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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-583-824]

Polyvinyl Alcohol From Taiwan: Final Results of Second

Antidumping Duty Administrative Review

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

Department of Commerce.

SUMMARY: On February 8, 1999, the Department of Commerce published in

the Federal Register the preliminary results of the second

administrative review of the antidumping duty order on polyvinyl

alcohol from Taiwan (64 FR 6042). The review covers two manufacturers/

exporters of the subject merchandise to the United States, Chang Chun

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

May 1, 1997, through April 30, 1998.

We gave interested parties an opportunity to comment on our

preliminary results. Based on our analysis of the comments received, we

have made certain changes as described below in the ``Interested Party

Comments'' section of this notice, but those changes did not result in

final margins that were different from those calculated in our

preliminary results. The final results are listed below in the section

``Final Results of Review.''

EFFECTIVE DATE: June 15, 1999.

FOR FURTHER INFORMATION CONTACT: Brian Smith at (202) 482-1766 or Brian

Ledgerwood at (202) 482-3836, Import Administration, International

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

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

SUPPLEMENTARY INFORMATION:

Background

On February 8, 1999, the Department of Commerce (``the

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

of the 1997-1998 administrative review of the antidumping duty order on

polyvinyl alcohol (``PVA'') from Taiwan (64 FR 6042) (``Preliminary

Results''). The period of review (``POR'') for this administrative

review is May 1, 1997, through April 30, 1998.

On February 18, 1999, E.I. duPont de Nemours & Co. (``DuPont'')

withdrew its request that the Department apply the special rule for

value added in this case. On March 10, 1999, the Department requested

Chang Chun Petrochemical Co., Ltd. (``Chang Chun'') to provide

information clarifying the methodology it used to allocate production

costs between acetic acid and PVA. Chang Chun provided this data on

March 17, 1999. The petitioner, Air Products and Chemicals Inc., and

DuPont submitted case briefs on April 8, 1999. Chang Chun did not

submit a case brief. Chang Chun submitted a rebuttal brief on April 15,

1999. Since the petitioner did not comment on DuPont in its case brief,

DuPont did not submit a rebuttal brief. Neither the petitioner nor the

respondents requested a hearing in this case. On May 19, 1999, we

placed on the record of this review information from the record of the

first administrative review pertaining to the allocation of joint

production costs between acetic acid and PVA. On May 24, 1999, the

petitioner submitted comments on the use of this information in this

review.

The Department has now completed this administrative review, in

accordance with section 751(a) of the Act.

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 references are made to the Department's

regulations at 19 CFR Part 351 (1998).

Scope of Review

The product covered by this review is 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 3905.30.0000 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.

Changes Since the Preliminary Results

We have made changes in these final results only to the margin

calculation for Chang Chun. For Chang Chun, we adjusted its joint

production costs between PVA and acetic acid using the relative sales

value of each product

[[Page 32025]]

calculated on the basis of a two-year period prior to the period of the

less-than-fair-value investigation (``LTFV investigation'') (see

Comment 1 in the ``Interested Party Comments'' section of this notice,

Memorandum to the File dated May 19, 1999, and Final Results

Calculation Memorandum dated June 8, 1999, for further discussion).

Interested Party Comments

Chang Chun

Comment 1: Cost Allocation Methodology

The petitioner contends that Chang Chun's cost methodology produces

inexplicable and unreasonable results because the sales quantities of

acetic acid and PVA were less than their production quantities. In

particular, the petitioner maintains that unless Chang Chun made

significant changes to its production process, Chang Chun's average

annual yield ratio of acetic acid to PVA for the POR should be

representative of the average three-year yield ratio of acetic acid and

PVA for which Chang Chun reported sales data (see Exhibit 7 of Chan

Chun's January 19, 1999, submission). The petitioner goes on to state

that because Chan Chun has sold PVA and acetic acid in unequal

quantities, Chang Chun must have over-allocated its production costs to

acetic acid. Finally, the petitioner maintains that although Chang Chun

has used a unit value ratio to allocate costs in the prior antidumping

duty administrative review, the Department is not precluded from

examining the reasonableness of Chang Chun's methodology in subsequent

reviews.

