32810 Federal Register / Vol. 63, No. 115 /Tuesday, June 16, 1998 / Notices

Constitution Avenue NW., Washington,

DC 20230; telephone (202) 482–3836 or

(202) 482–2613, respectively.

SUPPLEMENTARY INFORMATION:

Background

On May 14, 1996, the Department

published in the Federal Register (61

FR 24286) an antidumping duty order

on polyvinyl alcohol (‘‘PVA’’) from

Japan. On March 12, 1998, Colorcon,

Inc. (‘‘Colorcon’’) requested that the

Department conduct a changed

circumstances review and revoke, in

part, the antidumping duty order with

respect to PVA from Japan for use in the

manufacture of an excipient or as an

excipient in the manufacture of film

coating systems which are components

of a drug or dietary supplement.

Colorcon included in its request a

statement from the petitioner dated

October 30, 1997, expressing (i) no

objection to a changed circumstances

review, and (ii) no further interest in

maintaining the antidumping duty order

with respect to PVA imported from

Japan for use in the manner described

above.

On April 30, 1998, the Department

published a notice of initiation of a

changed circumstances antidumping

duty review and preliminary results of

the review with intent to revoke, in part,

the antidumping duty order on PVA

from Japan. In that notice, we stated that

we intend to revoke in part, the

antidumping duty order as it relates to

‘‘imports of PVA for use as a

pharmaceutical excipient or for use in

the manufacture of film coating systems

which are components of a drug or

dietary supplement’’ (63 FR 23722,

April 30, 1998). Subsequently, it came

to the Department’s attention that our

description of the type of PVA subject

to the proposed revocation did not

accurately reflect the description

contained in the petitioner’s expression

of no further interest. In particular, the

Department’s description of the product

subject to revocation did not include

PVA ‘‘for use in the manufacture of an

excipient.’’ As a result, we are amending

our preliminary results published on

April 30, 1998, to clarify our description

of the type of PVA subject to the

proposed revocation.

Scope of Review

The product covered by this review is

PVA. PVA is a dry, white to creamcolored, 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

3905.30.00 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.

Amended Preliminary Results of

Changed Circumstances Review and

Intent To Revoke Order in Part

Pursuant to section 751(d) of the Act,

the Department may partially revoke an

antidumping duty order based on a

review under section 751(b) of the Act

(i.e., a ‘‘changed circumstances’’

review). Section 751(b)(1) of the Act

requires a changed circumstances

review to be conducted upon receipt of

a request containing information

concerning changed circumstances

sufficient to warrant a review.

Section 351.222(g) of the

Department’s regulations provides that

the Department will conduct a changed

circumstances review under 19 CFR

351.216, and may revoke an order in

whole (or in part) if it determines that

the producers accounting for

substantially all of the production of the

domestic like product to which the

order pertains have expressed a lack of

interest in the order, in whole or in part.

The affirmative statement of no interest

by the petitioner covered PVA from

Japan for use in the manufacture of an

excipient or as an excipient in the

manufacture of film coating systems

which are components of a drug or

dietary supplement. In the preliminary

results issued on April 30, 1998 (63 FR

23722) we inadvertently excluded from

our description of the product subject to

revocation, PVA ‘‘for use in the

manufacture of an excipient.’’

Therefore, we are hereby notifying the

public of our intent to revoke, in part,

the antidumping duty order as it relates

to imports of PVA for use in the

manufacture of an excipient or as an

excipient in the manufacture of film

coating systems which are components

of a drug or dietary supplement.

Because of the error in the original

description of the products covered by

this changed circumstances review, we

are affording the parties an additional

opportunity to comment (see Public

Comment section below). Suspension of

liquidation will be extended

accordingly.

If final revocation, in part, occurs, we

intend to instruct the Customs Service

to end, effective on the date of

publication in the Federal Register of

the final notice of partial revocation, the

suspension of liquidation and to refund

any estimated antidumping duties

collected for all unliquidated entries of

the above-described PVA not subject to

final results of an administrative review.

We will also instruct the Customs

Service to pay interest on such refunds

in accordance with section 778 of the

Act. The current requirement for a cash

deposit of estimated antidumping duties

will continue until publication of the

final results of this changed

circumstances review.

Public Comment

Interested parties may submit case

briefs and/or written comments no later

than 10 days after the date of

publication of these results. Rebuttal

briefs and rebuttals to written

comments, limited to issues raised in

such briefs or comments, may be filed

no later than 17 days after the date of

publication of these amended

preliminary results. The Department

will issue its final results no later than

45 days after it has issued its amended

preliminary results if all parties agree to

our preliminary results.

The preliminary results in this review

and notice are in accordance with

section 751(b) of the Act (19 U.S.C.

1675(b)), and 19 CFR 351.216, 351.221,

and 351.222.

Dated: June 6, 1998.

Robert S. LaRussa,

Assistant Secretary for Import

Administration.

[FR Doc. 98–15875 Filed 6–15–98; 8:45 am]

BILLING CODE 3510–DS–P

DEPARTMENT OF COMMERCE

International Trade Administration

[A–583–824]

Polyvinyl Alcohol From Taiwan: Final

Results of Antidumping Duty

Administrative Review

AGENCY: Import Administration,

International Trade Administration,

U.S. Department of Commerce.

SUMMARY: On February 9, 1998, the

Department of Commerce published in

the Federal Register the preliminary

results of the administrative review of

the antidumping duty order on

polyvinyl alcohol from Taiwan. The

review covers two manufacturers/

exporters of the subject merchandise to

the United States, Chang Chun
Federal Register / Vol. 63, No. 115 /Tuesday, June 16, 1998 / Notices 32811

Petrochemical and E.I. duPont de

Nemours & Co. The period of review is

May 15, 1996, through April 30, 1997.

We gave interested parties an

opportunity to comment on our

preliminary results. Based on our

analysis of the comments received and

the correction of certain clerical and

computer programming errors, we have

changed our results from those

presented in our preliminary results, as

described below in the comment section

of this notice. The final results are listed

below in the section ‘‘Final Results of

Review.’’

EFFECTIVE DATE: June 16, 1998.

FOR FURTHER INFORMATION CONTACT:

Everett Kelly at (202) 482–4194, or

Sunkyu Kim at (202) 482–2613, Import

Administration, International Trade

Administration, U.S. Department of

Commerce, 14th Street and Constitution

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

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 citations

to the Department of Commerce’s

regulations are to 19 CFR Part 353 (April

1, 1997). Although the Department’s

new regulations, codified at 19 CFR Part

351, 62 FR 27296 (May 19, 1997) (‘‘Final

Regulations’’), do not govern this

review, citations to those regulations are

provided, where appropriate, as a

statement of current departmental

practice.

SUPPLEMENTARY INFORMATION:

Background

On February 9, 1998, the Department

of Commerce (‘‘the Department’’)

published in the Federal Register its

preliminary results of the 1996–1997

administrative review of the

antidumping duty order on polyvinyl

alcohol from Taiwan (63 FR 6526)

(‘‘Preliminary Results’’). We gave

interested parties an opportunity to

comment on our preliminary results. Air

Products and Chemicals Inc. (‘‘the

petitioner’’), E.I. du Pont de Nemours &

Co. (‘‘DuPont’’), Chang Chun

Petrochemical Co., Ltd. (‘‘Chang

Chun’’), and Perry Chemical

Corporation (‘‘Perry’’) submitted case

briefs on March 11, 1998, and rebuttal

briefs on March 18, 1998. Pursuant to a

timely request from the petitioner, we

held a public hearing on March 25,

1998. On April 23, 1998, the

Department requested Chang Chun to

provide supplemental information

concerning its sales to the United States

which were used in our preliminary

results calculation (see ‘‘Treatment of

Sales of Tolled Merchandise’’ section

below for further discussion). Chang

Chun provided this data on April 30,

1998. Additionally, Chang Chun

provided data on additional shipments

made during the POR which were not

included in our preliminary results (see

Memorandum to File from Everett Kelly,

Case Analyst, dated May 20, 1998). In

May 1998, the Department verified the

data provided by Chang Chun (see

Verification Report dated May 28, 1998).

On May 11, 1998, the petitioner filed

a submission objecting to certain

information provided by Chang Chun in

its April 30, 1998, submission. Chang

Chun submitted its response to the

petitioner’s comments on May 22, 1998

(see Comment 7 for Chang Chun for

further discussion).

The Department has now completed

this administrative review, in

accordance with section 751(a) of the

Act.

