[Federal Register Volume 61, Number 130 (Friday, July 5, 1996)]
[Notices]
[Pages 35177-35188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17159]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-580-807]


Polyethylene Terephthalate Film, Sheet, and Strip from the 
Republic of Korea; Final Results of Antidumping Duty Administrative 
Reviews and Notice of Revocation in Part

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

ACTION: Notice of Final Results of Antidumping Duty Administrative 
Reviews and Notice of Revocation in Part.

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SUMMARY: On September 29, 1995, the Department of Commerce (the 
Department) published the preliminary results of administrative reviews 
and notice of intent to revoke in part the antidumping duty order on 
polyethylene terephythalate (PET) film, sheet, and strip from the 
Republic of Korea. The reviews cover four manufacturers/exporters of 
the subject merchandise to the United States and the periods June 1, 
1992 through May 31, 1993 and June 1, 1993 through May 31, 1994.
    As a result of comments we received, the antidumping margins have 
changed from those we presented in our preliminary results.

EFFECTIVE DATES: July 5, 1996.

FOR FURTHER INFORMATION CONTACT:
Michael J. Heaney, or John Kugelman, Office of Antidumping Compliance, 
Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue NW., 
Washington, DC 20230, telephone: (202) 482-4475/0649.

SUPPLEMENTARY INFORMATION:

Background

    On September 29, 1995 (59 FR 50547), the Department published the 
preliminary results of administrative reviews and notice of intent to 
revoke in part the antidumping duty order on PET film from the Republic 
of Korea (56 FR 25669, June 5, 1991). At the request of petitioners and 
three respondents, we held a hearing on April 9, 1996.
    These reviews cover four manufacturer/exporters: Cheil Synthetics, 
Inc. (Cheil), Kolon Industries (Kolon), SKC Limited (SKC), and STC 
Corporation (STC).
    We are revoking the order for Cheil because Cheil has sold the 
subject merchandise at not less than foreign market value (FMV) in 
these reviews and for at least three consecutive periods. Cheil has 
also submitted certification that it will not sell at less than FMV in 
the future.

Scope of the Review

    Imports covered by these reviews are shipments of all gauges of 
raw, pretreated, or primed polyethylene terephthalate film, sheet, and 
strip, whether extruded or coextruded. The films excluded from this 
review are metallized films and other finished films that have had at 
least one of their surfaces modified by the application of a 
performance-enhancing resinous or inorganic layer of more than 0.00001 
inches (0.254 micrometers) thick. Roller transport cleaning film which 
has at least one of its surfaces modified by the application of 0.5 
micrometers of SBR latex has also been ruled as not within the scope of 
the order.
    PET film is currently classifiable under Harmonized Tariff Schedule 
(HTS) subheading 3920.62.00.00. The HTS subheading is provided for 
convenience and for U.S. Customs purposes. The written description 
remains dispositive as to the scope of the product coverage.
    The reviews cover the periods June 1, 1992 through May 31, 1993 
(second review period) and June 1, 1993 through May 31, 1994 (third 
review period). The Department has conducted these reviews in 
accordance with section 751 of the Tariff Act of 1930, as amended (the 
Act).

Applicable Statute and Regulations

    Unless otherwise stated, all citations to the statute and to the 
Department's regulations are references to the provisions as they 
existed on December 31, 1994.

Analysis of Comments Received

    We invited interested parties to comment on the preliminary results 
of this administrative review. We received timely comments from the 
petitioners and all four respondents. At the request of the petitioners 
and three respondents, we held a public hearing on April 9, 1996.
    Comment 1: Petitioners argue generally that the methodologies 
employed by SKC and Cheil to value recycled chip (RC) assign an 
unreasonably low cost to recycled resin. Petitioners contend that the 
cost of processing recycled film is directly associated with the cost 
of the chemicals which are reclaimed. Petitioners assert that to 
properly account for the cost of producing PET film, the Department 
must include both the cost of the materials content of the recycled 
film and the cost of the recycling. Petitioners also argue that both 
virgin resin and recycled resin contain the same basic chemicals in the 
same quantities, and that recycled resin is a nearly ``one for one'' 
substitute for virgin resin. Petitioners assert that the differences 
between virgin resin and recycled resin are ``minimal.'' While limits 
exist on the amount of recycled resin that can be used in PET film 
production, petitioners note that in many instances recycled resin 
accounts for more than 50 percent of the raw material inputs. 
Petitioners further note that the bill of materials (``recipes'') for 
PET films can be adjusted to tolerate a greater or lesser volume of 
recycled resin, and that producers can adjust the molecular weight of 
virgin chip (VC) to accommodate varying usage of recycled resin. 
Petitioners also assert that producers can modify the production 
process to minimize problems related to discoloration caused by using 
recycled resin.
    Petitioners contend that, in general, the methodologies used by 
Cheil and SKC to value recycled resin do not reflect the actual cost of 
that material. Petitioners assert that the Statement of

