Polyethylene Terephthalate Film, Sheet, and Strip From the Republic of Korea; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

[A-580-807]

Polyethylene Terephthalate Film, Sheet, and Strip From the

Republic of Korea; Final Results of Antidumping Duty Administrative

Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

review.

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SUMMARY: On March 7, 1997, the Department of Commerce (the Department)

published the preliminary results of administrative review of the

antidumping duty order on polyethylene terephthalate film sheet, and

strip (PET film) from the Republic of Korea. The review covers two

manufacturers/exporters of the subject merchandise to the United States

and the period June 1, 1995 through May 31, 1996.

As a result of comments we received, the dumping margin for one

respondent, SKC Limited (SKC) has changed from the one presented in our

preliminary results. The margin for STC Corporation (STC) remains the

same as the one published in our preliminary results.

EFFECTIVE DATE: July 16, 1997.

FOR FURTHER INFORMATION CONTACT:

Michael J. Heaney, Maureen McPhillips, or Linda Ludwig, AD/CVD

Enforcement Group III, Import Administration, International Trade

Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, NW, Washington, DC 20230, telephone: (202) 482-

4475, 3019, or 3833, respectively.

SUPPLEMENTARY INFORMATION:

Background

On March 7, 1997 (62 FR 10527), the Department published the

preliminary results of administrative review and termination in part of

the antidumping duty order on PET film from the Republic of Korea, 56

FR 25669 (June 5, 1991).

This review covers two manufacturers/exporters of the subject

merchandise to the United States: SKC and STC, and the period June 1,

1995 through May 31, 1996.

The Department has concluded this review in accordance with section

751 of the Tariff Act of 1930, as amended (the Tariff Act).

Scope of the Review

Imports covered by this review are shipments of all gauges of raw

pretreated, or primed polyethylene terephthalate film, sheet, and

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

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

least one of their surfaces modified by the application of a

performance-enhancing resinous or inorganic layer of more than 0.00001

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

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

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

the order.

PET film is currently classifiable under Harmonized Tariff Schedule

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

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

remains dispositive as to the scope of the product coverage.

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

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the Tariff Act of

1930, as amended (the Tariff Act), are references to the provisions

effective January 1, 1995, the effective date of the amendments made to

the Tariff Act by the Uruguay Round Agreements Act. In addition, unless

otherwise indicated, all references to the Department's regulations are

to 19 CFR part 353, as amended by the regulations published in the

Federal Register on May 19, 1997 (62 FR 27296).

[[Page 38065]]

Analysis of Comments Received

We invited interested parties to comment on the preliminary results

of this administrative review. We received timely comments from the

respondent, SKC on April 7, 1997. On April 14, 1997, we received a

reply to SKC's brief from the petitioners, E.I. DuPont de Nemours &

Company, Hoechst Celanese Corporation, and ICI Americas Inc.

Comment 1: SKC objects to the Department's allocation of the cost

of scrap equally to A-grade and B-grade films, stating that SKC's cost

allocation methodology is reasonable and consistent with widely

recognized cost accounting concepts. SKC references its March 8, 1996

case brief filed in the second and third reviews, wherein its arguments

in support of its allocation methodology are set forth more fully (see,

Attachment I of SKC's April 7, 1997 case brief).

SKC states that allocating the cost of scrap film equally to A-

grade and B-grade films improperly overstates the cost of B-grade films

while understating the cost of A-grade films. SKC contends that its

methodology of initially allocating costs equally among A-grade film,

B-grade film, and scrap, and then reallocating the cost of scrap to the

cost of A-grade film is consistent with accepted cost accounting

methodologies.

