Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices 54823

days after the date of publication of the

notice of initiation of the administrative

review. In light of the fact that Japan

Synthetic Rubber Co., Ltd.’s request for

termination was submitted within the

90-day time limit and there were no

requests for review from other interested

parties, we are terminating this review

for Japan Synthetic Rubber Co., Ltd. See

Certain Welded Stainless Steel Pipe

from Korea, Termination of

Antidumping Duty Administration

Review, 62 FR 47460, (September 9,

1997). We will issue appraisement

instructions directly to the U.S. Customs

Service.

This notice is in accordance with 19

CFR 353.22(a)(5).

Dated: October 15, 1997.

Richard W. Moreland,

Acting Deputy Assistant Secretary, Group II,

Import Administration.

[FR Doc. 97–27993 Filed 10–21–97; 8:45 am]

BILLING CODE 3510–DS–M

DEPARTMENT OF COMMERCE

International Trade Administration

[A–583–824]

Notice of Termination of New Shipper

Antidumping Duty Administrative

Review: Polyvinyl Alcohol From

Taiwan

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: October 22, 1997.

FOR FURTHER INFORMATION CONTACT:

Everett Kelly or Brian Smith, Import

Administration, International Trade

Administration, U.S. Department of

Commerce, 14th Street and Constitution

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

telephone: (202) 482–4194 or (202) 482–

1766, respectively.

The 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

references to the Department’s

regulations are to those codified at 19

CFR part 353, as they existed on April

1, 1996.

Background

On December 18, 1996, the

Department published in the Federal

Register notice the initiation of a new

shipper administrative review of the

antidumping duty order on polyvinyl

alcohol from Taiwan covering the

exporter Perry Chemical Corporation

(‘‘Perry’’) and the period May 1, 1996,

through October 31, 1996 (61 FR 68237,

December 28, 1996).

Under Section 751(a)(2)(B)(i) of the

Act, the Department will conduct an

administrative review to establish an

individual weighted average dumping

margin if the Department receives a

request from an exporter or producer

that establishes (1) it did not export the

merchandise that was the subject of the

antidumping duty order to the United

States during the period of investigation

and (2) it is not affiliated within the

meaning of section 771(33), any

exporter or producer who exported the

merchandise to the United States during

that period of investigation.

In the less than fair value (LTFV)

investigation, the Department

investigated the sales of Chang Chun

Petrochemicals, Ltd. (Chang Chun), the

only exporter of PVA from Taiwan

during the period of investigation,

including sales to Perry, a U.S. importer.

The record indicates that Perry has had

a longstanding business relationship as

an importer of PVA produced by Chang

Chun and imported the subject

merchandise produced and exported by

Chang Chun during the period of the

LTFV investigation. The Department

found Chang Chun to be dumping at a

rate of 19.21 percent during the LTFV

investigation. In this review, the

business relationship remains

essentially unchanged. As shown by

proprietary information on the record in

this review, Perry continues to be the

importer and Chang Chun continues to

undertake the entire production of PVA.

For the sales in question in this

review, Perry states that in addition to

being the importer, it is now also the

‘‘manufacturer/exporter’’ of the subject

merchandise, and that as a new

exporter, it is entitled to a new shipper

rate. Perry indicates that to produce the

subject merchandise, Perry purchased

the primary input of PVA, vinyl acetate

monomer (VAM) from a Taiwan

producer of VAM through an

unaffiliated U.S. trading company. Perry

contracted with Chang Chun to produce

PVA utilizing Perry’s VAM under a

tolling arrangement. Perry then sold the

PVA to unaffiliated customers in the

United States and Canada during the

period of review (POR).

In most past cases involving tolling

arrangements the Department

considered the manufacturer of the

product exported to the United States to

be the processor or toller, and not the

party which controlled the production

process, set the prices of the finished

product in all markets, and held title to

both the inputs and the subject

merchandise (see, e.g., Final

Determination of Sales at Less Than

Fair Value: Certain Small Diameter

Welded Carbon Steel Pipes and Tubes

from the Phillippines, 51 FR 33099,

September 18, 1986).

