[Federal Register Volume 69, Number 65 (Monday, April 5, 2004)]
[Notices]
[Pages 17645-17648]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-7643]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-580-853]


Notice of Final Determination of Sales at Not Less Than Fair 
Value: Wax and Wax/Resin Thermal Transfer Ribbon from the Republic of 
Korea

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

ACTION: Notice of Final Determination of Sales at Not Less Than Fair 
Value.

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EFFECTIVE DATE: April 5, 2004.

FOR FURTHER INFORMATION CONTACT: Fred Baker, Mike Heaney, or Robert 
James, AD/CVD Enforcement, Group III, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230, 
telephone: (202) 482-2924, (202) 482-4475, or (202) 482-0649, 
respectively.

SUPPLEMENTARY INFORMATION:

Final Determination

    We determine that wax and wax/resin thermal transfer ribbons (TTR) 
are not being, nor are likely to be, sold in the United States at less 
than fair value (LTFV), as provided in section 735 of the Tariff Act of 
1930, as amended (the Tariff Act).

Case History

    The Department published the preliminary determination of sales at 
not less-than-fair-value on December 22, 2003. See Notice of 
Determination of Sales at Not Less Than Fair Value: Wax and Wax/Resin 
Thermal Transfer Ribbons from the Republic of Korea, 68 FR 71078 
(December 22, 2003) (Preliminary Determination). Since then the 
following events have occurred.
    On December 22, 2003 respondent Illinois Tool Works, Inc. (the only 
known producer/exporter of TTR from Korea to the United States (ITW)) 
submitted its response to the Department's November 28, 2003 
supplemental questionnaire regarding the section E further 
manufacturing response of ITW's U.S. affiliate ITW Thermal Films 
(ITWTF). Also on December 22, 2003 ITW submitted its response to the 
Department's sections A, B, and C supplemental questionnaire, issued on 
December 1, 2003.
    On December 23, 2003 DigiPrint International, a U.S. importer of 
TTR slit in India, submitted comments on substantial transformation and 
country of origin.These comments were made part of the TTR from Korea 
investigation as an attachment to a memorandum to the file dated 
January 9, 2004. See memorandum from Cheryl Werner to the file dated 
January 9, 2004 on file in room B-099 of the Department of Commerce 
building.
    On January 5, 2004 ITW submitted its response to the Department's 
December 18, 2003 section D supplemental questionnaire. Also on January 
5, 2004 the Department issued another section E supplemental 
questionnaire.
    On January 5, 2004 and January 16, 2004, International Imaging 
Materials, Inc. (petitioner) submitted comments regarding (1) its 
allegation that respondents in the three concurrent investigations of 
TTR (France, Japan, and South Korea) would attempt to circumvent the 
order by slitting jumbo rolls in third countries, and (2) its request 
that the Department therefore determine that slitting does not change 
the country of origin of TTR for antidumping purposes.
    On January 6, 2004 petitioner submitted comments on the upcoming 
cost of production (COP) verification.
    On January 9, 2004 Armor S.A. (the sole respondent in the 
antidumping investigation of TTR from France) submitted a response to 
petitioner's January 5, 2004 comments on country of origin.
    On January 12, 2004 ITW submitted its response to the Department's 
January 5, 2004 section E supplemental questionnaire.
    From January 12 through January 16, 2004 Department officials 
verified the cost of production response of ITW Specialty Films Co., 
Ltd. (ITWSFK) in Seoul, Korea. See February 5, 2004 cost verification 
report. This and all other memoranda cited herein are on file in the 
Central Records Unit, room B-099 of the Department of Commerce 
building.
    From January 16 through January 19, 2004 Department officials 
verified the sales response of ITWSFK in Seoul, Korea. See February 17, 
2004 sales verification report.
    On January 20, 2004 petitioner met with Department officials to 
discuss their concerns about some of the information on the record. See 
Memorandum from Fred Baker to the File, dated January 22, 2004.

