. PVA in fiber form is not included in the 
scope of this review.
    The merchandise under review is currently classifiable under 
subheading 3905.30.00 of the Harmonized Tariff Schedule of the United 
States (``HTSUS''). Although the HTSUS subheading is provided for 
convenience and customs purposes, our written description of the scope 
is dispositive.

Treatment of Sales of Tolled Merchandise

    As discussed in the Preliminary Results of this proceeding, DuPont 
and Perry sold in the U.S. and third-country markets subject 
merchandise tolled by the Taiwan producer, Chang Chun. Both DuPont and 
Perry claim that they are the manufacturer of the tolled merchandise 
under the Department's newly articulated treatment of tollers and 
subcontractors in tolling arrangements (see 19 CFR 351.401(h) (62 FR 
27926) (May 19, 1997)). Accordingly, each company claims that it is 
entitled to its own dumping rate.
    In our preliminary results, we determined that, based on the 
evidence on the record, DuPont is the manufacturer of the tolled 
merchandise, and therefore the appropriate respondent. With respect to 
Perry, based upon a review of the arrangement between Perry and Chang 
Chun, we preliminarily determined that Perry is not the manufacturer of 
PVA it imported into the United States during the POR.
    For the final results, we continue to treat DuPont as the 
manufacturer/exporter of PVA produced under a tolling arrangement with 
Chang Chun (see Comment 1 for DuPont). With respect to Perry, we 
continue to find that Perry is not a manufacturer of the subject 
merchandise. As in the preliminary results, we are treating Perry as an 
importer and U.S. reseller of the subject merchandise (see Comment 1 
for Chang Chun).
    As a result of our preliminary decision that Chang Chun was the 
producer of the PVA sold to Perry, certain information was not on the 
record of this review, which required us to substitute missing data in 
the Preliminary Results. Initially, Chang Chun had reported a small 
number of EP sales to Perry which were not produced under the agreement 
with Perry. Included in that reporting were all the expenses associated 
with those sales, i.e., movement expenses from Chang Chun's factory to 
the port of entry in the United States, and selling expenses including 
credit and bank charges. We also had a larger number of transactions 
originally reported by Perry, which were sales from Chang Chun to Perry 
produced pursuant to the agreement. In the Preliminary Results, we used 
both the sales reported by Chang Chun and those reported by Perry to 
calculate the EP for Chang Chun (see Calculation Memorandum for the 
Preliminary Results for Chang Chun Petrochemical Co., Ltd., dated 
February 2, 1998 (``Preliminary Calculation Memorandum'').
    Although Perry reported its expenses associated with selling the 
PVA at issue to unaffiliated customers in the United States, we did not 
have Chang Chun's selling expenses on the record for those sales. 
However, because all of the sales were made to Perry and were all 
shipped by Chang Chun on the same delivery terms, we used the movement 
and selling expenses associated with the sales reported by Chang Chun 
in its U.S. sales listing submitted on August 22, 1997, as a reasonable 
substitute for the missing expense data for the sales originally 
reported by Perry.

[[Page 32812]]

Furthermore, having determined that the Perry-reported transactions are 
sales by Chang Chun, we lacked appropriate, verified sales dates, 
shipment dates or the entry dates. As a result, in our Preliminary 
Results, from information on the record, we estimated the sales dates 
and shipment dates (see ``Preliminary Calculation Memorandum for Chang 
Chun'').
    For these Final Results we gathered additional information from 
Chang Chun, which we verified, so that our review of Chang Chun's EP 
sales encompassed all sales shipped during the POR (see Comment 7 for 
Chang Chun). Additionally, we obtained and verified the prices Chang 
Chun's affiliate charged Perry, through an intermediary trading 
company, for the major input, VAM, during the POR. With this new data, 
we were able to properly construct Chang Chun's U.S. price to Perry for 
the PVA transactions covered by this review by combining the VAM prices 
with the prices Chang Chun charged Perry for converting the VAM into 
PVA (see Comment 2 for Chang Chun).

Normal Value Comparisons

    To determine whether sales of the subject merchandise by the 
respondents to the United States were made at below normal value, we 
compared, where appropriate, the export price (``EP'') and constructed 
export price (``CEP'') to the normal value (``NV'') as described below. 
In accordance with section 777A(d)(2) of the Act, we compared, where 
appropriate, the EPs and CEPs of individual transactions to the monthly 
weighted-average price of sales of the foreign like product.
    On January 8, 1998, the Court of Appeals for the Federal Circuit 
issued a decision in Cemex v. United States, 1998 WL 3626 (Fed Cir.). 
In that case, based on the pre-URAA version of the Act, the Court 
discussed the appropriateness of using constructed value (``CV'') as 
the basis for foreign market value when the Department finds home 
market sales to be outside the ordinary course of trade. This issue was 
not raised by any party in this review. However, the URAA amended the 
definition of sales outside the ``ordinary course of trade'' to include 
sales below cost. See section 771(15) of the Act. Consequently, the 
Department has reconsidered its practice in accordance with this 
decision and has determined that it would be inappropriate to resort 
directly to CV as the basis for NV, in lieu of foreign market sales, if 
the Department finds foreign market sales of merchandise identical or 
most similar to that sold in the United States to be outside the 
ordinary course of trade. Instead, the Department will use sales of 
similar merchandise, if such sales exist. The Department will use CV as 
the basis for NV only when there are no above-cost sales that are 
otherwise suitable for comparison. Therefore, in this proceeding, when 
making comparisons in accordance with section 771(16) of the Act, we 
considered all products sold in the home market as described in the 
``Scope of the Review'' section of this notice, above, that were in the 
ordinary course of trade for purposes of determining appropriate 
product comparisons to U.S. sales. Where there were no sales of 
identical merchandise in the home market made in the ordinary course of 
trade to compare to U.S. sales, we compared U.S. sales to sales of the 
most similar foreign like product made in the ordinary course of trade, 
based on the characteristics listed in sections B and C of our 
antidumping duty questionnaire.

Export Price and Constructed Export Price

    We calculated EP and CEP, as appropriate, in accordance with 
section 772 of the Act. The calculation for each respondent was based 
on the same methodology used in the preliminary results, with the 
following exceptions:

Chang Chun

    As noted in the ``Treatment of Sales of Tolled Merchandise'' 
section, we modified the gross unit prices and dates of sale and 
shipment for transactions used in our Preliminary Results based on 
information obtained after the preliminary results. We also included 
certain additional sales shipped during the POR which were not included 
in our preliminary analysis. Furthermore, as identified by Chang Chun 
in its case brief, we made corrections to the product characteristics 
for certain U.S. sales which were incorrectly assigned in our 
preliminary results calculation. We made the corrections based on 
information Chang Chun provided in its November 12, 1998, supplemental 
Section C response (see Calculation Memorandum for the Final Results 
for Chang Chun Petrochemical Co., Ltd. dated June 9, 1998, (``Final 
Calculation Memorandum for Chang Chun'')).

