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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-580-807]

Polyethylene Terephthalate Film, Sheet, and Strip from the

Republic of Korea; Final Results of Antidumping Duty Administrative

Reviews and Notice of Revocation in Part

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Final Results of Antidumping Duty Administrative

Reviews and Notice of Revocation in Part.

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SUMMARY: On September 29, 1995, the Department of Commerce (the

Department) published the preliminary results of administrative reviews

and notice of intent to revoke in part the antidumping duty order on

polyethylene terephythalate (PET) film, sheet, and strip from the

Republic of Korea. The reviews cover four manufacturers/exporters of

the subject merchandise to the United States and the periods June 1,

1992 through May 31, 1993 and June 1, 1993 through May 31, 1994.

As a result of comments we received, the antidumping margins have

changed from those we presented in our preliminary results.

EFFECTIVE DATES: July 5, 1996.

FOR FURTHER INFORMATION CONTACT:

Michael J. Heaney, or John Kugelman, Office of Antidumping Compliance,

Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue NW.,

Washington, DC 20230, telephone: (202) 482-4475/0649.

SUPPLEMENTARY INFORMATION:

Background

On September 29, 1995 (59 FR 50547), the Department published the

preliminary results of administrative reviews and notice of intent to

revoke in part the antidumping duty order on PET film from the Republic

of Korea (56 FR 25669, June 5, 1991). At the request of petitioners and

three respondents, we held a hearing on April 9, 1996.

These reviews cover four manufacturer/exporters: Cheil Synthetics,

Inc. (Cheil), Kolon Industries (Kolon), SKC Limited (SKC), and STC

Corporation (STC).

We are revoking the order for Cheil because Cheil has sold the

subject merchandise at not less than foreign market value (FMV) in

these reviews and for at least three consecutive periods. Cheil has

also submitted certification that it will not sell at less than FMV in

the future.

Scope of the Review

Imports covered by these reviews are shipments of all gauges of

raw, pretreated, or primed polyethylene terephthalate film, sheet, and

strip, whether extruded or coextruded. The films excluded from this

review are metallized films and other finished films that have had at

least one of their surfaces modified by the application of a

performance-enhancing resinous or inorganic layer of more than 0.00001

inches (0.254 micrometers) thick. Roller transport cleaning film which

has at least one of its surfaces modified by the application of 0.5

micrometers of SBR latex has also been ruled as not within the scope of

the order.

PET film is currently classifiable under Harmonized Tariff Schedule

(HTS) subheading 3920.62.00.00. The HTS subheading is provided for

convenience and for U.S. Customs purposes. The written description

remains dispositive as to the scope of the product coverage.

The reviews cover the periods June 1, 1992 through May 31, 1993

(second review period) and June 1, 1993 through May 31, 1994 (third

review period). The Department has conducted these reviews in

accordance with section 751 of the Tariff Act of 1930, as amended (the

Act).

Applicable Statute and Regulations

Unless otherwise stated, all citations to the statute and to the

Department's regulations are references to the provisions as they

existed on December 31, 1994.

Analysis of Comments Received

We invited interested parties to comment on the preliminary results

of this administrative review. We received timely comments from the

petitioners and all four respondents. At the request of the petitioners

and three respondents, we held a public hearing on April 9, 1996.

Comment 1: Petitioners argue generally that the methodologies

employed by SKC and Cheil to value recycled chip (RC) assign an

unreasonably low cost to recycled resin. Petitioners contend that the

cost of processing recycled film is directly associated with the cost

of the chemicals which are reclaimed. Petitioners assert that to

properly account for the cost of producing PET film, the Department

must include both the cost of the materials content of the recycled

film and the cost of the recycling. Petitioners also argue that both

virgin resin and recycled resin contain the same basic chemicals in the

same quantities, and that recycled resin is a nearly ``one for one''

substitute for virgin resin. Petitioners assert that the differences

between virgin resin and recycled resin are ``minimal.'' While limits

exist on the amount of recycled resin that can be used in PET film

production, petitioners note that in many instances recycled resin

accounts for more than 50 percent of the raw material inputs.

Petitioners further note that the bill of materials (``recipes'') for

PET films can be adjusted to tolerate a greater or lesser volume of

recycled resin, and that producers can adjust the molecular weight of

virgin chip (VC) to accommodate varying usage of recycled resin.

Petitioners also assert that producers can modify the production

process to minimize problems related to discoloration caused by using

recycled resin.

Petitioners contend that, in general, the methodologies used by

Cheil and SKC to value recycled resin do not reflect the actual cost of

that material. Petitioners assert that the Statement of

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Administrative Action (SAA), Congressional Reports on the Uruguay Round

Agreements Act, and the Court of Appeals for the Federal Circuit (CAFC)

decision in Ipsco Inc. v. the United States, 965 F. 2d 1056, 1059-1061

(Fed. Cir. 1992) (Ipsco Appeal), preclude the Department from using

cost calculations which substitute assigned values for actual costs.

Even if the methodologies employed by Cheil and SKC to account for

recycled film are consisted with Korean Generally Accepted Accounting

Principles (GAAP), petitioners argue that Cheil's and SKC's

methodologies are unacceptable because they fail to reasonably reflect

the costs associated with recycled material. Petitioners contend that

the Department has accepted from Cheil and SKC different, contradictory

accounting treatments of the cost of RC.

Cheil: Specifically with regard to Cheil, petitioners assert that

the number of sales used by Cheil to establish the net realizable value

(NRV) of recycled resin is too small to be representative of the actual

cost of the material. Petitioners further argue that the customers who

purchase resin from Cheil are using the resin in a less demanding

process. These customers, petitioners assert, do not require recycled

resin of the same quality as PET film producers. Petitioners argue that

there is no indication that the grades of PET film sold by Cheil on the

open market are the same as that which Cheil uses internally.

Petitioners contend that most PET films can be made within a broad

range of virgin resin/recycled resin ratios. petitioners argue that

given the flexibility to increase or reduce the usage of recycled

resin, Cheil's decision to sell a small amount of PET resin at a price

that is much lower than the price of virgin resin makes little economic

sense. Petitioners suggest that Cheil's rationale for selling a small

amount of recycled chip on the open market could be to establish an

artificially low value for the recycled chip used in PET film exports

to the United States.

In response, Cheil argues that the appropriate accounting treatment

for valuing its recycled resin (pellets) is the NRV that Cheil assigns

to these pellets. Cheil notes that the NRV methodology is consistent

with both Korean and U.S. GAAP. Cheil contends that Departmental

review, analysis, and verification of the cost data submitted by Cheil

uncovered no evidence that Cheil's NRV methodology is manipulative, or

that Cheil substituted increasing quantities of pellets for VCs in an

attempt to minimize its dumping liability.

Cheil contends that the NRV established for recycled pellet

represents a market price for that merchandise. Cheil argues that the

Department has no basis to exclude these sales because such sales are

``too small'' to constitute a valid market. Cheil further contends that

its NRV methodology was in place before the onset of the Department's

less-than-fair-value (LTFV) investigation in 1991, and that the

Department accepted and used that methodology during the fair value

investigation and the first administrative review. Cheil also argues

that precedent obligates the Department to accept Cheil's practice of

valuing RC at its NRV. Cheil cites to thirteen separate cases in which

NRV methodologies have been applied. Moreover, Cheil argues that the

Court of International Trade (CIT) has approved the use of NRV for

valuing by-products in Asociacion Colombiana de Exportadores de Flores

v. United States, 704 F. Supp. 1114, 1125 (CIT 1989). Cheil contends

that there is nothing on the record that distinguishes the instant

facts from the numerous other cases in which the Department has used an

NRV methodology to value by-products.

Cheil also asserts that VCs and the resin it recycles as pellets

are not physically one-for-one substitutes, and, thus, its practice of

valuing pellets at an NRV below that of VC is economically sound. Cheil

argues that pellets and VCs have different molecular structures and

chemical compositions. Cheil contends that a mixture of pellet and VC

can create blending problems. Because of differences in the molecular

structure of pellets and VCs, Cheil contends that VCs and pellets melt

at different temperatures. Cheil also claims that additional production

problems (such as contamination) will result if too many pellets are

employed in the production process.

Cheil argues that waste film production has a direct costs impact

on PET film through lower yields, and that higher pellet usage

increases fabrication costs. Cheil contends that the Department has no

basis to assume that historical production yields would remain constant

if the production process utilizes 100 percent VCs. Based on these

factors, Cheil argues that pellets should be assigned a lower cost than

VCs.

