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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-583-824]

Polyvinyl Alcohol From Taiwan: Final Results of Antidumping Duty

Administrative Review

AGENCY: Import Administration, International Trade Administration, U.S.

Department of Commerce.

SUMMARY: On February 9, 1998, the Department of Commerce published in

the Federal Register the preliminary results of the administrative

review of the antidumping duty order on polyvinyl alcohol from Taiwan.

The review covers two manufacturers/exporters of the subject

merchandise to the United States, Chang Chun

[[Page 32811]]

Petrochemical and E.I. duPont de Nemours & Co. The period of review is

May 15, 1996, through April 30, 1997.

We gave interested parties an opportunity to comment on our

preliminary results. Based on our analysis of the comments received and

the correction of certain clerical and computer programming errors, we

have changed our results from those presented in our preliminary

results, as described below in the comment section of this notice. The

final results are listed below in the section ``Final Results of

Review.''

EFFECTIVE DATE: June 16, 1998.

FOR FURTHER INFORMATION CONTACT: Everett Kelly at (202) 482-4194, or

Sunkyu Kim at (202) 482-2613, Import Administration, International

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

Constitution Avenue, N.W., Washington, D.C. 20230.

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

references to the provisions effective January 1, 1995, the effective

date of the amendments made to the Tariff Act of 1930 (``the Act'') by

the Uruguay Round Agreements Act (``URAA''). In addition, unless

otherwise indicated, all citations to the Department of Commerce's

regulations are to 19 CFR Part 353 (April 1, 1997). Although the

Department's new regulations, codified at 19 CFR Part 351, 62 FR 27296

(May 19, 1997) (``Final Regulations''), do not govern this review,

citations to those regulations are provided, where appropriate, as a

statement of current departmental practice.

SUPPLEMENTARY INFORMATION:

Background

On February 9, 1998, the Department of Commerce (``the

Department'') published in the Federal Register its preliminary results

of the 1996-1997 administrative review of the antidumping duty order on

polyvinyl alcohol from Taiwan (63 FR 6526) (``Preliminary Results'').

We gave interested parties an opportunity to comment on our preliminary

results. Air Products and Chemicals Inc. (``the petitioner''), E.I. du

Pont de Nemours & Co. (``DuPont''), Chang Chun Petrochemical Co., Ltd.

(``Chang Chun''), and Perry Chemical Corporation (``Perry'') submitted

case briefs on March 11, 1998, and rebuttal briefs on March 18, 1998.

Pursuant to a timely request from the petitioner, we held a public

hearing on March 25, 1998. On April 23, 1998, the Department requested

Chang Chun to provide supplemental information concerning its sales to

the United States which were used in our preliminary results

calculation (see ``Treatment of Sales of Tolled Merchandise'' section

below for further discussion). Chang Chun provided this data on April

30, 1998. Additionally, Chang Chun provided data on additional

shipments made during the POR which were not included in our

preliminary results (see Memorandum to File from Everett Kelly, Case

Analyst, dated May 20, 1998). In May 1998, the Department verified the

data provided by Chang Chun (see Verification Report dated May 28,

1998).

On May 11, 1998, the petitioner filed a submission objecting to

certain information provided by Chang Chun in its April 30, 1998,

submission. Chang Chun submitted its response to the petitioner's

comments on May 22, 1998 (see Comment 7 for Chang Chun for further

discussion).

The Department has now completed this administrative review, in

accordance with section 751(a) of the Act.

Scope of Review

The product covered by this review is polyvinyl alcohol (``PVA'').

PVA is a dry, white to cream-colored, water-soluble synthetic polymer.

Excluded from this review are PVAs covalently bonded with

acetoacetylate, carboxylic acid, or sulfonic acid uniformly present on

all polymer chains in a concentration equal to or greater than two mole

percent, and PVAs covalently bonded with silane uniformly present on

all polymer chains in a concentration equal to or greater than one-

tenth of one mole percent. PVA in fiber form is not included in the

scope of this review.

The merchandise under review is currently classifiable under

subheading 3905.30.00 of the Harmonized Tariff Schedule of the United

States (``HTSUS''). Although the HTSUS subheading is provided for

convenience and customs purposes, our written description of the scope

is dispositive.

Treatment of Sales of Tolled Merchandise

As discussed in the Preliminary Results of this proceeding, DuPont

and Perry sold in the U.S. and third-country markets subject

merchandise tolled by the Taiwan producer, Chang Chun. Both DuPont and

Perry claim that they are the manufacturer of the tolled merchandise

under the Department's newly articulated treatment of tollers and

subcontractors in tolling arrangements (see 19 CFR 351.401(h) (62 FR

27926) (May 19, 1997)). Accordingly, each company claims that it is

entitled to its own dumping rate.

In our preliminary results, we determined that, based on the

evidence on the record, DuPont is the manufacturer of the tolled

merchandise, and therefore the appropriate respondent. With respect to

Perry, based upon a review of the arrangement between Perry and Chang

Chun, we preliminarily determined that Perry is not the manufacturer of

PVA it imported into the United States during the POR.

For the final results, we continue to treat DuPont as the

manufacturer/exporter of PVA produced under a tolling arrangement with

Chang Chun (see Comment 1 for DuPont). With respect to Perry, we

continue to find that Perry is not a manufacturer of the subject

merchandise. As in the preliminary results, we are treating Perry as an

importer and U.S. reseller of the subject merchandise (see Comment 1

for Chang Chun).

As a result of our preliminary decision that Chang Chun was the

producer of the PVA sold to Perry, certain information was not on the

record of this review, which required us to substitute missing data in

the Preliminary Results. Initially, Chang Chun had reported a small

number of EP sales to Perry which were not produced under the agreement

with Perry. Included in that reporting were all the expenses associated

with those sales, i.e., movement expenses from Chang Chun's factory to

the port of entry in the United States, and selling expenses including

credit and bank charges. We also had a larger number of transactions

originally reported by Perry, which were sales from Chang Chun to Perry

produced pursuant to the agreement. In the Preliminary Results, we used

both the sales reported by Chang Chun and those reported by Perry to

calculate the EP for Chang Chun (see Calculation Memorandum for the

Preliminary Results for Chang Chun Petrochemical Co., Ltd., dated

February 2, 1998 (``Preliminary Calculation Memorandum'').

Although Perry reported its expenses associated with selling the

PVA at issue to unaffiliated customers in the United States, we did not

have Chang Chun's selling expenses on the record for those sales.

However, because all of the sales were made to Perry and were all

shipped by Chang Chun on the same delivery terms, we used the movement

and selling expenses associated with the sales reported by Chang Chun

in its U.S. sales listing submitted on August 22, 1997, as a reasonable

substitute for the missing expense data for the sales originally

reported by Perry.

[[Page 32812]]

Furthermore, having determined that the Perry-reported transactions are

sales by Chang Chun, we lacked appropriate, verified sales dates,

shipment dates or the entry dates. As a result, in our Preliminary

Results, from information on the record, we estimated the sales dates

and shipment dates (see ``Preliminary Calculation Memorandum for Chang

Chun'').