Scope of Review

The product covered by this review is

polyvinyl alcohol (‘‘PVA’’). PVA is a

dry, white to cream-colored, watersoluble 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

3905.30.00 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.

Treatment of Sales of Tolled

Merchandise

As discussed in the Preliminary

Results of this proceeding, DuPont and

Perry sold in the U.S. and third-country

markets subject merchandise tolled by

the Taiwan producer, Chang Chun. Both

DuPont and Perry claim that they are

the manufacturer of the tolled

merchandise under the Department’s

newly articulated treatment of tollers

and subcontractors in tolling

arrangements (see 19 CFR 351.401(h)

(62 FR 27926) (May 19, 1997)).

Accordingly, each company claims that

it is entitled to its own dumping rate.

In our preliminary results, we

determined that, based on the evidence

on the record, DuPont is the

manufacturer of the tolled merchandise,

and therefore the appropriate

respondent. With respect to Perry, based

upon a review of the arrangement

between Perry and Chang Chun, we

preliminarily determined that Perry is

not the manufacturer of PVA it imported

into the United States during the POR.

For the final results, we continue to

treat DuPont as the manufacturer/

exporter of PVA produced under a

tolling arrangement with Chang Chun

(see Comment 1 for DuPont). With

respect to Perry, we continue to find

that Perry is not a manufacturer of the

subject merchandise. As in the

preliminary results, we are treating

Perry as an importer and U.S. reseller of

the subject merchandise (see Comment

1 for Chang Chun).

As a result of our preliminary

decision that Chang Chun was the

producer of the PVA sold to Perry,

certain information was not on the

record of this review, which required us

to substitute missing data in the

Preliminary Results. Initially, Chang

Chun had reported a small number of

EP sales to Perry which were not

produced under the agreement with

Perry. Included in that reporting were

all the expenses associated with those

sales, i.e., movement expenses from

Chang Chun’s factory to the port of

entry in the United States, and selling

expenses including credit and bank

charges. We also had a larger number of

transactions originally reported by

Perry, which were sales from Chang

Chun to Perry produced pursuant to the

agreement. In the Preliminary Results,

we used both the sales reported by

Chang Chun and those reported by Perry

to calculate the EP for Chang Chun (see

Calculation Memorandum for the

Preliminary Results for Chang Chun

Petrochemical Co., Ltd., dated February

2, 1998 (‘‘Preliminary Calculation

Memorandum’’).

Although Perry reported its expenses

associated with selling the PVA at issue

to unaffiliated customers in the United

States, we did not have Chang Chun’s

selling expenses on the record for those

sales. However, because all of the sales

were made to Perry and were all

shipped by Chang Chun on the same

delivery terms, we used the movement

and selling expenses associated with the

sales reported by Chang Chun in its U.S.

sales listing submitted on August 22,

1997, as a reasonable substitute for the

missing expense data for the sales

originally reported by Perry.
32812 Federal Register / Vol. 63, No. 115 /Tuesday, June 16, 1998 / Notices

Furthermore, having determined that

the Perry-reported transactions are sales

by Chang Chun, we lacked appropriate,

verified sales dates, shipment dates or

the entry dates. As a result, in our

Preliminary Results, from information

on the record, we estimated the sales

dates and shipment dates (see

‘‘Preliminary Calculation Memorandum

for Chang Chun’’).

For these Final Results we gathered

additional information from Chang

Chun, which we verified, so that our

review of Chang Chun’s EP sales

encompassed all sales shipped during

the POR (see Comment 7 for Chang

Chun). Additionally, we obtained and

verified the prices Chang Chun’s

affiliate charged Perry, through an

intermediary trading company, for the

major input, VAM, during the POR.

With this new data, we were able to

properly construct Chang Chun’s U.S.

price to Perry for the PVA transactions

covered by this review by combining the

VAM prices with the prices Chang Chun

charged Perry for converting the VAM

into PVA (see Comment 2 for Chang

Chun).

Normal Value Comparisons

To determine whether sales of the

subject merchandise by the respondents

to the United States were made at below

normal value, we compared, where

appropriate, the export price (‘‘EP’’) and

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.

On January 8, 1998, the Court of

Appeals for the Federal Circuit issued a

decision in Cemex v. United States,

1998 WL 3626 (Fed Cir.). In that case,

based on the pre-URAA version of the

Act, the Court discussed the

appropriateness of using constructed

value (‘‘CV’’) as the basis for foreign

market value when the Department

finds home market sales to be outside

the ordinary course of trade. This issue

was not raised by any party in this

review. However, the URAA amended

the definition of sales outside the

‘‘ordinary course of trade’’ to include

sales below cost. See section 771(15) of

the Act. Consequently, the Department

has reconsidered its practice in

accordance with this decision and has

determined that it would be

inappropriate to resort directly to CV as

the basis for NV, in lieu of foreign

market sales, if the Department finds

foreign market sales of merchandise

identical or most similar to that sold in

the United States to be outside the

ordinary course of trade. Instead, the

Department will use sales of similar

merchandise, if such sales exist. The

Department will use CV as the basis for

NV only when there are no above-cost

sales that are otherwise suitable for

comparison. Therefore, in this

proceeding, when making comparisons

in accordance with section 771(16) of

the Act, we considered all products sold

in the home market as described in the

‘‘Scope of the Review’’ section of this

notice, above, that were in the ordinary

course of trade for purposes of

determining appropriate product

comparisons to U.S. sales. Where there

were no sales of identical merchandise

in the home market made in the

ordinary course of trade to compare to

U.S. sales, we compared U.S. sales to

sales of the most similar foreign like

product made in the ordinary course of

trade, based on the characteristics listed

in sections B and C of our antidumping

duty questionnaire.

Export Price and Constructed Export

Price

We calculated EP and CEP, as

appropriate, in accordance with section

772 of the Act. The calculation for each

respondent was based on the same

methodology used in the preliminary

results, with the following exceptions:

Chang Chun

As noted in the ‘‘Treatment of Sales

of Tolled Merchandise’’ section, we

modified the gross unit prices and dates

of sale and shipment for transactions

used in our Preliminary Results based

on information obtained after the

preliminary results. We also included

certain additional sales shipped during

the POR which were not included in our

preliminary analysis. Furthermore, as

identified by Chang Chun in its case

brief, we made corrections to the

product characteristics for certain U.S.

sales which were incorrectly assigned in

our preliminary results calculation. We

made the corrections based on

information Chang Chun provided in its

November 12, 1998, supplemental

Section C response (see Calculation

Memorandum for the Final Results for

Chang Chun Petrochemical Co., Ltd.

dated June 9, 1998, (‘‘Final Calculation

Memorandum for Chang Chun’’)).

DuPont

In our Preliminary Results, as noted

by DuPont in its case brief, we

incorrectly stated that we calculated EP

for some of DuPont’s sales when, in fact,

all of DuPont’s sales should have been

classified as CEP sales. In our

preliminary margin program, however,

we actually calculated all sales reported

by DuPont as CEP transactions. For the

final results, we corrected the CEP price

calculation for DuPont’s sales of further

manufactured products by stating the

prices on the same unit basis as the

normal value (see Calculation

Memorandum for the Final Results for

E.I. duPont de Nemours & Co., dated

June 9, 1998 (‘‘Final Calculation

Memorandum for DuPont’’), see also,

Polyethylene Terephthalate Film, Sheet,

and Strip from the Republic of Korea;

Final Results of Antidumping Duty

Administrative Review, 60 FR 42835,

42845 (August 17, 1995) where the

Department made the same type of

adjustment to CEP calculation for sales

of further manufactured merchandise).

Normal Value

For Chang Chun, we based NV on the

prices at which the foreign like products

were first sold for consumption in the

home market. For DuPont, 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, Australia. We

calculated NV based on the same

methodology used in the preliminary

results, except for DuPont where we

modified the margin calculation

program to correct for certain

ministerial errors identified by the

petitioner. Specifically, we made the

following corrections:

1. We corrected the calculation of

variable manufacturing costs (‘‘VCOM’’)

for DuPont’s further processed U.S.

sales by stating the per unit costs on the

same unit basis as the VCOM of the

Australian sales (see ‘‘Final Calculation

Memorandum for DuPont’’).

2. We corrected the gross unit price

for a third-country market sale which

was added to DuPont’s sales listing

based on findings at verification. We

note, however, that the per unit price

suggested by the petitioner in its case

brief is incorrect. We calculated the

gross unit price based on the verified

quantity and total value listed on the

invoice (see ‘‘Final Calculation

Memorandum for DuPont’’).