Cheil contends that, contrary to petitioners' assertion, its usage

of VC relative to pellets has actually increased from the second to the

third review. Cheil asserts that the true value of pellets (because of

the lack of substitutability between VC and pellet) is actually lower

than their NRV.

Cheil argues that the NRVs that it assigned to pellets reflect the

same set of assumptions and market behavior as the NRVs that it

assigned to off-grade chip production. Cheil thus concludes that if the

Department decides to back out the NRVs at the virgin and chip level,

it must also back out the NRVs at the chip production cost level.

Cheil further contends that any methodology which assigns an equal

value to VCs and RCs would not properly account for the valuation of

beginning and ending inventory. Cheil contends that this is because VCs

and recycled pellets would be valued according to one cost methodology,

while period-of-review costs would be valued according to a completely

different methodology.

SKC: With regard to SKC, petitioners contend that its methodology

for costing recycled resin is economically unreasonable and was

concocted especially for the Department's fair value investigation.

Petitioners assert that prior to the fair value investigation of this

case, SKC calculated an average materials cost without distinguishing

between virgin and recycled resin. Petitioners assert that the

methodology used by SKC in these reviews ignores the costs of the

material content of the recycled resin. Petitioners argue that the true

cost of the recycled resin is much higher than the value assigned to it

by SKC.

Petitioners argue that SKC's normal method of accounting for

recycled resin correctly accounts for the processing costs (i.e.,

labor, overhead, etc.) of recycling, but fails to address the cost of

the chemicals which are reclaimed as the recycled resin. Petitioners

maintain that SKC must recognize the presence of valuable PET resin in

the chips that SKC recycles. By omitting material costs in determining

the cost of RC, petitioners assert that SKC understates the cost of

films that use a higher proportion of recycled materials.

In response, SKC maintains that its cost accounting methodology

does not exclude the cost of the raw materials of recycled resin from

PET film cost of production (COP). SKC argues that the PET film

production process is a closed cycle, and that all costs are fully

accounted for in the system. SKC explains that both VCs and RCs are

released into the production line to form PET film as follows: at the

end of the film production line scrap film is recovered; the recovered

scrap is then reprocessed to produce recycled resin, and the recycled

material is then used together with VC to produce more PET film, a

portion of which will again be reclaimed. According to SKC raw

[[Page 35179]]

materials (ethylene glycol (EG) and dimethyl terephthalate (DMT) or

terephthalic acid (TPA)) are used exclusively for the production of VC;

the recycled material is produced entirely from scrap film without

input of additional raw materials. In other words, all recycled resin

is produced from VCs that were released into the film production line

during a previous production cycle. SKC states that it does not take a

credit for the scrap which it recycles. Therefore, SKC argues that the

finished film bears the cost of all raw materials consumed in the film

production process, including the cost of raw materials that are later

reclaimed to produce RCs.

SKC argues that the Department should continue to value recycled

resin according to the methodology employed by SKC in its internal cost

accounting system. SKC contends that its cost methodology is reasonable

and consistent with accepted accounting concepts. SKC contends that

recycled resin has a ``lower intrinsic viscosity, lower molecular

weight, and increased discoloration'' than do VCs. SKC notes that the

Department determined that there is no evidence on the record

suggesting that SKC has manipulated its chip blends to alter production

costs. Finally, SKC asserts that its blending ratios have been stable

over time.

Department's Position: We believe that Cheil's and SKC's methods of

accounting for their recycled raw materials are reasonable and have

relied on them for these final determinations. The legislative history

of section 773(b) states that ``in determining whether merchandise has

been sold at less than cost [the Department] will employ accounting

principles generally accepted in the home market of the country of

exportation if [the Department] is satisfied that such principles

reasonably reflect the variable and fixed costs of producing the

merchandise.'' H.R. Rep. No. 571, 93d Cong., 1st Sess. 71 (1973)

(emphasis added). The CIT has upheld the Department's use of expenses

recorded in the company's financial statements, when those statements

are prepared in accordance with the home country's GAAP and do not

significantly distort the company's actual costs. See, e.g., Leclede

Steel Co. v. United States, Slip Op. 94-160 at 22 (CIT 1994).

Accordingly, our practice is to adhere to an individual firm's

recording of costs, if we are satisfied that such principles reasonably

reflect the costs of producing the subject merchandise, and are in

accordance with the GAAP of its home country. See, e.g., Canned

Pineapple Fruit from Thailand: Final Determination of Sales at Less

Than Fair Value (Canned Pineapple from Thailand), 60 FR 29553, 29559

(June 5, 1995); Certain Stainless Steel Welded Pipe from the Republic

of Korea; Final Determination of Sales at Less Than Fair Value, 57 FR

53693, 53705 (November 12, 1992); and Furfuryl Alcohol from South

Africa: Final Determination of Sales at Less Than Fair Value, 60 FR

22550, 22556 (May 8, 1995) (``The Department normally relies on the

respondent's books and records prepared in accordance with the home

country GAAP unless these accounting principles do not reasonably

reflect the COP of the merchandise''). Normal accounting practices

provide an objective standard by which to measure costs, while allowing

respondents a predictable basis on which to compute those costs.

However, in those instances where it is determined that normal

accounting practices result in an unreasonable allocation of production

costs, the Department will make certain adjustments or may use

alternative methodologies that more accurately capture the costs

incurred. See, e.g., New Minivans from Japan; Final Determination of

Sales at Less Than Fair Value, 57 FR 21937, 21952 (May 26, 1992).

In the instant proceeding, therefore, the Department examined

whether the respondents' normal recycled resin accounting methodology

results in costs of producing the subject merchandise (finished PET

film) that reasonably reflect its cost of production. Notably, we found

that a characteristic of the PET film production process is that a

substantial amount of film becomes unusable during production. The PET

film production process generally takes place in two stages. In the

first stage, a mixture of basic chemicals and special additives are

used to crate VCs. Both Cheil and SKC produce several different types

of VCs, each from a specific chemical recipe designed to promote

certain physical attributes in the finished PET film product.

In the second production stage, one or more VC types are measured

and mixed with recycled material. The mixture of VC and recycled

material is then melted. The molten polymer is extruded onto a chilled

casting drum, where it spreads into a continuous polymer film. From the

casting drum the film passes through a series of stretching machines.

As the finished film cools, it is wound onto a master roll. The master

rolls of finished film undergo quality inspection for various physical

characteristics. Films that fail this inspection are either sold as

off-quality PET film or recycled.

As previously stated, the PET film manufacturing process and

finished film quality standards are such that substantial quantities of

recyclable waste film are generated. This film is recycled as a raw

material input to the production process for PET film. Each type of PET

film has a maximum amount of recycled materials that can be added while

still allowing the film to meet its quality requirements. We note that

the respondents use different processes for recycling the waste film

and different methods of accounting for the recycled materials. (See

recycled raw materials accounting memorandum, August 17, 1995).

However, each company's method is similar in that they assign

significantly less cost to the recycled material than they do to the

original VC.

Under its normal cost accounting system, SKC attributes to its

recycled film only the costs related to recycling. SKC assigns no costs

to the waste film used in the recycling process. Thus, SKC records as

the cost of recycled material, only the labor and overhead costs

incurred for shredding the film and reprocessing it.

Cheil recycled film is treated as a by-product of the film

production process and valued at its NRV. Cheil's NRV represents the

revenues received (less disposal costs) for recycled material sold as

filler for mattresses and toys. Cheil deducts the pellets' NRV from the

cost of producing the good PET film output.

On March 20, 1996, the CIT issued its decision in the appeal of the

underlying investigation in this proceeding, E.I. Dupont de Nemours &

Co., et al. versus United States, Slip. Op. 96-56, Court No. 91-07-

00487 (March 20, 1996) (Dupont II). The CIT's decision recognized the

above facts with respect to the production of PET film and each

respondent's accounting for recycled materials. In light of those

facts, the CIT found that:

[petitioners'] argument that pellets should be costed like

virgin chip because they are functionally equivalent defies common

sense and arithmetic logic. The reason that PET film production

utilizes recycled material is that it is cheaper to recycle scrap

film than to manufacture virgin chip; this being the case, assigning

pellets the cost of virgin chip would overstate the actual costs of

PET film production. Dupont II, at 9.

The CIT further noted that the record did not support the

allegation that Cheil manipulated the usage rate of pellet in order to

shift costs away from PET film exported to the United States.

The CIT also rejected petitioners' arguments concerning SKC's

accounting practices. The Court noted that the

[[Page 35180]]

reason SKC uses a ``zero value'' for the material cost of RC is that

``SKC did not subtract the value of pellets resulting from PET film

production runs from the accounting cost of producing PET film;

therefore, there was no basis for adding any pellet value back into the

accounting cost of PET film manufactured with pellet material input.''