For these Final Results we gathered additional information from

Chang Chun, which we verified, so that our review of Chang Chun's EP

sales encompassed all sales shipped during the POR (see Comment 7 for

Chang Chun). Additionally, we obtained and verified the prices Chang

Chun's affiliate charged Perry, through an intermediary trading

company, for the major input, VAM, during the POR. With this new data,

we were able to properly construct Chang Chun's U.S. price to Perry for

the PVA transactions covered by this review by combining the VAM prices

with the prices Chang Chun charged Perry for converting the VAM into

PVA (see Comment 2 for Chang Chun).

Normal Value Comparisons

To determine whether sales of the subject merchandise by the

respondents to the United States were made at below normal value, we

compared, where appropriate, the export price (``EP'') and constructed

export price (``CEP'') to the normal value (``NV'') as described below.

In accordance with section 777A(d)(2) of the Act, we compared, where

appropriate, the EPs and CEPs of individual transactions to the monthly

weighted-average price of sales of the foreign like product.

On January 8, 1998, the Court of Appeals for the Federal Circuit

issued a decision in Cemex v. United States, 1998 WL 3626 (Fed Cir.).

In that case, based on the pre-URAA version of the Act, the Court

discussed the appropriateness of using constructed value (``CV'') as

the basis for foreign market value when the Department finds home

market sales to be outside the ordinary course of trade. This issue was

not raised by any party in this review. However, the URAA amended the

definition of sales outside the ``ordinary course of trade'' to include

sales below cost. See section 771(15) of the Act. Consequently, the

Department has reconsidered its practice in accordance with this

decision and has determined that it would be inappropriate to resort

directly to CV as the basis for NV, in lieu of foreign market sales, if

the Department finds foreign market sales of merchandise identical or

most similar to that sold in the United States to be outside the

ordinary course of trade. Instead, the Department will use sales of

similar merchandise, if such sales exist. The Department will use CV as

the basis for NV only when there are no above-cost sales that are

otherwise suitable for comparison. Therefore, in this proceeding, when

making comparisons in accordance with section 771(16) of the Act, we

considered all products sold in the home market as described in the

``Scope of the Review'' section of this notice, above, that were in the

ordinary course of trade for purposes of determining appropriate

product comparisons to U.S. sales. Where there were no sales of

identical merchandise in the home market made in the ordinary course of

trade to compare to U.S. sales, we compared U.S. sales to sales of the

most similar foreign like product made in the ordinary course of trade,

based on the characteristics listed in sections B and C of our

antidumping duty questionnaire.

Export Price and Constructed Export Price

We calculated EP and CEP, as appropriate, in accordance with

section 772 of the Act. The calculation for each respondent was based

on the same methodology used in the preliminary results, with the

following exceptions:

Chang Chun

As noted in the ``Treatment of Sales of Tolled Merchandise''

section, we modified the gross unit prices and dates of sale and

shipment for transactions used in our Preliminary Results based on

information obtained after the preliminary results. We also included

certain additional sales shipped during the POR which were not included

in our preliminary analysis. Furthermore, as identified by Chang Chun

in its case brief, we made corrections to the product characteristics

for certain U.S. sales which were incorrectly assigned in our

preliminary results calculation. We made the corrections based on

information Chang Chun provided in its November 12, 1998, supplemental

Section C response (see Calculation Memorandum for the Final Results

for Chang Chun Petrochemical Co., Ltd. dated June 9, 1998, (``Final

Calculation Memorandum for Chang Chun'')).

DuPont

In our Preliminary Results, as noted by DuPont in its case brief,

we incorrectly stated that we calculated EP for some of DuPont's sales

when, in fact, all of DuPont's sales should have been classified as CEP

sales. In our preliminary margin program, however, we actually

calculated all sales reported by DuPont as CEP transactions. For the

final results, we corrected the CEP price calculation for DuPont's

sales of further manufactured products by stating the prices on the

same unit basis as the normal value (see Calculation Memorandum for the

Final Results for E.I. duPont de Nemours & Co., dated June 9, 1998

(``Final Calculation Memorandum for DuPont''), see also, Polyethylene

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

Results of Antidumping Duty Administrative Review, 60 FR 42835, 42845

(August 17, 1995) where the Department made the same type of adjustment

to CEP calculation for sales of further manufactured merchandise).

Normal Value

For Chang Chun, we based NV on the prices at which the foreign like

products were first sold for consumption in the home market. For

DuPont, we based NV on the prices at which the foreign like products

were first sold for consumption in the respondent's largest third-

country market, Australia. We calculated NV based on the same

methodology used in the preliminary results, except for DuPont where we

modified the margin calculation program to correct for certain

ministerial errors identified by the petitioner. Specifically, we made

the following corrections:

1. We corrected the calculation of variable manufacturing costs

(``VCOM'') for DuPont's further processed U.S. sales by stating the per

unit costs on the same unit basis as the VCOM of the Australian sales

(see ``Final Calculation Memorandum for DuPont'').

2. We corrected the gross unit price for a third-country market

sale which was added to DuPont's sales listing based on findings at

verification. We note, however, that the per unit price suggested by

the petitioner in its case brief is incorrect. We calculated the gross

unit price based on the verified quantity and total value listed on the

invoice (see ``Final Calculation Memorandum for DuPont'').

3. We changed the difference-in-merchandise adjustment calculation

to correct for a clerical error in the equation used in our preliminary

margin program (see ``Final Calculation Memorandum for DuPont'').

4. Although we did not resort to CV as the basis for NV for any of

DuPont's U.S. sales in the final results, we made corrections for

certain clerical errors contained in the preliminary margin program for

calculating CV (see ``Final Calculation Memorandum for DuPont'').

[[Page 32813]]

Cost of Production Analysis

As discussed in the preliminary results, we conducted an

investigation to determine whether the respondents made sales of

foreign like product in the comparison market during the POR at prices

below their cost of production (``COP'') within the meaning of section

773(b)(1) of the Act. We calculated the COP following the same

methodology as in the preliminary results on a model-specific basis,

except that for Chang Chun, we reallocated costs between PVA and acetic

acid based on relative sales value, and made the appropriate adjustment

to the reported COP (see Comment 4 for Chang Chun and ``Final

Calculation Memorandum for Chang Chun'').

Pursuant to section 773(b)(2)(C) of the Act, where less than 20

percent of a respondent's sales of a given product were made at prices

below the COP, we did not disregard any below-cost sales of that

product because we determined that the below-cost sales were not made

in ``substantial quantities.'' Where 20 percent or more of a

respondent's sales of a given product were made at prices below the

COP, we disregarded the below-cost sales because such sales were found

to be made within an extended period of time in ``substantial

quantities'' in accordance with sections 773(b)(2) (B) and (C) of the

Act, and because the below cost sales of the product were at prices

which would not permit recovery of all costs within a reasonable period

of time, in accordance with section 773(b)(2)(D) of the Act. Where all

contemporaneous sales of identical and similar merchandise were

disregarded, we calculated NV based on CV, in accordance with section

773(a)(4) of the Act.