SKC also asserts that its methodology is consistent with the

Department's treatment of jointly produced in numerous other

antidumping proceedings, wherein the Department recognized that a pure

quantitative, or physical measures approach to cost allocation is

unreasonable where there is a significant difference in the value of

the jointly produced products. SKC cities Elemental Sulphur from

Canada, 61 FR 8239, 8241-8243 (March 4, 1996) (Sulphur from Canada);

Oil Country Tubular Goods from Argentina, 60 FR 33539, 33547 (June 28,

1995) (OCTG from Argentina); Canned Pineapple Fruit from Thailand, 60

FR 29553, 29560 (June 5, 1995) (Pineapple from Thailand) in support of

its position.

SKC maintains that it is the Department's well-established practice

to calculate costs in accordance with a respondent's normal cost

accounting system unless the system results in an unreasonable

allocation of costs. SKC states that its reported cost of manufacturing

(COM) data were calculated in accordance with its normal and long-

established management cost accounting system. Therefore, SKC concludes

that the Department should use its COM data as originally reported.

The petitioners argue that there is no change in fact or

circumstance in this review with would warrant the Department to

reverse its position established in the investigation and earlier

reviews of this case, requiring SKC to assign the same costs to A-grade

and B-grade PET film. The petitioners note that in the second and third

administrative reviews of this order, the Department thoroughly

discussed the basis for its conclusion that yield losses should be

allocated to A- and B-grade films on the basis of weight, instead of

assigning all yield loss to A-grade films (see, Attachment A, Comment

10 of the petitioners April 14, 1997 reply to SKC's case brief).

Moreover, the petitioners state that SKC admits that A- and B-grade

films ``are produced simultaneously in a single process'' (SKC Case

Brief at 3). The fact that SKC sells B-grade products at low prices in

the United States does not, in the petitioners' view, justify the

assignment of a lower cost of production to B-grade films.

In conclusion, the petitioners challenge SKC's characterization of

its proposed allocation methodology as ``normal and long-established.''

The petitioners state that in determining the reasonableness and

accuracy of an allocation methodology, the Department must consider

``whether the producer historically used its submitted cost allocation

methods to compute the cost of the subject merchandise prior to the

investigation or review and in the normal course of its business

operation,'' citing the Statement of Administrative Action Accompanying

the URAA, at 835). According to the petitioners, at the time of the

original investigation, SKC's ``normal'' accounting system assigned an

equal cost per-unit weight to all film types, and SKC created its

proposed accounting system specifically for the Department's

investigation.

Department's Position: As we explained in the final results of

previous reviews of this order, we determined that A-grade and B-grade

PET film have identical production costs, and accordingly, we continue

to rely on an equal cost methodology for both grades of PET film in

these final results; (see, Polyethylene Terephthalate Film, Sheet, and

Strip from the Republic of Korea; Final Results of Review and Tentative

Revocation in Part, 61 FR 35177, 35182-83, (July 5, 1996) (Second and

Third Reviews); and Polyethylene Terephthalate Film, Sheet, and Strip

from the Republic of Korea; Final Results of Review and Notice of

Revocation in Part, 61 FR 58375-76, (November 14, 1996) (Fourth

Review).

Moreover, as noted in the final results of the second through the

fourth reviews, the Court of International Trade (CIT) has ruled that

our allocation of SKC's production costs between A-grade and B-grade

film is reasonable (See, E.I. DuPont de Nemours & Co., Inc. et al. v.

United States, 932 F. Supp. 296 (CIT 1996)).

As explained in previous reviews of PET film, A-grade and B-grade

film undergo an identical production process that involves an equal

amount of material and fabrication expenses. The only difference in the

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

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

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

classified as lower quality B-grade film (see Fourth Review, 61 FR

58375).

We continue to maintain that SKC's reliance on Sulphur from Canada,

Pineapple from Thailand, and OCTG from Argentina is misplaced. Those

cases concerned the appropriate cost methodology for products

manufactured from a joint production process. SKC has mischaracterized

the continuous production process of PET film as joint processing. A

joint production process occurs when two or more products result

simultaneously from the use of one raw material as production takes

place.'' (see, Management Accountants' Handbook, Keller, et al., Fourth

Edition at 11:1.) A joint production process produces two distinct

products and the essential point of a joint production process is that

``the raw material, labor, and overhead costs prior to the initial

split-off can be allocated to the final product only in some arbitrary,

although necessary, manner.'' Id. The identification of different

grades of merchandise does not transform the manufacturing process into

a joint production process which would require the allocation of costs.