Dupont II, at 10. While the CIT determined that the Department's

refusal to address SKC's methodology for valuing pellet was proper

under the scope of the remand, it indicated that even if such

instructions ``had been part of the remand order, SKC's methodology is

reasonable and fully accounts for the value of'' its recycled resin.

Dupont II, at 11.

In this review, we continue to find that Cheil and SKC have

reasonably valued RC. We determined that although differing in

approach, both methodologies reasonably capture the cost of producing

PET film. As previously noted, every PET film production run uses both

virgin chip and recycled material. The scrap film resulting from each

production run is recycled into subsequent production passes. Each

respondent's method of accounting for the recycled material is used in

the normal course of business and is GAAP-consistent.

We examined Cheil's and SKC's books and records and found that each

company relies on its recycled resin methodology in the normal course

of business and has done so for at least the last several years. We

further found that each respondent's allocation methodology is

consistent with GAAP practiced in Korea.

We disagree with petitioners' argument that the cost basis for

recycled materials should be the purchase price of the raw material.

The record in this case demonstrates that recycled resin is not the

functional equivalent of VC, since the production process degrades the

chemicals and introduces contaminants into the process. Thus, while

recycled material can be used in place of VC within certain limits,

recycled resin and VC are not completely equivalent.

We also do not accept petitioners' contention that SKC's

methodology is economically unreasonable. SKC's methodology fully

accounts for all costs because each type of film is charged with the

cost of the material consumed in its production (as well as the

material which will be reused in later production runs). Thus, all

production costs are fully charged to the subject merchandise.

We also disagree with petitioners' arguments that Cheil's NRV

should be disallowed because it is not representative of a market

value. Despite the fact that Cheil's recycled film purchasers use the

pellets in less demanding processes, there is no evidence that these

transactions do not represent a fair valuation for this material.

Moreover, we note that a petitioner also makes sales of recycled film

chips or pellets to manufacturers of pillows and carpet. This company

indicated that it sells the recycled chip at a price significantly less

than the cost to manufacture VC. In addition, the company explained

that it had recently adopted a costing methodology based on the

relative sales value of RC that is similar to that used by Cheil. (See

plant tour memorandum, April 5, 1995.)

Comment 2: Petitioners contend that Cheil and SKC have understated

their costs and overstated their U.S. selling prices by misrepresenting

the quantities of film that they produce and sell, and that the

quantity of films actually shipped are not the quantities of film

actually billed. Petitioners assert that since producers will be

penalized if they include too little film on a roll, producers will

generally include more film on a roll than they actually invoice.

Petitioners assert that exhibits collected as part of the verifications

for the second and third reviews of Cheil and SKC support their

assertion that SKC and Cheil are providing more film on a roll than

they have actually reported to the Department. Petitioners additionally

contend that the verification exhibits collected in these reviews

provide further evidence that reported costs are incorrect because the

sales and production quantities used to derive those costs and prices

are either ``conceptionally inappropriate'' or ``simply wrong.''

Petitioners assert that the production quantities reported by Cheil

fail to account for losses occurring in the second slitting process.

Petitioners suggest that SKC's shifting of the reporting period form 1/

1/93-12/31/93 to 7/1/93-6/30/94 for the third administrative review

distorted the valuation of RCs and scrap. Petitioners assert that Cheil

may have distorted its costs through a similar shifting of the

reporting period.

SKC and Cheil contend that the Department verified reported

production quantities. SKC and Cheil assert that there is no evidence

on the record supporting petitioners' assertion that production

quantities were understated or that either company shipped more film on

a roll than was reported in SKC's or Cheil's responses.

Department's Position: We disagree with petitioners because there

is no evidence on the record to support their claim that either Cheil

or SKC understated their production quantities, or that either company

shipped more PET film on a roll than the customer ordered. During these

verifications, we traced reported production of PET film to the PET

film production records of Cheil and SKC. Our trace of production

quantities for Cheil accounted for the amount of film (sold exclusively

to third countries) that underwent second slitting. (See Cheil July 28,

1995 second review period verification report at page 5; Cheil January

26, 1996 third review period verification report at page 3.) The

Department also verified the production quantities reported by SKC.

(See SKC July 28, 1995 second review period verification report at page

15; SKC February 27, 1996 third review period verification report at

page 10.)

Moreover, we disagree with the petitioners' assertion that Cheil's

and SKC's valuation of RC and scrap was distorted because they shifted

the reporting period. The Department directed Cheil and SKC to report

costs for the third review period from July 1, 1993 through June 30,

1994, rather than for the calendar year January 1, 1993 through

December 31, 1993, so that the period for reporting COP/CV information

would more closely correspond to the time frame covered by the third

review. We have not allowed either Cheil or SKC to manipulate to their

advantage the period for reporting cost information.

Comment 3: Petitioners note that the language used to determine

whether below-cost sales were made over an extended period of time for

Cheil and Kolon fails to identify such sales of merchandise that were

sold in less than three months of each period of review. Petitioners

contend that this programming error exists for each of the respondents

included in these reviews.

Department's Position: We agree. For each of the respondents

included in these reviews, we have amended our computer programs to

exclude from FMV below-cost sales that were sold in less than three

months of the PORs and that made over an extended period of time.

Comment 4: Petitioners contend that the Department erred in

adjusting Cheil's home market price for pre-sale inland freight from

its factory to its warehouse. Petitioners contend that this deduction

contravenes Ad Hoc Comm. of AZ-NM-TX-FL Producers of Gray Portland

Cement v. United States, 13 F.3d 398, 401 (Fed. Cir. 1994).

Cheil contends that Departmental practice is to treat pre-sale

inland freight as a direct expense in instances where

[[Page 35181]]

products are channeled or customized for certain buyers.

Department's Position: We disagree with petitioners. As noted in

Canned Pineapple Fruit from Thailand, in Ad Hoc Committee, the Court

ruled that the Department could not use its inherent authority to

deduct home market pre-sale movement expenses. Instead, we will adjust

for these expenses under the circumstance-of-sale provision as long as

we determine that these expenses are directly related to the sales

under investigation. The Department generally treats pre-sale movement

expenses as direct where those expenses ``involve products channeled or

customized'' for certain buyers (Id. at 29563). Because Cheil knew the

identity of its customer and the product specifications of that

customer prior to the shipment of film from the factory to the

warehouse, we have treated Cheil's pre-sale inland freight as a direct

selling expense. This is consistent with our position in past segments

of this proceeding. (See Polyethylene Terephthalate Film, Sheet, and

Strip from the Republic of Korea; Final Determination of Sales at Less

than Fair Value 56 FR 16300, 16303 (April 21, 1991) (Final

Determination)).

Comment 5: Petitioners contend that certain sales that Cheil has

characterized as ``samples'' were sold in significant volume and should

be included in the Department's calculations. Petitioners contend that

Cheil's failure to report these sales mandates use of the best

information available for Cheil.

Cheil contends that the Department verified that its zero-priced

samples were not commercially valued. Cheil contends that the

Department's decision to exclude there sales was consistent with past

Departmental practice.

Department's Position: We do not consider Cheil's zero-priced

samples to be sales within the meaning of the antidumping law. This is

consistent with the position taken in Granular Polytetrafluoroethylene

Resin from Japan; Final Results of Antidumping Duty Administrative

Review (PTFE from Japan) 58 FR 50343, 50345 (September 27, 1993), in

which we did not include zero-priced samples in our calculations

because the samples were used for product evaluation purposes rather

than for commercial consumption.

During the PORs Cheil provided a limited number of zero-priced

samples to the United States. Cheil provided full documentation that

the shipments were not commercially valued, and were for product

evaluation purposes only. Accordingly, we did not include these zero-

priced samples in our analysis.

Comment 6: Petitioners assert that Cheil has failed to report

related-party commissions associated with its U.S. sales. Petitioners

assert that these expenses are directly related to U.S. price.

Cheil contends that the mark-up between the price charged by Cheil

to its U.S. subsidiary and the price charged by Cheil's U.S. subsidiary

to Cheil's U.S. customer is not a ``commission.'' Cheil notes that a

commission is ``a sum or percentage allowed to agents, sales

representatives, etc., for their services.'' (See Timken Co. v. United

States, 37 F.3d 1470, 1478 (Fed. Cir. 1994).) To receive a commission,

Cheil argues that a commissionaire must make a sale on another party's

behalf. Because there is no evidence on the record suggesting that

Cheil's U.S. subsidiary solicits sales for Cheil, or engages in any

activity to generate sales on Cheil's behalf, Cheil argues that the

mark-up between the price charged by Cheil to its U.S. subsidiary and

the price charged by Cheil's U.S. subsidiary to Cheil's U.S. customer

is not a ``commission'' within the meaning of the antidumpting law.