For both Chang Chun and DuPont, we did not find that comparison

market sales of PVA products were made at prices below COP within the

POR.

Analysis of Comments Received

Chang Chun

Comment 1: Treatment of Sales of Perry's Tolled Merchandise. Perry

argues that the Department has misinterpreted section 351.401(h) of its

proposed and final regulations in failing to find that Perry is the

producer of the subject merchandise under the tolling agreement with

Chang Chun. Perry claims that it meets all of the stated requirements

of section 351.401(h) which would qualify Perry as the producer. Perry

maintains that it controls all aspects of the production and sales of

the finished PVA and has ownership of the main input, VAM, as well as

the finished product, PVA. According to Perry, the Department's

conclusion in the preliminary results that Perry is not a producer is

based on factors that are irrelevant to the Department's determination

regarding the producer of subject merchandise under the tolling

arrangement. Perry argues that to be considered a producer in a tolling

situation, the Department's regulation at section 351.401(h) does not

require that the party be engaged in some processing work and dismisses

as irrelevant the fact that Perry does not engage in any production

activities, including production of the main input, VAM, does not own

production facilities, and does not engage in R&D activities. Perry

claims that, in past cases, the Department has found a ``tollee'' to be

a producer where no processing was done by the ``tollee.'' In support

of its position, Perry cites to the following cases: Notice of Final

Determination of Sales at Less Than Fair Value: Stainless Steel Flanges

from India, 58 FR 68853 (December 29, 1993) (``Steel Flanges from

India''), Notice of Final Determination of Sales at Less Than Fair

Value: Static Random Access Memories from Taiwan, 63 FR 8909 (February

23, 1998) (``SRAMS from Taiwan''), and Notice of Final Determination of

Sales at Less Than Fair Value: Collated Roofing Nails from Taiwan, 62

FR 51427 (October 1, 1997) (``Collated Roofing Nails from Taiwan'').

Additionally, Perry claims that in the Preliminary Results, the

Department cited ``obsolete reasoning'' in Chrome Plated Lug Nuts from

Taiwan, 56, FR 36130 (July 31, 1991) which has been overtaken by the

Department's later precedents cited above.

Furthermore, Perry contends that, contrary to the Department's

statement in the Preliminary Results that Perry's normal course of

conducting business has not substantively changed, the tolling

arrangement has required substantial changes in Perry's PVA business

because Perry now assumes all risks by acquiring control over VAM and

PVA production.

The petitioner responds that the Department was correct in

determining that Perry is not the producer of PVA it imports into the

United States. The petitioner states that the Department's

determination is consistent with past cases, in which the Department

deemed it necessary that the manufacturer be engaged in production

activities. According to the petitioner, Perry's lack of involvement in

critical production functions, such as knowledge of the physical

characteristics of toll produced PVA, demonstrates that Perry did not

have control over the production of tolled PVA it purported to have,

and thus, does not satisfy the requirements of a producer expressed in

the Department's proposed and final regulation. Accordingly, the

petitioner urges the Department to continue to find that Perry is not a

producer of PVA entitled to its own dumping rate.

DOC Position: On the basis of Perry's tolling agreement and Perry's

interpretation of the Department's new tolling regulation, Perry

asserts that it is the producer of the PVA processed under this

contract. See section 351.401(h) of the Final Regulations. We disagree.

In assessing whether Perry is the producer, we are not restricted to a

review of the four corners of the contract; rather, when determining

whether a party is a producer or manufacturer of subject merchandise,

we look at the totality of the circumstances presented. Moreover,

section 351.401(h) of the Final Regulations does not purport to address

all aspects of an analysis of tolling arrangements. It merely sets

forth certain conditions under which we will not find that a toller or

subcontractor is the producer of the subject merchandise. Based upon

the totality of the circumstances in this case, including the factors

set forth in section 351.401(h), we find that Chang Chun, not Perry, is

the producer of the PVA in question.

The record establishes that Chang Chun engaged in processing VAM

into PVA under the tolling contract with Perry. Evidence also

establishes that Chang Chun is a manufacturer of chemicals and a long-

time producer of PVA. In contrast, Perry has been a U.S. importer and

reseller of PVA produced by Chang Chun since 1978. It was only after

Chang Chun was found dumping and assigned a 19.21 percent margin that

Perry entered into the tolling arrangement. Prior to this arrangement,

at no time had Perry been in the business of producing or manufacturing

PVA or any other chemical nor, as part of its normal business practice,

was Perry ever engaged in subcontracting any kind of chemical

production or processing of subject merchandise or any chemical. (62 FR

at 6527). Moreover, we found no evidence to suggest that Perry's

decision to enter into a tolling arrangement with Chang Chun was for

the purpose of expanding its operations to begin producing PVA or any

other chemical. (62 FR at 6527). We find the mere rearrangement of

Perry's contractual relationship with Chang Chun insufficient to

establish Perry as a producer of PVA.

Although Perry claims that it acquired ownership of both the major

input and the PVA, under the circumstances this

[[Page 32814]]

does not persuade us that Perry is the producer of the PVA at issue.

Notwithstanding that Perry may have acquired contractual rights in the

VAM, the record establishes that, in effect, Chang Chun manufactured

the VAM purchased by Perry, and that Chang Chun retained possession and

control of the VAM before it underwent processing into subject

merchandise. Through a single intermediary, Perry made all of its VAM

purchases from an affiliate of Chang Chun, which produced the VAM in a

facility near Chang Chun's in Taiwan.

Perry argues that when purchasing VAM from the intermediary Perry

had no direct knowledge that the VAM was produced by a company

affiliated with Chang Chun and objects to the Department's

characterization in the Preliminary Results that Perry knew the

intermediary purchased the VAM from Chang Chun's affiliate. (63 FR at

6527). We stand by our interpretation of Perry's statements as

reasonable and regard Perry's comments after the fact as self-serving.

However, we note that even Perry acknowledges that it knew that Chang

Chun's affiliate was one of the suppliers of this intermediary.

Additionally, Chang Chun provided the Department with the VAM prices

charged by its affiliate to this intermediary, and Perry's name appears

on supporting documentation from this affiliate, thus demonstrating

that Chang Chun knew that Perry was the ultimate purchaser (see Exhibit

3 of Chang Chun's Supplemental Response submitted on April 30, 1998,

see also Comment 2 for Chang Chun). These facts describe circumstances

fundamentally different from DuPont's tolling arrangement, wherein

DuPont produced and owned the VAM it sent for processing to Chang Chun.

Additionally, the record indicates that Perry was not the exporter

of the PVA and in fact only gained possession and control over the PVA

as the U.S. importer when it reached the United States. In contrast,

DuPont produced the VAM and was the exporter, as well as the importer,

of the PVA to the United States. Thus, the record demonstrates that, in

essence, the transactions between Perry and Chang Chun did not change,

Perry merely paid Chang Chun twice--once for the VAM and once for the

PVA. It was Chang Chun that was the producer and exporter to the United

States--it retained control and possession of the VAM it produced, it

processed that VAM into PVA, and it exported the PVA to the United

States.