[[Page 35178]]

Administrative Action (SAA), Congressional Reports on the Uruguay Round 
Agreements Act, and the Court of Appeals for the Federal Circuit (CAFC) 
decision in Ipsco Inc. v. the United States, 965 F. 2d 1056, 1059-1061 
(Fed. Cir. 1992) (Ipsco Appeal), preclude the Department from using 
cost calculations which substitute assigned values for actual costs. 
Even if the methodologies employed by Cheil and SKC to account for 
recycled film are consisted with Korean Generally Accepted Accounting 
Principles (GAAP), petitioners argue that Cheil's and SKC's 
methodologies are unacceptable because they fail to reasonably reflect 
the costs associated with recycled material. Petitioners contend that 
the Department has accepted from Cheil and SKC different, contradictory 
accounting treatments of the cost of RC.
    Cheil: Specifically with regard to Cheil, petitioners assert that 
the number of sales used by Cheil to establish the net realizable value 
(NRV) of recycled resin is too small to be representative of the actual 
cost of the material. Petitioners further argue that the customers who 
purchase resin from Cheil are using the resin in a less demanding 
process. These customers, petitioners assert, do not require recycled 
resin of the same quality as PET film producers. Petitioners argue that 
there is no indication that the grades of PET film sold by Cheil on the 
open market are the same as that which Cheil uses internally.
    Petitioners contend that most PET films can be made within a broad 
range of virgin resin/recycled resin ratios. petitioners argue that 
given the flexibility to increase or reduce the usage of recycled 
resin, Cheil's decision to sell a small amount of PET resin at a price 
that is much lower than the price of virgin resin makes little economic 
sense. Petitioners suggest that Cheil's rationale for selling a small 
amount of recycled chip on the open market could be to establish an 
artificially low value for the recycled chip used in PET film exports 
to the United States.
    In response, Cheil argues that the appropriate accounting treatment 
for valuing its recycled resin (pellets) is the NRV that Cheil assigns 
to these pellets. Cheil notes that the NRV methodology is consistent 
with both Korean and U.S. GAAP. Cheil contends that Departmental 
review, analysis, and verification of the cost data submitted by Cheil 
uncovered no evidence that Cheil's NRV methodology is manipulative, or 
that Cheil substituted increasing quantities of pellets for VCs in an 
attempt to minimize its dumping liability.
    Cheil contends that the NRV established for recycled pellet 
represents a market price for that merchandise. Cheil argues that the 
Department has no basis to exclude these sales because such sales are 
``too small'' to constitute a valid market. Cheil further contends that 
its NRV methodology was in place before the onset of the Department's 
less-than-fair-value (LTFV) investigation in 1991, and that the 
Department accepted and used that methodology during the fair value 
investigation and the first administrative review. Cheil also argues 
that precedent obligates the Department to accept Cheil's practice of 
valuing RC at its NRV. Cheil cites to thirteen separate cases in which 
NRV methodologies have been applied. Moreover, Cheil argues that the 
Court of International Trade (CIT) has approved the use of NRV for 
valuing by-products in Asociacion Colombiana de Exportadores de Flores 
v. United States, 704 F. Supp. 1114, 1125 (CIT 1989). Cheil contends 
that there is nothing on the record that distinguishes the instant 
facts from the numerous other cases in which the Department has used an 
NRV methodology to value by-products.
    Cheil also asserts that VCs and the resin it recycles as pellets 
are not physically one-for-one substitutes, and, thus, its practice of 
valuing pellets at an NRV below that of VC is economically sound. Cheil 
argues that pellets and VCs have different molecular structures and 
chemical compositions. Cheil contends that a mixture of pellet and VC 
can create blending problems. Because of differences in the molecular 
structure of pellets and VCs, Cheil contends that VCs and pellets melt 
at different temperatures. Cheil also claims that additional production 
problems (such as contamination) will result if too many pellets are 
employed in the production process.
    Cheil argues that waste film production has a direct costs impact 
on PET film through lower yields, and that higher pellet usage 
increases fabrication costs. Cheil contends that the Department has no 
basis to assume that historical production yields would remain constant 
if the production process utilizes 100 percent VCs. Based on these 
factors, Cheil argues that pellets should be assigned a lower cost than 
VCs.
    Cheil contends that, contrary to petitioners' assertion, its usage 
of VC relative to pellets has actually increased from the second to the 
third review. Cheil asserts that the true value of pellets (because of 
the lack of substitutability between VC and pellet) is actually lower 
than their NRV.
    Cheil argues that the NRVs that it assigned to pellets reflect the 
same set of assumptions and market behavior as the NRVs that it 
assigned to off-grade chip production. Cheil thus concludes that if the 
Department decides to back out the NRVs at the virgin and chip level, 
it must also back out the NRVs at the chip production cost level.
    Cheil further contends that any methodology which assigns an equal 
value to VCs and RCs would not properly account for the valuation of 
beginning and ending inventory. Cheil contends that this is because VCs 
and recycled pellets would be valued according to one cost methodology, 
while period-of-review costs would be valued according to a completely 
different methodology.
    SKC: With regard to SKC, petitioners contend that its methodology 
for costing recycled resin is economically unreasonable and was 
concocted especially for the Department's fair value investigation. 
Petitioners assert that prior to the fair value investigation of this 
case, SKC calculated an average materials cost without distinguishing 
between virgin and recycled resin. Petitioners assert that the 
methodology used by SKC in these reviews ignores the costs of the 
material content of the recycled resin. Petitioners argue that the true 
cost of the recycled resin is much higher than the value assigned to it 
by SKC.
    Petitioners argue that SKC's normal method of accounting for 
recycled resin correctly accounts for the processing costs (i.e., 
labor, overhead, etc.) of recycling, but fails to address the cost of 
the chemicals which are reclaimed as the recycled resin. Petitioners 
maintain that SKC must recognize the presence of valuable PET resin in 
the chips that SKC recycles. By omitting material costs in determining 
the cost of RC, petitioners assert that SKC understates the cost of 
films that use a higher proportion of recycled materials.
    In response, SKC maintains that its cost accounting methodology 
does not exclude the cost of the raw materials of recycled resin from 
PET film cost of production (COP). SKC argues that the PET film 
production process is a closed cycle, and that all costs are fully 
accounted for in the system. SKC explains that both VCs and RCs are 
released into the production line to form PET film as follows: at the 
end of the film production line scrap film is recovered; the recovered 
scrap is then reprocessed to produce recycled resin, and the recycled 
material is then used together with VC to produce more PET film, a 
portion of which will again be reclaimed. According to SKC raw

