Polyethylene Terephthalate Film From Korea: Preliminary Results of Antidumping Duty Administrative Review and Partial Rescission of Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-580-807]

Polyethylene Terephthalate Film From Korea: Preliminary Results

of Antidumping Duty Administrative Review and Partial Rescission of

Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of preliminary results of antidumpting duty

administrative review and partial rescission of review.

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SUMMARY: In response to a request from one respondent and three U.S.

producers, the Department of Commerce (the Department) is conducting an

administrative review of the antidumping duty order on polyethylene

terephthalate film, sheet, and strip (PET film) from the Republic of

Korea. The review covers one manufacturer/exporter of the subject

merchandise to the United States and the period June 1, 1996 through

May 31, 1997. We preliminarily determine that SKC Limited (SKC) sold

subject merchandise below normal value (NV) during the period of

review. If these preliminary results are adopted in our final results

of review, we will instruct the U.S. Customs Service to assess

antidumping duties based on the difference between the United States

Price and NV. STC Corporation (STC) made no sales or shipments during

the POR. Accordingly, we are resinding the review with respect to STC.

Interested parties are invited to comment on these preliminary

results. Parties who submit argument in this proceeding are requested

to submit with the argument (1) a statement of the issue and (2) a

brief summary of the argument (no longer than five pages, including

footnotes).

EFFECTIVE DATE: March 6, 1998.

FOR FURTHER INFORMATION CONTACT: Michael J. Heaney or Linda Ludwig, AD/

CVD Enforcement Group III, Office 8, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone

(202) 482-4475/3833.

APPLICABLE STATUTE: Unless otherwise indicated, all citations to the

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

provisions effective January 1, 1995, the effective date of the

amendments made to the Act by the Uruguay Round Agreements Act (URAA).

In addition, unless otherwise indicated, all citations to the

Department's regulations are to the regulations, codified at 19 CFR

Part 353 (1997).

SUPPLEMENTARY INFORMATION:

Background

The Department published an antidumping duty order on PET film from

the Republic of Korea on June 5, 1991 (56 FR 25660). On June 23, 1997,

the petitioners, E.I. DuPont Nemours & Co., Inc., Hoescht Celanese

Corporation, and ICI Americas, Inc. requested reviews of SKC, and STC.

On June 27, 1997, SKC requested an administrative review of its sales.

We published a notice of initiation of the review on August 1, 1997 (62

FR 41339).

In its June 27, 1997 request for review, SKC requested revocation

pursuant to 19 CFR 353.25(b). We are not considering SKC's request for

revocation at this time because SKC has not sold the subject

merchandise at not less than fair value for three consecutive years.

In response to our request for information, STC reported that it

had no sales or shipments during the period of review. On November 25,

1997, the Department sent a no-shipment inquiry regarding STC to the

U.S. Customs Service. Customs did not report any shipments by STC

during the POR.

[[Page 11215]]

Accordingly, we are rescinding the review with respect to STC.

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, 1996 through May 31, 1997. The

Department is conducting this review in accordance with section 751 of

the Act, as amended.

Fair Value Comparisons

To determine whether sales of PET film in the United States were

made at less than fair value, we compared USP to the NV, as described

in the ``United States Price'' and ``Normal Value'' sections of this

notice. In accordance with section 777A(d)(2) of the Act, we calculated

monthly weighted-average prices for NV and compared these to individual

U.S. transactions.

United States Price (USP)

In calculating USP, the Department treated SKC's sales as export

price (EP) sales, as defined in section 772(a) of the Act, when the

merchandise was sold to unaffiliated U.S. purchasers prior to the date

of importation. The Department treated SKC's sales as constructed

export price (CEP) sales, as defined in section 772(b) of the Act, when

the merchandise was sold to unaffiliated U.S. purchasers after

importation.

