[Federal Register Volume 68, Number 34 (Thursday, February 20, 2003)]
[Notices]
[Pages 8203-8210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-4132]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-588-861]


Notice of Preliminary Determination of Sales at Less Than Fair 
Value: Polyvinyl Alcohol from Japan

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

ACTION: Notice of Preliminary Determination of Sales at Less Than Fair 
Value.

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SUMMARY: We preliminarily determine that polyvinyl alcohol from Japan 
is being, or is likely to be, sold in the United States at less than 
fair value, as provided in section 733(b) of the Tariff Act of 1930, as 
amended.
    Interested parties are invited to comment on this preliminary 
determination. We will make our final determination not later than 75 
days after the date of this preliminary determination.

EFFECTIVE DATE: February 20, 2003.

FOR FURTHER INFORMATION CONTACT: Mike Strollo or Gregory E. Kalbaugh, 
Office of AD/CVD Enforcement, Office 2, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW, Washington, DC 20230; telephone: 
(202) 482-0629 or (202) 482-3693, respectively.

SUPPLEMENTARY INFORMATION:

Preliminary Determination

    We preliminarily determine that polyvinyl alcohol (PVA) from Japan 
is being sold, or is likely to be sold, in the United States at less 
than fair value (LTFV), as provided in section 733 of the Tariff Act of 
1930, as amended (the Act). The estimated margins of sales at LTFV are 
shown in the ``Suspension of Liquidation'' section of this notice.

Case History

    Since the initiation of this investigation (Initiation of 
Antidumping Duty Investigations: Polyvinyl Alcohol from Germany, Japan, 
the People's Republic of China, the Republic of Korea, and Singapore, 
67 FR 61591 (Oct. 1, 2002)) (Initiation Notice), the following events 
have occurred:
    On September 30, 2002, we received scope comments from Celanese 
Ltd. and E.I. Dupont de Nemours & Co. (collectively, the petitioners), 
in which the petitioners requested that we revise the scope to exclude 
PVA used as, or in the manufacture of, excipients.
    On October 11, 2002, the petitioners and two Japanese producers, 
Kuraray Co., Ltd. (Kuraray) and Marubeni Specialty Chemicals, Inc. 
(Marubeni), submitted comments on the model-matching criteria to be 
used by the Department. On October 15, 2002, Marubeni submitted an 
amendment to its model-matching comments.
    On October 21, 2002, we received requests to exclude certain 
additional products from the scope of this investigation from Kuraray 
and two importers of PVA (i.e., Oxyvinyls, LP and Ricoh Electronics, 
Inc.).
    Also on October 21, 2002, the United States International Trade 
Commission (ITC) preliminarily determined that there is a reasonable 
indication that imports of PVA from Japan are materially injuring the 
United States industry. See ITC Investigation Nos. 731-TA-1014-1018 
(Publication No. 3553, Polyvinyl Alcohol from Germany, Japan, the 
People's Republic of China, the Republic of Korea, and Singapore, 67 FR 
65597 (Oct. 25, 2002)).
    On October 22, 2002, we issued antidumping questionnaires to Denki 
Kagaku Kogyo Kabushiki Kaisha (Denki Kagaku), Japan VAM & POVAL Co., 
Ltd. (Japan VAM & POVAL), Kuraray, and the Nippon Synthetic Chemical 
Industry Co., Ltd. (Nippon Gohsei), the producers/exporters accounting 
for all known exports of subject merchandise from Japan during the 
period of investigation (POI). For further discussion, see the 
memorandum to Louis Apple, Director, Office 2, from the Team entitled 
``Antidumping Duty Investigation of Polyvinyl Alcohol from Japan - 
Selection of Respondents,'' dated October 22, 2002.
    On November 19, 2002 and November 25, 2002, respectively, Kuraray 
and Nippon Gohsei submitted responses to Section A of the Department's 
questionnaire. Both Japan VAM & POVAL and Denki Kagaku failed to 
respond to the Department's questionnaire. For further discussion, see 
the ``Facts Available (FA)'' section of this notice.
    On December 5, 2002, Kuraray notified the Department that it would 
no longer participate in this investigation, and it requested that the 
Department remove all of its business proprietary information from the 
record of this proceeding. On December 11, 2002, the Department 
destroyed Kuraray's business proprietary information and notified 
Kuraray of this action. For further discussion, see the ``Facts 
Available (FA)'' section of this notice.
    On December 13, 2002, the petitioners and Nippon Gohsei submitted 
additional model-matching comments.
    On December 23, 2002, the petitioners agreed to the exclusion 
requests made on October 21, 2002. On January 9, 2003, Kuraray 
requested that the Department modify the scope language in the 
petitioners' December 23, 2002, submission to avoid unnecessary 
restrictions on imports of certain of the products covered by that 
submission which are not manufactured in the United States. On January 
22, 2003, the petitioners agreed to the majority of Kuraray's proposed 
revisions. Accordingly, certain exclusions have now been incorporated 
into the scope. For further discussion, see the ``Scope Comments'' 
section below.
    On January 27, 2003, Japan VAM & POVAL requested that the 
Department revise the scope to exclude certain additional copolymers. 
Also on January 27, 2003, Nippon Gohsei requested that the Department 
modify the scope language in the petitioners' December 23, 2002, 
submission to avoid unnecessary restrictions on imports of the 
remaining copolymers covered by

[[Page 8204]]

that submission not addressed in Kuraray's January 9, 2003, letter. On 
February 4, 2003, the petitioners agreed to all of the revisions 
requested by Nippon Gohsei, and an additional revision requested by 
Kuraray. On February 5, 2003, the petitioners submitted a letter noting 
that they were in the process of reviewing Japan VAM & POVAL's 
exclusion request, and had not yet agreed to the exclusion request. 
Because there was insufficient time to properly consider Japan VAM & 
POVAL's exclusion request, we will address it in the final 
determination.
    In December 2002 and January 2003, we received responses to the 
remaining sections of the Department's original questionnaire, as well 
as certain supplemental questionnaires, from Nippon Gohsei.