3. We changed the difference-inmerchandise adjustment calculation to

correct for a clerical error in the

equation used in our preliminary

margin program (see ‘‘Final Calculation

Memorandum for DuPont’’).

4. Although we did not resort to CV

as the basis for NV for any of DuPont’s

U.S. sales in the final results, we made

corrections for certain clerical errors

contained in the preliminary margin

program for calculating CV (see ‘‘Final

Calculation Memorandum for DuPont’’).
Federal Register / Vol. 63, No. 115 /Tuesday, June 16, 1998 / Notices 32813

Cost of Production Analysis

As discussed in the preliminary

results, we conducted an investigation

to determine whether the respondents

made sales of foreign like product in the

comparison market during the POR at

prices below their cost of production

(‘‘COP’’) within the meaning of section

773(b)(1) of the Act. We calculated the

COP following the same methodology as

in the preliminary results on a modelspecific basis, except that for Chang

Chun, we reallocated costs between

PVA and acetic acid based on relative

sales value, and made the appropriate

adjustment to the reported COP (see

Comment 4 for Chang Chun and ‘‘Final

Calculation Memorandum for Chang

Chun’’).

Pursuant to section 773(b)(2)(C) of the

Act, where less than 20 percent of a

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 a 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.

Where all contemporaneous sales of

identical and similar merchandise were

disregarded, we calculated NV based on

CV, in accordance with section 773(a)(4)

of the Act.

For both Chang Chun and DuPont, we

did not find that comparison market

sales of PVA products were made at

prices below COP within the POR.

Analysis of Comments Received

Chang Chun

Comment 1: Treatment of Sales of

Perry’s Tolled Merchandise. Perry

argues that the Department has

misinterpreted section 351.401(h) of its

proposed and final regulations in failing

to find that Perry is the producer of the

subject merchandise under the tolling

agreement with Chang Chun. Perry

claims that it meets all of the stated

requirements of section 351.401(h)

which would qualify Perry as the

producer. Perry maintains that it

controls all aspects of the production

and sales of the finished PVA and has

ownership of the main input, VAM, as

well as the finished product, PVA.

According to Perry, the Department’s

conclusion in the preliminary results

that Perry is not a producer is based on

factors that are irrelevant to the

Department’s determination regarding

the producer of subject merchandise

under the tolling arrangement. Perry

argues that to be considered a producer

in a tolling situation, the Department’s

regulation at section 351.401(h) does not

require that the party be engaged in

some processing work and dismisses as

irrelevant the fact that Perry does not

engage in any production activities,

including production of the main input,

VAM, does not own production

facilities, and does not engage in R&D

activities. Perry claims that, in past

cases, the Department has found a

‘‘tollee’’ to be a producer where no

processing was done by the ‘‘tollee.’’ In

support of its position, Perry cites to the

following cases: Notice of Final

Determination of Sales at Less Than

Fair Value: Stainless Steel Flanges from

India, 58 FR 68853 (December 29, 1993)

(‘‘Steel Flanges from India’’), Notice of

Final Determination of Sales at Less

Than Fair Value: Static Random Access

Memories from Taiwan, 63 FR 8909

(February 23, 1998) (‘‘SRAMS from

Taiwan’’), and Notice of Final

Determination of Sales at Less Than

Fair Value: Collated Roofing Nails from

Taiwan, 62 FR 51427 (October 1, 1997)

(‘‘Collated Roofing Nails from Taiwan’’).

Additionally, Perry claims that in the

Preliminary Results, the Department

cited ‘‘obsolete reasoning’’ in Chrome

Plated Lug Nuts from Taiwan, 56, FR

36130 (July 31, 1991) which has been

overtaken by the Department’s later

precedents cited above.

Furthermore, Perry contends that,

contrary to the Department’s statement

in the Preliminary Results that Perry’s

normal course of conducting business

has not substantively changed, the

tolling arrangement has required

substantial changes in Perry’s PVA

business because Perry now assumes all

risks by acquiring control over VAM

and PVA production.

The petitioner responds that the

Department was correct in determining

that Perry is not the producer of PVA it

imports into the United States. The

petitioner states that the Department’s

determination is consistent with past

cases, in which the Department deemed

it necessary that the manufacturer be

engaged in production activities.

According to the petitioner, Perry’s lack

of involvement in critical production

functions, such as knowledge of the

physical characteristics of toll produced

PVA, demonstrates that Perry did not

have control over the production of

tolled PVA it purported to have, and

thus, does not satisfy the requirements

of a producer expressed in the

Department’s proposed and final

regulation. Accordingly, the petitioner

urges the Department to continue to find

that Perry is not a producer of PVA

entitled to its own dumping rate.

DOC Position: On the basis of Perry’s

tolling agreement and Perry’s

interpretation of the Department’s new

tolling regulation, Perry asserts that it is

the producer of the PVA processed

under this contract. See section

351.401(h) of the Final Regulations. We

disagree. In assessing whether Perry is

the producer, we are not restricted to a

review of the four corners of the

contract; rather, when determining

whether a party is a producer or

manufacturer of subject merchandise,

we look at the totality of the

circumstances presented. Moreover,

section 351.401(h) of the Final

Regulations does not purport to address

all aspects of an analysis of tolling

arrangements. It merely sets forth

certain conditions under which we will

not find that a toller or subcontractor is

the producer of the subject

merchandise. Based upon the totality of

the circumstances in this case,

including the factors set forth in section

351.401(h), we find that Chang Chun,

not Perry, is the producer of the PVA in

question.

The record establishes that Chang

Chun engaged in processing VAM into

PVA under the tolling contract with

Perry. Evidence also establishes that

Chang Chun is a manufacturer of

chemicals and a long-time producer of

PVA. In contrast, Perry has been a U.S.

importer and reseller of PVA produced

by Chang Chun since 1978. It was only

after Chang Chun was found dumping

and assigned a 19.21 percent margin

that Perry entered into the tolling

arrangement. Prior to this arrangement,

at no time had Perry been in the

business of producing or manufacturing

PVA or any other chemical nor, as part

of its normal business practice, was

Perry ever engaged in subcontracting

any kind of chemical production or

processing of subject merchandise or

any chemical. (62 FR at 6527).

Moreover, we found no evidence to

suggest that Perry’s decision to enter

into a tolling arrangement with Chang

Chun was for the purpose of expanding

its operations to begin producing PVA

or any other chemical. (62 FR at 6527).

We find the mere rearrangement of

Perry’s contractual relationship with

Chang Chun insufficient to establish

Perry as a producer of PVA.

Although Perry claims that it acquired

ownership of both the major input and

the PVA, under the circumstances this
32814 Federal Register / Vol. 63, No. 115 /Tuesday, June 16, 1998 / Notices

does not persuade us that Perry is the

producer of the PVA at issue.

Notwithstanding that Perry may have

acquired contractual rights in the VAM,

the record establishes that, in effect,

Chang Chun manufactured the VAM

purchased by Perry, and that Chang

Chun retained possession and control of

the VAM before it underwent processing

into subject merchandise. Through a

single intermediary, Perry made all of

its VAM purchases from an affiliate of

Chang Chun, which produced the VAM

in a facility near Chang Chun’s in

Taiwan.

Perry argues that when purchasing

VAM from the intermediary Perry had

no direct knowledge that the VAM was

produced by a company affiliated with

Chang Chun and objects to the

Department’s characterization in the

Preliminary Results that Perry knew the

intermediary purchased the VAM from

Chang Chun’s affiliate. (63 FR at 6527).

We stand by our interpretation of

Perry’s statements as reasonable and

regard Perry’s comments after the fact as

self-serving. However, we note that even

Perry acknowledges that it knew that

Chang Chun’s affiliate was one of the

suppliers of this intermediary.

Additionally, Chang Chun provided the

Department with the VAM prices

charged by its affiliate to this

intermediary, and Perry’s name appears

on supporting documentation from this

affiliate, thus demonstrating that Chang

Chun knew that Perry was the ultimate

purchaser (see Exhibit 3 of Chang

Chun’s Supplemental Response

submitted on April 30, 1998, see also

Comment 2 for Chang Chun). These

facts describe circumstances

fundamentally different from DuPont’s

tolling arrangement, wherein DuPont

produced and owned the VAM it sent

for processing to Chang Chun.