[[Page 17646]]

    On January 21, 2004 petitioner requested a hearing.
    On January 22, 2004, petitioner submitted pre-verification comments 
for the upcoming further manufacturing verification in Romeo, Michigan.
    On January 23, 2004 ITW requested to participate in the hearing. 
Also on January 23, 2004 petitioner submitted comments on ITW's 
sections supplemental A, B, and C responses and the submissions by 
three of ITW's affiliated U.S. resellers. Also on January 23, 2004 
petitioner requested that the Department postpone the final 
determination until March 22, 2004.
    From January 26 through January 28, 2004 Department officials 
verified the further manufacturing response of ITW Thermal Films 
(ITWTF) in Romeo, Michigan. See February 5, 2004 further-manufacturing 
verification report. From January 28 through January 30, 2004 
Department officials verified the sales response of ITWTF in Romeo, 
Michigan. See February 18, 2004 CEP verification report.
    On February 9, 2004 petitioner met with Department officials to 
discuss various aspects of the distribution process for TTR in both the 
United States and Korea. See Memorandum from Robert James to the File 
dated February 9, 2004. On February 11, 2004 petitioner made a 
submission in follow-up to the February 9, 2004 meeting with Department 
officials.
    On February 12, 2004 the Department extended the deadline for 
issuing the final determination. See Notice of Postponement of Final 
Antidumping Duty Determination: Wax and Wax/Resin Thermal Transfer 
Ribbons from the Republic of Korea, 69 FR 6941 (February 12, 2004).
    On February 18, 2004 the Department issued a ``post-preliminary 
analysis'' of ITW's submitted data in response to the below-COP 
allegation made by petitioner. We initiated the below-cost sales 
investigation on November 19, 2003. The ``post-preliminary analysis'' 
consisted of a recalculation of ITW's dumping margin based on all the 
information on the record to date, including cost data and verification 
findings. See Memorandum from Fred Baker to the File dated February 18, 
2004.
    On February 26, 2004 ITW and petitioner submitted case briefs.
    On February 27, 2004 petitioner withdrew its request for a hearing.
    On March 2, 2004 ITW and petitioner submitted rebuttal briefs.
    On March 3, 2004 petitioner met with Department officials to 
discuss issues raised in the case briefs. See Memorandum to the File 
dated March 4, 2004.
    On March 10, 2004 ITW held a meeting with Department officials to 
discuss issues raised in the case briefs. See memorandum to the file 
dated March 10, 2004.
    On March 25, 2004 the Department again extended the deadline for 
issuing the final determination. See Notice of Postponement of Final 
Antidumping Duty Determination: Wax and Wax/Resin Thermal Transfer 
Ribbons from the Republic of Korea, 69 FR 15298 (March 25, 2004).
    On March 22, 2004 Department officials met with counsel for 
petitioners. See Memorandum to the File dated March 23, 2004. The 
following day Department officials met with counsel for ITW. See 
Memorandum to the File dated March 23, 2004.

Period of Investigation

    The period of investigation is April 1, 2002 through March 31, 
2003.

Analysis of Comments Received

    All issues raised in the case and rebuttal briefs by parties to 
this antidumping investigation are addressed in the ``Issues and 
Decision Memorandum'' (Decision Memorandum) from Joseph A. Spetrini, 
Deputy Assistant Secretary, Import Administration, to James J. Jochum, 
Assistant Secretary for Import Administration, dated March 29, 2004, 
which is hereby adopted by this notice. A list of the issues which 
parties have raised and to which we have responded, all of which are in 
the Decision Memorandum, is attached to this notice as an appendix. 
Parties can find a complete discussion of all issues raised in this 
investigation and the corresponding recommendations in this public 
memorandum which is on file in the Central Records Unit, room B-099 of 
the main Department of Commerce building. In addition, a complete 
version of the Decision Memorandum can be accessed directly on the Web 
at http://ia.ita.doc.gov/. The paper copy and electronic version of the 
Decision Memorandum are identical in content.