Period of Investigation

    The POI is July 1, 2001, through June 30, 2002. This period 
corresponds to the four most recent fiscal quarters prior to the month 
of the filing of the petition (i.e., September 2002).

Scope of Investigation

    The merchandise covered by this investigation is PVA. This product 
consists of all PVA hydrolyzed in excess of 80 percent, whether or not 
mixed or diluted with commercial levels of defoamer or boric acid, 
except as noted below.
    The following products are specifically excluded from the scope of 
this investigation:
1) PVA in fiber form.
2) PVA with hydrolysis less than 83 mole percent and certified not for 
use in the production of textiles.
3) PVA with hydrolysis greater than 85 percent and viscosity greater 
than or equal to 90 cps.
4) PVA with a hydrolysis greater than 85 percent, viscosity greater 
than or equal to 80 cps but less than 90 cps, certified for use in an 
ink jet application.
5) PVA for use in the manufacture of an excipient or as an excipient in 
the manufacture of film coating systems which are components of a drug 
or dietary supplement, and accompanied by an end-use certification.
6) PVA covalently bonded with cationic monomer uniformly present on all 
polymer chains in a concentration equal to or greater than one mole 
percent.
7) PVA covalently bonded with carboxylic acid uniformly present on all 
polymer chains in a concentration equal to or greater than two mole 
percent, certified for use in a paper application.
8) PVA covalently bonded with thiol uniformly present on all polymer 
chains, certified for use in emulsion polymerization of non-vinyl 
acetic material.
9) PVA covalently bonded with paraffin uniformly present on all polymer 
chains in a concentration equal to or greater than one mole percent.
10) PVA covalently bonded with silan uniformly present on all polymer 
chains certified for use in paper coating applications.
11) PVA covalently bonded with sulfonic acid uniformly present on all 
polymer chains in a concentration level equal to or greater than one 
mole percent.
12) PVA covalently bonded with acetoacetylate uniformly present on all 
polymer chains in a concentration level equal to or greater than one 
mole percent.
13) PVA covalently bonded with polyethylene oxide uniformly present on 
all polymer chains in a concentration level equal to or greater than 
one mole percent.
14) PVA covalently bonded with quaternary amine uniformly present on 
all polymer chains in a concentration level equal to or greater than 
one mole percent.
    The merchandise under investigation is currently classifiable under 
subheading 3905.30.00 of the Harmonized Tariff Schedule of the United 
States (HTSUS). Although the HTSUS subheading is provided for 
convenience and customs purposes, the written description of the 
merchandise under investigation is dispositive.

Scope Comments

    In accordance with the preamble to our regulations (see Antidumping 
Duties; Countervailing Duties, 62 FR 27296, 27323 (May 19, 1997)), we 
set aside a period of time for parties to raise issues regarding 
product coverage and encouraged all parties to submit comments within 
20 calendar days of publication of the initiation notice. See the 
Initiation Notice, 67 FR at 61591.
    On September 30, 2002, the petitioners requested that we exclude 
PVA used as, or in the manufacture, of excipients.
    On October 21, 2002, Kuraray and two importers of PVA (i.e., Ricoh 
Electronics and Oxyvinyls) requested that the Department also revise 
the scope to exclude various PVA products with specific physical 
characteristics and/or specific end-uses. These products included: 1) 
C-polymers - certain copolymers of PVA and cationic monomer; 2) K-
polymers - certain copolymers of PVA and carboxylic acid for use in a 
paper application; 3) M-polymers - certain copolymers of PVA and thiol 
for use in emulsion polymerization of non-vinyl acetic material; 4) MP-
polymers - certain copolymers of PVA and paraffin; 5) R-polymers - 
certain copolymers of PVA and silan that are used in paper coating 
applications; and 6) PVA hydrolyzed at less than 83 percent. Each of 
the exclusion requests specified ranges of hydrolysis and viscosity and 
maximum levels of volatiles and ash, by weight.
    On December 23, 2002, the petitioners agreed to these requests, 
shown as items 2, 3, and 5 through 13 in the ``Scope of Investigation'' 
section above, and modified as noted below.
    On January 9, 2003, Kuraray requested that the Department broaden 
these exclusions to cover certain additional products not produced in 
the United States. Specifically, Kuraray requested that the scope 
exclusions agreed to by the petitioners with respect to certain 
copolymer products specify a minimum percentage of the non-PVA monomers 
present in these copolymer products outlined above (i.e., cationic 
monomer, carboxylic acid, thiol, and paraffin) instead of specifying 
exact levels of hydrolysis, viscosity, volatiles, and ash content as 
noted in the petitioners' December 23, 2002, submission.
    On January 22, 2003, the petitioners agreed to the majority of the 
modifications proposed by Kuraray. Specifically, with respect to 
copolymers of PVA and carboxylic acid, the petitioners agreed to remove 
the specifications for hydrolysis, viscosity, volatiles, and ash 
content from the proposed exclusion language. However, the petitioners 
did not agree to change the end-use requirement in the proposed 
exclusion from ``certified for use in a paper application'' to 
``certified not for use in the production of textiles.'' With respect 
to copolymers of PVA and paraffin, the petitioners agreed to remove the 
specification for hydrolysis, viscosity, volatiles, and ash content 
from the proposed exclusion language. However, the petitioners did not 
agree to change the concentration level of the additional monomer from 
one percent to 0.5 percent (or lower). Finally, the petitioners agreed 
to lower the viscosity level of homopolymers hydrolyzed greater than 85 
percent from 90 to 80 centipoise, provided that, when the product has a 
viscosity of greater than or equal to 80 centipoise and less than 90 
centipoise, it is certified for use in an ink-jet application. 
Accordingly, certain exclusions have now been incorporated into the 
scope. See the ``Scope of the Investigation'' section above.
    On January 27, 2003, Japan VAM & POVAL, one of the mandatory