DuPont

    In our Preliminary Results, as noted by DuPont in its case brief, 
we incorrectly stated that we calculated EP for some of DuPont's sales 
when, in fact, all of DuPont's sales should have been classified as CEP 
sales. In our preliminary margin program, however, we actually 
calculated all sales reported by DuPont as CEP transactions. For the 
final results, we corrected the CEP price calculation for DuPont's 
sales of further manufactured products by stating the prices on the 
same unit basis as the normal value (see Calculation Memorandum for the 
Final Results for E.I. duPont de Nemours & Co., dated June 9, 1998 
(``Final Calculation Memorandum for DuPont''), see also, Polyethylene 
Terephthalate Film, Sheet, and Strip from the Republic of Korea; Final 
Results of Antidumping Duty Administrative Review, 60 FR 42835, 42845 
(August 17, 1995) where the Department made the same type of adjustment 
to CEP calculation for sales of further manufactured merchandise).

Normal Value

    For Chang Chun, we based NV on the prices at which the foreign like 
products were first sold for consumption in the home market. For 
DuPont, we based NV on the prices at which the foreign like products 
were first sold for consumption in the respondent's largest third-
country market, Australia. We calculated NV based on the same 
methodology used in the preliminary results, except for DuPont where we 
modified the margin calculation program to correct for certain 
ministerial errors identified by the petitioner. Specifically, we made 
the following corrections:
    1. We corrected the calculation of variable manufacturing costs 
(``VCOM'') for DuPont's further processed U.S. sales by stating the per 
unit costs on the same unit basis as the VCOM of the Australian sales 
(see ``Final Calculation Memorandum for DuPont'').
    2. We corrected the gross unit price for a third-country market 
sale which was added to DuPont's sales listing based on findings at 
verification. We note, however, that the per unit price suggested by 
the petitioner in its case brief is incorrect. We calculated the gross 
unit price based on the verified quantity and total value listed on the 
invoice (see ``Final Calculation Memorandum for DuPont'').
    3. We changed the difference-in-merchandise adjustment calculation 
to correct for a clerical error in the equation used in our preliminary 
margin program (see ``Final Calculation Memorandum for DuPont'').
    4. Although we did not resort to CV as the basis for NV for any of 
DuPont's U.S. sales in the final results, we made corrections for 
certain clerical errors contained in the preliminary margin program for 
calculating CV (see ``Final Calculation Memorandum for DuPont'').

[[Page 32813]]

Cost of Production Analysis

    As discussed in the preliminary results, we conducted an 
investigation to determine whether the respondents made sales of 
foreign like product in the comparison market during the POR at prices 
below their cost of production (``COP'') within the meaning of section 
773(b)(1) of the Act. We calculated the COP following the same 
methodology as in the preliminary results on a model-specific basis, 
except that for Chang Chun, we reallocated costs between PVA and acetic 
acid based on relative sales value, and made the appropriate adjustment 
to the reported COP (see Comment 4 for Chang Chun and ``Final 
Calculation Memorandum for Chang Chun'').
    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of a respondent's sales of a given product were made at prices 
below the COP, we did not disregard any below-cost sales of that 
product because we determined that the below-cost sales were not made 
in ``substantial quantities.'' Where 20 percent or more of a 
respondent's sales of a given product were made at prices below the 
COP, we disregarded the below-cost sales because such sales were found 
to be made within an extended period of time in ``substantial 
quantities'' in accordance with sections 773(b)(2) (B) and (C) of the 
Act, and because the below cost sales of the product were at prices 
which would not permit recovery of all costs within a reasonable period 
of time, in accordance with section 773(b)(2)(D) of the Act. Where all 
contemporaneous sales of identical and similar merchandise were 
disregarded, we calculated NV based on CV, in accordance with section 
773(a)(4) of the Act.
    For both Chang Chun and DuPont, we did not find that comparison 
market sales of PVA products were made at prices below COP within the 
POR.

Analysis of Comments Received

Chang Chun
    Comment 1: Treatment of Sales of Perry's Tolled Merchandise. Perry 
argues that the Department has misinterpreted section 351.401(h) of its 
proposed and final regulations in failing to find that Perry is the 
producer of the subject merchandise under the tolling agreement with 
Chang Chun. Perry claims that it meets all of the stated requirements 
of section 351.401(h) which would qualify Perry as the producer. Perry 
maintains that it controls all aspects of the production and sales of 
the finished PVA and has ownership of the main input, VAM, as well as 
the finished product, PVA. According to Perry, the Department's 
conclusion in the preliminary results that Perry is not a producer is 
based on factors that are irrelevant to the Department's determination 
regarding the producer of subject merchandise under the tolling 
arrangement. Perry argues that to be considered a producer in a tolling 
situation, the Department's regulation at section 351.401(h) does not 
require that the party be engaged in some processing work and dismisses 
as irrelevant the fact that Perry does not engage in any production 
activities, including production of the main input, VAM, does not own 
production facilities, and does not engage in R&D activities. Perry 
claims that, in past cases, the Department has found a ``tollee'' to be 
a producer where no processing was done by the ``tollee.'' In support 
of its position, Perry cites to the following cases: Notice of Final 
Determination of Sales at Less Than Fair Value: Stainless Steel Flanges 
from India, 58 FR 68853 (December 29, 1993) (``Steel Flanges from 
India''), Notice of Final Determination of Sales at Less Than Fair 
Value: Static Random Access Memories from Taiwan, 63 FR 8909 (February 
23, 1998) (``SRAMS from Taiwan''), and Notice of Final Determination of 
Sales at Less Than Fair Value: Collated Roofing Nails from Taiwan, 62 
FR 51427 (October 1, 1997) (``Collated Roofing Nails from Taiwan''). 
Additionally, Perry claims that in the Preliminary Results, the 
Department cited ``obsolete reasoning'' in Chrome Plated Lug Nuts from 
Taiwan, 56, FR 36130 (July 31, 1991) which has been overtaken by the 
Department's later precedents cited above.
    Furthermore, Perry contends that, contrary to the Department's 
statement in the Preliminary Results that Perry's normal course of 
conducting business has not substantively changed, the tolling 
arrangement has required substantial changes in Perry's PVA business 
because Perry now assumes all risks by acquiring control over VAM and 
PVA production.
    The petitioner responds that the Department was correct in 
determining that Perry is not the producer of PVA it imports into the 
United States. The petitioner states that the Department's 
determination is consistent with past cases, in which the Department 
deemed it necessary that the manufacturer be engaged in production 
activities. According to the petitioner, Perry's lack of involvement in 
critical production functions, such as knowledge of the physical 
characteristics of toll produced PVA, demonstrates that Perry did not 
have control over the production of tolled PVA it purported to have, 
and thus, does not satisfy the requirements of a producer expressed in 
the Department's proposed and final regulation. Accordingly, the 
petitioner urges the Department to continue to find that Perry is not a 
producer of PVA entitled to its own dumping rate.
    DOC Position: On the basis of Perry's tolling agreement and Perry's 
interpretation of the Department's new tolling regulation, Perry 
asserts that it is the producer of the PVA processed under this 
contract. See section 351.401(h) of the Final Regulations. We disagree. 
In assessing whether Perry is the producer, we are not restricted to a 
review of the four corners of the contract; rather, when determining 
whether a party is a producer or manufacturer of subject merchandise, 
we look at the totality of the circumstances presented. Moreover, 
section 351.401(h) of the Final Regulations does not purport to address 
all aspects of an analysis of tolling arrangements. It merely sets 
forth certain conditions under which we will not find that a toller or 
subcontractor is the producer of the subject merchandise. Based upon 
the totality of the circumstances in this case, including the factors 
set forth in section 351.401(h), we find that Chang Chun, not Perry, is 
the producer of the PVA in question.
    The record establishes that Chang Chun engaged in processing VAM 
into PVA under the tolling contract with Perry. Evidence also 
establishes that Chang Chun is a manufacturer of chemicals and a long-
time producer of PVA. In contrast, Perry has been a U.S. importer and 
reseller of PVA produced by Chang Chun since 1978. It was only after 
Chang Chun was found dumping and assigned a 19.21 percent margin that 
Perry entered into the tolling arrangement. Prior to this arrangement, 
at no time had Perry been in the business of producing or manufacturing 
PVA or any other chemical nor, as part of its normal business practice, 
was Perry ever engaged in subcontracting any kind of chemical 
production or processing of subject merchandise or any chemical. (62 FR 
at 6527). Moreover, we found no evidence to suggest that Perry's 
decision to enter into a tolling arrangement with Chang Chun was for 
the purpose of expanding its operations to begin producing PVA or any 
other chemical. (62 FR at 6527). We find the mere rearrangement of 
Perry's contractual relationship with Chang Chun insufficient to 
establish Perry as a producer of PVA.
    Although Perry claims that it acquired ownership of both the major 
input and the PVA, under the circumstances this