Chang Chun states that its sales quantities are lower than its

production quantities because Chang Chun excluded the internal

transfers of acetic acid and PVA from the weighted-average sales prices

of acetic acid and PVA as internal transfers do not reflect any revenue

raised by these products, thereby refuting the petitioner's claim that

the difference which exists between sales and production quantities has

a distortive impact when applying the cost allocation methodology. In

addition, Chang Chun maintains that most of the sales and production

data the petitioner is questioning was verified by the Department in

the first administrative review. Therefore, Chang Chun contends that

its reported sales and production data should be accepted by the

Department in this review. Chang Chun maintains that its value-based

cost allocation methodology is appropriate and requests that the

Department confirm this fact, as well as confirm that the cost

allocation methodology correctly reflects the Department's prior

determinations. Finally, Chang Chun states that the petitioner has

offered no evidence which would warrant the Department to reexamine the

reasonableness of Chang Chun's value-based allocation methodology in

future reviews.

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

confirms, generally, that it is appropriate and in accordance with the

Department's practice for Chang Chun to maintain a value-based

methodology for allocating joint production costs between PVA and

acetic acid. However, the Department has not adopted Chang Chun's

particular value-based cost allocation methodology in its entirety. Our

review of Chang Chun's allocation methodology indicates that Chang Chun

relied upon POR sales prices of PVA as a basis for allocating costs

between PVA and acetic acid. While we determined in the LTFV

investigation 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 prior to allegations

of dumping for the subject merchandise (see Notice of Final

Determination of Sales at Less Than Fair Value: Polyvinyl Alcohol from

Taiwan, 61 FR 14064, 14071 (March 29, 1996) (``PVA Final

Determination''). In the final determination of the LTFV investigation

and first administrative review of the antidumping duty order on PVA

from Taiwan, we allocated joint production costs between PVA and acetic

acid using each product's relative sales value from a two-year period

prior to the initial period of investigation (``POI'') (see Polyvinyl

Alcohol from Taiwan: Final Results of Antidumping Duty Administrative

Review, 63 FR 32810, 32815 (June 16, 1998) (``PVA 1st Admin Review'')).

Consistent with our methodology established in the LTFV

determination and first administrative review, we consider it

inappropriate in this review to rely exclusively on PVA sales prices

relevant 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. We believe that by adjusting the POR sales figures with sales

of PVA and acetic acid over an extended period prior to the original

investigation, the total relative sales value can reasonably be relied

upon to form the basis for 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. In order to reallocate Chang Chun's joint

production costs in the manner discussed above, we adjusted Chang

Chun's POR sales values to reflect the relative sales values for the

two-year period prior to the POI based on data obtained from the record

of the first administrative review which has been placed on the record

of this proceeding (see Memorandum to the File, dated May 19, 1999).

Chang Chun defends its use of POR sales values for acetic acid and

PVA as the basis for allocating its costs between these two products

based on the fact that the Department found no sales below the cost of

production in the first administrative review. Although the Department

found no below-cost sales of PVA during the first administrative review

for Chang Chun, we continue to find it appropriate to adjust the POR

relative sales values to reflect the relative sales values for the two-

year period prior to the POI as we did in the first administrative

review. This adjustment is appropriate because the manipulation of

pricing patterns, even slight in nature as a result of future

antidumping duty proceedings, still may result.

Accordingly, for this second administrative review, we continue to

accept Chang Chun's relative-sales-value-based cost allocation

methodology in general. However, we have applied the same adjustment

methodology as that in first administrative review in order to allocate

Chang Chun's joint production costs between PVA and acetic acid (see

``Final Calculation Memorandum for Chang Chun'' dated June 8, 1999).

Comment 2: PVA and Acetic Acid Calculated Profitability Margins

The petitioner contends that Chang Chun's methodology used for

allocating production cost between PVA and acetic acid produces

distortive results because the profit margins for PVA and acetic acid

are not the same.

Chang Chun maintains that its methodology correctly allocates its

production costs between acetic acid and PVA based on relative sales

value. Chang Chun states that the Department has never specified that

the profit margins be exactly the same for PVA and acetic acid for the

methodology to be acceptable. In fact, Chang Chun contends that the

Department has specified only that the methodology should yield

``approximately the same'' profit margins for PVA and acetic acid. In

this review, Chang Chun maintains that the profit rates for PVA and

acetic acid are ``approximately the same.''

[[Page 32026]]

Therefore, Chang Chun requests the Department to dismiss the

petitioner's argument and find that Chang Chun's methodology correctly

allocates its production costs between acetic acid and PVA based on the

respective sales values of each product. Chang Chun cites to PVA 1st

Admin Review, 63 FR at 32815 in support of its argument.