We also disagree with Perry that examining whether it has engaged

in any production activities is irrelevant under section 351.401(h) of

the Final Regulations. Although Perry argues that section 351.401(h)

does not explicitly require that a party perform some processing to be

deemed a producer, section 351.401(h) only addresses the circumstances

in which a toller will be considered a producer of subject merchandise.

Therefore, the Department is not restricted to the factors set forth in

that regulation when determining whether a party other than a toller is

the producer of merchandise under consideration. Moreover, while

examining the production activities of a party may not be decisive in

every case, whether a party has engaged either directly or indirectly

in some aspect of the production of subject merchandise is an important

consideration.

Additionally, Perry is simply incorrect in claiming that the

Department has found a party to be the producer when the party

performed no processing or manufacturing. See Sweaters Wholly or in

Chief Weight of Man-Made Fibre From Taiwan, 58 FR 32644 (1993) (Jia

Farn not the manufacturer where it performed no processing); Stainless

Steel Flanges From India, 58 FR 68853 (1993) (Akai producer where

related party performed some processing); Static Random Access Memories

From Taiwan, 63 FR 8909 (1998) (producer was party controlling design

of processed wafer, which was a substantial element of production);

Collated Roofing Nails From Taiwan, 62 FR 51427 (1997) (Lei Chu the

producer where affiliated party performed some processing).

Furthermore, a review of those cases demonstrates that Perry's claim

that Chrome-Plated Lug Nuts From Taiwan, 56 FR 36130, 131 (1991) is no

longer valid reasoning is unfounded. Even though Chrome-Plated Lug Nuts

From Taiwan pre-dated these cases, the reasoning is entirely consistent

with the later cases.

Finally, Perry's assertion that its control over PVA sales to

unaffiliated customers qualifies it as the producer under section

315.401(h) is also not dispositive of the issue. As discussed above,

the issue here is who is the producer of the subject merchandise.

Because we have found that Chang Chun is the producer/exporter, Perry's

sales to unaffiliated customers are irrelevant.

A review of the tolling arrangement at issue and the surrounding

circumstances leads us to conclude that this arrangement merely re-

ordered the contractual relationship between the parties, but had no

significant effect on how they conducted business. Perry continued to

purchase PVA from Chang Chun, albeit in two separate transactions

instead of through a single purchase of the finished product.

Therefore, Perry is not a producer. Perry remains an importer and

reseller of subject merchandise. We find, as we did in our Preliminary

Results, that Chang Chun is the producer of the PVA under

consideration.

Comment 2: Gross Unit Prices Constructed for Sales from Chang Chun

to Perry. The petitioner notes that the record does not contain the

prices Chang Chun's affiliated party charged for the sales of VAM to

the unaffiliated trading company which, in turn, sold the VAM to Perry.

As a substitute for the price Perry would have paid had it bought the

VAM directly from Chang Chun's affiliate, the petitioner argues that

the Department should estimate the trading company's mark-up (i.e.,

profit) by calculating the average mark-up Perry received on its U.S.

sales of PVA. According to the petitioner, Perry's mark-up for its

sales of PVA is a reasonable proxy for the trading company's mark-up on

VAM because both companies are trading companies involved in the

purchase and resales of chemical products.

Chang Chun argues that the adjustment proposed by the petitioner is

arbitrary, untimely and unsupported by any factual grounds. According

to Chang Chun, the adjustment requested by the petitioner seeks to

penalize Chang Chun for an alleged gap in the record for which it bears

no responsibility. Chang Chun submits that the sales price of VAM by

its affiliate to the trading company, which in turn sold the VAM to

Perry, was not on the record at the time of the preliminary results

because such information was not requested by the Department. Thus,

Chang Chun urges the Department to reject the petitioner's request.

DOC Position: Because these sales were originally reported by

Perry, the record did not contain information regarding prices from

Chang Chun to Perry (see ``Treatment of Sales of Tolled Merchandise'').

Although we have determined that Chang Chun produced and sold PVA to

Perry, Chang Chun charged Perry separately for VAM and for processing

VAM into PVA. At the time of our preliminary results, the record

contained the price charged by Chang Chun to Perry for the conversion

of VAM into PVA. However, we lacked the price charged by Chang Chun's

affiliate for the VAM, the sum of which would equal Chang Chun's export

price to Perry. What we had for purposes of the preliminary results was

the price Chang Chun's affiliate charged for the VAM to an unaffiliated

trading company, which in turn sold the VAM

[[Page 32815]]

to Perry. Therefore, the gross unit prices we calculated for the

additional U.S. sales in our preliminary results did not reflect actual

revenues Chang Chun received from these sales, because, as noted by the

petitioner, these sales prices include a mark-up paid by Perry to an

unaffiliated trading company. For the final results, we requested Chang

Chun to provide the prices Chang Chun's affiliated party charged for

the sales of VAM to the unaffiliated trading company. Chang Chun

provided this information on April 30, 1998, which the Department

verified in May 1998. Therefore, in our final margin program, we

recalculated the gross unit prices by adding the price of VAM Chang

Chun's affiliate charged to the unaffiliated trading company to Chang

Chun's conversion fee.

Comment 3: Entered Values for Sales Reported by Perry. The

petitioner notes that, in assessing dumping margins, the Department's

regulations state that it ``normally will calculate the assessment rate

by dividing the dumping margin found on the subject merchandise

examined by the entered value of such merchandise for normal Customs

duty purposes.'' The petitioner further notes that the regulations go

on to say that the Customs Service will ``assess dumping duties by

applying the assessment rate to the entered value of the merchandise.''

The intent of the regulation, the petitioner observes, is to align the

numerator and denominator of the dumping ratio.

The petitioner first notes that the entered values reported by

Perry in its U.S. sales listing appear to be the sum of Perry's VAM

costs and its processing fees. The petitioner claims, however, that the

entered values reviewed at verification are systematically inconsistent

with the values reported in Perry's U.S. sales listing. As a result,

the petitioner contends that the total entered value of subject

merchandise used in our assessment rate calculation is not calculated

on the same basis as the entered value to which the rate will be

applied. Because none of the reported entered values were the same as

the verified entered values, the petitioner argues that the Department

should revise the entered values to equal the average verified entered

values.

Chang Chun argues that there were no discrepancies between the

entered values reported by Perry in its sales listing and the entered

values examined at verification. According to Chang Chun, the entered

values of PVA as verified by the Department consistently reflected the

sum of the reported VAM costs and the conversion fee Perry paid to

Chang Chun.

DOC Position: We disagree with the petitioner that there were

discrepancies between the entered values reported by Perry in its sales

listing and the entered values examined at verification. At

verification, we confirmed the entered values reported by Perry in its

U.S. sales listing for the sales examined (see Verification Report of

Perry Chemical Corporation, dated January 30, 1998, at page 11).