Scope of Investigation

    This investigation covers wax and wax/resin thermal transfer 
ribbons (TTR), in slit or unslit (``jumbo'') form originating from 
Korea with a total wax (natural or synthetic) content of all the image 
side layers, that transfer in whole or in part, of equal to or greater 
than 20 percent by weight and a wax content of the colorant layer of 
equal to or greater than 10 percent by weight, and a black color as 
defined by industry standards by the CIELAB (International Commission 
on Illumination) color specification such that L < *35, -20 < a* <35 
and -40 < b* <31, and black and near-black TTR. TTR is typically used in 
printers generating alphanumeric and machine-readable characters, such 
as bar codes and facsimile machines.
    The petition does not cover pure resin TTR, and finished thermal 
transfer ribbons with a width greater than 212 millimeters (mm), but 
not greater than 220 mm (or 8.35 to 8.66 inches) and a length of 230 
meters (m) or less (i.e., slit fax TTR, including cassetted TTR), and 
ribbons with a magnetic content of greater than or equal to 45 percent, 
by weight, in the colorant layer.
    The merchandise subject to this investigation may be classified in 
the Harmonized Tariff Schedule of the United States (HTSUS) at heading 
3702 and subheadings 3921.90.40.25, 9612.10.90.30, 3204.90, 3506.99, 
3919.90, 3920.62, 3920.99 and 3926.90. The tariff classifications are 
provided for convenience and Customs and Border Protection (CBP) 
purposes; however, the written description of the scope of the 
investigation is dispositive.

Currency Conversion

    We made currency conversions into U.S. dollars in accordance with 
section 773A(a) of the Tariff Act based on exchange rates in effect on 
the dates of the United States sales, as provided by the Dow Jones 
Business Information Services.

Verification

    As provided in section 782(i) of the Tariff Act, we verified the 
information submitted by the respondent for use in our final 
determination. We used standard verification procedures, including 
examination of relevant accounting and production records, as well as 
original source documents provided by the respondent.

Affiliation Issues

    Petitioner alleges in its February 26, 2004 Case Brief that ITW is 
affiliated to SKC Corporation, a Korean film producer which sold its 
TTR and specialty film mill to ITW in April 1999. Petitioner also 
accuses ITW of misreporting home market sales be concealing its 
affiliation with a certain home market customer. ITW denies both 
allegations in its March 2, 2004 Rebuttal Brief. A complete discussion 
of theses issues, necessitating extensive references to business 
proprietary information, is found in a memorandum to Joseph A. 
Spetrini, ``Antidumping

[[Page 17647]]

Duty Investigation on Wax and Wax/Resin Thermal Transfer Ribbons from 
South Korea: Affiliation Issues Concerning Respondent Illinois Tool 
Works, Inc.,'' dated March 25, 2004. See also, the Decision Memorandum.

