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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-583-824]

Polyvinyl Alcohol From Taiwan: Preliminary Results of Antidumping

Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce

ACTION: Notice of preliminary results of antidumping duty

administrative review.

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

SUMMARY: In response to requests by the petitioner, Air Products and

Chemicals, Inc., and by two manufacturers/exporters of subject

merchandise, the Department of Commerce (``the Department'') is

conducting an administrative review of the antidumping duty order on

polyvinyl alcohol (``PVA'') from Taiwan. The period of review is May 1,

1997, through April 30, 1998.

We have preliminarily found that no sales of subject merchandise

have been made below normal value. If these preliminary results are

adopted in our final results of administrative review, we will instruct

the Customs Service not to assess antidumping duties on entries subject

to this review. Interested parties are invited to comment on these

preliminary results. Parties who submit case briefs in this proceeding

should provide a summary of the arguments not to exceed five pages and

a table of statues, regulations, and case cited.

EFFECTIVE DATE: February 8, 1999.

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

Brian Smith, at (202) 482-1766, Import Administration, International

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

Constitution Avenue, Washington, D.C. 20230.

SUPPLEMENTARY INFORMATION:

The 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, as amended

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

addition, unless otherwise indicated, all references are made to the

Department's final regulations at 19 CFR Part 351 (1998).

Case History

On May 14, 1996, the Department published in the Federal Register

an antidumping duty order on polyvinyl alcohol from Taiwan. See 61 FR

24286. On May 12, 1997, the Department published a notice providing an

opportunity to request an administrative review of this order for the

period May 1, 1997, through April 30, 1998 (63 FR 26143). On May 27,

1998, we received a request for an administrative review from E.I. du

Pont de Nemours & Co. (``DuPont''). On May 29, 1998, we received a

request for a review from Chang Chun Petrochemical (``Chang Chun''). On

May 29, 1998, the petitioner also requested reviews of Chang Chun and

DuPont, and an additional review of Perry Chemical Corporation

(``Perry''). On June 29, 1998, we published a notice of initiation of

this review for Chang Chun and Dupont (63 FR 35188). We did not

initiate a review of the importer Perry because we do not consider

Perry to be a manufacturer or exporter of the subject merchandise based

on the factors set forth in section 351.401(h) of the Department's

regulations (see Final Results of Antidumping Duty Administrative

Review: Polyvinyl Alcohol from Taiwan, 63 FR 32810, 32813 (June 16,

1998)).

On June 17, 1998, we issued an antidumping questionnaire to Chang

Chun and Dupont. The Department received responses from the two

companies in September and December 1998. We issued supplemental

questionnaires to these companies in October 1998 and January 1999.

Responses to these questionnaires were received in November 1998 and

January 1999.

On July 24, 1998, Chang Chun requested that the Department clarify

and confirm that the scope of the merchandise includes PVA ``hydrolyzed

in excess of 85 percent whether or not mixed or diluted with defoamer

or boric acid.'' In addition, Chang Chun requested that the Department

confirm that the language in the scope of the order is still effective.

Chang Chun contended that the language describing

[[Page 6043]]

the scope of subject merchandise covered by the antidumping order still

controls the scope of review in this proceeding. Pursuant to Chang

Chun's request, we confirmed that the scope of the merchandise includes

PVA ``hydrolyzed in excess of 85 percent whether or not mixed or

diluted with defoamer or boric acid.'' See ``Scope of Review'' section

of this notice for confirmation of the scope of subject merchandise

covered by the antidumping duty order and this review.

On August 26, 1998, DuPont requested that the Department apply the

special rule set forth in 19 CFR 351.402(c) with respect to its

further-manufactured sales in the United States. DuPont claimed that

sales of non-further-manufactured subject merchandise should be used as

``proxy'' sales if the Department deems that there are a sufficient

number of such sales to provide a reasonable basis for an accurate

dumping margin calculation. Otherwise, DuPont stated that if the

Department were to include the further-manufactured sales in its

calculations, the results would be unreliable and inaccurate (see

``Further Manufactured Sales'' section below for further discussion).

On September 25, 1998, DuPont submitted further analysis in support

of its contention that the Department should exclude its further-

manufactured sales in the preliminary results.