Department's Position: We agree with Cheil. Because Cheil's U.S.

subsidiary did not solicit sales for Cheil, we do not consider the

mark-up between the price charged by Cheil to its U.S. subsidiary and

the price charged by Cheil to Cheil's U.S. customer to be a commission

within the meaning of the antidumping law.

Comment 7: Petitioners assert that the Department should use

quality control criteria values (QCCVs) rather than product codes to

match Cheil's home market and U.S. sales. Petitioners contend that

matching sales through QCCVs would be less susceptible to manipulation.

Cheil asserts that use of QCCVs instead of product codes would

result in comparisons of home market merchandise that is less similar

to the merchandise sold in the United States.

Department's Position: We disagree with petitioners. As noted in

Antifriction Bearings (Other than Tapered Roller Bearings) and Parts

Thereof from France, et. al., 57 FR 28360, 28366, (June 24, 1992) our

policy is to ``maintain a stable, normal and predictable approach''

with regards to model match, and not to alter that methodology unless

compelling reasons exist. In these reviews we have used the same

methodology for matching Cheil's home market sales that we employed in

the less than fair value (LTFV) investigation and in the first review.

There is no evidence on the record to suggest that use of product codes

has enabled Cheil to manipulate the matching of home market sales.

Finally, we note that use of QCCVs would in several instances

result in the matching of merchandise that is less similar to the U.S.

merchandise than would the product codes submitted by Cheil. In one

instance this dissimilarity would result in the comparison of a product

that is coated with a product that is non-coated, and in another

instance this would result in comparison of merchandise that is of

different chemical compositions.

Comment 8: Petitioners contend that the Department should calculate

the credit period for Cheil's U.S. sales from the date of shipment from

Cheil's factory to the U.S. customer rather than from the date of

export shipment from Korea. Petitioners also assert that the Department

should require Cheil to provide the actual date of payment for those

U.S. sales for which Cheil had not received payment at the time that

Cheil prepared its U.S. response.

Cheil contends that the Department should recalculate Cheil's

inventory carrying cost expenses, if it decides to recalculate the

credit period from the date of shipment from Cheil's factory.

Department's Position: In these final results we have followed our

normal policy and calculated the U.S. credit period beginning with the

date that the merchandise leaves the factory. (See Antifriction

Bearings (Other than Tapered Roller Bearings) and Parts Thereof from

France, et. al., 60 FR 10900, 10916, (February 28, 1995).) We have also

recalculated Cheil's inventory carrying costs to avoid double counting

of Cheil's credit expenses. Because we noted no significant

discrepancies between payment term and the date that Cheil actually

received payment, we used payment terms to calculate Cheil's U.S.

credit expense for those U.S. sales for which Cheil had not received

payment at the time that it prepared its response.

Comment 9: Petitioners contend that the Department should adjust

U.S. sales for advertising and promotion expenses that Cheil incurred

on its U.S. sales.

Cheil contends that it had no direct advertising or sales promotion

expenses during the PORs.

Department's Position: We disagree with petitioners. In response to

our questionnaire and our request for supplemental information, Cheil

indicated that it had no direct promotion or advertising expenses

during the periods of review, and there is no contrary evidence on the

record. Since all of Cheil's sales were PP transactions and there were

no commissions incurred for home market

[[Page 35182]]

sales, the issue of whether Cheil had indirect advertising or sales

promotion expenses is moot because in PP transactions we do not adjust

for indirect selling expenses, absent commissions in the other market.

Comment 10: SKC contends that the Department's reallocation of its

manufacturing costs between A- and B-grade film is contrary to

Department practice and unreasonably overstates SKC's B- grade film

costs. SKC asserts that B-grade film cannot be used by its normal PET

film customers, and should not bear the same cost as A-grade film. SKC

contends that the Department's allocation of cost to B-grade film

should reflect the economic value of the products manufactured. SKC

argues that B-grade film is a by-product of PET film rather than a co-

product, and that B-grade film is an unavoidable consequence of

manufacturing A-grade film. SKC contends that it seeks to minimize the

production of B-grade film, and that B-grade film does not undergo

significant processing prior to sale. SKC asserts that sales of B-grade

film constitute a small (less than 10 percent) and declining portion of

its PET film revenues.

SKC notes that in Canned Pineapple from Thailand, The Department

did not use physical measures to allocate joint products but rather

used an allocation methodology that recognized the significantly

different economic values of the products. Based on the dissimilarity

of A-grade and B-grade film, SKC contends that the Department's joint

allocation of costs between these two products is economically

unreasonable.

SKC further asserts that it valued B-grade film in accordance with

its longstanding practice. SKC contends that the Department has

consistently rejected the use of physical allocation methodologies in

cases where the one joint product has a significantly lower economic

value than the other product. SKC cites to Elemental Sulphur from

Canada: Final Results of Antidumping Finding Administrative Review, 61

FR 8239, 8241-8243 (March 4, 1996) (Sulphur), and Oil Country Tubular

Goods from Argentina, Final Determination of Sales at Less than Fair

Value, 60 FR 33539, 33547 (June 28, 1995), as two such cases where the

Department did not use physical measures to allocate costs. SKC

contends that the Department's general practice is to use a company's

normal accounting system unless that system results in an unreasonable

allocation of costs. SKC further argues that the Department's

methodology of allocating yield losses equally between A-grade and B-

grade film produces absurd results because the methodology allocates

expenses associated with one type of scrap to another part of scrap.

SKC also contends that the physical defects inherent in B-grade film

compel SKC to (1) sell B-grade film for non-PET film applications, and

(2) assign B-grade film a lower value than A-grade film.

SKC asserts that the Department's decision to allocate yield losses

equally between A-grade and B-grade film conflicts with the model-match

and cost test methodologies employed in these reviews. SKC notes that

for model-match purposes, the Department restricted comparisons of U.S.

B-grade film to home market sales of B-grade film. SKC asserts that the

Department cannot ignore differences between A-grade and B-grade film

for purposes of its cost analysis.

Finally, SKC asserts that the Department should accept its cost

methodology even if the Department determines that B-grade film is a

co-product rather than a by-product of A-grade film. SKC asserts that

its cost system is consistent with the Ipsco Appeal decision, since,

unlike Ipsco, SKC does not rely upon sales value to allocate costs. SKC

asserts that this is consistent with the methodology employed by the

Department in Polyvinyl Alcohol from Taiwan, 61 FR 14064 (March 29,

1996). (See Memorandum to Chris Marsh from Art Stein, September 27,

1995.)

Petitioners argue that the Department was correct in equalizing the

yield loss that SKC experienced between A-grade and B-grade films.

Petitioners contend that allocating all yield loss to A-grade film

would result in a misallocation of SKC's costs, an improper use of

below-cost sales in the Department's margin calculations, and an

understatement of margins for SKC's sales of slitted B-grade film.

Petitioners point out that in various submissions filed in the

course of the initial investigation, respondents as a group (including

SKC) stated that the essential facts in the administrative proceedings

underlying the Ipsco Appeal are indistinguishable from the facts in

this case.

Petitioners contend that the Department's reallocation reflects the

mandate of the Ipsco Appeal, and also the realities of PET film

production. Petitioners explain that from a batch of resin, a single

production run will generate a given amount of A-grade film and a given

amount of B-grade film. Regardless of the quality of film, the actual

costs of producing a run of film are borne equally. Petitioners

maintain that it takes the same volume of raw materials and the same

processing effort to make A-grade film as B-grade film.

Petitioners argue that the fact that the Ipsco Appeal involved oil

country tubular goods instead of PET film is irrelevant. Petitioners

maintain that B-grade PET film is not a by-product of the PET film

production process, but is PET film. B-grade PET film is used in PET

film applications, and is generated from the same production run as A-

grade film using the same materials and processes. Petitioners

therefore conclude that SKC's A-grade and B-grade film must bear the

same costs.

Department's Position: We believe that A-grade and B-grade PET film

have identical production costs and we have relied on equal costing for

this final determination. The CIT's decision in the remand of the

underlying investigation (Dupont II) affirmed the Department's remand

calculation of the cost of production for prime and off-grade film

(i.e., A-grade and B-grade film). Dupont II, at 6-7. The CIT determined

that our recalculation of Cheil's and SKC's production costs was

reasonable. As we explained in the remand, we recalculated the cost of

off-grade film to reflect actual costs by allocating production costs

based on actual production quantities.