Country of Origin

    As noted above, petitioner has requested that the Department 
determine that TTR produced in Korea (in jumbo roll, i.e., unslit form) 
that is slit in a third country does not change the country of origin 
for antidumping purposes. According to petitioner, because slitting 
does not constitute a ``substantial transformation,'' Korean jumbo 
rolls slit in a third country should be classified as Korean TTR for 
antidumping purposes, and, therefore, within the scope of this 
investigation and any resulting order. Petitioner submitted comments on 
this request on October 28, 2003, December 5, 2003, January 5 and 
January 16, 2004. According to petitioner, substantial transformation 
does not take place because: 1) both slit and jumbo rolls have the same 
essential physical characteristics (e.g., both have the same chemical 
properties that make them suitable for thermal transfer printing); 2) 
large capital investments are required for coating and ink-making 
(production stages prior to slitting), but not for slitting; 3) coating 
and ink-making require significantly more skill, expertise, and 
research and development; and, 4) the majority of costs and value comes 
from coating and ink-making. Petitioner states that, for purposes of 
this issue, slitting and packaging do not account for a substantial 
amount of the total cost of finished TTR (depending on the degree of 
automation and whether new or secondhand equipment is involved); and 
that a slitting operation requires a small amount of capital, compared 
with a large amount of capital required for a coating and ink-making 
operation.
    Armor, the sole respondent in the investigation of TTR from France, 
argues that slitting does constitute substantial transformation, and, 
therefore, that the Department should determine that French jumbo rolls 
slit in a third country should be considered to have originated in that 
third country for antidumping purposes. Armor submitted comments on 
November 26, 2003, December 12, 2003, and January 9, 2004. Armor argues 
that substantial transformation does take place because: 1) slitting, 
and the repackaging that necessarily goes along with it, involves 
transforming the product into its final end-use dimensions, the 
insertion of one or two cores (for loading the ribbons into printers), 
and the addition of leaders, bridges, and trailers, which result in a 
new product, with a new name, new character, and new purpose; 2) 
petitioner excluded TTR slit to fax proportions, acknowledging the 
importance of slitting; and, 3) U.S. Customs and Border Protection 
(CBP) and the Court of International Trade (CIT) have determined that 
slitting and repackaging amount to substantial transformation. 
DigiPrint, in comments received on January 2, 2004, argues that the 
record of this investigation indicates that slitting and packaging 
account for a large amount (34%) of total cost, indicating substantial 
transformation.
    The Department has considered several factors in determining 
whether a substantial transformation has taken place, thereby changing 
a product's country of origin. These have included: the value added to 
the product; the sophistication of the third-country processing; the 
possibility of using the third-country processing as a low cost means 
of circumvention; and, most prominently, whether the processed product 
falls into a different class or kind of product when compared to the 
downstream product. While all of these factors have been considered by 
the Department in the past, it is the last factor which is consistently 
examined and emphasized.\1\ When the upstream and processed products 
fall into different classes or kinds of merchandise, the Department 
generally finds that this is indicative of substantial transformation. 
See, e.g., Cold-Rolled 1993, 58 FR at 37066.
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    \1\ See, e.g., Notice of Final Determination of Sales at Less 
Than Fair Value: Certain Cold- Rolled Carbon Steel Flat Products 
From Argentina, 58 FR 37062, 37066 (July 9, 1993) (Cold-Rolled 
1993); Final Determination of Sales at Less Than Fair Value; 
Limousines From Canada, 55 FR 11036, 11040, comment 10 (March 26, 
1990) (Limousines); Erasable Programmable Read Only Memories 
(EPROMs) From Japan; Final Determination of Sales at Less than Fair 
Value, 51 FR 39680, 39692, comment 28 (October 30, 1986) (EPROMs); 
and, Cold-Rolled 1993, 58 FR at 37066; respectively.
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    Accordingly, the Department has generally found that substantial 
transformation has taken place when the upstream and downstream 
products fall within two different ``classes or kinds'' of merchandise: 
(see, e.g., steel slabs converted to hot-rolled band; wire rod 
converted through cold-drawing to wire; cold-rolled steel converted to 
corrosion resistant steel; flowers arranged into bouquets; automobile 
chassis converted to limousines).\2\ Conversely, the Department almost 
invariably determines substantial transformation has not taken place 
when both products are within the same ``class or kind'' of 
merchandise: (see, e.g., computer memory components assembled and 
tested; hot-rolled coils pickled and trimmed; cold-rolled coils 
converted into cold-rolled strip coils; rusty pipe fittings converted 
to rust free, painted pipe fittings; green rod cleaned, coated, and 
heat treated into wire rod).\3\ In this case, both jumbo and slit TTR 
are within the same class or kind of merchandise, as defined in the 
Department's initiation and as defined for this final determination.
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    \2\ Notice of Final Determination of Sales at Less Than Fair 
Value; Stainless Steel Sheet and Strip in Coils From the United 
Kingdom, 64 FR 30688, 30703, comment 13 (June 8, 1999); Notice of 
Final Determination of Sales at Less Than Fair Value-Stainless Steel 
Round Wire from Canada, 64 FR 17324, 17325, comment 1 (April 9, 
1999); Cold-Rolled 1993, 58 FR at 37066; Certain Fresh Cut Flowers 
From Colombia; Final Results of Antidumping Duty Administrative 
Review, 55 FR 20491, 20499, comment 49 (May 17, 1990); and, 
Limousines, 55 FR 11040; respectively.
    \3\ Notice of Initiation of Countervailing Duty Investigation: 
Dynamic Random Access Memory Semiconductors from the Republic of 
Korea, 67 FR 70927, 70928 (November 27, 2002) (DRAMs); EPROMs, 51 FR 
at 39692; Dynamic Random Access Memory Semiconductors of 256 
Kilobits and Above from Japan; Suspension of Investigation and 
Amendment of Preliminary Determination, 51 FR 28396, 28397 (August 
7, 1986); Notice of Preliminary Determination of Sales at Less Than 
Fair Value: Certain Hot-Rolled Carbon Steel Flat Products From the 
People's Republic of China, 66 FR 22183, 22186 (May 3, 2001); 
Memorandum to Troy H. Cribb, Acting Assistant Secretary, from Holly 
Kuga, Acting Deputy Assistant Secretary, Issues and Decision 
Memorandum for the Investigation of Certain Cold-Rolled Flat-Rolled 
Carbon Quality Steel Products from Taiwan, comment 1 (May 22, 2000); 
Notice of Preliminary Determination of Sales at Less Than Fair Value 
and Postponement of Final Determination: Steel Wire Rod From Canada, 
62 FR 51572, 51573 (October 1, 1997); Final Determination of Sales 
at Less Than Fair Value: Certain Carbon Steel Butt-Weld Pipe 
Fittings From India, 60 FR 10545, 10546 (February 27, 1995); 
respectively.
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    While slitting and packaging might account for 34 percent of the 
total cost of production,\4\ the processes and equipment involved do 
not amount to substantial transformation of the jumbo TTR for 
antidumping purposes. According to information submitted by petitioner, 
and not rebutted by any party to this investigation, a slitting 
operation requires only a fraction of the capital investment required 
for a coating and