On November 10, 1998, the Department preliminarily determined that

the application of the special rule to DuPont's further-manufactured

sales was not appropriate. (See Memorandum from the Team to Louis Apple

dated November 10 , 1998 (``Special Rule Memo'').)

Scope of Review

The product covered by this review is PVA. PVA is a dry, white to

cream-colored, water-soluble synthetic polymer. This product consists

of polyvinyl alcohols hydrolyzed in excess of 85 percent, whether or

not mixed or diluted with defoamer or boric acid. 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.

Period of Review

The period of review (``POR'') covers the period May 1, 1997,

through April 30, 1998.

Fair Value Comparisons

To determine whether sales of the subject merchandise by the

respondents to the United States were made at prices below normal

value, we compared, where appropriate, the export price (``EP'') or

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 made in the ordinary course of trade.

Product Comparisons

In accordance with section 771(16) of the Act, we considered all

products produced by Chang Chun and Dupont covered by the description

in the ``Scope of the Review'' section, above, to be foreign like

products for purposes of determining appropriate product comparisons to

U.S. sales. We compared U.S. sales to sales made in the home market or

third country, where appropriate, within the contemporaneous window

period, which extends from three months prior to the month of the U.S.

sale through two months after the month of the U.S. sale. Where there

were no sales of identical merchandise in the home market or third

country 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. In making the product

comparisons, we matched foreign like products based on the physical

characteristics reported by the respondents in the following order:

viscosity, hydrolysis, particle size, tackifier, defoamer, ash, color,

volatiles, and visual impurities.

Export Price and Constructed Export Price

For the price to the United States, we used EP or CEP as defined in

sections 772(a) and 772(b) of the Act, as appropriate.

We made company-specific adjustments as follows.

Chang Chun

In accordance with sections 772(a) and (c) of the Act, we

calculated an EP for all of Chang Chun's sales, since the merchandise

was sold to the first unaffiliated purchaser in the United States prior

to importation, and CEP was not otherwise warranted based on the facts

of record. We calculated EP based on the packed CIF price to

unaffiliated purchasers in, or for exportation to, the United States.

We made deductions from the starting price for movement expenses in

accordance with section 772(c)(2)(A) of the Act; these expenses

included domestic inland freight, foreign brokerage and handling,

international freight, and marine insurance.

DuPont

We calculated CEP for all sales of subject merchandise, which were

made in the United States after importation. We based CEP on packed FOB

or delivered prices to unaffiliated purchasers in the United States. As

appropriate, we made deductions for discounts and rebates. We also made

deductions, where appropriate, for movement expenses in accordance with

section 772(c)(2)(A) of the Act; these included U.S. brokerage and

handling expenses, U.S. Customs duties (which include harbor

maintenance and merchandise processing fees), U.S. warehousing

expenses, and U.S. inland freight expenses (freight from port to

warehouse and freight from warehouse to the customer).

In accordance with section 772(d)(1) of the Act, we deducted from

CEP selling expenses associated with DuPont's economic activities

occurring in the United States, including direct selling expenses and

indirect selling expenses. We also deducted from CEP an amount for

profit and further manufacturing costs in accordance with section

772(d)(3) and section 772(d)(2) of the Act, respectively.

DuPont's Further-Manufactured Sales

Dupont claims that the special rule set forth in section 772(e) of

the Act should apply to its further-manufactured sales because the

value added is above the Department's 65 percent threshold, and there

are a sufficient number of sales of the subject merchandise with no

value-added to use as ``proxy sales.'' Further, DuPont states that

because of the way in which it reports costs associated with further

manufacturing the subject merchandise, including its further-

manufactured sales in the Department's dumping analysis would produce

unreliable and inaccurate results.

[[Page 6044]]

Moreover, the exclusion of its further-manufactured sales from the

Department's analysis would not appreciably affect the accuracy of the

margin results, and that the burdens of preparing, reporting, and

analyzing information for its further-manufactured sales would outweigh

any gains from such an analysis. Therefore, DuPont requests that the

Department exclude these further-manufactured sales and apply the

``Special Rule'' set forth in 19 CFR 351.402(c). Finally, Dupont notes

in its Section E questionnaire response dated December 7, 1998, that if

the Department finds that it must include the selling prices of the

further-manufactured product in its margin calculation, it should

compare the U.S. price of the further-manufactured product to the CV of

that product. According to Dupont, this methodology would result in a

more accurate and reliable margin calculation.