[[Page 8205]]

respondents who has not responded to the Department's questionnaire, 
requested that the Department revise the scope to exclude certain PVA 
products with specific physical characteristics and/or specific end-
uses. These products include: D-copolymers (i.e., certain copolymers of 
PVA and diacetoneacrylamide) for use in a paper application.
    Additionally, on January 27, 2003, Nippon Gohsei requested that the 
remaining scope exclusions agreed to by the petitioners but not 
addressed in Kuraray's January 9, 2003, submission specify a minimum 
percentage of the non-PVA monomers (i.e., sulfonic acid, 
acetoacetylate, polyethylene oxide, or quaternary amine) instead of 
specifying exact levels of hydrolysis, viscosity, volatiles, and ash 
content as noted in the petitioners' December 23, 2002, submission.
    On February 4, 2003, the petitioners agreed to all of the revisions 
requested by Nippon Gohsei. In addition, the petitioners also agreed to 
revise the scope to exclude certain copolymers covalently bonded with 
silan uniformly present on all polymer chains in a concentration equal 
to or greater than one mole percent, certified for use in paper coating 
applications, pursuant to a request made by Kuraray.
    As noted above, on February 5, 2003, the petitioners submitted a 
letter noting that they were in the process of reviewing Japan VAM & 
POVAL's exclusion request, and had not yet agreed to the exclusion 
request. Because there was insufficient time to properly consider Japan 
VAM & POVAL's exclusion request, we will address it in the final 
determination.

Facts Available (FA)

1. Application of FA
    Section 776(a)(2) of the Act provides that if an interested party 
(A) withholds information requested by the Department, (B) fails to 
provide such information by the deadline, or in the form or manner 
requested, (C) significantly impedes a proceeding, or (D) provides 
information that cannot be verified, the Department shall use, subject 
to sections 782(d) and (e) of the Act, facts otherwise available in 
reaching the applicable determination.
    Pursuant to section 782(e) of the Act, the Department shall not 
decline to consider submitted information if all of the following 
requirements are met: (1) The information is submitted by the 
established deadline; (2) the information can be verified; (3) the 
information is not so incomplete that it cannot serve as a reliable 
basis for reaching the applicable determination; (4) the interested 
party has demonstrated that it acted to the best of its ability; and 
(5) the information can be used without undue difficulties.
    On October 22, 2002, the Department issued its questionnaire to 
Denki Kagaku, Japan VAM & POVAL, and Kuraray. Neither Denki Kagaku nor 
Japan VAM & POVAL responded to the Department's questionnaires. 
Moreover, on December 5, 2002, Kuraray informed the Department that it 
did not intend to participate in this investigation. Because these 
companies failed to supply necessary information, we have applied FA to 
calculate their dumping margins, pursuant to section 776(a)(2)(B) of 
the Act.
2. Selection of Adverse FA (AFA)
    In selecting from among the facts otherwise available, section 
776(b) of the Act authorizes the Department to use an adverse inference 
if the Department finds that an interested party failed to cooperate by 
not acting to the best of its ability to comply with the request for 
information. See, e.g., Notice of Final Determination of Sales of Less 
Than Fair Value and Final Negative Critical Circumstances: Carbon and 
Certain Alloy Steel Wire Rod from Brazil, 67 FR 55792, 55794-96 (Aug. 
30, 2002). Each of the respondents was notified in the Department's 
questionnaires that failure to submit the requested information by the 
date specified might result in use of FA. As a general matter, it is 
reasonable for the Department to assume that Denki Kagaku, Japan VAM & 
POVAL, and Kuraray possessed the records necessary for this 
investigation and that by not supplying the information the Department 
requested, these companies failed to cooperate to the best of their 
ability. As the respondents failed to cooperate to the best of their 
ability, we are applying an adverse inference pursuant to section 
776(b) of the Act.
3. Corroboration of Information
    Section 776(b) of the Act authorizes the Department to use as AFA 
information derived from the petition, the final determination from the 
LTFV investigation, a previous administrative review, or any other 
information placed on the record.
    Section 776(c) of the Act requires the Department to corroborate, 
to the extent practicable, secondary information used as FA. Secondary 
information is defined as ``{i{time} nformation derived from the 
petition that gave rise to the investigation or review, the final 
determination concerning the subject merchandise, or any previous 
review under section 751 concerning the subject merchandise.'' See 
Statement of Administrative Action (SAA) accompanying the Uruguay Round 
Agreements Act, H.R. Doc. No. 103-316 at 870 (1994) and 19 CFR 
351.308(d).
    The SAA clarifies that ``corroborate'' means that the Department 
will satisfy itself that the secondary information to be used has 
probative value. See the SAA at 870. The SAA also states that 
independent sources used to corroborate such evidence may include, for 
example, published price lists, official import statistics and customs 
data, and information obtained from interested parties during the 
particular investigation. Id.
    In order to determine the probative value of the margins in the 
petition for use as AFA for purposes of this determination, we examined 
evidence supporting the calculations in the petition. We reviewed the 
adequacy and accuracy of the information in the petition during our 
pre-initiation analysis of the petition, to the extent appropriate 
information was available for this purpose. See the September 25, 2002, 
Initiation Checklist, on file in the Central Records Unit, Room B-099, 
of the Main Commerce Department building, for a discussion of the 
margin calculations in the petition. In accordance with section 776(c) 
of the Act, to the extent practicable, we examined the key elements of 
the export price (EP) and normal value (NV) calculations on which the 
margins in the petition were based.
    In selecting from among the facts otherwise available and using an 
adverse inference, we reviewed the information provided in the petition 
and in the response submitted by Nippon Gohsei. The petition contained 
a margin calculation for each of two products sold by Kuraray. See 
below for a review of the methodology used by the petitioners for their 
calculations of EP and NV. Because these margins were higher than the 
margin that we calculated for Nippon Gohsei, we selected these margins 
for purposes of corroboration.