As noted by the petitioner, for duty assessment purposes, we

calculate an assessment rate by dividing the dumping margin found on

the sales of the subject merchandise examined by the entered value of

such merchandise. In this case, as stated in our Preliminary Results,

for duty assessment purposes, we estimated the entered values for Chang

Chun's sales by subtracting international movement expenses from the

gross sales value. We have continued to use this methodology in our

final results. Specifically, for the sales in question, we estimated

the entered values in the following manner: (1) for each sale of PVA

shipped during the POR, we constructed the gross sales value by adding

the price of VAM Chang Chun charged to the unaffiliated trading company

to the price Chang Chun charged Perry for conversion of VAM to PVA; (2)

we then subtracted international movement expenses from these gross

sales value.

Comment 4: Allocation of Cost Between PVA and Glacial Acetic Acid.

The petitioner contends that Chang Chun incorrectly allocated its costs

between PVA and its coproduct, glacial acetic acid. Specifically, the

petitioner asserts that Chang Chun did not allocate costs on the basis

of relative sales value, as directed by the Department, resulting in a

significant understatement of the cost of producing PVA. According to

the petitioner, the flaw in Chang Chun's cost allocation methodology is

evident from the resulting relative profit margins for PVA and acetic

acid. The petitioner states that allocation of costs on the basis of

relative sales value, when applied properly, should result in the same

profit margins on the two products. In this case, the petitioner argues

that Chang Chun's allocation methodology does not yield the same profit

rate on PVA and acetic acid. Therefore, the petitioner contends that

the Department should reallocate Chang Chun's reported costs as set

forth in its case brief.

Chang Chun responds that the petitioner failed to identify any

specific discrepancy in Chang Chun's allocation methodology and

dismisses it as a conjecture without any support on factual grounds.

Chang Chun asserts that it had correctly allocated its costs between

acetic acid and PVA on a value basis, and therefore urges the

Department to continue to use the reported costs in the final results.

DOC Position: We agree with Chang Chun, in part. The Department's

long-standing practice, now codified at section 773(f)(1)(A) of the

Act, is to rely on data from a respondent's normal books and records if

they are prepared in accordance with the generally accepted accounting

principles (``GAAP'') of the exporting country and reasonably reflect

the costs of producing the merchandise (see Notice of Final Results of

antidumping Duty Administrative Review: Canned Pineapple Fruit from

Thailand, 63 FR 7392, 7398 (February 13, 1998)).

At verification, we noted that Chang Chun's methodology for

allocating production costs to PVA and acetic acid was based on a

relative-sales-value methodology and is consistent with the company's

normal books and records prepared in accordance with its home country

GAAP. Our review of Chang Chun's allocation methodology, however,

indicates that Chang Chun relied upon sales prices of PVA occurring

during the POR as a basis for allocating costs between PVA and acetic

acid. While we determined in the less-than-fair-value investigation of

this case that a relative-sales-value based allocation methodology is

appropriate, we expressed concern that the sales value for PVA, used in

our calculation, be representative of a period in which there is no

allegation of dumping for the subject merchandise (see Notice of Final

Determination at Sales than Less Than Value: PVA from Taiwan 61 FR

14064, 14071 (March 29, 1996) (``LTFV Determination''). Therefore, in

the LTFV determination, we allocated joint production costs between PVA

and acetic acid based on each product's relative sales values for a

two-year period prior to the initial period of investigation (``POI'').

Consistent with our methodology established in the LTFV

Determination, we consider it inappropriate, in this review, to rely on

PVA sales prices occurring during a period of alleged dumping as a

basis to allocate costs to PVA, particularly when these allocated costs

are used as a means to measure the fairness of the selling prices for

the same product, PVA. As stated in the LTFV Determination, we believe

that by using sales of both products over an extended period prior to

the original investigation, prices can reasonably be relied upon to

form the basis for

[[Page 32816]]

allocating joint production costs, particularly in this case where

acetic acid and PVA are commodity products, and their selling prices

are influenced by world market forces of supply and demand.

Therefore, in this review, we requested Chang Chun to provide the

relative sales value data for the two-year period prior to the POI (see

October 16, 1997 Supplemental Questionnaire at page 10). Chang Chun

provided the information in its November 7, 1997, supplemental

response. For the final results, we have reallocated Chang Chun's joint

production costs between PVA and acetic acid using the relative sales

value of each product calculated on the basis of a two-year period

prior to the POI (see ``Final Calculation Memorandum for Chang Chun''

dated June 9, 1998).

With respect to the petitioner's argument, while we agree that a

relative-sales-value methodology should yield approximately the same

profit rate for PVA and acetic acid, we note that the petitioner's data

and analysis used to demonstrate that Chang Chun's allocation

methodology results in distorted profit rates for PVA and acetic acid

is based on incomplete information. Specifically, in calculating a

profit rate for acetic acid, the petitioner used a different company's

purchase price of acetic acid instead of Chang Chun's sales price

because the record does not contain Chang Chun's actual average per

unit sales price of acetic acid. Because the petitioner's analysis is

not based on Chang Chun's own sales price information, we do not find

it to be a reliable basis for reallocating Chang Chun's reported costs.

Moreover, as stated above, for the final results, we have reallocated

Chang Chun's costs between PVA and acetic acid in accordance with the

methodology established in the LTFV determination.

Comment 5: Date of Sale. Chang Chun argues that the Department

incorrectly determined the date of sale for a particular U.S. sales

transaction, which can be confirmed from a worksheet contained in a

verification exhibit. Based on this exhibit, Chang Chun provided a

revised date of sale for this transaction and requested the Department

to use the revised date in the final results.

The petitioner responds that the document used by Chang Chun to

determine the revised date of sale is unreliable because it is

unverified, and therefore, should not be used. Furthermore, the

petitioner argues that the Department should recalculate the estimated

date of sale not just for the one sale described by Chang Chun, but for

all additional sales from Chang Chun to Perry included in our

preliminary analysis.

DOC Position: As noted above in the ``Treatment of Sales of Tolled

Merchandise'' section of the notice, for the final results, we used the

actual dates of sale from Chang Chun to Perry provided by Chang Chun in

its April 30, 1998, submission, which was verified by the Department.

Therefore, both the respondent's and petitioner's comments are moot.

Comment 6: Chang Chun's Sales of PVA Shipped During the POR. On May

11, 1998, the petitioner filed a submission objecting to certain

information provided by Chang Chun in its April 30, 1998, submission in

response to the Department's request of April 23, 1998. The petitioner

argues that the information on additional sales of PVA shipped during

the POR which were not included in our preliminary analysis should be

rejected. The petitioner claims that these new sales were untimely

filed, incomplete, and relate to shipments that were not entered into

the United States during the POR. As a result, the petitioner contends

that these sales should not be included in the margin calculation.

Chang Chun objects to the petitioner's comments, stating that the

information it provided in its April 30, 1998, submission was in

accordance with the Department's specific requests for information.

Chang Chun further argues that the additional sales of PVA shipped

during the POR which were not included in the Department's preliminary

analysis should be included for purposes of margin calculation if the

Department continues to find the Chang Chun and not Perry is the

producer of these sales of PVA.