For the reasons stated in the November 10, 1998, Special Rule Memo,

we disagree with DuPont that including the sales of the subject

merchandise that is further-manufactured would necessarily produce

unreliable or inaccurate results, or present a burden for the

Department to calculate a margin using its normal methodology (see

Special Rule Memo for further discussion). Because the purpose of

section 772(e) is to reduce the administrative burden on the

Department, the Department has the discretion to refrain from applying

the special rule in circumstances where, as here, the value-added,

while above the 65 percent threshold, is simple to calculate and does

not present an administrative burden. Moreover, we do not agree with

Dupont that applying our standard methodology will result in inaccurate

and distortive results. However, we may revisit our preliminary

decision to include the further-manufactured sales in our analysis

based on our findings at verification.

Normal Value

In order to determine whether there was a sufficient volume of

sales in the home market to serve as a viable basis for calculating NV,

we compared each respondent's volume of home market sales of the

foreign like product to the volume of U.S. sales of the subject

merchandise, in accordance with section 773(a)(1)(C)(ii) of the Act.

For Chang Chun, we determined that the quantity of foreign like product

sold in the exporting country was sufficient to permit a proper

comparison with the sales of the subject merchandise to the United

States because Chang Chun had sales in its home market which were

greater than five percent of its sales in the U.S. market. Therefore,

in accordance with section 773(a)(1)(C) of the Act, we based NV on

sales in Taiwan.

For DuPont, in accordance with section 773(a)(1)(B)(ii) and

773(a)(1)(C) of the Act and consistent with our practice, 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 (i.e.,

Australia) because DuPont did not have sales of the foreign like

product in the exporting country during the POR and because Australia

was a viable market with respect to DuPont's sales of PVA.

We made company-specific adjustments as follows.

Chang Chun

We calculated NV based on packed, FOB or delivered prices to

unaffiliated purchasers in Taiwan. We made adjustments for differences

in packing costs in accordance with section 773(a)(6)(A) and (B) of the

Act. We also made adjustments, where appropriate, for movement expenses

consistent with section 773(a)(6)(B) of the Act; these expenses

included inland freight from plant to customer. In addition, we made

adjustments for differences in cost attributable to differences in

physical characteristics of the merchandise pursuant to section

773(a)(6)(C)(ii) of the Act, as well as for differences in

circumstances of sale (``COS'') in accordance with section

773(a)(6)(C)(iii) of the Act and 19 C.F.R. 351.410. We made COS

adjustments by deducting direct selling expenses incurred for home

market sales (i.e., credit expenses) and adding U.S. direct selling

expenses (i.e., credit expenses and bank charges).

DuPont

We calculated NV based on packed, delivered prices to unaffiliated

purchasers in Australia. We made adjustments for movement expenses

(i.e., brokerage and handling fees, ocean freight, and inland freight)

in accordance with section 773(a)(6)(B) of the Act. In addition, we

made adjustments for differences in cost attributable to differences in

physical characteristics of the merchandise pursuant to section

773(a)(6)(C)(ii) of the Act, as well as for differences in COS in

accordance with section 773(a)(6)(C)(iii) of the Act and 19 C.F.R.

351.410. We made COS adjustments by deducting direct selling expenses

incurred for third-country market sales (i.e., credit expenses) and

adding U.S. direct selling expenses (i.e., credit expenses), where

appropriate. Since DuPont was unable to separate packing expenses from

its variable cost of manufacture, we made no adjustment for differences

in packing expenses. As discussed below in the ``Level of Trade''

section, we allowed a CEP offset for comparisons made at different

levels of trade. To calculate the CEP offset, we deducted from NV the

third-country market indirect selling expenses (including inventory

carrying costs), capped by the amount of the indirect selling expenses

deducted in calculating the CEP under section 772(d)(1)(D) of the Act.

Level of Trade

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

practicable, we determined 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 constructed value, that of the sales from which we

derive selling, general and administrative expenses and profit. For EP,

the 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 export sale from the exporter to the affiliated 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 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

an 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 difference 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

Notice of Final Determination of Sales at Less Than Fair Value: Certain

Cut-to-Length Carbon Steel Plate from South Africa, 62 FR 61731

(November 19, 1997).