Export Price

    With respect to the margins in the petition, EP was based on POI 
price quotes for the sale of PVA produced by Kuraray to customers in 
the United States. The petitioners calculated net U.S. prices for PVA 
by deducting a distributor mark-up, where applicable, and certain 
movement charges.
    We corroborated the U.S. prices from the petition by comparing them 
to prices of comparable products sold by Nippon Gohsei. We found that 
Nippon

[[Page 8206]]

Gohsei made U.S. sales of comparable products at similar prices to the 
U.S. prices from the petition, thus corroborating the prices provided 
in the petition. For ocean freight expense, we likewise found that the 
petition contained the same expense for each of the two products and 
that sales by Nippon Gohsei with ocean freight in excess of these 
amounts of expenses were sufficient to corroborate the amounts provided 
in the petition. We were unable to corroborate the U.S. inland freight 
charges from the petition since no such charges were reported by Nippon 
Gohsei. The Department was provided with no useful information by the 
respondents or other interested parties and is aware of no other 
independent sources of information that would enable us to further 
corroborate the EP calculations in the petition. Specifically, we 
attempted to locate inland freight charges through publicly available 
sources, but we were unable to do so.
    It is worth noting that the implementing regulation for section 776 
of the Act states, ``(t)he fact that corroboration may not be 
practicable in a given circumstance will not prevent the Secretary from 
applying an adverse inference as appropriate and using secondary 
information in question.'' See 19 CFR 351.308(d). Additionally, the SAA 
specifically states that where ``corroboration may not be practicable 
in a given circumstance, the Department need not prove that the facts 
available are the best alternative information.'' See the SAA at 870. 
For further discussion, see the February 12, 2003, memorandum to the 
file from the team entitled ``Corroboration of Data Contained in the 
Petition for Assigning Facts Available Rates'' (Corroboration Memo).

Normal Value

    The petitioners based NV on home market price quotes from Kuraray 
for PVA of a comparable grade to the products exported to the United 
States. These price quotes were contemporaneous with the U.S. price 
quotes used as the basis for EP. In addition, the petitioners alleged 
that sales of PVA products in the home market were made at prices below 
the fully absorbed cost of production (COP), within the meaning of 
section 773(b) of the Act, and requested that the Department conduct a 
country-wide sales-below-cost investigation. Based upon a comparison of 
the prices of the foreign like product in the home market to the 
calculated COP of the product, we found reasonable grounds to believe 
or suspect that sales of the foreign like product were made below the 
COP, within the meaning of section 773(b)(2)(A)(i) of the Act. 
Accordingly, the Department initiated a country-wide cost 
investigation. Pursuant to section 773(b)(3) of the Act, COP consisted 
of the cost of manufacture (COM), selling, general and administrative 
(SG&A) expenses, and packing. The petitioners calculated COP based on 
the experience of a U.S. PVA producer during the 2001 fiscal year, 
adjusted for known differences between costs incurred to manufacture 
PVA in the United States and Japan.
    Pursuant to sections 773(a)(4), 773(b) and 773(e) of the Act, the 
petitioners based NV for sales in Japan on constructed value (CV). The 
petitioners calculated CV using the same COM, SG&A and financial 
expense figures used to compute the COP. Consistent with section 
773(e)(2) of the Act, the petitioners included in CV an amount for 
profit. For profit, the petitioners relied upon the amount reported in 
Kuraray's 2001 financial statements.
    We found that Nippon Gohsei made sufficient home market sales at 
prices similar to the home market prices provided in the petition. One 
COP amount was provided in the petition for the two products sold by 
Kuraray. We were able to corroborate this amount, since the highest COP 
reported by Nippon Gohsei for a comparable product was similar to the 
COP provided in the petition. For further discussion, see the 
Corroboration Memo.
    Therefore, based on our efforts, described above, to corroborate 
information contained in the petition, and in accordance with 776(c) of 
the Act, we consider the margins in the petition to be corroborated to 
the extent practicable for purposes of this preliminary determination.
    Accordingly, in selecting AFA with respect to Denki Kagaku, Japan 
VAM & POVAL, and Kuraray, we have applied the margin rate of 144.16 
percent, which is the highest estimated dumping margin set forth in the 
notice of initiation. See the Initiation Notice, 67 FR at 61593.