[[Page 32814]]

does not persuade us that Perry is the producer of the PVA at issue. 
Notwithstanding that Perry may have acquired contractual rights in the 
VAM, the record establishes that, in effect, Chang Chun manufactured 
the VAM purchased by Perry, and that Chang Chun retained possession and 
control of the VAM before it underwent processing into subject 
merchandise. Through a single intermediary, Perry made all of its VAM 
purchases from an affiliate of Chang Chun, which produced the VAM in a 
facility near Chang Chun's in Taiwan.
    Perry argues that when purchasing VAM from the intermediary Perry 
had no direct knowledge that the VAM was produced by a company 
affiliated with Chang Chun and objects to the Department's 
characterization in the Preliminary Results that Perry knew the 
intermediary purchased the VAM from Chang Chun's affiliate. (63 FR at 
6527). We stand by our interpretation of Perry's statements as 
reasonable and regard Perry's comments after the fact as self-serving. 
However, we note that even Perry acknowledges that it knew that Chang 
Chun's affiliate was one of the suppliers of this intermediary. 
Additionally, Chang Chun provided the Department with the VAM prices 
charged by its affiliate to this intermediary, and Perry's name appears 
on supporting documentation from this affiliate, thus demonstrating 
that Chang Chun knew that Perry was the ultimate purchaser (see Exhibit 
3 of Chang Chun's Supplemental Response submitted on April 30, 1998, 
see also Comment 2 for Chang Chun). These facts describe circumstances 
fundamentally different from DuPont's tolling arrangement, wherein 
DuPont produced and owned the VAM it sent for processing to Chang Chun.
    Additionally, the record indicates that Perry was not the exporter 
of the PVA and in fact only gained possession and control over the PVA 
as the U.S. importer when it reached the United States. In contrast, 
DuPont produced the VAM and was the exporter, as well as the importer, 
of the PVA to the United States. Thus, the record demonstrates that, in 
essence, the transactions between Perry and Chang Chun did not change, 
Perry merely paid Chang Chun twice--once for the VAM and once for the 
PVA. It was Chang Chun that was the producer and exporter to the United 
States--it retained control and possession of the VAM it produced, it 
processed that VAM into PVA, and it exported the PVA to the United 
States.
    We also disagree with Perry that examining whether it has engaged 
in any production activities is irrelevant under section 351.401(h) of 
the Final Regulations. Although Perry argues that section 351.401(h) 
does not explicitly require that a party perform some processing to be 
deemed a producer, section 351.401(h) only addresses the circumstances 
in which a toller will be considered a producer of subject merchandise. 
Therefore, the Department is not restricted to the factors set forth in 
that regulation when determining whether a party other than a toller is 
the producer of merchandise under consideration. Moreover, while 
examining the production activities of a party may not be decisive in 
every case, whether a party has engaged either directly or indirectly 
in some aspect of the production of subject merchandise is an important 
consideration.
    Additionally, Perry is simply incorrect in claiming that the 
Department has found a party to be the producer when the party 
performed no processing or manufacturing. See Sweaters Wholly or in 
Chief Weight of Man-Made Fibre From Taiwan, 58 FR 32644 (1993) (Jia 
Farn not the manufacturer where it performed no processing); Stainless 
Steel Flanges From India, 58 FR 68853 (1993) (Akai producer where 
related party performed some processing); Static Random Access Memories 
From Taiwan, 63 FR 8909 (1998) (producer was party controlling design 
of processed wafer, which was a substantial element of production); 
Collated Roofing Nails From Taiwan, 62 FR 51427 (1997) (Lei Chu the 
producer where affiliated party performed some processing). 
Furthermore, a review of those cases demonstrates that Perry's claim 
that Chrome-Plated Lug Nuts From Taiwan, 56 FR 36130, 131 (1991) is no 
longer valid reasoning is unfounded. Even though Chrome-Plated Lug Nuts 
From Taiwan pre-dated these cases, the reasoning is entirely consistent 
with the later cases.
    Finally, Perry's assertion that its control over PVA sales to 
unaffiliated customers qualifies it as the producer under section 
315.401(h) is also not dispositive of the issue. As discussed above, 
the issue here is who is the producer of the subject merchandise. 
Because we have found that Chang Chun is the producer/exporter, Perry's 
sales to unaffiliated customers are irrelevant.
    A review of the tolling arrangement at issue and the surrounding 
circumstances leads us to conclude that this arrangement merely re-
ordered the contractual relationship between the parties, but had no 
significant effect on how they conducted business. Perry continued to 
purchase PVA from Chang Chun, albeit in two separate transactions 
instead of through a single purchase of the finished product. 
Therefore, Perry is not a producer. Perry remains an importer and 
reseller of subject merchandise. We find, as we did in our Preliminary 
Results, that Chang Chun is the producer of the PVA under 
consideration.
    Comment 2: Gross Unit Prices Constructed for Sales from Chang Chun 
to Perry. The petitioner notes that the record does not contain the 
prices Chang Chun's affiliated party charged for the sales of VAM to 
the unaffiliated trading company which, in turn, sold the VAM to Perry. 
As a substitute for the price Perry would have paid had it bought the 
VAM directly from Chang Chun's affiliate, the petitioner argues that 
the Department should estimate the trading company's mark-up (i.e., 
profit) by calculating the average mark-up Perry received on its U.S. 
sales of PVA. According to the petitioner, Perry's mark-up for its 
sales of PVA is a reasonable proxy for the trading company's mark-up on 
VAM because both companies are trading companies involved in the 
purchase and resales of chemical products.
    Chang Chun argues that the adjustment proposed by the petitioner is 
arbitrary, untimely and unsupported by any factual grounds. According 
to Chang Chun, the adjustment requested by the petitioner seeks to 
penalize Chang Chun for an alleged gap in the record for which it bears 
no responsibility. Chang Chun submits that the sales price of VAM by 
its affiliate to the trading company, which in turn sold the VAM to 
Perry, was not on the record at the time of the preliminary results 
because such information was not requested by the Department. Thus, 
Chang Chun urges the Department to reject the petitioner's request.
    DOC Position: Because these sales were originally reported by 
Perry, the record did not contain information regarding prices from 
Chang Chun to Perry (see ``Treatment of Sales of Tolled Merchandise''). 
Although we have determined that Chang Chun produced and sold PVA to 
Perry, Chang Chun charged Perry separately for VAM and for processing 
VAM into PVA. At the time of our preliminary results, the record 
contained the price charged by Chang Chun to Perry for the conversion 
of VAM into PVA. However, we lacked the price charged by Chang Chun's 
affiliate for the VAM, the sum of which would equal Chang Chun's export 
price to Perry. What we had for purposes of the preliminary results was 
the price Chang Chun's affiliate charged for the VAM to an unaffiliated 
trading company, which in turn sold the VAM