In this case, since production records clearly identify the amount of

yield losses for each specific type of PET film, our allocation of

yield losses to the films bearing those losses is reasonable, not

arbitrary (Fourth Review at 58575-76).

SKC is correct in its statement that it is the Department's

practice to calculate costs in accordance with a respondent's

management accounting system, unless that system results in an

unreasonable allocation of costs. Management accounting deals with

providing information that managers inside an organization will use.

Managerial accounting reports typically provide more detailed

information about product costs, revenue and profits. They

[[Page 38066]]

are used to identify problems, objectives or goals, and possible

alternatives. In order to respond to the Department's questionnaires,

SKC officials devised a management accounting methodology for

allocating costs incurred in the film and chip production costs centers

to individual products produced during the period of investigation. SKC

adopted this cost accounting system to reflect a management goal (i.e.,

to respond to the Department). Under this system, SKC assigns the yield

loss from the production of A- and B-grade films exclusively to the A-

grade films. This methodology helps management to focus on the film

types with low yields. However, notwithstanding SKC management's

concern that it accurately portray the cost of their A-grade products,

this managerial accounting methodology is not appropriate for reporting

the actual costs of A- and B-grade products. As previously noted, A-

grade and B-grade films undergo an identical production process, B-

grade film is made using the same materials, on the same equipment, at

the same time as the A-grade film. As such, both A- and B-grade films

must be allocated the same costs. It is within the Department's mandate

to accept or reject the allocation methodologies devised by

respondents. In this instance, we have continued to rely on an equal

cost allocation methodology which reflects the actual costs incurred

for both A-grade and B-grade film.

Comment 2: SKC maintains that the Department erroneously deducted

indirect selling expenses and inventory carrying costs incurred on its

export sales in Korea from the U.S. price (USP). SKC points out that

according to the Department's regulations, in calculating constructed

export price (CEP), the Department must deduct from the starting price

only those expenses incurred by the U.S. reseller in selling to its

unaffiliated U.S. customer, not those incurred by the foreign producer

in selling to the affiliated U.S. reseller.

SKC notes that the Department's proposed methodology is consistent

with the logic of the treatment of CEP profit and level of trade in the

URAA, because the Department's goal is to construct an export price at

the level of the sale from the foreign producer to its affiliated

reseller. SKC cites Dynamic Random Access Memory Semiconductors of One

Megabit or Above from the Republic of Korea, 62 FR 965,968, (January 7,

1997); Certain Pasta from Italy, 61 FR 1344, 1348 (January 19, 1996),

and Bicycles from the People's Republic of China, 61 FR 19062, 19031

(April 30, 1996) as examples of cases wherein the Department has

properly implemented this new methodology and has not subtracted

foreign indirect selling expenses and inventory carrying costs from the

United States price in calculating CEP.

The petitioners counter that SKC's citation of prior cases in which

the Department apparently did not deduct indirect selling expenses and

inventory carrying costs incurred in the home market is not necessarily

relevant in the instant case. The petitioners maintain that the

Statement of Administrative Action (SAA) directs the Department to

deduct ``any expenses which result from, and bear a direct relationship

to, selling activities in the United States.'' (SAA at 823)

The petitioners conclude that (1) this language clearly mandates

that the Department's treatment of such expenses must be case-specific,

and (2) SKC is wrong in stating that the deductions are limited to

``only those expenses incurred by the U.S. reseller.'' The petitioners

cite the Preliminary Results of Antidumping Administrative Review;

Aramid Fiber Formed of Poly Para-Phylene Terephthalamide (PPD-T) from

the Netherlands, 62 FR 10524 (March 7, 1997) in support of their

position.