Moreover, our use of an equal costing methodology in this

proceeding is based on substantial evidence and is otherwise in

accordance with law. In the instant reviews, the A-grade and B-grade

film undergo an identical production process, involving an equal amount

of material and fabrication expenses. The only difference in the

resulting A- and B-grade film is that at the end of the manufacturing

process a quality inspection is performed during which some of the film

is classified as high quality A-grade product, while other film is

classified as lower quality B-grade film. The identification of

different grades of merchandise does not transform the manufacturing

process into a joint production process which would require the

allocation of costs.

SKC mischaracterizes the continuous production process of PET film

as joint processing. A joint production process occurs when ``two or

more products result simultaneously from the use of one raw material as

production takes place.'' (See Management Accountants' Handbook,

Keeler, et. al., Fourth Edition at 11:1.) The essential point of a

joint production process is that ``the raw material, labor, and

overhead costs prior to the initial split-off can be allocated to the

final product only in some arbitrary, although necessary, manner,'' Id.

In this case, the costs attributable to PET film yield losses can

clearly be allocated to

[[Page 35183]]

the production of specific types of PET film.

SKC argues incorrectly that its method of accounting for lesser

quality product is consistent with the Ipsco Appeal. Ipsco Appeal

involved the Department's use of an appropriate methodology for

allocating costs between two grades of steel pipe. These two grades of

steel pipe were distinguished on the basis of quality. Ipsco Appeal,

965 F.2d at 1058. The same production inputs for materials, labor, and

overhead went into the manufacturing lot that yielded both grades of

pipe. Id. Given these facts, in our final determination we allocated

production costs equally between those two grades of pipe. We reasoned

that because they were produced at the same time, on the same

production lines, and following the identical manufacturing process,

the two grades of pipe in fact had identical production costs. Id.

SKC's reliance on Sulphur, Canned Pineapple Fruit from Thailand,

and Polyvinyl Alcohol from Taiwan is misplaced. Those cases relate

primarily to by-product/co-product costing methodologies. In none of

the cases cited by SKC were both products within the scope of the same

antidumping order. The PET film production process produces two

finished products, both of which are salable, and both of which are PET

film products. B-grade PET film (like A-grade film) is sold as PET film

and consumed as PET film. By contrast, the resulting joint products or

by-products in the cases cited by SKC were of a different class or kind

of merchandise than the products that the manufacturer set out to

produce. Pineapple shells, cores, and ends are made into pineapple

juice. Natural gas is not of the same class or kind as elemental

sulphur, nor are polyvinyl alcohol and methyl acetate. Moreover, we

note that in the ordinary course of business SKC treats methanol, and

not B-grade film, as the by-product of the PET film production process.

Accounting literature identifies by-products as separate and distinct

products, not grades of the same product. Unlike the chemical reaction

that occurs in the production of polyvinyl alcohol resulting in the by-

product methyl acetate, B-grade film is not a by-product. Theoretically

the production of B-grade film is avoidable since the PET film

manufacturing process need not result in poor quality product.

Finally, SKC's argument that matching A- and B-grade film to

identical merchandise necessitates that each of these models have a

unique cost is without merit. Two products that are not ``identical''

for model-match purposes may indeed have the same costs. For purposes

of determining COP/CV, however, we must account for all of the costs

associated with the production of the merchandise.

Comment 11: Petitioners contend that SKC understated the cost of

extending credit to Anacomp on its U.S. sales. Petitioners contend that

the credit terms offered to Anacomp by SKC do not constitute a normal

extension of credit between buyer and seller, but rather involve an

``incentive to finance Anacomp's film purchases at below market

rates.'' Further, petitioners argue that the antidumping statute does

not contemplate a circumstance-of-sale adjustment to U.S. price for

interest payments that offset credit risk. Finally, petitioners argue

that if the Department accepts the Anacomp payments as interest income,

it should ``impute SKC's interest expense'' using an interest rate that

is the ``equivalent of the market rate sales to Anacomp.''

SKC contends that petitioners have offered no grounds for reversing

the Department's previous decision to offset interest income against

SKC's imputed credit expense.

Department's Position: We disagree with petitioners because, as

noted in the first review of this order, ``* * * failure to adjust for

SKC's interest income received from Anacomp would overstate SKC's U.S.

credit expense, and distort our dumping analysis.'' (See Polyethylene

Terephthalate Film, Sheet, and Strip from the Republic of Korea, Final

Results of Antidumping Administrative Review (Final Results of the

First Review), 60 FR 42835, 42838 (August 17, 1995). During our

verification of SKC we determined that SKC and Anacomp adhered to all

of the terms of the ``Master Supply Agreement'' which governed the

payment of interest income to SKC. We also verified the amount of

interest income received by SKC. Accordingly, in these final results we

have continued to make an offset for interest income as we did in the

preliminary results of this review.

Comment 12: Petitioners note that Kolon Industries (Kolon) did not

include home market sales of scrap film in its sales listing because

``this scrap is not PET film.'' Petitioners contend that Kolon has

failed to substantiate its claim that these scrap sales were not of PET

film.

Kolon asserts that the scrap material is not PET film. Kolon

contends that the material consists of (1) molten PET material that is

deposited in the filters of the extruder before the molten PET material

is extruded onto the cooling drum and formed into sheet and film, and

(2) shredded trimmings from the film production process. Because the

scrap material is not PET film, Kolon argues that it is not within the

scope of the order.

Department's Position: We agree with Kolon. Because the scope of

the antidumping order is limited to PET ``film, sheet and strip,'' and

this material is not PET film, we have not included these scrap sales

in our calculations.

Comment 13: Petitioners contend that the Department should include

Kolon's U.S. sample sales in its margin calculations. Petitioners

contend that while the Department has the authority to omit zero-price

samples if the samples were not used for commercial consumption, that

exception does not apply for Kolon since those sales were consumed

commercially. Petitioners note that the Department included Kolon's

zero-price samples in its calculations for the first review.

Kolon contends that the Department should exclude these zero-price

samples from its analysis. Kolon notes that in PTFE from Japan, the

Department excluded such transactions even though the merchandise was

not returned to the manufacturer. Kolon contends that the Department's

decision to include zero-price sales in its first period analysis was

based upon ``the incorrect belief that there is no evidence on the

record that Kolon's U.S. sample sales are destroyed or rendered

unusable.'' Kolon contends that the nature of PET film requires the

tester to unwind the film, and to usually coat the film, stamp it, or

use it on a machine. Kolon contends that such testing, by its nature,

renders the PET film unusable.

Department's Position: As noted in response to Comment 5, in PTFE

from Japan we determined that zero-priced transactions were not

``sales'' within the meaning of the antidumping law because the zero-

priced samples were used for product evaluation purposes rather than

commercial consumption. In the Final Results of the First Review, we

indicated that PTFE from Japan was not applicable because there was no

evidence on the record that Kolon's U.S. samples were destroyed or

rendered unusable. (See Final Results of First Review, at 42841.)

However, the record in these reviews demonstrates that Kolon

provided the zero-priced samples for product evaluation and testing

purposes rather than commercial consumption. Kolon stated that its one

shipment of zero-priced samples during the third review was used for

product testing. Moreover, we find that record evidence shows that like

PTFE resin, the nature of PET film

[[Page 35184]]

is such that once it has been tested, it cannot be re-used. Therefore,

consistent with PTFE from Japan, we did not include Kolon's zero priced

samples in our analysis.

Comment 14: Petitioners contend that Kolon incorrectly used home

market adjustments applicable to other reviews in compiling its second

and third review responses. Petitioners contend that such a methodology

results in inconsistencies.

Kolon contends that it did not revise sales data that it had

reported in previous questionnaires in order to avoid inconsistencies

from one review to the next.

Department's Position: We disagree with petitioners. It is the

Department's longstanding practice to base USP and FMV price

comparisons on reasonably contemporaneous sales of similar merchandise.

(See Certain Forged Steel Crankshafts from the United Kingdom, 56 FR

5975, 5976 (February 14, 1991).) In compliance with our instructions,

during the second review Kolon reported data for its sales for the

period from December 1991 through July 1993. For the third review, in

order to ensure contemporaneous matches, we requested data on sales for

the period December 1992 through July 1994. Kolon complied with our

request and did not make any revisions to the sales and adjustment data

that is had previously reported in prior reviews. Because revising

these data previously submitted would result in inconsistencies for

identical sales, we determine that Kolon's approach is a reasonable

methodology to avoid such inconsistencies.