Additionally, the record indicates that

Perry was not the exporter of the PVA

and in fact only gained possession and

control over the PVA as the U.S.

importer when it reached the United

States. In contrast, DuPont produced the

VAM and was the exporter, as well as

the importer, of the PVA to the United

States. Thus, the record demonstrates

that, in essence, the transactions

between Perry and Chang Chun did not

change, Perry merely paid Chang Chun

twice—once for the VAM and once for

the PVA. It was Chang Chun that was

the producer and exporter to the United

States—it retained control and

possession of the VAM it produced, it

processed that VAM into PVA, and it

exported the PVA to the United States.

We also disagree with Perry that

examining whether it has engaged in

any production activities is irrelevant

under section 351.401(h) of the Final

Regulations. Although Perry argues that

section 351.401(h) does not explicitly

require that a party perform some

processing to be deemed a producer,

section 351.401(h) only addresses the

circumstances in which a toller will be

considered a producer of subject

merchandise. Therefore, the Department

is not restricted to the factors set forth

in that regulation when determining

whether a party other than a toller is the

producer of merchandise under

consideration. Moreover, while

examining the production activities of a

party may not be decisive in every case,

whether a party has engaged either

directly or indirectly in some aspect of

the production of subject merchandise

is an important consideration.

Additionally, Perry is simply

incorrect in claiming that the

Department has found a party to be the

producer when the party performed no

processing or manufacturing. See

Sweaters Wholly or in Chief Weight of

Man-Made Fibre From Taiwan, 58 FR

32644 (1993) (Jia Farn not the

manufacturer where it performed no

processing); Stainless Steel Flanges

From India, 58 FR 68853 (1993) (Akai

producer where related party performed

some processing); Static Random Access

Memories From Taiwan, 63 FR 8909

(1998) (producer was party controlling

design of processed wafer, which was a

substantial element of production);

Collated Roofing Nails From Taiwan, 62

FR 51427 (1997) (Lei Chu the producer

where affiliated party performed some

processing). Furthermore, a review of

those cases demonstrates that Perry’s

claim that Chrome-Plated Lug Nuts

From Taiwan, 56 FR 36130, 131 (1991)

is no longer valid reasoning is

unfounded. Even though Chrome-Plated

Lug Nuts From Taiwan pre-dated these

cases, the reasoning is entirely

consistent with the later cases.

Finally, Perry’s assertion that its

control over PVA sales to unaffiliated

customers qualifies it as the producer

under section 315.401(h) is also not

dispositive of the issue. As discussed

above, the issue here is who is the

producer of the subject merchandise.

Because we have found that Chang

Chun is the producer/exporter, Perry’s

sales to unaffiliated customers are

irrelevant.

A review of the tolling arrangement at

issue and the surrounding

circumstances leads us to conclude that

this arrangement merely re-ordered the

contractual relationship between the

parties, but had no significant effect on

how they conducted business. Perry

continued to purchase PVA from Chang

Chun, albeit in two separate

transactions instead of through a single

purchase of the finished product.

Therefore, Perry is not a producer. Perry

remains an importer and reseller of

subject merchandise. We find, as we did

in our Preliminary Results, that Chang

Chun is the producer of the PVA under

consideration.

Comment 2: Gross Unit Prices

Constructed for Sales from Chang Chun

to Perry. The petitioner notes that the

record does not contain the prices

Chang Chun’s affiliated party charged

for the sales of VAM to the unaffiliated

trading company which, in turn, sold

the VAM to Perry. As a substitute for the

price Perry would have paid had it

bought the VAM directly from Chang

Chun’s affiliate, the petitioner argues

that the Department should estimate the

trading company’s mark-up (i.e., profit)

by calculating the average mark-up

Perry received on its U.S. sales of PVA.

According to the petitioner, Perry’s

mark-up for its sales of PVA is a

reasonable proxy for the trading

company’s mark-up on VAM because

both companies are trading companies

involved in the purchase and resales of

chemical products.

Chang Chun argues that the

adjustment proposed by the petitioner is

arbitrary, untimely and unsupported by

any factual grounds. According to

Chang Chun, the adjustment requested

by the petitioner seeks to penalize

Chang Chun for an alleged gap in the

record for which it bears no

responsibility. Chang Chun submits that

the sales price of VAM by its affiliate to

the trading company, which in turn sold

the VAM to Perry, was not on the record

at the time of the preliminary results

because such information was not

requested by the Department. Thus,

Chang Chun urges the Department to

reject the petitioner’s request.

DOC Position: Because these sales

were originally reported by Perry, the

record did not contain information

regarding prices from Chang Chun to

Perry (see ‘‘Treatment of Sales of Tolled

Merchandise’’). Although we have

determined that Chang Chun produced

and sold PVA to Perry, Chang Chun

charged Perry separately for VAM and

for processing VAM into PVA. At the

time of our preliminary results, the

record contained the price charged by

Chang Chun to Perry for the conversion

of VAM into PVA. However, we lacked

the price charged by Chang Chun’s

affiliate for the VAM, the sum of which

would equal Chang Chun’s export price

to Perry. What we had for purposes of

the preliminary results was the price

Chang Chun’s affiliate charged for the

VAM to an unaffiliated trading

company, which in turn sold the VAM
Federal Register / Vol. 63, No. 115 /Tuesday, June 16, 1998 / Notices 32815

to Perry. Therefore, the gross unit prices

we calculated for the additional U.S.

sales in our preliminary results did not

reflect actual revenues Chang Chun

received from these sales, because, as

noted by the petitioner, these sales

prices include a mark-up paid by Perry

to an unaffiliated trading company. For

the final results, we requested Chang

Chun to provide the prices Chang

Chun’s affiliated party charged for the

sales of VAM to the unaffiliated trading

company. Chang Chun provided this

information on April 30, 1998, which

the Department verified in May 1998.

Therefore, in our final margin program,

we recalculated the gross unit prices by

adding the price of VAM Chang Chun’s

affiliate charged to the unaffiliated

trading company to Chang Chun’s

conversion fee.

Comment 3: Entered Values for Sales

Reported by Perry. The petitioner notes

that, in assessing dumping margins, the

Department’s regulations state that it

‘‘normally will calculate the assessment

rate by dividing the dumping margin

found on the subject merchandise

examined by the entered value of such

merchandise for normal Customs duty

purposes.’’ The petitioner further notes

that the regulations go on to say that the

Customs Service will ‘‘assess dumping

duties by applying the assessment rate

to the entered value of the

merchandise.’’ The intent of the

regulation, the petitioner observes, is to

align the numerator and denominator of

the dumping ratio.

The petitioner first notes that the

entered values reported by Perry in its

U.S. sales listing appear to be the sum

of Perry’s VAM costs and its processing

fees. The petitioner claims, however,

that the entered values reviewed at

verification are systematically

inconsistent with the values reported in

Perry’s U.S. sales listing. As a result, the

petitioner contends that the total

entered value of subject merchandise

used in our assessment rate calculation

is not calculated on the same basis as

the entered value to which the rate will

be applied. Because none of the

reported entered values were the same

as the verified entered values, the

petitioner argues that the Department

should revise the entered values to

equal the average verified entered

values.

Chang Chun argues that there were no

discrepancies between the entered

values reported by Perry in its sales

listing and the entered values examined

at verification. According to Chang

Chun, the entered values of PVA as

verified by the Department consistently

reflected the sum of the reported VAM

costs and the conversion fee Perry paid

to Chang Chun.

DOC Position: We disagree with the

petitioner that there were discrepancies

between the entered values reported by

Perry in its sales listing and the entered

values examined at verification. At

verification, we confirmed the entered

values reported by Perry in its U.S. sales

listing for the sales examined (see

Verification Report of Perry Chemical

Corporation, dated January 30, 1998, at

page 11).

As noted by the petitioner, for duty

assessment purposes, we calculate an

assessment rate by dividing the

dumping margin found on the sales of

the subject merchandise examined by

the entered value of such merchandise.

In this case, as stated in our Preliminary

Results, for duty assessment purposes,

we estimated the entered values for

Chang Chun’s sales by subtracting

international movement expenses from

the gross sales value. We have

continued to use this methodology in

our final results. Specifically, for the

sales in question, we estimated the

entered values in the following manner:

(1) for each sale of PVA shipped during

the POR, we constructed the gross sales

value by adding the price of VAM

Chang Chun charged to the unaffiliated

trading company to the price Chang

Chun charged Perry for conversion of

VAM to PVA; (2) we then subtracted

international movement expenses from

these gross sales value.

Comment 4: Allocation of Cost

Between PVA and Glacial Acetic Acid.