[[Page 32815]]

to Perry. Therefore, the gross unit prices we calculated for the 
additional U.S. sales in our preliminary results did not reflect actual 
revenues Chang Chun received from these sales, because, as noted by the 
petitioner, these sales prices include a mark-up paid by Perry to an 
unaffiliated trading company. For the final results, we requested Chang 
Chun to provide the prices Chang Chun's affiliated party charged for 
the sales of VAM to the unaffiliated trading company. Chang Chun 
provided this information on April 30, 1998, which the Department 
verified in May 1998. Therefore, in our final margin program, we 
recalculated the gross unit prices by adding the price of VAM Chang 
Chun's affiliate charged to the unaffiliated trading company to Chang 
Chun's conversion fee.
    Comment 3: Entered Values for Sales Reported by Perry. The 
petitioner notes that, in assessing dumping margins, the Department's 
regulations state that it ``normally will calculate the assessment rate 
by dividing the dumping margin found on the subject merchandise 
examined by the entered value of such merchandise for normal Customs 
duty purposes.'' The petitioner further notes that the regulations go 
on to say that the Customs Service will ``assess dumping duties by 
applying the assessment rate to the entered value of the merchandise.'' 
The intent of the regulation, the petitioner observes, is to align the 
numerator and denominator of the dumping ratio.
    The petitioner first notes that the entered values reported by 
Perry in its U.S. sales listing appear to be the sum of Perry's VAM 
costs and its processing fees. The petitioner claims, however, that the 
entered values reviewed at verification are systematically inconsistent 
with the values reported in Perry's U.S. sales listing. As a result, 
the petitioner contends that the total entered value of subject 
merchandise used in our assessment rate calculation is not calculated 
on the same basis as the entered value to which the rate will be 
applied. Because none of the reported entered values were the same as 
the verified entered values, the petitioner argues that the Department 
should revise the entered values to equal the average verified entered 
values.
    Chang Chun argues that there were no discrepancies between the 
entered values reported by Perry in its sales listing and the entered 
values examined at verification. According to Chang Chun, the entered 
values of PVA as verified by the Department consistently reflected the 
sum of the reported VAM costs and the conversion fee Perry paid to 
Chang Chun.
    DOC Position: We disagree with the petitioner that there were 
discrepancies between the entered values reported by Perry in its sales 
listing and the entered values examined at verification. At 
verification, we confirmed the entered values reported by Perry in its 
U.S. sales listing for the sales examined (see Verification Report of 
Perry Chemical Corporation, dated January 30, 1998, at page 11).
    As noted by the petitioner, for duty assessment purposes, we 
calculate an assessment rate by dividing the dumping margin found on 
the sales of the subject merchandise examined by the entered value of 
such merchandise. In this case, as stated in our Preliminary Results, 
for duty assessment purposes, we estimated the entered values for Chang 
Chun's sales by subtracting international movement expenses from the 
gross sales value. We have continued to use this methodology in our 
final results. Specifically, for the sales in question, we estimated 
the entered values in the following manner: (1) for each sale of PVA 
shipped during the POR, we constructed the gross sales value by adding 
the price of VAM Chang Chun charged to the unaffiliated trading company 
to the price Chang Chun charged Perry for conversion of VAM to PVA; (2) 
we then subtracted international movement expenses from these gross 
sales value.
    Comment 4: Allocation of Cost Between PVA and Glacial Acetic Acid. 
The petitioner contends that Chang Chun incorrectly allocated its costs 
between PVA and its coproduct, glacial acetic acid. Specifically, the 
petitioner asserts that Chang Chun did not allocate costs on the basis 
of relative sales value, as directed by the Department, resulting in a 
significant understatement of the cost of producing PVA. According to 
the petitioner, the flaw in Chang Chun's cost allocation methodology is 
evident from the resulting relative profit margins for PVA and acetic 
acid. The petitioner states that allocation of costs on the basis of 
relative sales value, when applied properly, should result in the same 
profit margins on the two products. In this case, the petitioner argues 
that Chang Chun's allocation methodology does not yield the same profit 
rate on PVA and acetic acid. Therefore, the petitioner contends that 
the Department should reallocate Chang Chun's reported costs as set 
forth in its case brief.
    Chang Chun responds that the petitioner failed to identify any 
specific discrepancy in Chang Chun's allocation methodology and 
dismisses it as a conjecture without any support on factual grounds. 
Chang Chun asserts that it had correctly allocated its costs between 
acetic acid and PVA on a value basis, and therefore urges the 
Department to continue to use the reported costs in the final results.
    DOC Position: We agree with Chang Chun, in part. The Department's 
long-standing practice, now codified at section 773(f)(1)(A) of the 
Act, is to rely on data from a respondent's normal books and records if 
they are prepared in accordance with the generally accepted accounting 
principles (``GAAP'') of the exporting country and reasonably reflect 
the costs of producing the merchandise (see Notice of Final Results of 
antidumping Duty Administrative Review: Canned Pineapple Fruit from 
Thailand, 63 FR 7392, 7398 (February 13, 1998)).
    At verification, we noted that Chang Chun's methodology for 
allocating production costs to PVA and acetic acid was based on a 
relative-sales-value methodology and is consistent with the company's 
normal books and records prepared in accordance with its home country 
GAAP. Our review of Chang Chun's allocation methodology, however, 
indicates that Chang Chun relied upon sales prices of PVA occurring 
during the POR as a basis for allocating costs between PVA and acetic 
acid. While we determined in the less-than-fair-value investigation of 
this case that a relative-sales-value based allocation methodology is 
appropriate, we expressed concern that the sales value for PVA, used in 
our calculation, be representative of a period in which there is no 
allegation of dumping for the subject merchandise (see Notice of Final 
Determination at Sales than Less Than Value: PVA from Taiwan 61 FR 
14064, 14071 (March 29, 1996) (``LTFV Determination''). Therefore, in 
the LTFV determination, we allocated joint production costs between PVA 
and acetic acid based on each product's relative sales values for a 
two-year period prior to the initial period of investigation (``POI'').
    Consistent with our methodology established in the LTFV 
Determination, we consider it inappropriate, in this review, to rely on 
PVA sales prices occurring during a period of alleged dumping as a 
basis to allocate costs to PVA, particularly when these allocated costs 
are used as a means to measure the fairness of the selling prices for 
the same product, PVA. As stated in the LTFV Determination, we believe 
that by using sales of both products over an extended period prior to 
the original investigation, prices can reasonably be relied upon to 
form the basis for