EP was based on the delivered, or c.i.f. U.S. port, packed prices

to unaffiliated purchasers in the United States. We made adjustments,

where applicable, for Korean and U.S. brokerage charges, Korean and

U.S. inland freight, ocean freight, U.S. duties, and rebates in

accordance with section 772(c) of the Act. We made an addition to EP

for duty drawback pursuant to section 772(c)(1)(B) of the Act.

CEP was based on the delivered, packed prices to unaffiliated

purchasers in the United States. We made adjustments, where applicable,

for Korean and U.S. brokerage charges, Korean and U.S. inland freight,

ocean freight, rebates, U.S. duties and rebates, in accordance with

section 772(c) of the Act. We made an offset to interest expense and

adjustments for post-sale cost and quantity adjustments that were not

reflected in the gross price. Pursuant to section 772(c)(1)(B) of the

Act, we made an addition to CEP for duty drawback. In accordance with

section 772(d)(1) of the Act, we made deductions for selling expenses

associated with economic activities in the United States, including

warranties, credit, bank charges, and indirect selling expenses.

Pursuant to section 772(d)(3) of the Act, the price was further reduced

by an amount for profit to arrive at the CEP.

With respect to subject merchandise to which value was added in the

United States by SKC prior to sale to unaffiliated customers, we

deducted the cost of further manufacturing in accordance with section

772(d)(2) of the Act.

Normal Value

In order to determine whether there were sufficient sales of PET

film in the home market (HM) to serve as a viable basis for calculating

NV, we compared the volume of home market sales of PET film to the

volume of PET film sold in the United States, in accordance with

section 773(a)(1)(C) of the Act. SKC's aggregate volume of HM sales of

the foreign like product was greater than five percent of its

respective aggregate volume of U.S. sales of the subject merchandise.

Therefore, we have based NV on HM sales.

Based on the fact that the Department had disregarded sales in the

fourth administrative review because they were made below the cost of

production (COP), the Department initiated a sales-below-cost of

production (COP) investigation for SKC in accordance with section

773(b) of the Act. (The fourth administrative review was the most

recently completed review at the time that we issued our antidumping

questionnaire.)

We performed a model-specific COP test in which we examined whether

each HM sale was priced below the merchandise's COP. We calculated the

COP of the merchandise using SKC's cost of materials and fabrication

for the foreign like product, plus amounts for home market general

expenses and packing costs in accordance with section 773(b)(3) of the

Act. We allocated yield losses equally between A-Grade and B-grade film

because these grades have identical production costs. This is

consistent with the methodology employed in past reviews of this case.

(See e.g., Polyethylene Terephthalate Film, Sheet and Strip from the

Republic of Korea; Final Results of Antidumping Duty Administrative

Review, 62 FR 38064, (July 16, 1997).)

In accordance with section 773(b)(1) of the Act, in determining

whether to disregard home market sales made at prices below COP, we

examined whether such sales were made within an extended period of time

in substantial quantities, and whether such sales were made at prices

which would permit recovery of all costs within a reasonable period of

time.

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

percent of a respondent's sales of a given model were at prices less

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

because these below-cost sales were not made in substantial quantities.

We found that, for certain models of PET film, 20 percent or more of

the home market sales were sold at below-cost prices. Where 20 percent

or more of a respondent's home market sales of a given model were at

prices less than the COP, we disregarded the below-cost sales because

such sales were found to be made (1) in substantial quantities within

the POR (i.e., within an extended period of time) and (2) 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 (i.e., the

sales were made at prices below the weighted-average per unit COP for

the POR). We used the remaining above-cost sales as the basis of

determining NV if such sales existed, in accordance with section

773(b)(1).

On January 8, 1998 the U.S. Court of Appeals for the Federal

Circuit issued a decision in Cemex v. United States, 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 foreign market

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

not raised by any party in this proceeding. 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

court decision and has determined that it would be inappropriate to

resort

[[Page 11216]]

directly to CV, in lieu of foreign market sales, as the basis for NV 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 Investigation'' 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 information provided by SKC in response to our antidumping

questionnaire. We have implemented the Court's decision in this case to

the extent that the data on the record permitted.