Fair Value Comparisons

    To determine whether sales of PVA from Japan to the United States 
were made at less than fair value, we compared the EP to the NV, as 
described in the ``Export Price'' and ``Normal Value'' sections of this 
notice, below. In accordance with section 777A(d)(1)(A)(i) of the Act, 
we compared POI weighted-average EPs to weighted-average NVs.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced and sold by Nippon Gohsei in the home market during 
the POI that fit the description in the ``Scope of Investigation'' 
section of this notice to be foreign like products for purposes of 
determining appropriate product comparisons to U.S. sales. We compared 
U.S. sales to sales made in the home market, where appropriate. 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 discussed below.
    In October 2002, Kuraray, Marubeni, and the petitioners submitted 
comments on the model-matching criteria to be used by the Department. 
Based on these comments, we proposed to match products sold in the 
United States to products sold in the home market in the ordinary 
course of trade that were identical with respect to the following 
hierarchy of characteristics: molecular structure, hydrolysis, 
viscosity, degree of modification, particle size, tackifier, defoamer, 
ash, color, volatiles, and visual impurities. We invited interested 
parties to submit additional comments on these criteria prior to the 
preliminary determination.
    In December 2002, the petitioners requested that the Department 
revise the proposed model-matching hierarchy to place hydrolysis and 
viscosity as the most important criteria.
    Also in December 2002, Nippon Gohsei requested the Department 
revise the particle size field of the hierarchy to include PVA in 
standard, fine, pellet, and liquid forms. In addition, Nippon Gohsei 
requested that the Department add the field SOLH/U in order to 
distinguish between PVA sold in dry form versus liquid form. Finally, 
Nippon Gohsei requested that the Department allow respondents to report 
hydrolysis, viscosity, and degree of modification in ranges.
    After analyzing these comments, we have reconsidered the model-
matching hierarchy and revised it as follows: 1) we added as the most 
important criterion whether the product is a homo- or a co- polymer; 2) 
we placed hydrolysis and viscosity before molecular structure (i.e., 
the type of copolymer); 3) we accepted the proposed changes to particle 
size field suggested by Nippon Gohsei; and 4) we allowed the reporting 
of hydrolysis, viscosity, and degree of modification in

[[Page 8207]]

ranges. All other characteristics remained the same. For further 
discussion, see the memorandum entitled ``Concurrence Memorandum for 
the Preliminary Determination in the Investigation of Polyvinyl Alcohol 
from Japan,'' dated February 12, 2003 (the Concurrence Memorandum), on 
file in room B-099 of the Department's Central Records Unit (CRU).

Export Price

    In accordance with section 772(a) of the Act, we based our 
calculations on EP because the subject merchandise was sold by the 
producer or exporter directly to the first unaffiliated purchaser prior 
to importation. In cases where Nippon Gohsei sold pursuant to multiple-
shipment sales agreements, we used the date of the sales agreement, 
where available, as the date of sale. Where the date of the sales 
agreement was not known, we used the date of shipment as the date of 
sale because this date preceded the date of invoice. For further 
discussion, see the Concurrence Memo.
    We based EP on the packed delivered prices to unaffiliated 
purchasers in either Japan or the United States. Where appropriate, we 
made adjustments for billing errors. We also made deductions for 
movement expenses, in accordance with section 772(c)(2)(A) of the Act; 
these included, where appropriate, foreign inland freight, foreign 
brokerage and handling, loading expenses, international freight, and 
marine insurance.

Normal Value

A. Home Market Viability
    In order to determine whether there is a sufficient volume of sales 
in the home market to serve as a viable basis for calculating NV (i.e., 
the aggregate volume of home market sales of the foreign like product 
is equal to or greater than five percent of the aggregate volume of 
U.S. sales), we compared the respondent's volume of home market sales 
of the foreign like product to the volume of U.S. sales of the subject 
merchandise, in accordance with section 773(a)(1)(C) of the Act. 
Because the respondent's aggregate volume of home market sales of the 
foreign like product was greater than five percent of its aggregate 
volume of U.S. sales for the subject merchandise, we determined that 
the home market was viable for the respondent.
B. Affiliated-Party Transactions and Arm's-Length Test
    Nippon Gohsei reported sales of the foreign like product to 
affiliated end-users. To test whether these sales to affiliated 
customers were made at arm's length, where possible, we compared the 
prices of sales to affiliated and unaffiliated customers, net of all 
movement charges, direct selling expenses, and packing. Where the price 
to the affiliated party was, on average, 99.5 percent or more of the 
price to unaffiliated parties, we determined that sales made to the 
affiliated party were at arm's length. Consistent with section 
351.403(c) of the Department's regulations, we excluded from our 
analysis those sales where the price to the affiliated parties was less 
than 99.5 percent of the price to the unaffiliated parties.
C. Cost of Production Analysis
    Based on our analysis of an allegation contained in the petition, 
we found that there were reasonable grounds to believe or suspect that 
sales of PVA in the home market were made at prices below their COP. 
Accordingly, pursuant to section 773(b) of the Act, we initiated a 
country-wide sales-below-cost investigation to determine whether sales 
were made at prices below their respective COPs. See the Initiation 
Notice, 67 FR at 61594.