[[Page 17648]]

ink-making operation.\5\ Moreover, the ITC noted in this investigation 
that the ``slitting and packaging process is not particularly complex, 
especially as compared to the jumbo TTR production process.'' ITC 
Report, at 7. The ITC also noted that the primary cost involved in a 
slitting and packaging operation is not capital cost, but direct labor 
cost, which, we note, might be hired cheaply in a third country. Id. at 
14. Thus, it appears that a slitting operation could be established in 
a third country for circumvention purposes with far greater ease than a 
coating and ink-making operation.
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    \4\ The ITC report states that ``[s]ix U.S. producers indicate 
that slitting and packaging accounts for an average of 34 percent of 
the cost of finished bar code TTR.'' Certain Wax and Wax/Resin 
Thermal Transfer Ribbons from France, Japan, and Korea, 
Investigations Nos. 731-TA-1039-1041 (Preliminary), (July 2003) (ITC 
Report), at 7. DigiPrint apparently is referring to this figure, 
when it refers to 34 percent in its January 2, 2004 submission. 
Figures placed on the record by petitioner related to this issue are 
proprietary, but indicate that the relevant figure might be 
significantly less than 34 percent, depending on the country in 
which the slitter is located, the type of equipment used, the degree 
of automation involved, and whether the process relies more on labor 
than capital.
    \5\ These figures agree with statements made by DNP, a 
respondent in the Japanese TTR investigation, recorded in the 
preliminary report by the U.S. International Trade Commission (ITC), 
that capital investment in a slitting operation was ``generally very 
small'' ($100,000 to $300,000). Id. at 14.
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    Finally, the ITC concluded that, while slit and jumbo TTR are like 
products, U.S. slitting and packaging operations (or ``converters'') 
were not part of the domestic industry for purposes of this 
investigation, ``for lack of sufficient production related 
activities.'' Id. at 13. The implication of the ITC's conclusion, based 
on its extensive multi-pronged analysis, is that TTR is the product of 
coating and ink-making, not slitting and packaging: ``The production 
related activities of converters are insufficient for such firms to be 
deemed producers of the domestic like product.'' Id. While we are not 
bound by the ITC's decisions, the ITC's determination is important to 
consider in this particular instance because it is based on the full 
participation of respondents and petitioner, whereas respondent 
withdrew its information from our investigation.
    As the Department has stated on numerous occasions, CBP decisions 
regarding substantial transformation and customs regulations, referred 
to by respondent, are not binding on the Department, because we make 
these decisions with different aims in mind (e.g., anticircumvention). 
See, e.g., DRAMs, 67 FR at 70928. The Department's independent 
authority to determine the scope of its investigations has been upheld 
by the CIT. See Diversified Products Corp. v. United States, 572 F. 
Supp. 883, 887 (CIT 1983). Presumably, a CIT decision interpreting 
substantial transformation in the context of CBP regulations, also 
cited by respondent, also is not binding on the Department.
    While the other facts noted by respondent are not necessarily 
irrelevant to this determination, they do not overcome the conclusion 
indicated by the fact that the slitting and packaging of jumbo rolls 
into slit TTR does not create a ``new and different article.'' In other 
words, the totality of the circumstances indicates that slitting does 
not constitute substantial transformation for antidumping purposes. 
Even accepting, arguendo, DigiPrint's statement regarding the amount of 
total cost accounted for by slitting and packaging, and respondent's 
statements regarding how slitting and packaging transform the product 
into its final end-use form, the product still has not changed 
sufficiently to fall outside the class or kind of merchandise defined 
in this investigation. Jumbo rolls are intermediate products, and slit 
rolls are final, end-use products, but the transformation of an 
upstream product into a downstream product does not necessarily 
constitute ``substantial transformation'' and, in this case, does not, 
given the considerations listed above.
    Similarly, in DRAMs, we decided that wafers shipped to a third 
country to be used in the assembly of DRAMs (subject merchandise) did 
not amount to substantial transformation because the wafers were the 
``essential'' component in the product. In this case, the ITC report 
notes petitioner's statement, unrefuted by respondents, that ``the 
essential characteristic of finished TTR, like that of jumbo TTR, is 
that of a strip of PET film coated with ink.'' We agree and note that 
the essential characteristic is contained in the jumbo TTR imported 
into the third country.
    Therefore, in light of this fact and the facts discussed below, we 
determine that slitting jumbo rolls does not constitute substantial 
transformation. Jumbo rolls originating in Korea but slit in a third 
country will be subject to any antidumping duties imposed on Korean 
TTR, if an antidumping duty order on such products is issued.