The petitioner contends that Chang

Chun incorrectly allocated its costs

between PVA and its coproduct, glacial

acetic acid. Specifically, the petitioner

asserts that Chang Chun did not allocate

costs on the basis of relative sales value,

as directed by the Department, resulting

in a significant understatement of the

cost of producing PVA. According to the

petitioner, the flaw in Chang Chun’s

cost allocation methodology is evident

from the resulting relative profit

margins for PVA and acetic acid. The

petitioner states that allocation of costs

on the basis of relative sales value,

when applied properly, should result in

the same profit margins on the two

products. In this case, the petitioner

argues that Chang Chun’s allocation

methodology does not yield the same

profit rate on PVA and acetic acid.

Therefore, the petitioner contends that

the Department should reallocate Chang

Chun’s reported costs as set forth in its

case brief.

Chang Chun responds that the

petitioner failed to identify any specific

discrepancy in Chang Chun’s allocation

methodology and dismisses it as a

conjecture without any support on

factual grounds. Chang Chun asserts

that it had correctly allocated its costs

between acetic acid and PVA on a value

basis, and therefore urges the

Department to continue to use the

reported costs in the final results.

DOC Position: We agree with Chang

Chun, in part. The Department’s longstanding practice, now codified at

section 773(f)(1)(A) of the Act, is to rely

on data from a respondent’s normal

books and records if they are prepared

in accordance with the generally

accepted accounting principles

(‘‘GAAP’’) of the exporting country and

reasonably reflect the costs of producing

the merchandise (see Notice of Final

Results of antidumping Duty

Administrative Review: Canned

Pineapple Fruit from Thailand, 63 FR

7392, 7398 (February 13, 1998)).

At verification, we noted that Chang

Chun’s methodology for allocating

production costs to PVA and acetic acid

was based on a relative-sales-value

methodology and is consistent with the

company’s normal books and records

prepared in accordance with its home

country GAAP. Our review of Chang

Chun’s allocation methodology,

however, indicates that Chang Chun

relied upon sales prices of PVA

occurring during the POR as a basis for

allocating costs between PVA and acetic

acid. While we determined in the lessthan-fair-value investigation of this case

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 in which

there is no allegation of dumping for the

subject merchandise (see Notice of Final

Determination at Sales than Less Than

Value: PVA from Taiwan 61 FR 14064,

14071 (March 29, 1996) (‘‘LTFV

Determination’’). Therefore, in the LTFV

determination, we allocated joint

production costs between PVA and

acetic acid based on each product’s

relative sales values for a two-year

period prior to the initial period of

investigation (‘‘POI’’).

Consistent with our methodology

established in the LTFV Determination,

we consider it inappropriate, in this

review, to rely on PVA sales prices

occurring 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, PVA. As stated in the

LTFV Determination, we believe that by

using sales of both products over an

extended period prior to the original

investigation, prices can reasonably be

relied upon to form the basis for
32816 Federal Register / Vol. 63, No. 115 /Tuesday, June 16, 1998 / Notices

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.

Therefore, in this review, we

requested Chang Chun to provide the

relative sales value data for the two-year

period prior to the POI (see October 16,

1997 Supplemental Questionnaire at

page 10). Chang Chun provided the

information in its November 7, 1997,

supplemental response. For the final

results, we have reallocated Chang

Chun’s joint production costs between

PVA and acetic acid using the relative

sales value of each product calculated

on the basis of a two-year period prior

to the POI (see ‘‘Final Calculation

Memorandum for Chang Chun’’ dated

June 9, 1998).

With respect to the petitioner’s

argument, while we agree that a relativesales-value methodology should yield

approximately the same profit rate for

PVA and acetic acid, we note that the

petitioner’s data and analysis used to

demonstrate that Chang Chun’s

allocation methodology results in

distorted profit rates for PVA and acetic

acid is based on incomplete

information. Specifically, in calculating

a profit rate for acetic acid, the

petitioner used a different company’s

purchase price of acetic acid instead of

Chang Chun’s sales price because the

record does not contain Chang Chun’s

actual average per unit sales price of

acetic acid. Because the petitioner’s

analysis is not based on Chang Chun’s

own sales price information, we do not

find it to be a reliable basis for

reallocating Chang Chun’s reported

costs. Moreover, as stated above, for the

final results, we have reallocated Chang

Chun’s costs between PVA and acetic

acid in accordance with the

methodology established in the LTFV

determination.

Comment 5: Date of Sale. Chang Chun

argues that the Department incorrectly

determined the date of sale for a

particular U.S. sales transaction, which

can be confirmed from a worksheet

contained in a verification exhibit.

Based on this exhibit, Chang Chun

provided a revised date of sale for this

transaction and requested the

Department to use the revised date in

the final results.

The petitioner responds that the

document used by Chang Chun to

determine the revised date of sale is

unreliable because it is unverified, and

therefore, should not be used.

Furthermore, the petitioner argues that

the Department should recalculate the

estimated date of sale not just for the

one sale described by Chang Chun, but

for all additional sales from Chang Chun

to Perry included in our preliminary

analysis.

DOC Position: As noted above in the

‘‘Treatment of Sales of Tolled

Merchandise’’ section of the notice, for

the final results, we used the actual

dates of sale from Chang Chun to Perry

provided by Chang Chun in its April 30,

1998, submission, which was verified

by the Department. Therefore, both the

respondent’s and petitioner’s comments

are moot.

Comment 6: Chang Chun’s Sales of

PVA Shipped During the POR. On May

11, 1998, the petitioner filed a

submission objecting to certain

information provided by Chang Chun in

its April 30, 1998, submission in

response to the Department’s request of

April 23, 1998. The petitioner argues

that the information on additional sales

of PVA shipped during the POR which

were not included in our preliminary

analysis should be rejected. The

petitioner claims that these new sales

were untimely filed, incomplete, and

relate to shipments that were not

entered into the United States during

the POR. As a result, the petitioner

contends that these sales should not be

included in the margin calculation.

Chang Chun objects to the petitioner’s

comments, stating that the information

it provided in its April 30, 1998,

submission was in accordance with the

Department’s specific requests for

information. Chang Chun further argues

that the additional sales of PVA shipped

during the POR which were not

included in the Department’s

preliminary analysis should be included

for purposes of margin calculation if the

Department continues to find the Chang

Chun and not Perry is the producer of

these sales of PVA.

DOC Position: With respect to the

petitioner’s argument that these sales

should not be included in our margin

calculation because they relate to

shipments entered into the United

States after the POR, we note that for

purposes of administrative reviews, the

Department’s practice is to calculate

dumping margins for export price sales

based on sales entered during the POR,

or if entry date is unavailable, based on

sales shipped during the POR (see Final

Results of Antidumping Duty

Administrative Review: Ferrosilicon

From Brazil, 62 FR 43504, 43509–10

(August 14, 1997) and Final Results of

Antidumping Duty Administrative

Review: High-Tenacity Rayon Filament

Yarn from Germany, 61 FR 51421, 22

(October 2, 1996)). Here, the record

indicates that Chang Chun could only

accurately report its EP sales based on

shipment dates in the POR. The

antidumping questionnaire issued in

this review specifically required Chang

Chun to ‘‘report each U.S. sale of

merchandise entered for consumption

during the POR, except: (1) For EP sales,

if you do not know the entry dates,

report each transaction involving

merchandise shipped during the POR.’’

In response to these questionnaire

instructions, Chang Chun reported its

sales based on shipments of PVA made

during the POR. Accordingly, in our

preliminary analysis, we examined

Chang Chun’s transactions involving

merchandise shipped during the POR,

including the additional shipments

Chang Chun identified in its April 30,

1998, submission.

We also disagree with the petitioner

that the information on additional sales

shipped during the POR provided by

Chang Chun on April 30, 1998, was

untimely information or incomplete. In

a letter dated April 23, 1998, we

requested Chang Chun to provide

additional information (i.e., date of sale

and date of shipment) concerning its

U.S. sales to Perry used in our

preliminary results. Subsequently,

through a telephone conversation, we

instructed Chang Chun to include in its

response to the Department date of sale

and date of shipment information for

sales of PVA shipped during the POR

which were not included in our

preliminary analysis (see Memorandum

to the File from Case Analyst, dated May

20, 1998). Thus, the information Chang

Chun provided was timely submitted in

accordance with the Department’s

specific request.