[[Page 32816]]

allocating joint production costs, particularly in this case where 
acetic acid and PVA are commodity products, and their selling prices 
are influenced by world market forces of supply and demand.
    Therefore, in this review, we requested Chang Chun to provide the 
relative sales value data for the two-year period prior to the POI (see 
October 16, 1997 Supplemental Questionnaire at page 10). Chang Chun 
provided the information in its November 7, 1997, supplemental 
response. For the final results, we have reallocated Chang Chun's joint 
production costs between PVA and acetic acid using the relative sales 
value of each product calculated on the basis of a two-year period 
prior to the POI (see ``Final Calculation Memorandum for Chang Chun'' 
dated June 9, 1998).
    With respect to the petitioner's argument, while we agree that a 
relative-sales-value methodology should yield approximately the same 
profit rate for PVA and acetic acid, we note that the petitioner's data 
and analysis used to demonstrate that Chang Chun's allocation 
methodology results in distorted profit rates for PVA and acetic acid 
is based on incomplete information. Specifically, in calculating a 
profit rate for acetic acid, the petitioner used a different company's 
purchase price of acetic acid instead of Chang Chun's sales price 
because the record does not contain Chang Chun's actual average per 
unit sales price of acetic acid. Because the petitioner's analysis is 
not based on Chang Chun's own sales price information, we do not find 
it to be a reliable basis for reallocating Chang Chun's reported costs. 
Moreover, as stated above, for the final results, we have reallocated 
Chang Chun's costs between PVA and acetic acid in accordance with the 
methodology established in the LTFV determination.
    Comment 5: Date of Sale. Chang Chun argues that the Department 
incorrectly determined the date of sale for a particular U.S. sales 
transaction, which can be confirmed from a worksheet contained in a 
verification exhibit. Based on this exhibit, Chang Chun provided a 
revised date of sale for this transaction and requested the Department 
to use the revised date in the final results.
    The petitioner responds that the document used by Chang Chun to 
determine the revised date of sale is unreliable because it is 
unverified, and therefore, should not be used. Furthermore, the 
petitioner argues that the Department should recalculate the estimated 
date of sale not just for the one sale described by Chang Chun, but for 
all additional sales from Chang Chun to Perry included in our 
preliminary analysis.
    DOC Position: As noted above in the ``Treatment of Sales of Tolled 
Merchandise'' section of the notice, for the final results, we used the 
actual dates of sale from Chang Chun to Perry provided by Chang Chun in 
its April 30, 1998, submission, which was verified by the Department. 
Therefore, both the respondent's and petitioner's comments are moot.
    Comment 6: Chang Chun's Sales of PVA Shipped During the POR. On May 
11, 1998, the petitioner filed a submission objecting to certain 
information provided by Chang Chun in its April 30, 1998, submission in 
response to the Department's request of April 23, 1998. The petitioner 
argues that the information on additional sales of PVA shipped during 
the POR which were not included in our preliminary analysis should be 
rejected. The petitioner claims that these new sales were untimely 
filed, incomplete, and relate to shipments that were not entered into 
the United States during the POR. As a result, the petitioner contends 
that these sales should not be included in the margin calculation.
    Chang Chun objects to the petitioner's comments, stating that the 
information it provided in its April 30, 1998, submission was in 
accordance with the Department's specific requests for information. 
Chang Chun further argues that the additional sales of PVA shipped 
during the POR which were not included in the Department's preliminary 
analysis should be included for purposes of margin calculation if the 
Department continues to find the Chang Chun and not Perry is the 
producer of these sales of PVA.
    DOC Position: With respect to the petitioner's argument that these 
sales should not be included in our margin calculation because they 
relate to shipments entered into the United States after the POR, we 
note that for purposes of administrative reviews, the Department's 
practice is to calculate dumping margins for export price sales based 
on sales entered during the POR, or if entry date is unavailable, based 
on sales shipped during the POR (see Final Results of Antidumping Duty 
Administrative Review: Ferrosilicon From Brazil, 62 FR 43504, 43509-10 
(August 14, 1997) and Final Results of Antidumping Duty Administrative 
Review: High-Tenacity Rayon Filament Yarn from Germany, 61 FR 51421, 22 
(October 2, 1996)). Here, the record indicates that Chang Chun could 
only accurately report its EP sales based on shipment dates in the POR. 
The antidumping questionnaire issued in this review specifically 
required Chang Chun to ``report each U.S. sale of merchandise entered 
for consumption during the POR, except: (1) For EP sales, if you do not 
know the entry dates, report each transaction involving merchandise 
shipped during the POR.'' In response to these questionnaire 
instructions, Chang Chun reported its sales based on shipments of PVA 
made during the POR. Accordingly, in our preliminary analysis, we 
examined Chang Chun's transactions involving merchandise shipped during 
the POR, including the additional shipments Chang Chun identified in 
its April 30, 1998, submission.
    We also disagree with the petitioner that the information on 
additional sales shipped during the POR provided by Chang Chun on April 
30, 1998, was untimely information or incomplete. In a letter dated 
April 23, 1998, we requested Chang Chun to provide additional 
information (i.e., date of sale and date of shipment) concerning its 
U.S. sales to Perry used in our preliminary results. Subsequently, 
through a telephone conversation, we instructed Chang Chun to include 
in its response to the Department date of sale and date of shipment 
information for sales of PVA shipped during the POR which were not 
included in our preliminary analysis (see Memorandum to the File from 
Case Analyst, dated May 20, 1998). Thus, the information Chang Chun 
provided was timely submitted in accordance with the Department's 
specific request.
    Finally, with regard to the petitioner's argument that the 
information provided by Chang Chun is incomplete because Chang Chun did 
not include the necessary information regarding movement charges or 
selling expenses for these additional shipments, we limited the scope 
of our request to the date of sale and shipment for shipments occurring 
in the POR. For movement and selling expenses for these additional 
sales Chang Chun provided, we are applying the expenses reported by 
Chang Chun in its U.S. sales listing submitted to the Department on 
August 22, 1997. Because these additional sales were made to Perry and 
were shipped by Chang Chun on the same delivery terms, we find that the 
expenses Chang Chun originally reported for its EP sales reasonably 
reflect the expenses it incurred for the additional sales included in 
our analysis.
DuPont
    Comment 1: DuPont is the Producer of Tolled-PVA. In our Preliminary 
Results,