1. Calculation of COP

    In accordance with section 773(b)(3) of the Act, we calculated COP 
based on the sum of the cost of materials and fabrication for the 
foreign like product, plus an amount for general and administrative 
expenses (G&A), including interest expenses. See the ``Test of Home 
Market Sales Prices'' section below for treatment of home market 
selling expenses. We relied on the COP data submitted by Nippon Gohsei, 
except as noted below:
[sbull] We revised the reported costs for raw materials and utilities 
obtained from an affiliated party using facts available because Nippon 
Gohsei failed to report either the affiliate's costs and/or the market 
price for these inputs, as required by section 773(f)(3) of the Act 
(i.e., the ``major input'' rule). Because Nippon Gohsei stated that it 
attempted to obtain the necessary cost data from its affiliate but was 
unable to compel its affiliate to provide this information, we have 
used ``gap-filler'' facts available for the affiliate's costs and/or a 
market price in accordance with our practice. See Notice of Final 
Determination of Sales at Less Than Fair Value: Certain Polyester 
Staple Fiber From the Republic of Korea, 65 FR 16880 (Mar. 30, 2000) 
and accompanying Issues and Decision Memorandum at Comment 6. As ``gap-
filler'' facts available, we derived a cost and/or a market price for 
these inputs using data contained in the petition. We then used the 
higher of these costs, the market price, or the reported transfer 
prices, in accordance with section 773(f)(3) of the Act.
[sbull] We included the total amount of research and development 
expense incurred by Nippon Gohsei during the cost reporting period in 
the G&A rate calculation. We also included gain and loss on sale of 
fixed assets, and other operating incomes and expenses in the G&A rate 
calculation.
    For further discussion, see the memorandum from Sheikh M. Hannan to 
Neal Halper, Director, Office of Accounting, entitled ``Cost of 
Production and Constructed Value Adjustments for the Preliminary 
Determination,'' dated February 12, 2003.

2. Test of Home Market Sales Prices

    On a product-specific basis, we compared the adjusted weighted-
average COP to the home market sales of the foreign like product, as 
required under section 773(b) of the Act, in order to determine whether 
the sale prices were below the COP. The prices were adjusted for 
billing errors and were exclusive of any applicable movement charges, 
and direct and indirect selling expenses. We recalculated indirect 
selling expenses for certain sales made through affiliated parties to 
capture the additional layer of indirect selling expenses incurred by 
the affiliate. For further discussion, see the memorandum to the File 
from the Team Re: Calculations Performed for The Nippon Synthetic 
Chemical Industry Co., Ltd. for the Preliminary Determination in the 
2001-2002 Antidumping Duty Investigation of Polyvinyl Alcohol from 
Japan, dated February 12, 2003, which is available in room B-099 of the 
Department's CRU. In determining whether to disregard home market sales 
made at prices less than their COP, we examined, in accordance with 
sections 773(b)(1)(A) and (B) of the Act, whether such sales were made 
(1) within an extended period of time in substantial quantities, and 
(2) at prices which permitted the recovery of all costs within a 
reasonable period of time.

3. Results of the COP Test

    Pursuant to section 773(b)(2)(C), where less than 20 percent of the 
respondent's sales of a given product are at prices less than the COP, 
we do not disregard any below-cost sales of that product, because we 
determine that in such instances the below-cost sales were not made in 
``substantial quantities.'' Where 20 percent or more of a respondent's 
sales of a given product during the POI are at prices less than the

[[Page 8208]]

COP, we determine that in such instances the below-cost sales represent 
``substantial quantities'' within an extended period of time, in 
accordance with section 773(b)(1)(A) of the Act. In such cases, we also 
determine whether such sales were made at prices which would not permit 
recovery of all costs within a reasonable period of time, in accordance 
with section 773(b)(1)(B) of the Act.
    We found that, for certain specific products, more than 20 percent 
of Nippon Gohsei's home market sales were at prices less than the COP 
and, in addition, such sales did not provide for the recovery of costs 
within a reasonable period of time. We therefore excluded these sales 
and used the remaining sales, if any, as the basis for determining NV, 
in accordance with section 773(b)(1) of the Act.
D. Level of Trade
    In accordance with section 773(a)(1)(B)(i), to the extent 
practicable, we determine NV based on sales in the comparison market at 
the same level of trade (LOT) as EP or CEP. Sales are made at different 
LOTs if they are made at different marketing stages (or their 
equivalent). See 19 CFR 412(c)(2). Substantial differences in selling 
activities are a necessary, but not sufficient, condition for 
determining that there is a difference in the stages of marketing. Id.; 
see also Notice of Final Determination of Sales at Less Than Fair 
Value: Certain Cut-to-Length Carbon Steel Plate From South Africa, 62 
FR 61731, 61732 (Nov. 19, 1997). In order to determine whether the 
comparison sales were at different stages in the marketing process than 
the U.S. sales, we reviewed the distribution system in each market 
(i.e., the ``chain of distribution''),\1\ including selling 
functions,\2\ class of customer (``customer category''), and the level 
of selling expenses for each type of sale.
---------------------------------------------------------------------------

    \1\ The marketing process in the United States and comparison 
markets begins with the producer and extends to the sale to the 
final user or consumer. The chain of distribution between the two 
may have many or few links, and the respondent's sales occur 
somewhere along this chain. In performing this evaluation, we 
considered the narrative responses of the respondent to properly 
determine where in the chain of distribution the sale appears to 
occur.
    \2\ Selling functions associated with a particular chain of 
distribution help us to evaluate the level(s) of trade in a 
particular market. For purposes of this preliminary determination, 
we have organized the PVA selling functions into four major 
categories: sales process and marketing support, freight and 
delivery, inventory and warehousing, and quality assurance/warranty 
services, where applicable
---------------------------------------------------------------------------