DOC Position: With respect to the petitioner's argument that these

sales should not be included in our margin calculation because they

relate to shipments entered into the United States after the POR, we

note that for purposes of administrative reviews, the Department's

practice is to calculate dumping margins for export price sales based

on sales entered during the POR, or if entry date is unavailable, based

on sales shipped during the POR (see Final Results of Antidumping Duty

Administrative Review: Ferrosilicon From Brazil, 62 FR 43504, 43509-10

(August 14, 1997) and Final Results of Antidumping Duty Administrative

Review: High-Tenacity Rayon Filament Yarn from Germany, 61 FR 51421, 22

(October 2, 1996)). Here, the record indicates that Chang Chun could

only accurately report its EP sales based on shipment dates in the POR.

The antidumping questionnaire issued in this review specifically

required Chang Chun to ``report each U.S. sale of merchandise entered

for consumption during the POR, except: (1) For EP sales, if you do not

know the entry dates, report each transaction involving merchandise

shipped during the POR.'' In response to these questionnaire

instructions, Chang Chun reported its sales based on shipments of PVA

made during the POR. Accordingly, in our preliminary analysis, we

examined Chang Chun's transactions involving merchandise shipped during

the POR, including the additional shipments Chang Chun identified in

its April 30, 1998, submission.

We also disagree with the petitioner that the information on

additional sales shipped during the POR provided by Chang Chun on April

30, 1998, was untimely information or incomplete. In a letter dated

April 23, 1998, we requested Chang Chun to provide additional

information (i.e., date of sale and date of shipment) concerning its

U.S. sales to Perry used in our preliminary results. Subsequently,

through a telephone conversation, we instructed Chang Chun to include

in its response to the Department date of sale and date of shipment

information for sales of PVA shipped during the POR which were not

included in our preliminary analysis (see Memorandum to the File from

Case Analyst, dated May 20, 1998). Thus, the information Chang Chun

provided was timely submitted in accordance with the Department's

specific request.

Finally, with regard to the petitioner's argument that the

information provided by Chang Chun is incomplete because Chang Chun did

not include the necessary information regarding movement charges or

selling expenses for these additional shipments, we limited the scope

of our request to the date of sale and shipment for shipments occurring

in the POR. For movement and selling expenses for these additional

sales Chang Chun provided, we are applying the expenses reported by

Chang Chun in its U.S. sales listing submitted to the Department on

August 22, 1997. Because these additional sales were made to Perry and

were shipped by Chang Chun on the same delivery terms, we find that the

expenses Chang Chun originally reported for its EP sales reasonably

reflect the expenses it incurred for the additional sales included in

our analysis.

DuPont

Comment 1: DuPont is the Producer of Tolled-PVA. In our Preliminary

Results,

[[Page 32817]]

we determined that DuPont is the producer of the PVA processed in

Taiwan by Chang Chun from VAM produced by DuPont in the United States.

The petitioner argues that, to be considered a producer in a tolling

situation, the Department's new tolling regulation, section 351.401(h)

of the Final Regulations, requires that the producer retain title to

the raw material input. See Antidumping Rules; Countervailing Duties,

62 FR 27296, 27411, which is legally effective only for segments of the

proceeding initiated based on requests filed after June 18, 1997, but

nevertheless a restatement of the Department's practice. The petitioner

points to a particular clause in the tolling contract between DuPont

and Chang Chun as evidence that one of the conditions in section

351.401(h) has not been met. Because of the business proprietary nature

of the tolling contract, our full discussion of the petitioner's claim

is contained in a separate memorandum (see Memorandum to Louis Apple,

Office Director, from Team, dated June 8, 1998 (``DuPont

Memorandum'')). As a result, the petitioner argues that DuPont is not

the producer of PVA processed under the tolling agreement.

DuPont takes issue with the petitioner's interpretation of the

particular clause in the tolling contract and responds that, contrary

to the petitioner's contention, the Department properly concluded that

DuPont was the producer of the tolled merchandise.

DOC Position: After review of the tolling contract between DuPont

and Chang Chun, we disagree with the petitioner's reading of the

particular clause at issue and continue to find that DuPont is the

producer under section 351.401(h). As noted above, because the tolling

contract itself and this particular clause is business proprietary, our

discussion of this issue is contained in the ``DuPont Memorandum.''

Comment 2: Cost of Production Calculation for Sales of DuPont. The

petitioner argues that the Department should have used Chang Chun's

actual processing costs when conducting the sales-below-cost analysis,

instead of the fee DuPont paid to Chang Chun for the tolling of VAM

into PVA. The petitioner notes that the statute clearly requires

Department to investigate the actual cost of producing the merchandise

in any sales-below-cost investigation. According to the petitioner,

even though the Department appears to consider DuPont to be the

respondent in this case, because Chang Chun is the entity actually

producing the subject merchandise in Taiwan, Chang Chun's cost of

production should be examined. Citing to Final Determination of Sales

at Less Than Fair Value: Fresh and Chilled Atlantic Salmon from Norway,

56 FR 7661 (February 25, 1991) (``Salmon from Norway'') and Final

Determination of Sales at Less Than Fair Value: Fresh Kiwifruit from

New Zealand, 57 FR 13695 (April 17, 1992) (``Kiwifruit from New

Zealand''), the petitioner contends that the Department's practice has

been to base the cost of production, not on the purchase price between

the respondent and the unaffiliated producer, but on the actual cost of

producing the subject merchandise.

DuPont argues that it would be contrary to the statute and

Department practice to use Chang Chun's actual cost of production

because, according to DuPont, Chang Chun is nothing more than a

supplier of services to DuPont. According to DuPont, the statute calls

for determining costs from the records of the producer, and not from

the records of any supplier of services to the producer. DuPont further

argues that the statutory language governing the cost of production

investigation does not support the petitioner's argument that the

arm's-length price charged by Chang Chun to DuPont for tolling services

should be disregarded in favor of Chang Chun's costs of production.

DuPont contends that since DuPont is the producer in this case, its

costs are the ones that should be examined.

DOC Position: We disagree with the petitioner. We find no statutory

basis or precedent for the petitioner's argument that Chang Chun's

actual cost of processing should be examined when determining DuPont's

cost of production. Section 773(f)(1)(A) of the Act states that, for

purposes of conducting an analysis of sales at less than COP, the

``costs shall be based on the records of the exporter or producer of

the merchandise...'' In this review, we determined that DuPont is the

producer of PVA processed by Chang Chun. Accordingly, the costs we

examine in our analysis should reflect the total costs incurred by

DuPont. DuPont's total costs consist of its cost to produce VAM and the

cost it incurred to convert the VAM into PVA, which is the fee DuPont

paid to Chang Chun.

We also note that the cases cited by the petitioner do not support

its claim because these cases involved respondents who were resellers,

not producers. The Department generally does not base COP on a

reseller's cost to acquire the subject merchandise. However, the

Department does base COP on the producer's actual costs, including the

cost of inputs and services. See section 773(f) of the Act. In this

case, DuPont is the producer and therefore, its actual costs are the

proper basis for COP.