Chang Chun reported one channel of distribution for its U.S. and

home market sales. Based on our analysis of the selling functions, we

found that the selling activities performed in both the home market and

the United States were similar. Therefore, we have found that sales in

both markets are at the same

[[Page 6045]]

LOT and consequently no LOT adjustment is warranted.

DuPont reported one customer category and one channel of

distribution for its third-country market sales. For its CEP sales to

the United States, it reported three customer categories and three

channels of distribution corresponding to each customer category. Based

on our analysis, we found that all of its CEP sales comprise a single

level of trade.

For Dupont's CEP sales, after making the appropriate deductions

under the section 772(d) of the Act, we found that there are no selling

expenses or functions associated with selling activities performed by

Dupont that are reflected in the CEP price. In contrast, the NV LOT is

more remote from the factory than the CEP LOT, and NV prices include

the indirect selling expenses attributable to selling activities

performed by DuPont for the third-country market such as sales support

functions. Accordingly, we have concluded that CEP is at a different

LOT from the third-country market LOT.

We then examined whether a LOT adjustment or CEP offset may be

appropriate. In this case, DuPont only sold at one LOT in the third-

country market; therefore, there is no information available to

determine a LOT adjustment between LOTs with respect to the foreign

like product. Further, we do not have information which would allow us

to examine pricing patterns based on respondent's sales of other

products, and there are no other respondents or other record

information on which such an analysis could be based. Accordingly,

because the data available do not provide an appropriate basis for

making a LOT adjustment, but the LOT in the third-country is at a more

advanced stage of distribution than the LOT of the CEP, we made a CEP

offset adjustment in accordance with section 773(a)(7)(B) of the Act.

Cost of Production Analysis (``COP'')

For Chang Chun, because we disregarded sales below the COP in the

last completed segment of the proceeding (i.e., the first

administrative review), we had reasonable grounds to believe or suspect

that sales of the foreign product under consideration for the

determination of NV in this review may have been made at prices below

the COP, as provided by section 773(b)(2)(A)(ii) of the Act. For

DuPont, because DuPont had no sales below the COP in the last review,

we did not initiate a COP investigation (see Policy Bulletin No. 94.1,

Cost of Production--Standards for Initiation of Inquiry (March 25,

1994)). Therefore, pursuant to section 773(b)(1) of the Act, we

initiated a COP investigation of sales by Chang Chun in the home

market.

We conducted the COP analysis described below.

A. Calculation of COP

In accordance with section 773(b)(3) of the Act, we calculated the

weighted-average COP, by grade, based on the sum of the cost of

materials and fabrication, selling, general and administrative

(``SG&A'') expenses, and packing costs. For Chang Chun, we relied on

the submitted COPs.

Chang Chun purchased a major input (i.e., vinyl acetate monomer

(``VAM'')) for PVA from an affiliated party. Section 773(f)(3) of the

Act indicates that, if transactions between affiliated parties involve

a major input, then the Department may value the major input based on

the COP if the cost is greater than the amount (higher of transfer

price or market price) that would be determined under section 773(f)(2)

of the Act. Section 773(f)(3) of the Act applies if the Department

``has reasonable grounds to believe or suspect that an amount

represented as the value of such input is less than the COP of such

input.'' The Department generally finds that such ``reasonable

grounds'' exist where it has initiated a COP investigation of the

subject merchandise. See Notice of Final Determination of Sales at Less

Than Fair Value: Stainless Steel Wire Rod from Sweden, 63 FR 40449,

40454 (July 29, 1998) (Comment 1).

Because a COP investigation is being conducted in this case, the

Department requested in its Section D questionnaire that Chang Chun

provide COP information for VAM. That cost information was provided by

Chang Chun in its Section D response. For purposes of our analysis, we

used the per-unit costs as reported by Chang Chun, which included the

cost of VAM based on the transfer price, which is a higher price than

the market price or its affiliate's COP.