    Pursuant to section 773(a)(1)(B)(i) of the Act, in identifying 
levels of trade for EP and comparison market sales (i.e., NV based on 
either home market or third country prices\3\), we consider the 
starting prices before any adjustments. For CEP sales, we consider only 
the selling activities reflected in the price after the deduction of 
expenses and profit under section 772(d) of the Act. See Micron 
Technology, Inc. v. United States, Court Nos. 00-1058,-1060 (Fed. Cir. 
2001).
---------------------------------------------------------------------------

    \3\ Where NV is based on CV, we determine the NV LOT based on 
the LOT of the sales from which we derive selling expenses, G&A and 
profit for CV, where possible.
---------------------------------------------------------------------------

    When the Department is unable to find sales of the foreign like 
product in the comparison market at the same LOT as the EP or CEP, the 
Department may compare the U.S. sale to sales at a different LOT in the 
comparison market. In comparing EP or CEP sales at a different LOT in 
the comparison market, where available data make it practicable, we 
make a LOT adjustment under section 773(a)(7)(A) of the Act. Finally, 
for CEP sales only, if an NV LOT is more remote from the factory than 
the CEP LOT and there is no basis for determining whether the 
difference in LOTs between NV and CEP affected price comparability 
(i.e., no LOT adjustment was practicable), the Department shall grant a 
CEP offset, as provided in section 773(a)(7)(B) of the Act. See Notice 
of Final Determination of Sales at Less Than Fair Value: Certain Cut-
to-Length Carbon Steel Plate from South Africa, 62 FR 61731 (Nov. 19, 
1997).
    We obtained information from Nippon Gohsei regarding the marketing 
stages involved in making the reported home market and U.S. sales, 
including a description of the selling activities performed by Nippon 
Gohsei for each channel of distribution. See page A-11 and exhibit 9 of 
Nippon Gohsei's November 22 section A response; see also pages 9 
through 17 and exhibit 7 of Nippon Gohsei's January 13 response to the 
Department's supplemental questionnaire.
    Nippon Gohsei reported sales through twelve channels of 
distribution in the home market, including: 1) sales through affiliated 
distributors to the unaffiliated distributors or end-users; and 2) 
direct sales to unaffiliated distributors and affiliated and 
unaffiliated end-users. Nippon Gohsei stated that it performed the 
following selling functions/services in the home market with respect to 
these channels of distribution: market research, price negotiations 
with customers, order processing, interactions with customers, forward 
inventory maintenance, technical advice, warranty services, freight 
arrangements, advertising, and just-in-time delivery. In addition, 
Nippon Gohsei provided information indicating that its affiliated 
resellers perform an additional layer of selling functions to customers 
in the home market.
    We first noted that sales by Nippon Gohsei through affiliated 
distributors pass through two companies before reaching the customer, 
whereas sales in the other chains of distribution pass directly to the 
customer. We then examined whether any differences existed with respect 
to the selling functions performed by Nippon Gohsei in making sales 
within each of these broad channels of distribution (i.e., through 
affiliates and direct to the customer). For the sales through Nippon 
Gohsei's affiliated distributors, we conducted our LOT analysis based 
on: 1) the selling activities performed by Nippon Gohsei to sell to the 
affiliated sellers; and 2) the selling activities performed by the 
affiliated reseller to sell to its unaffiliated customers. The 
information on the record indicates that the selling functions 
performed by both Nippon Gohsei and by its affiliated resellers in 
connection with sales through affiliated resellers are almost 
identical. Therefore, we find that sales through affiliated parties in 
the home market constitute one LOT.
    Nippon Gohsei also made sales to affiliated and unaffiliated home 
market end-users and unaffiliated home market distributors. The 
information on the record also indicates that the selling functions 
performed in selling directly to end-users and selling to unaffiliated 
distributors were also substantially the same. Accordingly, we do not 
find the differences in selling functions so significant as to warrant 
finding a distinct LOT for sales through these channels. However, when 
these functions are compared to those for sales through affiliated 
resellers, we find that Nippon Goshei and its affiliates provide an 
additional layer of selling functions that is substantially greater 
than the selling functions provided for direct sales. Consequently, we 
preliminarily find that Nippon Gohsei made sales at two LOTs in the 
home market: 1) sales through affiliated parties, and 2) direct sales 
to affiliated and unaffiliated customers.
    For its sales to the United States, Nippon Gohsei reported two 
channels of distribution, including sales to unaffiliated trading 
companies and direct sales to end-users. Nippon Gohsei stated that it 
performed the following selling functions/services in the U.S. market: 
market research, price negotiations with customers, order processing, 
interactions with customers,

[[Page 8209]]