Comment 3: Affiliation. The petitioner argues that, if the

Department cannot examine Chang Chun's actual cost of producing PVA

without finding Chang Chun and DuPont affiliated under section

771(33)(G) of the Act, then the Department should determine that the

parties are affiliated pursuant to the tolling contract. According to

the petitioner, the Department should have found DuPont and Chang Chun

to be affiliated because the tolling contract affords DuPont control

over production of PVA, and the legal and operational ability to

exercise direction over Chang Chun. The petitioner claims that the fact

that, under the tolling contract, DuPont does not exercise direction

over all activities of Chang Chun does not in any way diminish the fact

that DuPont is in a position to, and does indeed, exercise direction

over some of Chang Chun's operations, namely the production of tolled

PVA. According to the petitioner, the statute requires that parties be

deemed affiliated where legal or operational control exists as it does

here under the tolling contract, regardless of whether the ability to

exercise restraint or direction over the other person is pervasive or

encompassing all aspects of the other person's business.

DuPont contends that the statutory definition of affiliation based

on intercorporate control under section 771(33)(G) of the Act does not

apply in this case. DuPont asserts that the contractual relationship

between DuPont and Chang Chun is a mere supply contract relationship in

which a producer of goods (i.e., DuPont) contracts out a portion of the

processing of those goods to another company (i.e., Chang Chun).

According to DuPont, such contractual relationship is not sufficient,

in and of itself, to find affiliation between DuPont and Chang Chun.

DuPont contends that none of the factors listed in the Department's

regulations, such as a close supplier relationship, support a finding

of affiliation under section 771 (33)(G). DuPont notes that, even in a

far more extreme situation where a manufacturer was its customer's sole

supplier, the Department declined to conclude that the manufacturer

controlled the customer (see Final Results of Antidumping Duty

Administrative Review: Furfuryl Alcohol from South Africa, 62 FR 61084

(November 14, 1997) (``Furfuryl Alcohol from South Africa'').

Accordingly, DuPont urges the Department to reject the petitioner's

argument and sustain its position in the preliminary results that

DuPont and Chang Chun are not affiliated.

[[Page 32818]]

DOC Position: We agree with DuPont. In our Preliminary Results, we

examined this issue and found that DuPont was not affiliated with Chang

Chun based solely on the tolling agreement. As we stated, the tolling

contract, in and of itself, does not establish that DuPont has legal or

operational control over Chang Chun for the purposes of section

771(33)(G) of the Act (63 FR at 6527). We find no surrounding

circumstances or other connections between the parties which would lead

us to a contrary conclusion.

We cannot agree with the petitioner that the statutory language of

section 771(33)(G) must be read so broadly as to require affiliation

based solely on a conventional tolling agreement, which provides, at

most, narrowly drawn legal obligations of limited duration involving

some processing of subject merchandise. As DuPont notes, the contract

here is not unlike any contract that may exist between a producer of

goods and a company performing a portion of the production of those

goods for a fee. Hence, to find that a party is affiliated solely

because it is under a legal obligation to fulfill the terms of an

agreement for subcontracting would be to infer control under section

771(33)(G) whenever such a contractual relationship exists, regardless

of the surrounding circumstances or whether there are other connections

between the parties. Such an outcome is not supported by section

771(33)(G).

Comment 4: Major Input Rule. The petitioner notes that under the

major input rule set forth in section 773 (f)(3) of the Act, the

Department may determine the value of the major input on the basis of

the cost of production if the Department has reasonable grounds to

believe or suspect that the amount represented as the value of such

input is less than the cost of production of such input. Pursuant to

the major input rule, the petitioner argues that the Department should

have used Chang Chun's actual cost of production of PVA, rather than

the tolling fee charged to DuPont, for purposes of calculating DuPont's

COP. According to the petitioner, information on the record

demonstrates that the actual cost of producing PVA incurred by Chang

Chun was greater than the nominal tolling fee paid by DuPont. Moreover,

the petitioner claims that there is no economic basis for assuming that

the tolling fee Chang Chun charged to DuPont is equal to or exceeds its

total cost of producing PVA. In fact, the petitioner further claims

that, so long as the tolling fee Chang Chun charges to DuPont exceeds

its marginal cost of production, Chang Chun has an incentive to provide

its services, even if the tolling fee does not cover the full cost of

producing PVA.

DuPont counters that the major input rule does not apply in this

case since the Department has concluded that DuPont and Chang Chun are

not affiliated.

DOC Position: DuPont is correct that the major input rule set forth

in section 773(f)(3) of the Act applies only where the supplier of the

input is affiliated with the producer of the merchandise. Because we

have determined that Chang Chun and DuPont are not affiliated, the

major input rule is inapplicable (see Comment 3 for DuPont).

Comment 5: Tolling Regulation Is an Illegal Interpretation of the

Law. The petitioner contends that the Department's new tolling

regulation is contrary to the statute, and cannot stand if the

regulation does not permit an analysis of the costs incurred in the

subject country in the course of producing the subject merchandise.

According to the petitioner, an antidumping duty administrative review

concerning subject merchandise produced in a subject country that fails

to analyze the activity undertaken in the subject country solely

because the production is pursuant to a tolling agreement is an

impermissible construction of the statute and an abuse of the

Department's discretion.

DOC Position: We disagree with petitioner that the Department's

tolling regulation set forth in19 CFR 351.401(h) is inconsistent with

the statute. The tolling regulation provides a means for determining

when a toller will be considered the producer of a product, as

discussed above (see Comment 2 for DuPont). Once the producer is

determined, the Department must use the producer's actual costs of

producing the merchandise, in accordance with section 773(f)(1)(A).

DuPont's actual costs to produce PVA in Taiwan are its costs to produce

VAM and its cost for processing services in Taiwan. There is no basis

in the statute or the regulations for the petitioner's argument that

the Department must go behind the producer's actual cost for inputs and

services.

Comment 6: Special Merchandise Difference Adjustment. DuPont

contends that one of its reported U.S. sales should either be excluded

from the Department's calculations, or a value-based difference in

merchandise (``difmer'') adjustment should be applied to it, because

the sale involved a particular type of PVA with a certain physical

characteristic that does not result in manufacturing cost differences.

Because of this physical difference which, according to DuPont, is

shown in DuPont Verification Exhibit 8(e), DuPont claims that the

merchandise could not be sold for normal commercial uses at a market

price. DuPont further explains that there are no corresponding sales of

this product in the Australian market against which to compare this

transaction.

Citing to Final Determination of Sales at Less Than Fair Value:

Coated Groundwood Paper from Finland, 56 FR 56363 (November 4, 1991),

DuPont argues that it is a recognized practice of the Department to

exclude such an isolated transaction for which a NV cannot be

calculated. Alternatively, DuPont asserts that the Department should

make a value-based adjustment to NV to account for the physical

differences of this particular product based on differences in market

value. According to DuPont, the Department's conventional difmer cost-

based adjustment would not properly adjust for the product's physical

differences because the physical difference, in this case, is not

attributable to a manufacturing cost difference. DuPont claims that the

only way to quantify the appropriate adjustment for the physical

differences of this particular transaction is to examine the

differences in price between that sale and all its other U.S. sales. In

support of its claim, DuPont cites to Final Determination of Sales at

Less Than Fair Value: Nepheline Syenite From Canada, 57 FR 9237 (March

17, 1992) and U.H.F.C. Co. v. United States, 916 F.2d 689 (C.A.F.C.

