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

Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of preliminary results of antidumping duty

administrative review, and partial recission of review.

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SUMMARY: In response to a request from one respondent and two 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, 1997 through

May 31, 1998.

We preliminarily determine that there is a dumping margin for SKC

Limited (SKC) during the period June 1, 1997 through May 31, 1998. We

therefore preliminarily are denying SKC's request for revocation.

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 (USP)

and normal value (NV). STC Corporation (STC) made no sales or shipments

during the POR. Accordingly, we are rescinding 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 issues and (2) a

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

footnotes).

EFFECTIVE DATE: July 12, 1999.

FOR FURTHER INFORMATION CONTACT: Michael J. Heaney or John Kugelman,

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) 482-4475/0649.

Applicable statute: Unless otherwise indicated, all citations to

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

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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 351 (1998).

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 25, 1998,

two domestic producers, E.I. DuPont Nemours & Co., Inc. and Hoescht

Celanese Corporation, requested reviews of SKC and STC. On June 30,

1998, SKC requested an administrative review of its sales and

revocation of the order for SKC only. We published a notice of

initiation of the review on July 28, 1998 (63 FR 40258).

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

had no sales or shipments during the period of review (POR). On March

24, 1998, 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. Therefore, consistent with 19 CFR 351.213(d), we are

rescinding the review with respect to STC.

On December 7, 1998, the Department published a notice extending

the time limits for publication of its preliminary results by 120 days

(63 FR 67456).

Verification

As provided for in section 782(i)(2) of the Act, we verified the

information submitted by SKC. We used standard verification procedures,

including on-site inspection of the manufacturer's facilities and

examination of relevant sales and financial records. Our verification

findings are outlined in the verification reports placed in the case

file.

Intent Not To Revoke

In its submission of June 30, 1998, SKC requested, pursuant to 19

CFR 351.222(b)(2), revocation of the order with respect to its sales of

PET film from Korea. SKC certified that: (1) It sold the subject

merchandise at not less than NV for a period of at least three

consecutive years, (2) that in the future it will not sell the subject

merchandise at less than NV, and (3) that it agreed to its immediate

reinstatement in the order if the Department determines that,

subsequent to revocation, it sold the subject merchandise at less than

NV.

In this case SKC does not meet the first criterion required for

revocation. In this segment of the proceeding the Department

preliminarily has found that SKC sold subject merchandise at less than

NV. Since SKC has not met the first criterion for revocation, i.e.,

zero or de minimis margins for three consecutive reviews, the

Department need not reach a conclusion with respect to the second and

third criteria. Therefore, on this basis, we have preliminarily

determined not to revoke the order on PET film from Korea with respect

to SKC.

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, 1997 through May 31, 1998. The Department is

conducting this review in accordance with section 751 of the Act, as

amended.

Currency Conversion

Consistent with the position taken in Stainless Steel Sheet and

Strip in Coils from the Republic of Korea: Notice of Final

Determination of Sales at Less Than Fair Value (June 8, 1998, (64 FR

30664, 30670 )), the Department determined that the decline in the won

at the end of 1997 was so precipitous and large that the dollar-won

exchange rate cannot reasonably be viewed as having simply fluctuated

during this time, i.e., as having experienced only a momentary drop in

value. Therefore, for the final results the Department will use daily

rates exclusively for currency conversion purposes for HM sales matched

to U.S. sales occurring between November 1 and December 31, 1997, and

the standard exchange rate model with a modified benchmark for sales

occurring between January 1, 1999 and February 28, 1999.

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, and use of the constructed export price (CEP)

methodology was not otherwise indicated. The Department treated SKC's

sales as 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 discounts, 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, and U.S. duties, in accordance with section 772(c) of

the Act. Pursuant to section 772(c)(1)(B) of the Act, we made an

addition to CEP for duty drawback. We also made an addition to CEP for

interest revenue. 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 expenses,

bank charges, and indirect selling expenses.

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.

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

reduced by an amount for profit to arrive at the CEP.

Based upon our findings at verification, we revised SKC's reported

amounts for brokerage, interest revenue,

[[Page 37503]]

Korean inland freight, and further processing costs. (See Sales

Verification of SKC Co., Inc; PET Film from South Korea, July 6, 1999.)