Finally, with regard to the petitioner’s

argument that the information provided

by Chang Chun is incomplete because

Chang Chun did not include the

necessary information regarding

movement charges or selling expenses

for these additional shipments, we

limited the scope of our request to the

date of sale and shipment for shipments

occurring in the POR. For movement

and selling expenses for these

additional sales Chang Chun provided,

we are applying the expenses reported

by Chang Chun in its U.S. sales listing

submitted to the Department on August

22, 1997. Because these additional sales

were made to Perry and were shipped

by Chang Chun on the same delivery

terms, we find that the expenses Chang

Chun originally reported for its EP sales

reasonably reflect the expenses it

incurred for the additional sales

included in our analysis.

DuPont

Comment 1: DuPont is the Producer of

Tolled-PVA. In our Preliminary Results,
Federal Register / Vol. 63, No. 115 /Tuesday, June 16, 1998 / Notices 32817

we determined that DuPont is the

producer of the PVA processed in

Taiwan by Chang Chun from VAM

produced by DuPont in the United

States. The petitioner argues that, to be

considered a producer in a tolling

situation, the Department’s new tolling

regulation, section 351.401(h) of the

Final Regulations, requires that the

producer retain title to the raw material

input. See Antidumping Rules;

Countervailing Duties, 62 FR 27296,

27411, which is legally effective only for

segments of the proceeding initiated

based on requests filed after June 18,

1997, but nevertheless a restatement of

the Department’s practice. The

petitioner points to a particular clause

in the tolling contract between DuPont

and Chang Chun as evidence that one of

the conditions in section 351.401(h) has

not been met. Because of the business

proprietary nature of the tolling

contract, our full discussion of the

petitioner’s claim is contained in a

separate memorandum (see

Memorandum to Louis Apple, Office

Director, from Team, dated June 8, 1998

(‘‘DuPont Memorandum’’)). As a result,

the petitioner argues that DuPont is not

the producer of PVA processed under

the tolling agreement.

DuPont takes issue with the

petitioner’s interpretation of the

particular clause in the tolling contract

and responds that, contrary to the

petitioner’s contention, the Department

properly concluded that DuPont was the

producer of the tolled merchandise.

DOC Position: After review of the

tolling contract between DuPont and

Chang Chun, we disagree with the

petitioner’s reading of the particular

clause at issue and continue to find that

DuPont is the producer under section

351.401(h). As noted above, because the

tolling contract itself and this particular

clause is business proprietary, our

discussion of this issue is contained in

the ‘‘DuPont Memorandum.’’

Comment 2: Cost of Production

Calculation for Sales of DuPont. The

petitioner argues that the Department

should have used Chang Chun’s actual

processing costs when conducting the

sales-below-cost analysis, instead of the

fee DuPont paid to Chang Chun for the

tolling of VAM into PVA. The petitioner

notes that the statute clearly requires

Department to investigate the actual cost

of producing the merchandise in any

sales-below-cost investigation.

According to the petitioner, even though

the Department appears to consider

DuPont to be the respondent in this

case, because Chang Chun is the entity

actually producing the subject

merchandise in Taiwan, Chang Chun’s

cost of production should be examined.

Citing to Final Determination of Sales at

Less Than Fair Value: Fresh and Chilled

Atlantic Salmon from Norway, 56 FR

7661 (February 25, 1991) (‘‘Salmon from

Norway’’) and Final Determination of

Sales at Less Than Fair Value: Fresh

Kiwifruit from New Zealand, 57 FR

13695 (April 17, 1992) (‘‘Kiwifruit from

New Zealand’’), the petitioner contends

that the Department’s practice has been

to base the cost of production, not on

the purchase price between the

respondent and the unaffiliated

producer, but on the actual cost of

producing the subject merchandise.

DuPont argues that it would be

contrary to the statute and Department

practice to use Chang Chun’s actual cost

of production because, according to

DuPont, Chang Chun is nothing more

than a supplier of services to DuPont.

According to DuPont, the statute calls

for determining costs from the records

of the producer, and not from the

records of any supplier of services to the

producer. DuPont further argues that the

statutory language governing the cost of

production investigation does not

support the petitioner’s argument that

the arm’s-length price charged by Chang

Chun to DuPont for tolling services

should be disregarded in favor of Chang

Chun’s costs of production. DuPont

contends that since DuPont is the

producer in this case, its costs are the

ones that should be examined.

DOC Position: We disagree with the

petitioner. We find no statutory basis or

precedent for the petitioner’s argument

that Chang Chun’s actual cost of

processing should be examined when

determining DuPont’s cost of

production. Section 773(f)(1)(A) of the

Act states that, for purposes of

conducting an analysis of sales at less

than COP, the ‘‘costs shall be based on

the records of the exporter or producer

of the merchandise...’’ In this review, we

determined that DuPont is the producer

of PVA processed by Chang Chun.

Accordingly, the costs we examine in

our analysis should reflect the total

costs incurred by DuPont. DuPont’s total

costs consist of its cost to produce VAM

and the cost it incurred to convert the

VAM into PVA, which is the fee DuPont

paid to Chang Chun.

We also note that the cases cited by

the petitioner do not support its claim

because these cases involved

respondents who were resellers, not

producers. The Department generally

does not base COP on a reseller’s cost

to acquire the subject merchandise.

However, the Department does base

COP on the producer’s actual costs,

including the cost of inputs and

services. See section 773(f) of the Act.

In this case, DuPont is the producer and

therefore, its actual costs are the proper

basis for COP.

Comment 3: Affiliation. The petitioner

argues that, if the Department cannot

examine Chang Chun’s actual cost of

producing PVA without finding Chang

Chun and DuPont affiliated under

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

Department should determine that the

parties are affiliated pursuant to the

tolling contract. According to the

petitioner, the Department should have

found DuPont and Chang Chun to be

affiliated because the tolling contract

affords DuPont control over production

of PVA, and the legal and operational

ability to exercise direction over Chang

Chun. The petitioner claims that the fact

that, under the tolling contract, DuPont

does not exercise direction over all

activities of Chang Chun does not in any

way diminish the fact that DuPont is in

a position to, and does indeed, exercise

direction over some of Chang Chun’s

operations, namely the production of

tolled PVA. According to the petitioner,

the statute requires that parties be

deemed affiliated where legal or

operational control exists as it does here

under the tolling contract, regardless of

whether the ability to exercise restraint

or direction over the other person is

pervasive or encompassing all aspects of

the other person’s business.

DuPont contends that the statutory

definition of affiliation based on

intercorporate control under section

771(33)(G) of the Act does not apply in

this case. DuPont asserts that the

contractual relationship between

DuPont and Chang Chun is a mere

supply contract relationship in which a

producer of goods (i.e., DuPont)

contracts out a portion of the processing

of those goods to another company (i.e.,

Chang Chun). According to DuPont,

such contractual relationship is not

sufficient, in and of itself, to find

affiliation between DuPont and Chang

Chun. DuPont contends that none of the

factors listed in the Department’s

regulations, such as a close supplier

relationship, support a finding of

affiliation under section 771 (33)(G).

DuPont notes that, even in a far more

extreme situation where a manufacturer

was its customer’s sole supplier, the

Department declined to conclude that

the manufacturer controlled the

customer (see Final Results of

Antidumping Duty Administrative

Review: Furfuryl Alcohol from South

Africa, 62 FR 61084 (November 14,

1997) (‘‘Furfuryl Alcohol from South

Africa’’). Accordingly, DuPont urges the

Department to reject the petitioner’s

argument and sustain its position in the

preliminary results that DuPont and

Chang Chun are not affiliated.
32818 Federal Register / Vol. 63, No. 115 /Tuesday, June 16, 1998 / Notices

DOC Position: We agree with DuPont.

In our Preliminary Results, we

examined this issue and found that

DuPont was not affiliated with Chang

Chun based solely on the tolling

agreement. As we stated, the tolling

contract, in and of itself, does not

establish that DuPont has legal or

operational control over Chang Chun for

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

Act (63 FR at 6527). We find no

surrounding circumstances or other

connections between the parties which

would lead us to a contrary conclusion.

We cannot agree with the petitioner

that the statutory language of section

771(33)(G) must be read so broadly as to

require affiliation based solely on a

conventional tolling agreement, which

provides, at most, narrowly drawn legal

obligations of limited duration

involving some processing of subject

merchandise. As DuPont notes, the

contract here is not unlike any contract

that may exist between a producer of

goods and a company performing a

portion of the production of those goods

for a fee. Hence, to find that a party is

affiliated solely because it is under a

legal obligation to fulfill the terms of an

agreement for subcontracting would be

to infer control under section 771(33)(G)

whenever such a contractual

relationship exists, regardless of the

surrounding circumstances or whether

there are other connections between the

parties. Such an outcome is not

supported by section 771(33)(G).