1990), where the Court of Appeals directed the Department to make a

value-based difmer adjustment.

The petitioner contends that this sale should not be excluded

because there is no basis for excluding sales to the United States from

the margin calculation in administrative reviews. In addition, the

petitioner notes that DuPont did not request a difmer adjustment based

on market value prior to its case brief, nor did it submit any

information to justify any such adjustment. According to the

petitioner, the cases cited by DuPont refer to situations in which

physical differences were demonstrated to affect the market value of

the merchandise under consideration. For the DuPont sale in question,

however, the petitioner argues that there is no information to indicate

whether the difference in the price is limited to a difference in value

associated with physical differences in the merchandise, or whether the

difference in price on this sale was a result of a combination of

factors, possibly including a physical difference in the merchandise.

The petitioner

[[Page 32819]]

asserts, therefore, that there is no basis to quantify or make an

adjustment for the difference in value.

DOC Position: Although the Department has the discretion to adjust

for physical differences based on value, we agree with the petitioner

that the sale in question does not warrant a value-based difmer

adjustment based on information on the record for this proceeding (see

19 CFR 353.57(b) and 19 CFR 351.411(b)). We reviewed the documentation

included in DuPont's verification Exhibit 8(e), and noted that

information in the exhibit does not establish that the product sold was

physically different from other U.S. sales made by DuPont during the

POR. Because the nature of the physical difference DuPont alleges is

proprietary, our full analysis of this issue is contained in the

``DuPont Memorandum.'' Therefore, because DuPont has not established

that the PVA in question was physically different from any other PVA

sold in the United States during the POR, we have continued to use this

sale in our final margin analysis.

Comment 7: Foreign Inland Freight. In our preliminary results, we

disallowed DuPont's claim for an inland freight expense from the

Australian port to its warehouse for its comparison market sales

because, at verification, the company failed to provide supporting

documentation for the claimed amount. DuPont contends that the

Department's action in this regard was improper and that a deduction

for foreign inland freight should be allowed because it is an

undisputed fact that a freight expense was incurred by DuPont in moving

goods from the dock to its warehouse. DuPont further contends that

verification generally was successful in establishing the completeness

and accuracy of the information submitted by DuPont. According to

DuPont, the problem at verification with regard to inland freight was

that the company did not have ready access to original documentation

supporting the freight deduction.

The petitioner contends that no deduction should be allowed in this

instance. The petitioner notes that sections 782(i)(3) and 776(a)(2)(D)

of the Act direct the Department to verify all information relied upon

in making a final determination in an administrative review, and allow

the Department to use facts otherwise available if an interested party

``provides such information but the information cannot be verified.''

Because DuPont did not provide evidence to support its claimed

adjustment at verification, the petitioner states that the Department

is correct in denying the adjustment.

DOC Position: We agree with the petitioner. The Department has a

long-standing practice of denying a claim for an adjustment where the

Department could not verify the claimed adjustment because the

respondent fails to provide supporting evidence (see, e.g., Final

Results of Antidumping Duty Administrative Review: Certain Cut-to-

Length Carbon Steel Plate From Finland, 63 FR 2952, 2953 (January 20,

1998)). At verification, DuPont was unable to provide any supporting

documentation to establish an expense for foreign inland freight.

Accordingly, we have continued to disallow the claimed deduction for

foreign inland freight for comparison market sales in our final margin

calculation.

Comment 8: Scope of the Order. DuPont argues that its imports of

PVA from Taiwan through a tolling agreement with Chang Chun are outside

the scope of the antidumping duty order. According to DuPont, because

it is a U.S. company and the producer of the PVA tolled by Chang Chun,

it can not be subject to the antidumping law or the antidumping order.

DuPont cites to its arguments on this point as expressed in its October

1, 1996, Application for a Scope Ruling and its brief to the Court of

International Trade.

The petitioner responds that the Department correctly determined

that the subject merchandise is produced in Taiwan, and hence within

the scope of the order.

DOC Position: We disagree with DuPont. DuPont is the producer of

the PVA at issue. The PVA is produced in Taiwan and is a product of

Taiwan. Therefore, DuPont's Taiwanese PVA is subject to the order. The

fact that DuPont is a U.S. company is irrelevant. See E.I. DuPont de

Nemours v. United States, Slip.-Op. 98-46 (CIT April 17, 1998), which

upheld the Department's scope ruling that the PVA produced by DuPont in

Taiwan through the tolling agreement with Chang Chun is a product of

Taiwan and thus subject to the antidumping duty order; see also, the

Department's brief to the Court of International Trade, dated October

22, 1997, in opposition to DuPont's brief, made part of the record of

this review by petitioner.

Final Results of the Review

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

weighted-average margins exist for the period May 15, 1996, through

April 30, 1997:

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

Margin

Manufacturer/producer/exporter (percent)

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

Chang Chun Petrochemical Co. Ltd........................... 0.42

E.I. duPont de Nemours & Co................................ 9.46

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

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. We have

calculated an importer-specific duty assessment rate based on the ratio

of the total amount of AD duties calculated for the examined

transactions in the POR to the total entered value of the same

transactions. This rate will be assessed uniformly on all entries of

that particular importer made during the POR. The Department will issue

appraisement instructions concerning the respondents directly to the

U.S. Customs Service.

Furthermore, the following deposit rates shall be required for

merchandise entered, or withdrawn from warehouse, for consumption on or

after the publication date of these final results of administrative

review, as provided for by section 751(a)(1) of the Tariff Act: (1) The

cash deposit rates for DuPont and Chang Chun will be the rates

indicated above; (2) if the exporter is not a firm covered in this

review or the LTFV investigation, but the manufacturer is, the cash

deposit rate will be that established for the manufacturer of the

merchandise in these final results of review or LTFV investigation; and

(3) if neither the exporter nor the manufacturer is a firm covered in

this review or the LTFV investigation, the cash deposit rate will be

19.21 percent, the ``All Other'' rate made effective by the LTFV

investigation.

These deposit requirements shall remain in effect until publication

of the final results of the next administrative review.

This notice serves as the final reminder to importers of their

responsibility under 19 CFR 353.26 to file a certificate regarding the

reimbursement of antidumping duties prior to liquidation of the

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

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This notice also serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

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

conversion to judicial

[[Page 32820]]

protective order is hereby requested. Failure to comply with the

regulations and terms of the APO is a sanctionable violation.

This administrative review and notice are in accordance with

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

353.22(c).

Dated: June 9, 1998.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.

[FR Doc. 98-15876 Filed 6-15-98; 8:45 am]

BILLING CODE 3510-DS-P