[[Page 32817]]

we determined that DuPont is the producer of the PVA processed in 
Taiwan by Chang Chun from VAM produced by DuPont in the United States. 
The petitioner argues that, to be considered a producer in a tolling 
situation, the Department's new tolling regulation, section 351.401(h) 
of the Final Regulations, requires that the producer retain title to 
the raw material input. See Antidumping Rules; Countervailing Duties, 
62 FR 27296, 27411, which is legally effective only for segments of the 
proceeding initiated based on requests filed after June 18, 1997, but 
nevertheless a restatement of the Department's practice. The petitioner 
points to a particular clause in the tolling contract between DuPont 
and Chang Chun as evidence that one of the conditions in section 
351.401(h) has not been met. Because of the business proprietary nature 
of the tolling contract, our full discussion of the petitioner's claim 
is contained in a separate memorandum (see Memorandum to Louis Apple, 
Office Director, from Team, dated June 8, 1998 (``DuPont 
Memorandum'')). As a result, the petitioner argues that DuPont is not 
the producer of PVA processed under the tolling agreement.
    DuPont takes issue with the petitioner's interpretation of the 
particular clause in the tolling contract and responds that, contrary 
to the petitioner's contention, the Department properly concluded that 
DuPont was the producer of the tolled merchandise.
    DOC Position: After review of the tolling contract between DuPont 
and Chang Chun, we disagree with the petitioner's reading of the 
particular clause at issue and continue to find that DuPont is the 
producer under section 351.401(h). As noted above, because the tolling 
contract itself and this particular clause is business proprietary, our 
discussion of this issue is contained in the ``DuPont Memorandum.''
    Comment 2: Cost of Production Calculation for Sales of DuPont. The 
petitioner argues that the Department should have used Chang Chun's 
actual processing costs when conducting the sales-below-cost analysis, 
instead of the fee DuPont paid to Chang Chun for the tolling of VAM 
into PVA. The petitioner notes that the statute clearly requires 
Department to investigate the actual cost of producing the merchandise 
in any sales-below-cost investigation. According to the petitioner, 
even though the Department appears to consider DuPont to be the 
respondent in this case, because Chang Chun is the entity actually 
producing the subject merchandise in Taiwan, Chang Chun's cost of 
production should be examined. Citing to Final Determination of Sales 
at Less Than Fair Value: Fresh and Chilled Atlantic Salmon from Norway, 
56 FR 7661 (February 25, 1991) (``Salmon from Norway'') and Final 
Determination of Sales at Less Than Fair Value: Fresh Kiwifruit from 
New Zealand, 57 FR 13695 (April 17, 1992) (``Kiwifruit from New 
Zealand''), the petitioner contends that the Department's practice has 
been to base the cost of production, not on the purchase price between 
the respondent and the unaffiliated producer, but on the actual cost of 
producing the subject merchandise.
    DuPont argues that it would be contrary to the statute and 
Department practice to use Chang Chun's actual cost of production 
because, according to DuPont, Chang Chun is nothing more than a 
supplier of services to DuPont. According to DuPont, the statute calls 
for determining costs from the records of the producer, and not from 
the records of any supplier of services to the producer. DuPont further 
argues that the statutory language governing the cost of production 
investigation does not support the petitioner's argument that the 
arm's-length price charged by Chang Chun to DuPont for tolling services 
should be disregarded in favor of Chang Chun's costs of production. 
DuPont contends that since DuPont is the producer in this case, its 
costs are the ones that should be examined.
    DOC Position: We disagree with the petitioner. We find no statutory 
basis or precedent for the petitioner's argument that Chang Chun's 
actual cost of processing should be examined when determining DuPont's 
cost of production. Section 773(f)(1)(A) of the Act states that, for 
purposes of conducting an analysis of sales at less than COP, the 
``costs shall be based on the records of the exporter or producer of 
the merchandise...'' In this review, we determined that DuPont is the 
producer of PVA processed by Chang Chun. Accordingly, the costs we 
examine in our analysis should reflect the total costs incurred by 
DuPont. DuPont's total costs consist of its cost to produce VAM and the 
cost it incurred to convert the VAM into PVA, which is the fee DuPont 
paid to Chang Chun.
    We also note that the cases cited by the petitioner do not support 
its claim because these cases involved respondents who were resellers, 
not producers. The Department generally does not base COP on a 
reseller's cost to acquire the subject merchandise. However, the 
Department does base COP on the producer's actual costs, including the 
cost of inputs and services. See section 773(f) of the Act. In this 
case, DuPont is the producer and therefore, its actual costs are the 
proper basis for COP.
    Comment 3: Affiliation. The petitioner argues that, if the 
Department cannot examine Chang Chun's actual cost of producing PVA 
without finding Chang Chun and DuPont affiliated under section 
771(33)(G) of the Act, then the Department should determine that the 
parties are affiliated pursuant to the tolling contract. According to 
the petitioner, the Department should have found DuPont and Chang Chun 
to be affiliated because the tolling contract affords DuPont control 
over production of PVA, and the legal and operational ability to 
exercise direction over Chang Chun. The petitioner claims that the fact 
that, under the tolling contract, DuPont does not exercise direction 
over all activities of Chang Chun does not in any way diminish the fact 
that DuPont is in a position to, and does indeed, exercise direction 
over some of Chang Chun's operations, namely the production of tolled 
PVA. According to the petitioner, the statute requires that parties be 
deemed affiliated where legal or operational control exists as it does 
here under the tolling contract, regardless of whether the ability to 
exercise restraint or direction over the other person is pervasive or 
encompassing all aspects of the other person's business.
    DuPont contends that the statutory definition of affiliation based 
on intercorporate control under section 771(33)(G) of the Act does not 
apply in this case. DuPont asserts that the contractual relationship 
between DuPont and Chang Chun is a mere supply contract relationship in 
which a producer of goods (i.e., DuPont) contracts out a portion of the 
processing of those goods to another company (i.e., Chang Chun). 
According to DuPont, such contractual relationship is not sufficient, 
in and of itself, to find affiliation between DuPont and Chang Chun. 
DuPont contends that none of the factors listed in the Department's 
regulations, such as a close supplier relationship, support a finding 
of affiliation under section 771 (33)(G). DuPont notes that, even in a 
far more extreme situation where a manufacturer was its customer's sole 
supplier, the Department declined to conclude that the manufacturer 
controlled the customer (see Final Results of Antidumping Duty 
Administrative Review: Furfuryl Alcohol from South Africa, 62 FR 61084 
(November 14, 1997) (``Furfuryl Alcohol from South Africa''). 
Accordingly, DuPont urges the Department to reject the petitioner's 
argument and sustain its position in the preliminary results that 
DuPont and Chang Chun are not affiliated.