In accordance with section 773(e)(1) of the Act, we calculated CV

based on the sum of the respondent's cost of materials, fabrication,

and general expenses. We allocated yield losses equally between A-grade

and B-grade film. In accordance with section 773(e)(2)(A) of the Act,

we based selling, general, and administrative (SG&A) expenses and

profit on the amounts incurred and realized by SKC in connection with

the production and sale of the foreign like product in the ordinary

course of trade for consumption in the foreign country. For selling

expenses, we used the weighted-average HM selling expenses. Pursuant to

section 773(e)(3) of the Act, we included U.S. packing.

In accordance with section 773(a)(6), we adjusted NV, where

appropriate, by deducting home market packing expenses and adding U.S.

packing expenses. We also adjusted NV for credit expenses. When NV was

based upon home market sales, we made an adjustment for inland freight.

For SKC's local export sales, we also made an addition to home market

price for duty drawback. For comparisons to EP, we made an addition to

NV for U.S. warranty and credit expenses as circumstance-of-sale

adjustments pursuant to section 773(a)(6)(C) of the Act.

Level of Trade and CEP Offset

In accordance with section 773(a)(1)(B)(i) of the Act, to the

extent practicable, we determine NV based on sales in the comparison

market at the same level of trade (``LOT'') as the EP or CEP

transaction. The NV LOT is that of the starting price sales in the

comparison market or, when NV is based on CV, that of the sales from

which we derive SG&A expenses and profit. For EP, the US LOT is also

the level of the starting price sale, which is usually from the

exporter to the importer. For CEP, it is the level of the constructed

sale from the exporter to the importer.

To determine whether NV sales are at a different LOT than EP or

CEP, we examine stages in the marketing process and selling functions

along the chain of distribution between the producer and the

unaffiliated customer. If the comparison market sales are at a

different LOT, and the difference affects price comparability, as

manifested in a pattern of consistent price differences between the

sales on which NV is based and comparison market sales at the LOT of

the export transaction, we make a LOT adjustment under section

773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is

more remote from the factory than the CEP level and there is no basis

for determining whether the differences in the levels between NV and

CEP affects price comparability, we adjust NV under section

773(A)(7)(B) of the Act (the CEP offset provision). (See e.g., Certain

Carbon Steel Plate from South Africa, Final Determination of Sales at

Less Than Fair Value, 62 FR 61731 (November 19, 1997).)

In implementing these principles in this review, we asked SKC to

identify the specific differences and similarities in selling functions

and/or support services between all phases of marketing in the home

market and the United States. SKC identified two channels of

distribution in the home market: (1) wholesalers/distributors and (2)

end-users. For both channels, SKC performs similar selling functions

such as market research and after-sales warranty services. Because

channels of distribution do not qualify as separate levels of trade

when the selling functions performed for each customer class are

sufficiently similar, we determined that there exists one level of

trade for SKC's home market sales.

For the U.S. market, SKC reported two LOTs: (1) EP sales made

directly to its U.S. customers, and (2) CEP sales made through Sunkyong

America Ltd., SKC's wholly owned U.S. subsidiary (CEP sales). The

Department examined the selling functions performed by SKC for both EP

and CEP sales. These selling functions included customer sales contacts

(i.e., visiting current or potential customers receiving orders,

promotion of new products, collection of unpaid invoices), technical

services, inventory maintenance, and or business system development. We

found that SKC provided a greater degree of these services on EP sales

than it did on CEP sales, and that the selling functions were

sufficiently different to warrant two separate LOTs in the United

States.

When we compared EP sales to home market sales, we determined that

both sales were made at the same LOT. For both EP and home market

transactions, SKC sold directly to the customer, and provided similar

levels of customer sales contacts, technical services, inventory

maintenance and business system development. For CEP sales, SKC

performed fewer customer sales contacts, technical services, inventory

maintenance, and computer legal, audit and business system development.

In addition, the differences in selling functions performed for home

market and CEP transactions indicates that home market sales involved a

more advanced stage of distribution than CEP sales.