Comment 4: Major Input Rule. The

petitioner notes that under the major

input rule set forth in section 773 (f)(3)

of the Act, the Department may

determine the value of the major input

on the basis of the cost of production if

the Department has reasonable grounds

to believe or suspect that the amount

represented as the value of such input

is less than the cost of production of

such input. Pursuant to the major input

rule, the petitioner argues that the

Department should have used Chang

Chun’s actual cost of production of

PVA, rather than the tolling fee charged

to DuPont, for purposes of calculating

DuPont’s COP. According to the

petitioner, information on the record

demonstrates that the actual cost of

producing PVA incurred by Chang Chun

was greater than the nominal tolling fee

paid by DuPont. Moreover, the

petitioner claims that there is no

economic basis for assuming that the

tolling fee Chang Chun charged to

DuPont is equal to or exceeds its total

cost of producing PVA. In fact, the

petitioner further claims that, so long as

the tolling fee Chang Chun charges to

DuPont exceeds its marginal cost of

production, Chang Chun has an

incentive to provide its services, even if

the tolling fee does not cover the full

cost of producing PVA.

DuPont counters that the major input

rule does not apply in this case since

the Department has concluded that

DuPont and Chang Chun are not

affiliated.

DOC Position: DuPont is correct that

the major input rule set forth in section

773(f)(3) of the Act applies only where

the supplier of the input is affiliated

with the producer of the merchandise.

Because we have determined that Chang

Chun and DuPont are not affiliated, the

major input rule is inapplicable (see

Comment 3 for DuPont).

Comment 5: Tolling Regulation Is an

Illegal Interpretation of the Law. The

petitioner contends that the

Department’s new tolling regulation is

contrary to the statute, and cannot stand

if the regulation does not permit an

analysis of the costs incurred in the

subject country in the course of

producing the subject merchandise.

According to the petitioner, an

antidumping duty administrative review

concerning subject merchandise

produced in a subject country that fails

to analyze the activity undertaken in the

subject country solely because the

production is pursuant to a tolling

agreement is an impermissible

construction of the statute and an abuse

of the Department’s discretion.

DOC Position: We disagree with

petitioner that the Department’s tolling

regulation set forth in19 CFR 351.401(h)

is inconsistent with the statute. The

tolling regulation provides a means for

determining when a toller will be

considered the producer of a product, as

discussed above (see Comment 2 for

DuPont). Once the producer is

determined, the Department must use

the producer’s actual costs of producing

the merchandise, in accordance with

section 773(f)(1)(A). DuPont’s actual

costs to produce PVA in Taiwan are its

costs to produce VAM and its cost for

processing services in Taiwan. There is

no basis in the statute or the regulations

for the petitioner’s argument that the

Department must go behind the

producer’s actual cost for inputs and

services.

Comment 6: Special Merchandise

Difference Adjustment. DuPont

contends that one of its reported U.S.

sales should either be excluded from the

Department’s calculations, or a valuebased difference in merchandise

(‘‘difmer’’) adjustment should be

applied to it, because the sale involved

a particular type of PVA with a certain

physical characteristic that does not

result in manufacturing cost differences.

Because of this physical difference

which, according to DuPont, is shown

in DuPont Verification Exhibit 8(e),

DuPont claims that the merchandise

could not be sold for normal

commercial uses at a market price.

DuPont further explains that there are

no corresponding sales of this product

in the Australian market against which

to compare this transaction.

Citing to Final Determination of Sales

at Less Than Fair Value: Coated

Groundwood Paper from Finland, 56 FR

56363 (November 4, 1991), DuPont

argues that it is a recognized practice of

the Department to exclude such an

isolated transaction for which a NV

cannot be calculated. Alternatively,

DuPont asserts that the Department

should make a value-based adjustment

to NV to account for the physical

differences of this particular product

based on differences in market value.

According to DuPont, the Department’s

conventional difmer cost-based

adjustment would not properly adjust

for the product’s physical differences

because the physical difference, in this

case, is not attributable to a

manufacturing cost difference. DuPont

claims that the only way to quantify the

appropriate adjustment for the physical

differences of this particular transaction

is to examine the differences in price

between that sale and all its other U.S.

sales. In support of its claim, DuPont

cites to Final Determination of Sales at

Less Than Fair Value: Nepheline

Syenite From Canada, 57 FR 9237

(March 17, 1992) and U.H.F.C. Co. v.

United States, 916 F.2d 689 (C.A.F.C.

1990), where the Court of Appeals

directed the Department to make a

value-based difmer adjustment.

The petitioner contends that this sale

should not be excluded because there is

no basis for excluding sales to the

United States from the margin

calculation in administrative reviews. In

addition, the petitioner notes that

DuPont did not request a difmer

adjustment based on market value prior

to its case brief, nor did it submit any

information to justify any such

adjustment. According to the petitioner,

the cases cited by DuPont refer to

situations in which physical differences

were demonstrated to affect the market

value of the merchandise under

consideration. For the DuPont sale in

question, however, the petitioner argues

that there is no information to indicate

whether the difference in the price is

limited to a difference in value

associated with physical differences in

the merchandise, or whether the

difference in price on this sale was a

result of a combination of factors,

possibly including a physical difference

in the merchandise. The petitioner
Federal Register / Vol. 63, No. 115 /Tuesday, June 16, 1998 / Notices 32819

asserts, therefore, that there is no basis

to quantify or make an adjustment for

the difference in value.

DOC Position: Although the

Department has the discretion to adjust

for physical differences based on value,

we agree with the petitioner that the

sale in question does not warrant a

value-based difmer adjustment based on

information on the record for this

proceeding (see 19 CFR 353.57(b) and

19 CFR 351.411(b)). We reviewed the

documentation included in DuPont’s

verification Exhibit 8(e), and noted that

information in the exhibit does not

establish that the product sold was

physically different from other U.S.

sales made by DuPont during the POR.

Because the nature of the physical

difference DuPont alleges is proprietary,

our full analysis of this issue is

contained in the ‘‘DuPont

Memorandum.’’ Therefore, because

DuPont has not established that the PVA

in question was physically different

from any other PVA sold in the United

States during the POR, we have

continued to use this sale in our final

margin analysis.

Comment 7: Foreign Inland Freight. In

our preliminary results, we disallowed

DuPont’s claim for an inland freight

expense from the Australian port to its

warehouse for its comparison market

sales because, at verification, the

company failed to provide supporting

documentation for the claimed amount.

DuPont contends that the Department’s

action in this regard was improper and

that a deduction for foreign inland

freight should be allowed because it is

an undisputed fact that a freight

expense was incurred by DuPont in

moving goods from the dock to its

warehouse. DuPont further contends

that verification generally was

successful in establishing the

completeness and accuracy of the

information submitted by DuPont.

According to DuPont, the problem at

verification with regard to inland freight

was that the company did not have

ready access to original documentation

supporting the freight deduction.

The petitioner contends that no

deduction should be allowed in this

instance. The petitioner notes that

sections 782(i)(3) and 776(a)(2)(D) of the

Act direct the Department to verify all

information relied upon in making a

final determination in an administrative

review, and allow the Department to use

facts otherwise available if an interested

party ‘‘provides such information but

the information cannot be verified.’’

Because DuPont did not provide

evidence to support its claimed

adjustment at verification, the petitioner

states that the Department is correct in

denying the adjustment.

DOC Position: We agree with the

petitioner. The Department has a longstanding practice of denying a claim for

an adjustment where the Department

could not verify the claimed adjustment

because the respondent fails to provide

supporting evidence (see, e.g., Final

Results of Antidumping Duty

Administrative Review: Certain Cut-toLength Carbon Steel Plate From

Finland, 63 FR 2952, 2953 (January 20,

1998)). At verification, DuPont was

unable to provide any supporting

documentation to establish an expense

for foreign inland freight. Accordingly,

we have continued to disallow the

claimed deduction for foreign inland

freight for comparison market sales in

our final margin calculation.

Comment 8: Scope of the Order.

DuPont argues that its imports of PVA

from Taiwan through a tolling

agreement with Chang Chun are outside

the scope of the antidumping duty

order. According to DuPont, because it

is a U.S. company and the producer of

the PVA tolled by Chang Chun, it can

not be subject to the antidumping law

or the antidumping order. DuPont cites

to its arguments on this point as

expressed in its October 1, 1996,

Application for a Scope Ruling and its

brief to the Court of International Trade.