forward inventory maintenance, technical advice, warranty services, 
freight arrangements, advertising, and just-in-time delivery. The 
information on the record indicates that the selling functions 
performed in selling directly to end-users and selling to unaffiliated 
distributors were also virtually identical. Like Nippon Gohsei's sales 
to unaffiliated parties in the home market, the differences between the 
claimed channels in the U.S. market are not substantial enough to 
warrant a finding of separate LOTs. Therefore, we preliminarily find 
that Nippon Gohsei made sales through one LOT in the U.S. market: sales 
to unaffiliated parties. We further preliminarily find that the U.S. 
LOT is the same as the home market LOT for sales to unaffiliated 
parties because the selling functions performed by Nippon Gohsei are 
substantially the same in both markets. Consequently, we compared 
Nippon Gohsei's EP sales to its sales at the same LOT in the home 
market. Where we could not compare EP sales to home market sales of the 
most similar product at the same LOT, we made an LOT adjustment in 
accordance with section 773(a)(7)(A) of the Act. For further 
discussion, see the Concurrence Memo.
E. Calculation of Normal Value Based on Comparison Market Prices
    We calculated NV based on delivered prices to unaffiliated 
customers or prices to affiliated customers that we determined to be at 
arm's-length. Where appropriate, we made adjustments for billing 
errors. We also made deductions, where appropriate, for movement 
expenses, including inland freight (plant to distribution warehouse and 
plant/warehouse to customer) and warehousing under section 
773(a)(6)(B)(ii) of the Act. In addition, we made adjustments under 
section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410 for differences 
in circumstances of sale for imputed credit expenses and bank charges.
    Furthermore, we made adjustments for differences in costs 
attributable to differences in the physical characteristics of the 
merchandise in accordance with section 773(a)(6)(C)(ii) of the Act and 
19 CFR 351.411. We also deducted home market packing costs and added 
U.S. packing costs in accordance with section 773(a)(6)(A) and (B) of 
the Act.
    Finally, we made an LOT adjustment under section 773(a)(7)(A) of 
the Act and 19 CFR 351.412, where appropriate.

Currency Conversion

    Section 773A(a) of the Act directs the Department to convert 
foreign currencies based on the U.S. dollar exchange rate in effect on 
the date of sale of the subject merchandise, except if it is 
established that a currency transaction on forward markets is directly 
linked to an export sale. When a company demonstrates that a sale on 
forward markets is directly linked to a particular export sale in order 
to minimize its exposure to exchange rate losses, the Department will 
use the rate of exchange in the forward currency sale agreement. 
Accordingly, we made currency conversions based on the official 
exchange rates in effect on the dates of the U.S. sales as certified by 
the Federal Reserve Bank, except where Nippon Gohsei demonstrated that 
its exchange rates were established by forward exchange contracts.

Verification

    As provided in section 782(i) of the Act, we will verify all 
information relied upon in making our final determination.

Suspension of Liquidation

    In accordance with section 733(d)(2) of the Act, we are directing 
the Customs Service to suspend liquidation of all imports of subject 
merchandise from Japan entered, or withdrawn from warehouse, for 
consumption on or after the date of publication of this notice in the 
Federal Register. We will instruct the Customs Service to require a 
cash deposit or the posting of a bond equal to the weighted-average 
amount by which the NV exceeds the EP, as indicated in the chart below. 
These suspension of liquidation instructions will remain in effect 
until further notice.
    The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                       Weighted-average
                  Exporter/producer                       margin (in
                                                           percent)
------------------------------------------------------------------------
Denki Kagaku Kogyo Kabushiki Kaisha.................              144.16
Japan VAM & POVAL Co., Ltd..........................              144.16
Kuraray Co., Ltd....................................              144.16
The Nippon Synthetic Chemical Industry Co., Ltd.....               24.82
All Others..........................................               24.82
------------------------------------------------------------------------

    Pursuant to section 735(c)(5)(A) of the Act, we have excluded from 
the calculation of the All Others rate margins which are zero or de 
minimis, or determined entirely on facts available. Because we 
determined the margin for the three non-participating respondents 
entirely on facts available, we used Nippon Gohsei's margin as the All 
Others rate.

Disclosure

    The Department will disclose calculations performed within five 
days of the date of publication of this notice to the parties in this 
proceeding in accordance with 19 CFR 351.224(b).

ITC Notification

    In accordance with section 733(f) of the Act, we have notified the 
ITC of our determination. If our final antidumping determination is 
affirmative, the ITC will determine whether these imports are 
materially injuring, or threaten material injury to, the U.S. industry. 
The deadline for that ITC determination would be the later of 120 days 
after the date of this preliminary determination or 45 days after the 
date of our final determination.

Public Comment

    Case briefs for this investigation must be submitted no later than 
seven days after the date of the final verification report issued in 
this proceeding. Rebuttal briefs must be filed five days from the 
deadline date for case briefs. A list of authorities used, a table of 
contents, and an executive summary of issues should accompany any 
briefs submitted to the Department. Executive summaries should be 
limited to five pages total, including footnotes. See 19 CFR 351.309.
    Section 774 of the Act provides that the Department will hold a 
hearing to afford interested parties an opportunity to comment on 
arguments raised in case briefs, provided that such a hearing is 
requested by any interested party. If a request for a hearing is made 
in this investigation, the hearing will tentatively be held two days 
after the deadline for submission of the rebuttal briefs, at the U.S. 
Department of Commerce, 14th Street and Constitution

[[Page 8210]]

Avenue, NW, Washington, DC 20230. Parties should confirm by telephone 
the time, date, and place of the hearing 48 hours before the scheduled 
time. Interested parties who wish to request a hearing, or to 
participate if one is requested, must submit a written request within 
10 days of the publication of this notice. Requests should specify the 
number of participants and provide a list of the issues to be 
discussed. Oral presentations will be limited to issues raised in the 
briefs. See 19 CFR 351.310.
    We will make our final determination no later than 75 days after 
the date of this preliminary determination, pursuant to section 
735(a)(1) of the Act.
    This determination is issued and published pursuant to sections 
733(f) and 777(i) of the Act.

    Dated: February 12, 2003.
Faryar Shirzad,
Assistant Secretaryfor Import Administration.
[FR Doc. 03-4132 Filed 2-19-03; 8:45 am]
BILLING CODE 3510-DS-S