DOC Position: We agree, in part, with Chang Chun. We have re-

examined Chang Chun's methodology for the calculation of the profit

rate for acetic acid and PVA and found that the sales revenues upon

which those profitability margins were based generally reflect relative

sales values for acetic acid and PVA. As discussed in Comment 1 above,

in the LTFV investigation and first administrative review, application

of a relative-sales-value-based allocation methodology was considered

appropriate (see PVA Final Determination, 61 FR at 14071 and PVA 1st

Admin Review, 63 FR at 32815). Accordingly, in this review we find that

Chang Chun's general methodology is appropriate.

Furthermore, we agree with Chang Chun's argument that its profit

rates for acetic acid and PVA are approximately the same. As the

Department stated in the first administrative review, a relative-sales-

value-based allocation should yield approximately the same profit rates

for acetic acid and PVA (see PVA 1st Admin Review, 63 FR 32815).

However, for the reasons stated in the LTFV determination, the first

administrative review, and Comment 1 above, the Department has adjusted

Chang Chun's production costs by relative sale values representative of

a two-year period prior to the POI. We note that any differences in the

resulting POR profit rates for PVA and acetic acid are effectively

compensated through the Department's adjustment of the POR cost data on

the basis of the relative sales values representative of a two-year

period prior to the POI in which there was no allegation of dumping for

the subject merchandise (see Attachment 2 of the ``Final Calculation

Memorandum for Chang Chun'' dated June 8, 1999). This adjustment is

appropriate for allocating joint production costs and calculating the

profit rates between PVA and acetic acid (see PVA Final Determination,

61 FR at 14071, and PVA 1st Admin Review, 63 FR at 32815).

Comment 3: Acetic Acid Sales Prices and the Major Input Rule

The petitioner alleges that Chang Chun's reported acetic acid sales

prices are problematic. Based on a comparison of acetic acid sales

prices contained in Exhibits 5 and 7 of Chang Chun's January 19, 1999,

supplemental section D response, the petitioner purports that Chang

Chun under-reported its average sales price of acetic acid to

unaffiliated purchasers of acetic acid. Furthermore, the petitioner

argues that these sales prices warrant close scrutiny in future

administrative reviews because Chang Chun uses these prices for the

allocation of costs between PVA and acetic acid. Finally, the

petitioner questions whether Dairen, Chang Chun's affiliated vinyl

acetate monomer (``VAM'') supplier, has properly reported its costs for

producing VAM, which is a major input used in the production of PVA.

Specifically, the petitioner takes issue with the acetic acid price

that Dairen paid Chang Chun and included in its reported VAM production

costs.

Chang Chun urges the Department to reject the petitioner's

arguments because they are untimely and are not supported by record

evidence. Chang Chun notes that the petitioner's argument for applying

the major input rule to VAM production was untimely under 19 CFR

351.301(d)(3). Moreover, Chang Chun maintains that the major input rule

under section 773(f)(3) of the Act does not apply to acetic acid sales

transactions between Chang Chun and Dairen because acetic acid is not a

major input of the subject merchandise; rather, the major input to PVA

in this case is the VAM produced by Dairen. Specifically, Chang Chun

maintains that the Department verified the sales prices of acetic acid

reported in Chang Chun's submission in the first administrative review

of PVA. Furthermore, in support of its argument that the Department may

rely on knowledge of a respondent's records and data acquired from past

reviews in determining the reasonableness of its reporting

methodologies used in a current review, Chang Chun cites to Timken Co.

v. United States, 16 F. Supp. 2d 1102 (CIT 1998).

DOC Position: We agree with petitioner, in that Chang Chun's acetic

acid prices may be problematic. However, because this issue was raised

for the first time in the petitioner's case brief, there is

insufficient information on the record that would allow the Department

to address the differences that exist among Chang Chun's per-unit

market price for acetic acid, Chang Chun's per-unit transfer price for

acetic acid, or Chang Chun's per-unit COP for acetic acid. Based on the

record of the current review, we are unable to determine what impact,

if any, this issue may have on the final margin calculation. However,

we will consider this issue, if raised in a timely manner, in future

reviews as appropriate.

With respect to Chang Chun's untimeliness argument under 19 CFR

351.301(d)(3), we note that application of this regulation is

inappropriate because we conducted a cost investigation in this review.

Specifically, the Department's normal practice is to analyze an

affiliated supplier's production cost data for major inputs whenever it

conducts a cost investigation. Thus, the cited regulation is only

applicable where the Department has determined to base normal value on

constructed value, but there is no cost investigation (see Antidumping

Duties; Countervailing Duties; Final Rule, 62 FR at 27296, 27336 (May

19, 1997)).