Because we compared these CEP sales to HM sales at a different

level of trade, we examined whether a level-of-trade adjustment may be

appropriate. In this case SKC sold at one level of trade in the home

market; therefore, there is no basis upon which SKC has demonstrated a

pattern of consistent price differences between levels of trade.

Further, we do not have the information which would allow us to examine

pricing patterns of SKC's sales of other similar products, and there

are no other respondent's or other record evidence on which such an

analysis could be based.

Because the data available do not provide an appropriate basis for

making a level-of-trade adjustment but the level of trade in Korea for

SKC is at a more advanced stage than the level of trade of the CEP

sales, a CEP offset is appropriate in accordance with section

773(a)(7)(B) of the Act, as claimed by SKC. We based the CEP offset

amount on the amount of home market indirect selling expenses, and

limited the deduction for HM indirect selling expenses to the amount of

indirect selling expenses deducted from CEP in accordance with section

772(d)(1)(D) of the Act. We applied the CEP offset to NV, whether based

on home market prices or CV.

[[Page 11217]]

Preliminary Results of Review

We preliminarily determine that a margin of 6.83 percent exists fro

SKC for the period June 1, 1996 through May 31, 1997. Parties to this

proceeding may request disclosure within five days of publication of

this notice and any interested party may request a hearing within 10

days of publication. Any hearing, if requested, will be held 44 days

after the date of publication, or the first working day thereafter.

Interested parties may submit case briefs and/or written comments no

later than 30 days after the date of publication. Rebuttal briefs and

rebuttals to written comments, limited to issues raised in such briefs

or comments, may be filed no later than 37 days after the date of

publication. The Department will publish the final results of this

administrative review, which will include the results of its analysis

of issues raised in any such written comments or at a hearing, within

120 days after the date of publication of these preliminary results.

The Department shall determine, and Customs shall assess,

antidumping duties on all appropriate entries. We have calculated

importer-specific ad valorem duty assessment rates based on the total

amount of dumping margins calculated for the examined sales during the

POR to the total customs of the sales used to calculate these duties.

These rates will be assessed uniformly on all entries made during the

POR. (This is equivalent to dividing the total amount of antidumping

duties, which are calculated by taking the difference between statutory

NV and statutory EP or CEP, by the total statutory EP or CEP of the

sales compared, and adjusting the average differences between EP or CEP

and the entered value for all merchandise entered during the POR.) The

Department will issue appraisement instructions directly to Customs.

The final results of this review shall be the basis for the assessment

of antidumping duties on entries of merchandise covered by the

determination and for future deposits of estimated duties.

Furthermore, the following deposit requirements will be effective

upon completion of the final results of these administrative reviews

for all shipments of PET film from the Republic of Korea entered, or

withdrawn from warehouse, for consumption on or after the publication

date of the final results of these administrative reviews, as provided

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

firms will be the rate established in the final results of

administrative review; (2) for merchandise exported by manufacturers or

exporters not covered in these reviews but covered in the original

less-than-fair-value (LTFV) investigation or a previous review, the

cash deposit will continue to be the most recent rate published in the

final determination or final results for which the manufacturer or

exporter received a company-specific rate; (3) if the exporter is not a

firm covered in these reviews, or the original investigation, but the

manufacturer is, the cash deposit rate will be that established for the

manufacturer of the merchandise in the final results of these reviews,

or the LTFV investigation; and (4) if neither the exporter nor the

manufacturer is a firm covered in these or any previous reviews, the

cash deposit rate will be 21.5%, the ``all others'' rate established in

the LTFV investigation.

This notice also serves as a preliminary reminder to importers of

their responsibility under 19 CFR 353.26(b) to file a certificate

regarding the reimbursement of antidumping duties prior to liquidation

of the relevant entries during these review periods. Failure to comply

with this requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This administrative review and notice are in accordance with

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

Dated: March 2, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-5866 Filed 3-5-98; 8:45 am]

BILLING CODE 3510-DS-M