Comment 15: Petitioners content that Kolon has incorrectly omitted

labor and overhead expenses from its calculation of home market packing

expenses. Petitioners contend that this error results in an

understatement of FMV.

Kolon contends that its cost accounting system does not permit it

to retrieve the labor and overhead costs attributable to packing.

Department's Position: We disagree with the petitioners. In Kolon's

cost accounting system, because packing and labor costs for PET film

are recorded in a single cost center, Kolon cannot separate the

specific amount of labor and overhead expenses that are attributable to

packing from the labor and overhead expenses that are attributable to

the production of PET film. Moreover, since the merchandise that Kolon

sold in the home market and the United States is identical, the labor

and overhead expenses attributable to packing (were Kolon able to

isolate them) would have no effect upon the calculations.

Comment 16: Petitioners contend that expenses associated with

replacing defective film for Kolon's home market customers do not

qualify as indirect selling expenses. Furthermore, rather than

directly-related selling expenses, petitioners argue that these

replacement shipments should be included in Kolon's home market sales

listing.

Kolon argues that, consistent with past practice, the Department

properly treated the costs associated with defective film as indirect

selling expenses.

Kolon contents that it reported the movement expenses incurred on

its ESP transactions with as much specificity as possible.

Department's Position: We disagree with the petitioners. The cost

of replacing defective film is properly classified as a warranty cost

rather than as new sale since these expenses are associated with

replacing defective merchandise that had previously been sold. Kolon's

accounting records do not separately record the costs for replacing

defective film. Because the warranty expenses can not be isolated to

specific sales, Kolon properly treated these expenses as indirect

selling expenses. (See, e.g., Color Television Receivers from Korea;

Final Results of Antidumping Duty Administrative Review, 51 FR 41365,

41377 (November 14, 1986).)

Comment 17: Petitioners argue that Kolon should be required to

report Korean inland freight on a transaction-specific basis where

Kolon's accounting records would permit such reporting. Petitioners

contend that for certain exporter's sales price (ESP) transactions,

Kolon could provide transaction-specific movement expenses.

Kolon contents that it reported the movement expenses incurred on

its ESP transactions with as much specificity as possible.

Department's Position: We disagree with the petitioners. We accept

Kolon's approach of allocating movement expenses as reasonable.

Generally, the Department will accept a party's alternative methodology

for allocating expenses if the party's normal accounting records do not

permit it to provide data in the format requested and the party

provides data in a manner that approaches the Department's preferred

methodology as close as its records will allow. We have stated that we

will allow this alternative methodology as long as we determine that it

is reasonable. (See Antifriction Bearings (Other than Tapered Roller

Bearings) and Parts Thereof from the Federal Republic of Germany, 56 FR

31692, 31715 (July 11, 1991). In calculating its U.S. movement expenses

Kolon did not use a single average expense for inland freight. Kolon

attempted to match each ESP sale to the particular entry. Since ESP

merchandise was sold from inventory, however, Kolon could not normally

tie a particular ESP sale to an individual entry. Therefore, Kolon

allocated movement expenses to the particular group of entries on which

that merchandise could have entered. We verified Kolon's data and have

no evidence that Kolon's methodology is unreasonable.

Comment 18: Petitioners argue that to the extent that the lower

U.S. interest rate was available to the borrower, the Department should

use that rate to calculate Kolon's home market credit expense.

Petitioners assert that the Department should follow the precedent

established in LMI La Metalli Industriale, S.p.A. v. United States, 912

F.2d 455 (Fed. Cir. 1990), (LMI) wherein the Department applied the

lowest rate available to the borrower to calculate U.S. and home market

interest expenses.

Kolon contends that U.S. dollar interest rates only measure the

time value of money for dollars. Kolon argues that the U.S. interest

rate cannot be used to determine the opportunity cost of a delayed

payment in another currency, such as Korean won.

Department's Position: We disagree with the petitioners. We have

used Kolon's calculation of U.S. and Home market credit expenses in

these final results because Kolon's calculation of credit expenses is

consistent with `reasonable business behavior' and because we find that

Kolon's actual borrowing experience is the best indicator of Kolon's

cost of extending credit. LMI requires us to use `usual and reasonable

business behavior' to calculate credit expenses. Kolon based its

calculation of both home market and U.S. credit expenses on its actual

borrowings in the home market and the United States. In the home

market, Kolon used the interest expenses incurred in Korea to represent

its interest expense. In the United States, Kolon used the interest

rate charged on borrowings by its U.S. subsidiary because the U.S.

subsidiary was the entity that bore the cost of delayed payment from

the customer.

Comment 19: Petitioners argue that Kolon should be required to

provide customer- or transaction-specific U.S. rebates where such

information is available in Kolon's accounting records. Petitioners

contend that the Department should apply second-tier best

[[Page 35185]]

information available to those sales for which Kolon has reported

rebates, but did not quantify the rebate on a transaction- or customer-

specific basis.

Kolon contends that it did not provide transaction-specific rebates

because such a methodology would not capture rebates that were granted

after the preparation of the response. Kolon contends that its

methodology of dividing total rebate expense during the POR by total

PET film sales is not distortive, and was adopted so that Kolon would

not understate its rebate expense.

Department's Position: We agree with petitioners that our normal

policy is to calculate discounts or rebates on a transaction- or

customer-specific basis. (See Antifriction Bearings (Other than Tapered

Roller Bearings) and Parts Thereof from France, et. al., 58 FR 39729,

39762 (July 26, 1993). In reporting its rebate expense for the first

review of this order, however, Kolon discovered that a number of

rebates were paid several months after Kolon filed its questionnaire

response for that review. To avoid understating its rebate expenses in

these reviews, Kolon divided the total rebate amount granted on PET

film sold during the POR by the total U.S. sales of PET film during the

period. Because we did not ask Kolon to provide customer-specific

rebates, and because there is no evidence on the record suggesting that

Kolon's allocation of rebates is manipulative, we have used Kolon's

calculation of rebate expense in these reviews.

Comment 20: Petitioners contend that the Department should make an

adjustment to PP for post-sale warehousing expenses incurred on Kolon's

PP sales.

Kolon contends that the Department's normal practice is to treat

post-sale warehousing expense as direct only if the expense can be tied

to particular sales. Kolon asserts that in this case, the after-sale

expense does not vary with specific sales. Consistent with past

practice, Kolon argues that the Department should treat these

warehousing expenses as indirect.

Department's Position: We disagree with the petitioners. During the

PORs Kolon maintained a warehouse as its Korean factory. The expenses

associated with maintaining that warehouse were fixed and did not vary

with individual sales. Accordingly, we properly treated these expenses

as indirect selling expenses. See Professional Electric Cutting Tools

and Professional Electric Standing/Grinding Tools from Japan: Final

Determination of Sales at Less Than Fair Value, 58 FR 30144, 30147-

30148 (May 26, 1993).

Comment 21: Petitioners contend that in its margin calculations the

Department overstated the value of STS Corporation's (STC) further-

processed sales by using the wrong variable to represent the quantity

sold.

Department's Position: We agree and have adjusted our calculations

accordingly.

Comment 22: Cheil contends that the Department should use the

transfer price paid to a related supplier to represent the material

cost of EG in the Department's second record period calculations. Cheil

contends that Departmental practice is to accept transfer prices where

direct or indirect ownership is less than 50 percent between buyer and

seller. Cheil notes that the equity interest between Cheil and its

supplier of EG was much less than 50 percent, and asserts that there is

no evidence that Cheil had control over its suppliers.

Petitioners claim that the Department was correct in its

determination that Cheil is related to one of its suppliers of EG and

that the Department correctly adjusted Cheil's COP/CV calculations to

reflect its supplier's cost of producing EG.

Department's Position: We agree with petitioners that Cheil is

related to one of its suppliers of EG. Section 773(e)(4)(F) of the

Tariff Act of 1930, as amended, defines ``related parties'' as ``two or

more persons directly or indirectly controlling, controlled by, or

under common control with, any person'' (emphasis added). Cheil has

stated that it was a member of the Samsung Group, which is a group of

companies under common management control. (See Cheil September 27,

1993 Questionnaire Response at Exhibit 1, E.I. Dupont de Nemours, et.

al. v. United States, 841 F. Supp. 1237, 1247-48 (CIT 1993).) The

Samsung Group owns more than 50 percent of Cheil's supplier of EG. By

virtue of these relationships, we consider that both Cheil and its

supplier are under common control by the Samsung Group. Therefore, they

are related parties within the meaning of Sec. 773(e)(4)(F).

Based on this relationship, we tested the transactions between

Cheil and its related supplier of EG. During verification we collected

a schedule that reported the production costs of the related supplier.