Within the last few years, the

Department has reconsidered its

position of deeming the toller the

manufacturer. A toller has no control

over the price charged to U.S. and

domestic buyers of the finished product,

nor does a toller set the price in either

market. Moreover, because the

Department only considered the price or

cost of the tolling in making

comparisons between U.S. prices and

prices of sales of the foreign like

product, the Department did not capture

all of the costs of manufacturing the

subject merchandise, e.g., cost of inputs,

as required by the statute section 773.

Therefore, this approach did not allow

for analysis of price comparisons

between the finished products.

To resolve this situation, the

Department revised its tolling practice.

Rather than treat the toller as the

producer, the Department now will treat

the party who keeps title to the inputs

and the finished product, controls the

entire production process, and sets the

price of the finished product in each

market as the producer and, hence, the

proper respondent (see Discussion

Memorandum: A Proposed Alternative

to Current Tolling Methodology in the

Current Antidumping (AD) Reviews of

Carbon Steel Flat Products,

Memorandum from Joseph A. Spetrini,

Deputy Assistant Secretary for

Compliance, to Susan G. Esserman,

Assistant Secretary for Import

Administration, dated December 12,

1994).

This approach is also reflected in the

Department’s preamble to its new

regulations (Antidumping Duties;

Countervailing Duties; Final Rule, 62 FR

27295 (May 19,1997). Under section

351.401(h) of the new regulations,

which, although not legally in effect for

this new shipper review, are, at the time

of this request for review, an expression

of the Department’s practice, the

Department will not consider a toller or

subcontractor to be a manufacturer or

producer where the toller or

subcontractor does not acquire

ownership of the finished product and

does not control the relevant sale of the

subject merchandise and the foreign like

product. See also Antidumping Duties;

Countervailing Duties; Final Rule, 62 FR

27296, 27411 (legally effective only for

segments of the proceeding initiated

based on requests filed after June 18,
54824 Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices

1997, but nevertheless a restatement of

the Department’s practice).

Perry claims that under the tolling

agreement between Perry and Chang

Chun, Perry maintains control of the

entire production process by (1)

controlling the supply of the major

input, VAM, used to produce tolled

PVA by Chang Chun, (2) controlling

Chang Chun’s production of tolled PVA

through the specifications (grades) and

amounts to be produced, (3) retaining

title to VAM and the finished product

throughout the tolling process, and (4)

establishing the prices, the quantities

and specifications/grade at which the

tolled PVA will be sold in the United

States and other markets. Perry pays a

fee to Chang Chun for these services.

Perry has stated the following on the

record of this proceeding:

(1) Perry controlled the sales process

of the tolled PVA.

As detailed in its questionnaire

responses, Perry controlled all aspects

of its tolled PVA sales. It identified

customers and negotiated the terms of

sale with them. Perry arranged the

warehousing and palletization of the

tolled PVA prior to delivery to its

customers. Perry shipped the

merchandise to its customers and

carried the accounts receivables until

payment was received.

(2) Perry controlled the production of

the tolled merchandise.

As detailed in its questionnaire

responses, Perry controlled Chang

Chun’s production of PVA according to

the terms of the tolling agreement. Perry

determined all specifications for

production of the PVA. Chang Chun

could not deviate from Perry’s

production specifications without

Perry’s written approval. (This is

reflected in the warranty terms set out

in the contract.) Chang Chun could not

produce PVA from the VAM owned by

Perry without Perry’s written

instructions.

(3 ) Perry held title to the input

materials.

As detailed in Perry’s questionnaire

responses, Perry purchased VAM

through an unaffiliated trading

company. Perry retained title to the

merchandise throughout the PVA

production process while the material

was in Chang Chun’s possession. Title

did not transfer until it passed to Perry’s

customers upon delivery to them.

Petitioner, Air Products and

Chemicals, Inc., argues that Chang

Chun, not Perry, is the producer of the

subject merchandise because the

processing performed by Chang Chun is

not a minor finishing operation, but

rather a substantial transformation

which converts VAM into the subject

merchandise. Petitioner further

contends that the Department should

terminate this review because, based on

the facts presented in this proceeding,

there is no material difference between

the Chang Chun sales to Perry in the

LTFV investigation, when Perry was

merely an importer, and the alleged

tolling relationship now in existence

between Chang Chun and Perry. The

only difference is the paperwork.