Comment 4: U.S. Customs Investigation

The petitioner requests that the Department obtain and review the

results of an investigation conducted by the U.S. Customs Service

(``Customs Service'') which involved examining shipments of PVA to the

U.S. market to determine whether sales of merchandise claimed to be

outside the scope of the antidumping duty order were properly

classified.

Chang Chun claims that, since it has reported all of its U.S. sales

of subject merchandise during this review period, the Department should

reject the petitioner's request.

DOC Position: To establish the accuracy of the petitioner's

allegation regarding whether Chang Chun or DuPont properly reported all

sales of PVA during the POR, we would have had to conduct verifications

of the two firms' sales data. Because the petitioner did not raise the

allegation until it presented its case brief on April 8, 1999, we could

not verify in this administrative review.

In accordance with the petitioner's suggestion, we made a request

that the Customs Service provide us with the status of any

investigation into whether imports of subject PVA had been declared

improperly as being outside the scope of the antidumping duty order

(see Memorandum to the Customs Service dated April 16, 1999). In a May

13, 1999, reply to our request, the Customs Service stated it had

``conducted an analysis of shipments of PVA,'' but it could not

disclose whether any shipments of PVA were found to be non-compliant

with the antidumping duty order (see Memorandum to the file dated May

13, 1999). Instead, the Customs Service said that if there were any

shipments of PVA found to be non-compliant, it would have notified the

importer and corrective action would have been taken. Based on the

record of this proceeding, we cannot conclude

[[Page 32027]]

that the respondents have improperly reported sales of PVA during the

POR. We will review this issue, if it is raised in a timely manner, in

a future administrative review.

DuPont

Comment 1: Application of the Special Rule for Value Added

DuPont withdrew its request that the Department apply the special

rule for value added in this case and therefore exclude its sales of

further manufactured PVA from the analysis. However, DuPont maintains

that although it has withdrawn its request in this particular review,

applying the special rule is an important issue in the calculation of

DuPont's dumping margin and should be considered without prejudice in

future reviews.

The petitioner did not comment on this issue.

DOC Position: Because DuPont withdrew its request that the

Department apply the special rule in this case shortly after the

preliminary results, the Department has not considered further

application of the special rule for these final results. However, if

DuPont should request in a timely manner that the Department apply the

special rule in a subsequent proceeding, the Department will again give

DuPont's request full consideration.

Final Results of the Review

As a result of our review, we have determined that the following

weighted-average margins exist for the period May 1, 1997, through

April 30, 1998:

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

Margin

Manufacturer/producer/exporter (percent)

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

Chang Chun Petrochemical Co. Ltd........................... 0.00

E.I. DuPont de Nemours & Co................................ 0.00

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

Cash Deposit Requirements

The following deposit requirements shall be effective upon

publication of this notice of final results of administrative review

for all shipments of the subject merchandise from Taiwan that are

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

publication date, as provided for by section 751(a)(1) of the Act: (1)

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

indicated above (i.e., the cash deposit rate will be zero); (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 most recent period for the manufacturer of the

merchandise; 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 requirements shall remain in effect until

publication of the final results of the next administrative review.

Assessment Rates

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. For duty

assessment purposes, we have calculated importer-specific assessment

rates for the subject merchandise. Pursuant to 19 CFR 351.212(b)(1), we

have calculated importer-specific ad valorem duty assessment rates

based on the ratio of the total amount of the dumping margins

calculated for the examined sales to the total entered value of those

same sales. In order to estimate the entered value, we have subtracted

international movement expenses from the gross sales value. In

accordance with 19 CFR 351.106(c)(2), we will instruct the Customs

Service to liquidate without regard to antidumping duties all entries

of subject merchandise during the POR for which the importer-specific

assessment rate is zero or de minimis (i.e., less than 0.50 percent).

Notification to Importers and Interested Parties

This notice serves as a final reminder to importers of their

responsibility under 19 CFR 351.402(f) 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 final 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 351.305(a). Timely written notification

or conversion to judicial protective order is hereby requested. Failure

to comply with the regulations and terms of the APO is a sanctionable

violation.

This determination is issued and published in accordance with

sections 751(a)(1) and 777(i)(1) of the Act.

Dated: June 8, 1999.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.

[FR Doc. 99-15177 Filed 6-14-99; 8:45 am]

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