The schedule indicated that the product cost of EG exceeded the average

price paid by Cheil. (See Memorandum to Chris Marsh from Art Stein,

p.3, September 7, 1995.) Accordingly, consistent with our general

practice, we relied on the supplier's cost as the value for EG in PET

film production.

Comment 23: Cheil contends that the Department should subtract its

short-term interest income from its interest expense to derive Cheil's

net interest expense. Cheil asserts that the record indicates that its

interest income was clearly short-term in nature. Cheil contends that

the methodology which it employed in these reviews to derive net

interest expense is identical to that which was accepted by the

Department in the fair value investigation and the first review of this

case. Cheil contends that the Department may not depart from its

established practice without explaining its basis for so long. Finally,

Cheil asserts that there is no statutory or regulatory basis for

denying interest income as an offset to interest expense because that

interest income is restricted.

Petitioners claim that the Department correctly denied Cheil's

claimed short-term interest income offset because the income generating

assets were pledged as collateral for loans. Petitioners note that the

Department's standard questionnaire allows the respondent to reduce its

interest expense by any interest income earned on short-term

investments of its working capital. Petitioner contends that the assets

that were collateralized have, in effect, been transformed from short-

term to long-term assets.

Department's Position: We have disallowed Cheil's claimed offset of

short-term interest income against interest expense. We allow an offset

for interest expense only with interest income from short-term

investments. (See Certain Corrosion-Resistant Carbon Steel Flat

Products and Certain Cut-to-Length Carbon Steel Plat from Canada, 61 FR

13815, 13819 (March 28, 1996).) While this interest income was

classified as ``short-term'' in Cheil's financial statements, the

financial statements indicate that the assets are ``pledged for

collateral for borrowings,'' and ``are restricted as to use and are not

subject to immediate withdrawal.'' (See notes (3) and (5) to Cheil's

1992 audited financial statements, Section A Questionnaire Response,

September 27, 1993). Because these assets are not readily available to

Cheil, we consider it inappropriate to treat them as short-term

investments of working capital.

Comment 24: Cheil, Kolon, and STC contend that the Department

should make a tax-neutral adjustment to U.S. price for home market

taxes which were forgiven by virtue of export of the product to the

United States.

Department's Position: We agree. In light of the CAFC's decision in

Federal Mogul Corp. v. United States, 63 F. 3d 1572 (Fed. Cir. 1995)

the Department

[[Page 35186]]

has changed its treatment of home market consumption taxes. Where

merchandise exported to the United States is exempt from the

consumption tax, the Department will add to the U.S. price the absolute

amount of such taxes charged on the comparison sales in the home

market. We have adjusted our calculations accordingly.

Comment 25: Cheil contends that the Department should include

indirect selling expenses in its calculation of COP.

Department's Position: We agree. Since indirect selling expenses

were included in the price compared to COP, we have included indirect

selling expenses in our calculation of COP.

Comment 26: Cheil contends that the Department should include duty

drawback in the home market price that is compared to COP.

Department's Position: We agree. Duty drawback was applicable to

Cheil's local export sales. Accordingly, when comparing the home market

price to COP, we have included the duty drawback incurred on Cheil's

``local export'' sales.

Comment 27: Cheil contends that in calculating profit the

Department should not use net price rather than gross price.

Department's Position: We agree. Because profit represents the

arithmetic difference between sales revenue and the expenses incurred

in realizing that revenue, we have used Cheil's home market price net

of adjustments to calculate home market profit.

Comment 28: Cheil contends that in its second review period

calculations, the Department used an incorrect amount for differences

in merchandise (difmer). Cheil further contends that the Department

erroneously added rather than subtracted difmer from FMV in the second

review period. Finally, Cheil contends that since its difmer claim is

denominated in Korean won, the Department should convert difmer into

U.S. dollars prior to adding this amount to an FMV stated in dollars.

Department's Position: We agree and have adjusted our calculations

accordingly.

Comment 29: Cheil contends that the Department should exclude

direct selling expenses from its CV calculations because they are

comprised exclusively of movement expenses.

Department's Position: We agree and have excluded these expenses

from our calculation of CV.

Comment 30: Cheil and SKC contend that the Department double-

counted packing in its CV calculations.

Department's Position: We agree and have revised our CV

calculations to eliminate the double-counting of packing expenses.

Comment 31: Cheil, SKC, and STC contend that for U.S. sales which

were compared to CV, the Department should make an addition to U.S.

price for duty drawback. Cheil, SKC, and STC contend that this

adjustment is necessary because they included these duties in the cost

of manufacture (COM) component of CV.

Department's Position: We agree. Because Cheil, SKC, and STC

included import duties in their calculation of COM, we have made an

addition to U.S. price in these final results for duty drawback.

Comment 32: Kolon contends that for comparisons to CV, home market

inventory carrying costs would be included in the pool of indirect

selling expenses.

Department's Position: We agree. In these final results we included

inventory carrying costs in the pool of indirect selling expenses.

Comment 33: SLC argues that the Department should accept the price

charged to SKC by its related supplier of DMT and TPA. SKC notes that

the equity interest between SKC and its supplier of DMT and TPA was

much less than 50 percent, and asserts that there is no evidence that

SKC has control over its supplier. SKC asserts that it demonstrated

that its purchases of DMT and TPA were at arms-length. SKC also asserts

that it purchased DMT and TPA at ``market prices.'' SKC further

contends that a proper analysis of the cost of producing DMT and TPA

provides no evidence that prices for these materials were below cost.

Petitioners contend that the Department correctly adjusted SKC's

COP/CV calculations to reflect the supplier's cost of producing DMT and

TPA. Petitioners contend that SKC and its supplier are related within

the meaning of the antidumping law because an equity relationship

exists between SKC and that supplier.

Department's Position: We agree with petitioners that SKC is

related to one of its suppliers of DMT and TPA. During the PORS, SKC

owned more than a 5 percent interest in its supplier. (See SKC October

12, 1993 questionnaire response at Sec. VIII at 18, and SKC October 11,

1994 questionnaire response Sec. VIII at 21.) Thus, pursuant to

Sec. 773(e)(4)(E) of the statute, these parties are related.

Based on this relationship, we tested the transactions between SKC

and its related supplier. Analysis of these prices indicated that the

transfer price between SKC and its supplier was less than the

supplier's cost of producing DMT and TPA. During our verification of

SKC, we met with the supplier, who furnished us with a copy of the

detailed inventory statement from its financial statement. The

inventory statement listed the total and per-unit cost of goods sold in

the supplier's finished inventory.

SKC's supplier suggested that selling, general and administrative

expenses, and interest expense should be based on the cost of goods

sold (COGS) from the supplier's income statement. We calculated the

full cost of producing DMT and TPA based on that methodology. We then

compared these costs to the average monthly transfer prices reported on

attachments 4 and 5 of SKC's March 13, 1995 submission, and determined

that the supplier's cost for TPA exceeded the average transfer price

charged to SKC. We also determined that the supplier's cost for DMT

exceeded the average transfer price charged to SKC. (See Memorandum to

Chris Marsh from Paul McEnrue, August 18, 1995, at page 3.)

Accordingly, consistent with our general practice, we relied on the

supplier's cost as the value for TPA and DMT purchased from related

suppliers.

Comment 34: SKC asserts that if the Department does not use the

prices charged to SKC from a related supplier, the Department should

ensure that it relies upon a reasonable estimate of the supplier's

cost. SKC argues that the Department used an erroneous rate for SG&A

expenses in its analysis of the cost of producing DMT and TPA. SKC also

asserts that the Department in its third review calculations

erroneously compared the prices for DMT and TPA charged by all of its

suppliers for these materials, rather than the prices paid by SKC to

its related suppler.

Petitioners argue that the calculation methodology reflects a

reasonable and proper exercise of the Department's discretion.

Petitioners note that the methodology was proposed by SKC's related

supplier in the second review. Petitioners maintain that SKC, unhappy

with the results, proffered an alternative methodology in the third

review to achieve more favorable results. Petitioners argue that the

Department should reject SKC's request for changes since it failed to

substantiate why a change in mehtodology would be appropriate.

Department's Position: For the third review we changed the SG&A

rate used in our analysis of SKC's cost of DMT and TPA. Prior to

verification, we requested supplemental information for the third

review. Specifically; we asked SKC to document that its purchases of

major inputs were at arm's length. Based on the information provided by

SKC,

[[Page 35187]]

and for the reasons noted in response to Comment 33, we have revised

our calculations of the supplier's cost of producing DMT and TPA for

the third review period.