Petitioner concluded that Perry is not

entitled to a new shipper review

because Chang Chun is the true

manufacturer of the subject

merchandise.

Petitioner also argues that Perry is not

entitled to a new shipper review

because Perry and Chang Chun are

affiliated under the affiliated parties

provision of section 771(33)(G) of the

Act. Petitioner contends that although

Perry is not affiliated with Chang Chun

through stock ownership, it is affiliated

with Chang Chun by its close supplier

relationship and its debt financing.

Perry responds that it has fully

satisfied the Department’s revised

interpretation of a manufacturer/

exporter of tolled merchandise and,

therefore, Chang Chun is not the

manufacturer of the merchandise. Perry

further states that petitioner’s

conclusion that Chang Chun is the

manufacturer is inconsistent with the

standard for manufacturer/producer

status codified in the Department’s new

regulations at 19 CFR section 351.401(h)

(1997). Finally, Perry responds that, as

the proprietary information placed on

the record shows, its accounts payable

to Chang Chun is not debt financing and

does not establish an affiliation under

the Act. Moreover, Chang Chun made a

submission asserting that it does not

exercise control over Perry through the

supplier relationship.

We have determined that Perry does

not qualify as a new shipper regardless

of whether we regard it as the producer

of PVA tolled by Chang Chun. If we

were to continue to regard Chang Chun

as the producer, Chang Chun (not Perry)

would be both the producer and the

exporter, because Chang Chun has

knowledge at the time it sells to Perry

that the subject merchandise is for

export to the United States. On the other

hand, if Perry is the producer based on

a tolling arrangement with Chang Chun,

we find that Perry would be affiliated

with Chang Chun, an exporter of subject

merchandise during the investigation.

Perry claims that it controlled all

aspects of the subcontractor’s operations

in the tolling transaction—i.e., Chang

Chun’s processing of VAM. Perry’s own

questionnaire responses indicated that

Perry exercised direction over Chang

Chun in all facets of the processing of

VAM. This direction purportedly also

illustrated in the tolling agreement

between Perry and Chang Chun,

included as part of the February 26,

1997, questionnaire response.

Under section 771(33)(G) of the Act,

the Department will consider parties to

be ‘‘affiliated’’ if one person controls

any other person. The statutory

provision defines control as a situation

in which one person is legally or

operationally in a position to exercise

restraint or direction over another

person. Based on our analysis of the

information on the record, we do not

find that Chang Chun exercises control

over Perry through debt financing or the

supplier relationship. However, based

on Perry’s own statements on the

record, Perry was legally and

operationally in a position to exercise

direction over Chang Chun’s production

of PVA under contract to Perry and

exported by Perry to the United States

during the POR. Accordingly, Perry’s

assertions indicate that Perry and Chang

Chun are affiliated persons within the

meaning of section 771(33)(G) of the Act

with regard to Perry’s sales of PVA

tolled by Chang Chun.

Based on this determination of

affiliation, this proceeding does not

meet the requirements of section

751(a)(2)(B) of the Act for conducting a

new shipper review with regard to

Perry’s sales of tolled PVA since Perry

is affiliated with Chang Chun, which

was a producer who exported and

producer of the subject merchandise

during the period of the LTFV. This

determination of affiliation under

section 771(33)(G) of the Act is based on

the particular facts of this review, and

is made only in the context of

determining Perry’s eligibility for a new

shipper review under section

751(a)(2)(B). Alternatively, if Perry is

not the manufacturer based on a tolling

arrangement, there likewise is no basis

for conducting a new shipper review.

Therefore, the Department is

terminating this review.

Dated: October 14, 1997.

Robert S. LaRussa,

Assistant Secretary for Import

Administration.

[FR Doc. 97–27991 Filed 10–21–97; 8:45 am]

BILLING CODE 3510–DS–P