B. Test of Home Market Prices

We compared the weighted-average COP for Chang Chun, adjusted where

appropriate, to the comparison market sales of the foreign like product

as required under section 773(b) of the Act, in order to determine

whether these sales had been made at prices below the COP within an

extended period of time in substantial quantities, and whether such

prices were sufficient to permit the recovery of all costs within a

reasonable period of time. On a grade-specific basis, we compared the

COP to the comparison market prices, less any applicable movement

charges, discounts, rebates, commissions and other direct and indirect

selling expenses.

C. Results of the COP Test

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

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 the 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.

For Chang Chun, we found that certain comparison-market sales of

PVA products were made at below-COP prices in substantial quantities

within an extended period of time and at prices which would not permit

recovery of costs within a reasonable period of time.

Preliminary Results of Review

As a result of this review, we preliminarily determine that the

following margin exists for the period May 1, 1997, through April 30,

1998:

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

Margin

Manufacturer/exporter (percent)

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

Chang Chun Petrochemical Corporation......................... 0.00

E.I. du Pont de Nemours & Co................................. 0.00

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

Parties to the proceeding may request disclosure within five days

of the date of publication of this notice. Any interested party may

request a hearing within 30 days of publication. Any hearing, if

requested, will be held 44 days after the date of publication or the

first business day thereafter.

Issues raised in hearings will be limited to those raised in the

respective case briefs and rebuttal briefs. Case briefs from interested

parties and rebuttal briefs, limited to the issues raised in the

respective case briefs, may be submitted not later than 30 days and 37

days, respectively, from the date of publication of these preliminary

results. Parties who submit case briefs or rebuttal briefs in this

proceeding are requested to submit with each argument (1) a statement

of the issue and (2) a

[[Page 6046]]

brief summary of the argument. Parties are also encouraged to provide a

summary of the arguments not to exceed five pages and a table of

statutes, regulations and cases cited.

The Department will subsequently issue the final results of this

administrative review, including the results of its analysis of issues

raised in any such written briefs or at the hearing, if held, not later

than 120 days after the date of publication of this notice.

Interested parties who wish to request a hearing or to participate

if one is requested, must submit a written request to the Assistant

Secretary for Import Administration, Room B-099, within 30 days of the

date of publication of this notice. Requests should contain: (1) the

party's name, address and telephone number; (2) the number of

participants; and (3) a list of issues to be discussed.

Cash Deposit and Assessment Requirements

The following deposit requirements will be effective upon

publication of the final results of this antidumping duty review for

all shipments of PVA from Taiwan, entered or withdrawn from warehouse,

for consumption on or after the publication date, as provided by

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

companies will be those established in the final results of this

review; (2) for exporters not covered in this review, but covered in

the LTFV investigation or prior reviews, the cash deposit rate will

continue to be the company-specific rate from the LTFV investigation or

the prior review; (3) if the exporter is not a firm covered in this

review, a prior review, or the original LTFV investigation, but the

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

the most recent period for the manufacturer of the merchandise; and (4)

the cash deposit rate for all other manufacturers or exporters will

continue to be 19.21 percent, the ``All Others'' rate made effective by

the LTFV investigation. These requirements, when imposed, shall remain

in effect until publication of the final results of the next

administrative review.

The Department shall determine and the Customs Service shall assess

antidumping duties on all appropriate entries. The Department will

issue appropriate appraisement instructions directly to the Customs

Service upon completion of this review. The final results of this

review shall be the basis for the assessment of antidumping duties on

entries of merchandise covered by this review and for future deposits

of estimated duties. We will instruct the Customs Service to assess

antidumping duties on all appropriate entries covered by this review if

any importer-specific assessment rate calculated in the final results

of this review is above de minimis. For Chang Chun, for duty assessment

purposes, we will calculate importer-specific assessment rates by

aggregating the dumping margins calculated for all U.S. sales to each

importer and dividing this amount by the total entered value of the

same sales. In order to estimate the entered value, we will subtract

international movement expenses from the gross sales value. For DuPont,

we will calculate an assessment rate by aggregating the dumping margins

calculated for all U.S. sales examined and dividing this amount by the

total entered value of the sales examined

This notice serves as a preliminary reminder to importers of their

responsibility under 19 CFR 351.402(f)(2) 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) of the Act and 19 CFR 351.213.

Dated: February 1, 1999.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-2996 Filed 2-5-99; 8:45 am]

BILLING CODE 3510-DS-P