Changes Since the Preliminary Results

    Based on our findings at verification and our analysis of comments 
received, we have made adjustments to the preliminary determination 
calculation methodology and post-preliminary analysis methodology in 
calculating the final margin for ITW. These adjustments are discussed 
in the Decision Memorandum for this investigation.

Suspension of Liquidation

    Because the estimated weight-averaged dumping margin for the 
investigated company is 1.65 percent (de minimis), we are not directing 
the CBP to suspend liquidation of entries of TTR from Korea.

Final Determination Margin

    We determine that the following percentage weighted-average margin 
exists:

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               Exporter/manufacturer                   Margin (percent)
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ITW................................................                 1.65
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ITC Notification

    In accordance with section 735(d) of the Tariff Act, we have 
notified the International Trade Commission (ITC) of our determination.
    This notice also serves as a reminder to parties subject to 
administrative protective orders (APOs) or their responsibility 
concerning the return or destruction of proprietary information 
disclosed under APO in accordance with 19 CFR 351.305, which continues 
to govern business proprietary information in this segment of the 
proceeding. Timely written notification of the return/destruction of 
APO materials or conversion to judicial protective order is hereby 
requested. Failure to comply with the regulations and terms of an APO 
is a violation which is subject to sanction.
    This determination is issued and published pursuant to section 
735(d) and 777(i)(1) of the Tariff Act.

    Dated: March 29, 2004.
James J. Jochum,
Assistant Secretary for Import Administration.

Appendix 1 Issues in the Decision Memorandum

Comment 1: Affiliation Between ITW and SKC
Comment 2: Alleged Affiliation with Customer
Comment 3: Costs of Connums Sold in the United States
Comment 4: Allocation Indices
Comment 5: Low Costs of Type 2 Wax With Some Resin Jumbo Rolls
Comment 6: Film Cost
Comment 7: Ink-Making Costs
Comment 8: Coating Index
Comment 9: Korean Slitting Cost
Comment 10: Alleged Incorrectly-Reported U.S. Further-Manufacturing 
Costs
Comment 11: Use of Adverse Facts Available
Comment 12: Allocation of Goodwill Expenses
Comment 13: Royalty Expenses
Comment 14: Non-Operating Income
Comment 15: Averaging Groups for U.S. Sales
Comment 16: Treatment of Non-Dumped Sales
Comment 17: Clerical Errors
[FR Doc. 04-7643 Filed 4-2-04; 8:45 am]
BILLING CODE 3510-25-S