SKC also attempted to supply this information for the second review

period. The information, however, was provided outside the time

constraints of 19 CFR 353.31(a)(1)(ii), and was not provided in

response to our request. Therefore, we did not use this untimely and

unverified information in our second review period calculations.

Comment 35: SKC contends that if the Department does adjust RC

costs, it should calculate a uniform cost for VCs and for RCs. SKC

asserts that such an approach would be preferable to calculating the

cost of RC as the full cost of the scrap film plus the cost of

recycling.

Department's Position: As noted in our response to Comment 1,

because we did not adjust RC costs, this issue is moot.

Comment 36: For the third review SKC argues that the Department

should adjust its COM for certain period costs. SKC asserts that these

period costs could not be determined until the end of its fiscal year.

SKC assets that correction of these period costs is necessary in order

to ensure that the Department's cost calculations reflect the most

complete and accurate data available.

Department's Position: We agree, and for the final results of the

third review we have adjusted the COM of all products to reflect the

final, audited cost results.

Comment 37: SKC asserts that for the second that third reviews, the

Department erroneously used CV for all U.S. sales that had sufficient

home market comparisons. SKC asserts this error resulted from the

Department's erroneous reading of SKC's product concordance.

Department's Position: We agree with SKC that we misread its

product concordance in our preliminary results. In these final results

we amended our calculations to match U.S. sales with home market sales

of identical merchandise according to the concordance data provided by

SKC.

Comment 38: SKC asserts that due to a spreadsheet formula error,

the Department overstated the COM for products SM30/12 and SS01/12 in

the second review.

Department's Position: We agree, and for the final results of the

second review we have recalculated the COMs of these products.

Comment 39: SKC asserts that in these reviews the Department

erroneously overstated home market profit by failing to include selling

expenses in COP.

Department's Position: We agree. In these final results we have

included SKC's selling expenses in our calculation of home market

profit.

Comment 40: SKC contends that the Department erroneously included

inventory carrying costs in CV for purchase price (PP) sales.

Department's Position: We agree with SKC that inventory carrying

costs should be excluded from CV for comparisons with PP sales, and we

have amended our calculations accordingly.

Comment 41: SKC asserts that the Department overstated CV financing

expenses in these reviews by not including notes receivable in the

calculation of the financing expense offset.

Department's Position: We agree and have added notes receivable in

the offset used to calculate net finacning expenses for CV.

Comment 42. SKC asserts that for the third administrative review

the Department erroneously used COMs for the second review for products

SS01/12 and SS01/15.

Department's Position: We agree and have amended these final

results accordingly.

Comment 43: STC asserts that the Department should exclude aberrant

U.S. sales of obsolete merchandise from its margin analysis. STC

contends that the CIT determined in American Permac, Inc. v. the United

States, 783 F. Supp. 1421 (CIT 1992) that the Department had the

discretion to exclude such U.S. sales.

Department's Position: We disagree with STC. As noted in the Final

Results of the First Review, there is no provision in the statute for

the exclusion of U.S. sales based upon those U.S. sales being

``aberrant'' or outside the ordinary course of trade (See Final Results

of First Review, (42842).) Therefore, we have included these sales in

our calculations.

Comment 44: STC asserts that if the Department includes sales of

obsolete merchandise in its margin calculations for the third review,

it should compare them to comparable home market sales, even if such

sales were below cost. STC asserts that the legislative history of the

sales-below-cost provision and the SAA accompanying the Uruguay Round

support the use of below-cost sales of obsolete merchandise in the

calculation of FMV.

Department's Position: We disagree with STC. As explained in our

preliminary determination, all comparable home market sales were

excluded because they were below cost. Section 773(b) of the Act

explicitly mandates the exclusion of below cost sales if such sales

have been made in substantial quantities over an extended period of

time and are not at prices which permit recovery of all costs within a

reasonable period of time in the normal course of trade. Because the

language of the statute unambiguously requires the exclusion of all

below cost sales that have satisfied the listed criteria, it is

unnecessary to resort to the legislative history for further guidance.

See Davis v. Michigan Dep't. of Treasury, 489 U.S. 803, 808, n.3 (1989)

(``Legislative history is irrelevant to the interpretation of an

unambiguous statute.'').

Moreover, it is a primary tenet of statutory construction that, if

possible, legislative history must be read to be consistent with the

meaning of a clear statutory mandate. See Sutherland Stat. Const.

Sec. 48.06 (5th ed. 1992). Therefore, the references to obsolete and

end-of-model year merchandise in the legislative history of the COP

provision merely provide examples of instances when below cost sales

may not satisfy the statute's criteria of being made in substantial

quantities over an extended period of time and at prices which permit

recovery of costs.

Therefore, because we determined that STC's below-cost sales

satisfied the statutory criteria for exclusion, we complied with the

clear statutory mandate to disregard STC's below cost sales, including

these sales of obsolete merchandise. When necessary, we have used CV,

in accordance with section 773(b).

Comment 45: STC contends that the Department should correct its

calculation of profit for value-added sales by adjusting for movement

expenses.

Department's Position: We agree and have adjusted our calculations

accordingly.

Comment 46: STC contends that for third period ESP sales compared

to CV, the Department should include inventory carrying costs in the

pool of indirect selling expenses.

Department's Position: We agree that inventory carrying costs

should be included in the pool of indirect selling expenses for the

calculation of CV when used as the comparison for ESP sales. We have

adjusted our calculations accordingly.

Final Results of Review and Revocation in Part

Upon review of the comments submitted, the Department has

determined that the following margins exist for the periods indicated:

[[Page 35188]]

------------------------------------------------------------------------

Margin

Company Period (percent)

------------------------------------------------------------------------

Cheil............................................. 92-93 0

Cheil............................................. 93-94 0.01

Kolon............................................. 92-93 0.11

Kolon............................................. 92-93 0.12

SKC............................................... 92-93 5.89

SKC............................................... 93-94 0.52

STC............................................... 92-93 0.47

STC............................................... 93-94 0.93

------------------------------------------------------------------------

Based upon the information submitted by Cheil during these reviews

and the first administrative review, we further determine that Cheil

has met the requirements for revocation set forth in Sec. 353.25(a)(2)

and Sec. 353.25(b) of the Department's regulations. Cheil has

demonstrated three consecutive years of sales at not less than fair

value and has submitted the certifications required under 19 CFR

353.25(b)(1). The Department conducted a verification of Cheil as

required under 19 CFR 353.25(c)(2)(ii).

On the basis of no sales at less than FMV for a period of three

consecutive years, and the lack of any indication that such sales are

likely, the Department concludes that Cheil is not likely to sell the

merchandise at less than FMV in the future. Therefore, the Department

is revoking the order with respect to Cheil.

The Customs Service shall assess antidumping duties on all

appropriate entries. Individual differences between USP and FMV may

vary from the percentages stated above. The Department will issue

appraisement instructions concerning each respondent directly to the

U.S. Customs Service.

Furthermore, the following deposit requirements will be effective

for all shipments of the subject merchandise, entered, or withdrawn

from warehouse, for consumption on or after the publication date of

these final results of administrative review, as provided for by

section 751(a)(1) of the Tariff Act: (1) the cash deposit rate for the

reviewed firms will be the rates outlined above for the third review

period except for Cheil and Kolon; because Kolon's weighted-average

margin is de minimis, its cash deposit rate will be zero percent;

because we are revoking Cheil, no cash deposit will be required for

Cheil; (2) for previously reviewed or investigated companies not listed

above, the cash deposit rate will continue to be the company-specific

rate published for the most recent period; (3) if the exporter is not a

firm covered in this review, a prior review, or in the original LTFV

investigation, but the manufacturer is, the cash deposit rate will be

the rate established for the most recent period for the manufacturer of

the merchandise; and (4) if neither the exporter nor the manufacturer

is a firm covered in this or any previous review conducted by the

Department, the cash deposit rate will be 4.82 percent, the all-others

rate established in the LTFV investigation.

These deposit requirements shall remain in effect until publication

of the final results of the next administrative review.

This notice serves as the final reminder to importers of their

responsibility under 19 CFR 353.26 to file a certificate regarding the

reimbursement of antidumping duties prior to liquidation of the

relevant entries during these review periods. Failure to comply with

this requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This notice also serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 353.34(d). Timely written notification or

conversion to judicial protective order is hereby requested. Failure to

comply with the regulations and the terms of the APO is a sanctionable

violation.

This administrative review and notice are in accordance with

section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR

353.22.

Dated: June 26, 1996.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-17159 Filed 7-3-96; 8:45 am]

BILLING CODE 3510-DS-M