Department's Position: We agree with SKC that, in this instance, it

is not appropriate to deduct SKC's indirect selling expenses and

inventory carrying costs incurred in Korea from CEP. It is clear from

the SAA that under the new statute we should deduct from CEP only those

expenses associated with economic activities in the United States. The

SAA also indicates that CEP ``is now calculated to be, as closely as

possible, a price corresponding to an export price between non-

affiliated exporters and importers.'' See SAA at 823. In establishing

CEP under section 772(d) of the Tariff Act, the Department's new

regulations codify this principle, stating that ``the Secretary will

make adjustments for expenses associated with commercial activities in

the United States that relate to the sale to an unaffiliated purchaser,

no matter where or when paid.'' Section 351.402(b), Antidumpting

Duties, ``Countervailing Duties,'' final rule, 62 FR 27295, 27411 (May

19, 1997). Therefore, consistent with section 772(d) and the SAA, we

deduct only those expenses representing activities undertaken by the

affiliated importer to make the sale to the unaffiliated customers. We

ordinarily do not deduct indirect expenses incurred in selling to the

affiliated U.S. importer. See Gray Portland Cement and Clinker from

Mexico; Final Results of Antidumping Duty Administrative Review, 62 FR

17148, 17168 (April 9, 1997).

SKC's reported home market indirect selling expenses represent an

allocation of selling expenses over sales and cannot be tied with

specificity to SKC's U.S. sales. Likewise, the cost of carrying

inventory in the home market for sales to the affiliated importer are

not incurred ``on behalf of the buyer'' (i.e., the affiliated

importer), but for the benefit of the exporter in order to complete the

sale to the affiliated importer. See Antifriction Bearings, Other than

Tapered Roller Bearings, and Parts Thereof, from France, et al.; Final

Results of Antidumping Duty Administrative Reviews and Partial

Termination of Administrative Reviews, 62 FR 2124 (January 15, 1997).

Evidence on the record in this case indicates that SKC's indirect

selling expenses and inventory carrying costs, incurred in the home

market on behalf of sales to the U.S., cannot be directly associated to

commercial activity in the United States. Moreover, SKC incurs such

expenses on its own behalf, and for its own benefit in order to

complete the sale to its affiliated importer. Therefore, we have not

deducted these expenses from CEP for these final results.

Comment 3: SKC contends that the Department's computer program (1)

Fails to accurately read in product matches from SKC's concordance,

resulting in numerous sales being erroneously compared to constructed

value, (2) incorrectly calculates cost of production (COP) and net

price compared with COP, so that many above-cost sales erroneously

failed the cost test, (3) does not reflect the calculation of a CEP

offset, as stated in the Department's March 3, 1997 analysis

memorandum, and (4) contains several clerical errors in the calculation

of CEP profit that overstate the amount of the CEP profit adjustment.

Department's Position: For these final results, we have corrected

the clerical errors SKC noted for the first three items listed above.

Concerning the fourth item, the allegation of clerical errors in the

calculation of CEP profit, we agree with SKC that international

movement expenses and the cost of manufacturing were inadvertently

omitted from the calculations of CEP profit. See, Memorandum from

Analyst to File, June 30, 1997, for a more detailed explanation of the

specific changes that we made in the computer program.

Comment 4: In its comments on the CEP total profit calculation, SKC

also contends that the Department failed to include credit expenses and

inventory carrying costs in the total expenses for U.S. sales. SKC

notes that these items

[[Page 38067]]

were used in the numerator of the fraction used to allocate total

profit in determining CEP profit. SKC maintains that the Department

must account for these imputed expense in the calculation of total

costs.