[[Page 32818]]

    DOC Position: We agree with DuPont. In our Preliminary Results, we 
examined this issue and found that DuPont was not affiliated with Chang 
Chun based solely on the tolling agreement. As we stated, the tolling 
contract, in and of itself, does not establish that DuPont has legal or 
operational control over Chang Chun for the purposes of section 
771(33)(G) of the Act (63 FR at 6527). We find no surrounding 
circumstances or other connections between the parties which would lead 
us to a contrary conclusion.
    We cannot agree with the petitioner that the statutory language of 
section 771(33)(G) must be read so broadly as to require affiliation 
based solely on a conventional tolling agreement, which provides, at 
most, narrowly drawn legal obligations of limited duration involving 
some processing of subject merchandise. As DuPont notes, the contract 
here is not unlike any contract that may exist between a producer of 
goods and a company performing a portion of the production of those 
goods for a fee. Hence, to find that a party is affiliated solely 
because it is under a legal obligation to fulfill the terms of an 
agreement for subcontracting would be to infer control under section 
771(33)(G) whenever such a contractual relationship exists, regardless 
of the surrounding circumstances or whether there are other connections 
between the parties. Such an outcome is not supported by section 
771(33)(G).
    Comment 4: Major Input Rule. The petitioner notes that under the 
major input rule set forth in section 773 (f)(3) of the Act, the 
Department may determine the value of the major input on the basis of 
the cost of production if the Department has reasonable grounds to 
believe or suspect that the amount represented as the value of such 
input is less than the cost of production of such input. Pursuant to 
the major input rule, the petitioner argues that the Department should 
have used Chang Chun's actual cost of production of PVA, rather than 
the tolling fee charged to DuPont, for purposes of calculating DuPont's 
COP. According to the petitioner, information on the record 
demonstrates that the actual cost of producing PVA incurred by Chang 
Chun was greater than the nominal tolling fee paid by DuPont. Moreover, 
the petitioner claims that there is no economic basis for assuming that 
the tolling fee Chang Chun charged to DuPont is equal to or exceeds its 
total cost of producing PVA. In fact, the petitioner further claims 
that, so long as the tolling fee Chang Chun charges to DuPont exceeds 
its marginal cost of production, Chang Chun has an incentive to provide 
its services, even if the tolling fee does not cover the full cost of 
producing PVA.
    DuPont counters that the major input rule does not apply in this 
case since the Department has concluded that DuPont and Chang Chun are 
not affiliated.
    DOC Position: DuPont is correct that the major input rule set forth 
in section 773(f)(3) of the Act applies only where the supplier of the 
input is affiliated with the producer of the merchandise. Because we 
have determined that Chang Chun and DuPont are not affiliated, the 
major input rule is inapplicable (see Comment 3 for DuPont).
    Comment 5: Tolling Regulation Is an Illegal Interpretation of the 
Law. The petitioner contends that the Department's new tolling 
regulation is contrary to the statute, and cannot stand if the 
regulation does not permit an analysis of the costs incurred in the 
subject country in the course of producing the subject merchandise. 
According to the petitioner, an antidumping duty administrative review 
concerning subject merchandise produced in a subject country that fails 
to analyze the activity undertaken in the subject country solely 
because the production is pursuant to a tolling agreement is an 
impermissible construction of the statute and an abuse of the 
Department's discretion.
    DOC Position: We disagree with petitioner that the Department's 
tolling regulation set forth in19 CFR 351.401(h) is inconsistent with 
the statute. The tolling regulation provides a means for determining 
when a toller will be considered the producer of a product, as 
discussed above (see Comment 2 for DuPont). Once the producer is 
determined, the Department must use the producer's actual costs of 
producing the merchandise, in accordance with section 773(f)(1)(A). 
DuPont's actual costs to produce PVA in Taiwan are its costs to produce 
VAM and its cost for processing services in Taiwan. There is no basis 
in the statute or the regulations for the petitioner's argument that 
the Department must go behind the producer's actual cost for inputs and 
services.
    Comment 6: Special Merchandise Difference Adjustment. DuPont 
contends that one of its reported U.S. sales should either be excluded 
from the Department's calculations, or a value-based difference in 
merchandise (``difmer'') adjustment should be applied to it, because 
the sale involved a particular type of PVA with a certain physical 
characteristic that does not result in manufacturing cost differences. 
Because of this physical difference which, according to DuPont, is 
shown in DuPont Verification Exhibit 8(e), DuPont claims that the 
merchandise could not be sold for normal commercial uses at a market 
price. DuPont further explains that there are no corresponding sales of 
this product in the Australian market against which to compare this 
transaction.
    Citing to Final Determination of Sales at Less Than Fair Value: 
Coated Groundwood Paper from Finland, 56 FR 56363 (November 4, 1991), 
DuPont argues that it is a recognized practice of the Department to 
exclude such an isolated transaction for which a NV cannot be 
calculated. Alternatively, DuPont asserts that the Department should 
make a value-based adjustment to NV to account for the physical 
differences of this particular product based on differences in market 
value. According to DuPont, the Department's conventional difmer cost-
based adjustment would not properly adjust for the product's physical 
differences because the physical difference, in this case, is not 
attributable to a manufacturing cost difference. DuPont claims that the 
only way to quantify the appropriate adjustment for the physical 
differences of this particular transaction is to examine the 
differences in price between that sale and all its other U.S. sales. In 
support of its claim, DuPont cites to Final Determination of Sales at 
Less Than Fair Value: Nepheline Syenite From Canada, 57 FR 9237 (March 
17, 1992) and U.H.F.C. Co. v. United States, 916 F.2d 689 (C.A.F.C. 
1990), where the Court of Appeals directed the Department to make a 
value-based difmer adjustment.
    The petitioner contends that this sale should not be excluded 
because there is no basis for excluding sales to the United States from 
the margin calculation in administrative reviews. In addition, the 
petitioner notes that DuPont did not request a difmer adjustment based 
on market value prior to its case brief, nor did it submit any 
information to justify any such adjustment. According to the 
petitioner, the cases cited by DuPont refer to situations in which 
physical differences were demonstrated to affect the market value of 
the merchandise under consideration. For the DuPont sale in question, 
however, the petitioner argues that there is no information to indicate 
whether the difference in the price is limited to a difference in value 
associated with physical differences in the merchandise, or whether the 
difference in price on this sale was a result of a combination of 
factors, possibly including a physical difference in the merchandise. 
The petitioner