The petitioner responds that the

Department correctly determined that

the subject merchandise is produced in

Taiwan, and hence within the scope of

the order.

DOC Position: We disagree with

DuPont. DuPont is the producer of the

PVA at issue. The PVA is produced in

Taiwan and is a product of Taiwan.

Therefore, DuPont’s Taiwanese PVA is

subject to the order. The fact that

DuPont is a U.S. company is irrelevant.

See E.I. DuPont de Nemours v. United

States, Slip.-Op. 98–46 (CIT April 17,

1998), which upheld the Department’s

scope ruling that the PVA produced by

DuPont in Taiwan through the tolling

agreement with Chang Chun is a

product of Taiwan and thus subject to

the antidumping duty order; see also,

the Department’s brief to the Court of

International Trade, dated October 22,

1997, in opposition to DuPont’s brief,

made part of the record of this review

by petitioner.

Final Results of the Review

As a result of our review, we

determine that the following weightedaverage margins exist for the period May

15, 1996, through April 30, 1997:

Manufacturer/producer/exporter Margin

(percent)

Chang Chun Petrochemical Co.

Ltd ......................................... 0.42

E.I. duPont de Nemours & Co. 9.46

The Department shall determine, and

the Customs Service shall assess,

antidumping duties on all appropriate

entries. We have calculated an importerspecific duty assessment rate based on

the ratio of the total amount of AD

duties calculated for the examined

transactions in the POR to the total

entered value of the same transactions.

This rate will be assessed uniformly on

all entries of that particular importer

made during the POR. The Department

will issue appraisement instructions

concerning the respondents directly to

the U.S. Customs Service.

Furthermore, the following deposit

rates shall be required for merchandise

entered, or withdrawn from warehouse,

for consumption on or after the

publication date of these final results of

administrative review, as provided for

by section 751(a)(1) of the Tariff Act: (1)

The cash deposit rates for DuPont and

Chang Chun will be the rates indicated

above; (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 manufacturer of the

merchandise in these final results of

review or LTFV investigation; 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 deposit requirements shall

remain in effect until publication of the

final results of the next administrative

review.

This notice serves as the final

reminder to importers of their

responsibility under 19 CFR 353.26 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 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 353.34(d). Timely written

notification or conversion to judicial
32820 Federal Register / Vol. 63, No. 115 /Tuesday, June 16, 1998 / Notices

protective order is hereby requested.

Failure to comply with the regulations

and terms of the APO is a sanctionable

violation.

This administrative review and notice

are in accordance with section 751(a)(1)

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

CFR 353.22(c).

Dated: June 9, 1998.

Richard W. Moreland,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 98–15876 Filed 6–15–98; 8:45 am]

BILLING CODE 3510–DS–P

DEPARTMENT OF COMMERCE

International Trade Administration

[A–405–071]

Viscose Rayon Staple Fiber From

Finland: Final Results of Antidumping

Duty Administrative Review

AGENCY: Import Administration,

International Trade Administration,

U.S. Department of Commerce.

ACTION: Notice of final results of

antidumping duty administrative

review.

SUMMARY: On December 10, 1997, the

Department of Commerce published the

preliminary results of its administrative

review of the antidumping duty finding

on viscose rayon staple fiber from

Finland. This review covers one

company, Kemira Fibres Oy, and the

period of March 1, 1996 through

February 28, 1997. We gave interested

parties an opportunity to comment on

our preliminary results. Based on our

analysis of the comments received, we

have changed the results from those

presented in the preliminary results of

review.

EFFECTIVE DATE: June 16, 1998.

FOR FURTHER INFORMATION CONTACT:

Laurel LaCivita or Alexander Amdur,

Import Administration, International

Trade Administration, U.S. Department

of Commerce, 14th Street and

Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone:

(202) 482–4740 or (202) 482–5346,

respectively.

SUPPLEMENTARY INFORMATION:

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

by the Uruguay Rounds Agreements Act

(URAA). In addition, unless otherwise

indicated, all references to the

regulations of the Department of

Commerce (Commerce) are as codified

at 19 CFR part 353, as they existed on

April 1, 1997. Since the new regulations

do not apply in these final results, we

should note that whenever the new

regulations are cited, they operate as a

restatement of the Department’s

interpretation of the Act. See !62 FR

27296 (May 19, 1997).

Background

On December 10, 1997, we published

in the Federal Register (62 FR 65063)

the preliminary results of administrative

review of the antidumping duty finding

on viscose rayon staple fiber from

Finland (44 FR 17156, March 21, 1979).

We received a case brief from the sole

respondent, Kemira Fibres Oy (Kemira),

on January 22, 1998, as amended on

January 30, 1998. The petitioners,

Courtauld Fibers Inc. and Lenzing

Fibers Corporation, submitted a rebuttal

brief on January 29, 1998. We held a

public hearing on February 5, 1998. The

Department extended the final results of

this review until June 8, 1998. We are

conducting this administrative review

in accordance with section 751 of the

Act.

Scope of the Review

The product covered by this review is

viscose rayon staple fiber, except

solution dyed, in noncontinuous form,

not carded, not combed and not

otherwise processed, wholly of

filaments (except laminated filaments

and plexiform filaments). The term

includes both commodity and specialty

fiber. This product is currently

classifiable under Harmonized Tariff

Schedule (HTS) item numbers

5504.10.00 and 5504.90.00. The HTS

numbers are provided for convenience

and customs purposes. The written

description of the scope of the finding

remains dispositive.

Scope Issues

Kemira claims that short-cut (LK)

fiber and fire retardant (VISIL) fiber are

not covered by the scope of the order,

while petitioners claim that they are

covered.

The Department included LK and

VISIL fibers within the scope of the

order for the purposes of the

preliminary results of this review (see

62 FR 65063). We stated in our notice

of preliminary results that because of

the complexity of the issues relating to

LK and VISIL fibers, we would

commence a scope inquiry to determine

whether LK and VISIL fibers are covered

by the scope of the order.

We asked interested parties to submit

comments on these scope issues, which

we analyzed pursuant to 19 CFR

353.29(d)(6). On matters concerning the

scope of an antidumping finding or duty

order, the normal bases for determining

whether a product is included within

the scope are the descriptions of the

product contained in the determinations

by the Department (or the Treasury

Department) and the ITC, the initial

investigation, the petition and, if

applicable, prior scope rulings. See 19

CFR 353.29(i)(1). If these descriptions

are not dispositive, the Department

refers to the criteria listed under 19 CFR

353.29(i)(2). By reference to the product

descriptions provided by the parties, as

well as the descriptions of the product

contained in the final determinations of

the Treasury Department and the ITC,

and the petition, the Department is able

to determine whether LK and VISIL

fibers are covered by the scope of the

order. Therefore, we have determined

that it is unnecessary to refer to the

additional factors of section 353.29(i)(2).

Based on our analysis under 19 CFR

353.29(i)(1), the Department has

determined that LK and VISIL fibers are

within the scope of the antidumping

order on Viscose Rayon Staple Fiber

from Finland. See June 8, 1998

Memorandum to Maria Harris Tildon

from Holly Kuga Regarding Whether

Short-Cut (LK) Fiber And Fire Retardant

(VISIL) Fiber Are Within The Scope of

the Finding (Order) on Viscose Rayon

Staple Fiber from Finland.

Analysis of the Comments Received

Comment 1: Kemira argues that the

Department erroneously reclassified

certain export price (EP) sales made

through its selling agent in the United

States as constructed export price (CEP)

sales. Kemira notes that all of the sales

at issue were made prior to importation

based on the date the order was

confirmed and shipped directly from

Kemira’s factory to the customer in the

United States. Kemira argues that its

selling agent in the United States,

Newco Fibres Company (Newco),

relocates (in part) routine selling

functions of the company from Finland

to the United States, and does not

perform any more selling functions in

the United States than those U.S.

entities in various cases in which the

Department concluded that the sales

were EP sales (see, Certain Stainless

Steel Wire Rods from France, 58 FR

68865, 68869, (December 29, 1993);

Certain Corrosion-Resistant Carbon

Steel Flat Products from Korea: Final

Results of Antidumping Duty

Administrative Review, 61 FR 18547,

18552, (April 26, 1996)). Kemira also

argues that the Department’s recharacterization of the sales at issue is