Department's Position: To derive the total costs of U.S.

merchandise, we compute the unit cost of each observation in the U.S.

data base by adding the cost of manufacturing, general and

administrative expense, and net interest expense from the constructed

value (CV) data base. We then multiply the unit cost by the quantity

sold to derive the total cost of sales for each U.S. market

transaction. To calculate total U.S. selling expenses we add all direct

and indirect selling expenses and any further manufacturing costs

incurred in the United States. We exclude from this calculation imputed

amounts for credit expense and inventory carrying costs because in

calculating the total cost of the U.S. merchandise, we included net

interest expense from the CV data base. Thus, there is no need to

include imputed interest amounts in the profit calculation since we

have already accounted for actual interest in computing ``actual

profit'' under section 772(f). When allocating a portion of the actual

profit to each U.S. CEP sale, we will include imputed credit and

inventory carrying costs as part of the total U.S. expenses allocation

factor. This is consistent with section 772(f)(10) which defines the

term ``total U.S. expenses'' as those described under section 772(d)

(1) and (2).

Final Results of Review

As a result of our review, we determine that the following

weighted-average margins exist:

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

Manufacturer/exporter Period of review Margin

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

SKC Limited............................... 6/1/95-5/31/96 0.45

STC Corporation........................... 6/1/95-5/31/96 0.37

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

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between export price and normal value may vary from the

percentage stated above. The Department will issue appraisement

instructions directly to the Customs Service.

Furthermore, the following deposit requirements will be effective

upon publication of this notice of final results of review for all

shipments of PET film from the Republic of Korea within the scope of

the order entered, or withdrawn from warehouse, for consumption on or

after the publication date, as provided by section 751(a)(1) of the

Tariff Act: (1) The cash deposit rate for the reviewed companies will

be the rates listed above; (2) for previously reviewed or investigated

companies not listed above, the rate will continue to be the company-

specific rate published for the most recent period; (3) if the exporter

is not a firm covered in this review, a prior review, or the original

less-than-fair-value (LTFV) investigation, but the manufacturer is, the

cash deposit rate will be the rate established for the most recent

period for the manufacturer of the merchandise; and (4) for all other

producers and/or exporters of this merchandise, the cash deposit rate

will be 21.50 percent, the ``all others'' rate established in the

remand redetermination of the LTFV investigation, as explained below.

These deposit requirements shall remain in effect until publication of

the final results of the next administrative review.

On May 20, 1996, pursuant to court remand, the Department

recalculated the weighted-average dumping margins for the LTFV

investigation. As a result of the recalculation, the Department

established an ``all others'' rate of 21.50 percent. Final

Determination on Remand Pursuant to Court Order, E.I. Dupont de Nemours

& Co., Inc. v.United States, Court No. 91-07-00487, Slip Op. 96-56

(March 20, 1996). On February 5, 1997, the CIT affirmed the

Department's remand redetermination of the LTFV investigation. E.I.

Dupont de Nemours & Co., Inc., v.United States, Court No. 91-07-00487,

Slip Op. 97-17 (Gebrary 5, 1997). Accordingly, 21.50 percent is the

``all others'' rate established in the LTFV investigation. Pursuant to

the CIT decisions in Floral Trade Council v. United States, 822 F.

Supp. 766 (CIT 1993) and Federal Mogul Corporation v. United States,

822 F. Supp. 782 (CIT 19930, this ``all others'' rate can only be

changed through an administrative review.

This notice serves as a final reminder to importers of their

responsibility under 19 CFR Sec. 353.26 to file a certificate regarding

the reimbursement of antidumping duties prior to liquidation of the

relevant entries during this review period. Failure to comply with this

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and subsequent assessment

of double antidumping duties.

Notification of Interested Parties

This notice also serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR Sec. 353.34(d). Timely written

notification of return/destruction of APO materials or conversion to

judicial protective order is hereby requested. Failure to comply with

the regulations and the terms of an APO is a sanctionable violation.

Timely written notification of the return/destruction of APO materials

or conversion to judicial protective order is hereby requested.

This administrative review and notice are in accordance with

section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR

Sec. 353.22.

Dated: July 7, 1997.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-18731 Filed 7-15-97; 8:45 am]

BILLING CODE 3510-DS-M