[[Page 32819]]

asserts, therefore, that there is no basis to quantify or make an 
adjustment for the difference in value.
    DOC Position: Although the Department has the discretion to adjust 
for physical differences based on value, we agree with the petitioner 
that the sale in question does not warrant a value-based difmer 
adjustment based on information on the record for this proceeding (see 
19 CFR 353.57(b) and 19 CFR 351.411(b)). We reviewed the documentation 
included in DuPont's verification Exhibit 8(e), and noted that 
information in the exhibit does not establish that the product sold was 
physically different from other U.S. sales made by DuPont during the 
POR. Because the nature of the physical difference DuPont alleges is 
proprietary, our full analysis of this issue is contained in the 
``DuPont Memorandum.'' Therefore, because DuPont has not established 
that the PVA in question was physically different from any other PVA 
sold in the United States during the POR, we have continued to use this 
sale in our final margin analysis.
    Comment 7: Foreign Inland Freight. In our preliminary results, we 
disallowed DuPont's claim for an inland freight expense from the 
Australian port to its warehouse for its comparison market sales 
because, at verification, the company failed to provide supporting 
documentation for the claimed amount. DuPont contends that the 
Department's action in this regard was improper and that a deduction 
for foreign inland freight should be allowed because it is an 
undisputed fact that a freight expense was incurred by DuPont in moving 
goods from the dock to its warehouse. DuPont further contends that 
verification generally was successful in establishing the completeness 
and accuracy of the information submitted by DuPont. According to 
DuPont, the problem at verification with regard to inland freight was 
that the company did not have ready access to original documentation 
supporting the freight deduction.
    The petitioner contends that no deduction should be allowed in this 
instance. The petitioner notes that sections 782(i)(3) and 776(a)(2)(D) 
of the Act direct the Department to verify all information relied upon 
in making a final determination in an administrative review, and allow 
the Department to use facts otherwise available if an interested party 
``provides such information but the information cannot be verified.'' 
Because DuPont did not provide evidence to support its claimed 
adjustment at verification, the petitioner states that the Department 
is correct in denying the adjustment.
    DOC Position: We agree with the petitioner. The Department has a 
long-standing practice of denying a claim for an adjustment where the 
Department could not verify the claimed adjustment because the 
respondent fails to provide supporting evidence (see, e.g., Final 
Results of Antidumping Duty Administrative Review: Certain Cut-to-
Length Carbon Steel Plate From Finland, 63 FR 2952, 2953 (January 20, 
1998)). At verification, DuPont was unable to provide any supporting 
documentation to establish an expense for foreign inland freight. 
Accordingly, we have continued to disallow the claimed deduction for 
foreign inland freight for comparison market sales in our final margin 
calculation.
    Comment 8: Scope of the Order. DuPont argues that its imports of 
PVA from Taiwan through a tolling agreement with Chang Chun are outside 
the scope of the antidumping duty order. According to DuPont, because 
it is a U.S. company and the producer of the PVA tolled by Chang Chun, 
it can not be subject to the antidumping law or the antidumping order. 
DuPont cites to its arguments on this point as expressed in its October 
1, 1996, Application for a Scope Ruling and its brief to the Court of 
International Trade.
    The petitioner responds that the Department correctly determined 
that the subject merchandise is produced in Taiwan, and hence within 
the scope of the order.
    DOC Position: We disagree with DuPont. DuPont is the producer of 
the PVA at issue. The PVA is produced in Taiwan and is a product of 
Taiwan. Therefore, DuPont's Taiwanese PVA is subject to the order. The 
fact that DuPont is a U.S. company is irrelevant. See E.I. DuPont de 
Nemours v. United States, Slip.-Op. 98-46 (CIT April 17, 1998), which 
upheld the Department's scope ruling that the PVA produced by DuPont in 
Taiwan through the tolling agreement with Chang Chun is a product of 
Taiwan and thus subject to the antidumping duty order; see also, the 
Department's brief to the Court of International Trade, dated October 
22, 1997, in opposition to DuPont's brief, made part of the record of 
this review by petitioner.

Final Results of the Review

    As a result of our review, we determine that the following 
weighted-average margins exist for the period May 15, 1996, through 
April 30, 1997:

------------------------------------------------------------------------
                                                                Margin  
               Manufacturer/producer/exporter                 (percent) 
------------------------------------------------------------------------
Chang Chun Petrochemical Co. Ltd...........................         0.42
E.I. duPont de Nemours & Co................................         9.46
------------------------------------------------------------------------

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. We have 
calculated an importer-specific duty assessment rate based on the ratio 
of the total amount of AD duties calculated for the examined 
transactions in the POR to the total entered value of the same 
transactions. This rate will be assessed uniformly on all entries of 
that particular importer made during the POR. The Department will issue 
appraisement instructions concerning the respondents directly to the 
U.S. Customs Service.
    Furthermore, the following deposit rates shall be required for 
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 rates for DuPont and Chang Chun will be the rates 
indicated above; (2) if the exporter is not a firm covered in this 
review or the LTFV investigation, but the manufacturer is, the cash 
deposit rate will be that established for the manufacturer of the 
merchandise in these final results of review or LTFV investigation; and 
(3) if neither the exporter nor the manufacturer is a firm covered in 
this review or the LTFV investigation, the cash deposit rate will be 
19.21 percent, the ``All Other'' rate made effective by 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 the review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This notice also serves as a reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 353.34(d). Timely written notification or 
conversion to judicial

[[Page 32820]]

protective order is hereby requested. Failure to comply with the 
regulations and terms of the APO is a sanctionable violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 
353.22(c).

    Dated: June 9, 1998.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-15876 Filed 6-15-98; 8:45 am]
BILLING CODE 3510-DS-P