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 HM 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 aggregate volume of U.S.

sales of the subject merchandise. Therefore, we have based NV on the

price at which the foreign like product was sold for consumption in the

home market in the usual commercial quantities, in the ordinary course

of trade, and, to the extent practicable, at the same level of trade.

Based on the fact that the Department had disregarded SKC's sales

of the foreign like product in the June 1996-May 1997 administrative

review because they failed the cost test, the Department had reasonable

grounds to believe or suspect that SKC made sales below COP during this

POR. Accordingly, we initiated a sales-below-cost of production

investigation for SKC in accordance with section 773(b) of the Act.

(The June 1996-May 1997 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 and

administrative (G&A) 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, 63 FR 37334, 37335 (July 10, 1998).

Based upon our findings at verification, we revised SKC's reported

amounts for G&A and financing expenses. (See Cost Verification of SKC

Co., Inc; PET Film from South Korea, July 6, 1999.)

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 SKC'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. Where 20

percent or more of SKC'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) in accordance with

section 773(b)(2)(B) of the Act, 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 sales as the basis for determining NV, if such sales

existed, in accordance with section 773(b)(1) of the Act.

In determining NV, we considered comparison market sales of

identical or similar merchandise, or constructed value (CV).

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, G&

A expenses, and profit. 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 G&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) of the Act, 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.credit expenses, and bank charges 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 U.S. 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 affect 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 LOTs when the

selling functions performed for each customer class are sufficiently

similar, and in this case, we have determined that the selling

functions are similar, we determined

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that there exists one LOT 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 SKC

America, Inc., SKC's wholly-owned U.S. subsidiary. 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. Therefore, no LOT

adjustment was warranted.

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

indicate 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 LOT,

we examined whether a LOT adjustment may be appropriate. In this case

SKC sold at one LOT in the home market; therefore, there is no

demonstrated pattern of consistent price differences between LOTs.

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 LOT adjustment but the LOT in Korea for SKC is at a more

advanced stage than the LOT 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 home

market 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.

Preliminary Results of Review

We preliminarily determine that a margin of 1.21 percent exists for

SKC for the period June 1, 1997 through May 31, 1998. We will disclose

calculations performed in connection with this preliminary results of

review within 5 days of the day of publication of this notice.

Interested parties may request a hearing not later than 30 days after

publication of this notice. Interested parties may also submit written

arguments in case briefs on these preliminary results within 30 days of

the date of publication of this notice. Rebuttal briefs, limited to

issues raised in case briefs, may be filed no later than five days

after the time limit for filing case briefs. Parties who submit

arguments are requested to submit with each argument a statement of the

issue and a brief summary of the argument. All memoranda to which we

refer in this notice can be found in the public reading room, located

in the Central Records Unit, room B-009 of the main Department of

Commerce building. Any hearing, if requested, will be held two days

after the scheduled date for submission of rebuttal briefs.

The Department will publish the final results of this

administrative review, including a discussion of its analysis of issues

raised in any case or rebuttal brief or at a hearing. The Department

will issue final results of this review within 120 days of publication

of these preliminary results.

Upon completion of the final results in this review, the Department

shall determine, and the Customs Service shall assess, antidumping

duties on all appropriate entries. In accordance with 19 CFR 351.212

(b), we have calculated an importer/customer-specific assessment rate

based on the ratio of the total amount of antidumping duties calculated

for the examined sales to the entered value of those same sales. This

Department will issue appraisement instructions on each exporter

directly to the Customs Service.

Furthermore, the following deposit requirements will be effective

upon completion of the final results of this administrative review 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 this administrative review, as provided by

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

reviewed firm will be the rate established in the final results of

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

exporters not covered in this review 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 this review 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 this review or

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

manufacturer is a firm covered in this 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 351.402(f) to file a certificate

regarding the reimbursement of antidumping duties prior to liquidation

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

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

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This administrative review and notice are in accordance with

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

Dated: June 30, 1999.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.

[FR Doc. 99-17642 Filed 7-9-99; 8:45 am]

BILLING CODE 3510-DS-P