[[Page 35179]]

materials (ethylene glycol (EG) and dimethyl terephthalate (DMT) or 
terephthalic acid (TPA)) are used exclusively for the production of VC; 
the recycled material is produced entirely from scrap film without 
input of additional raw materials. In other words, all recycled resin 
is produced from VCs that were released into the film production line 
during a previous production cycle. SKC states that it does not take a 
credit for the scrap which it recycles. Therefore, SKC argues that the 
finished film bears the cost of all raw materials consumed in the film 
production process, including the cost of raw materials that are later 
reclaimed to produce RCs.
    SKC argues that the Department should continue to value recycled 
resin according to the methodology employed by SKC in its internal cost 
accounting system. SKC contends that its cost methodology is reasonable 
and consistent with accepted accounting concepts. SKC contends that 
recycled resin has a ``lower intrinsic viscosity, lower molecular 
weight, and increased discoloration'' than do VCs. SKC notes that the 
Department determined that there is no evidence on the record 
suggesting that SKC has manipulated its chip blends to alter production 
costs. Finally, SKC asserts that its blending ratios have been stable 
over time.
    Department's Position: We believe that Cheil's and SKC's methods of 
accounting for their recycled raw materials are reasonable and have 
relied on them for these final determinations. The legislative history 
of section 773(b) states that ``in determining whether merchandise has 
been sold at less than cost [the Department] will employ accounting 
principles generally accepted in the home market of the country of 
exportation if [the Department] is satisfied that such principles 
reasonably reflect the variable and fixed costs of producing the 
merchandise.'' H.R. Rep. No. 571, 93d Cong., 1st Sess. 71 (1973) 
(emphasis added). The CIT has upheld the Department's use of expenses 
recorded in the company's financial statements, when those statements 
are prepared in accordance with the home country's GAAP and do not 
significantly distort the company's actual costs. See, e.g., Leclede 
Steel Co. v. United States, Slip Op. 94-160 at 22 (CIT 1994).
    Accordingly, our practice is to adhere to an individual firm's 
recording of costs, if we are satisfied that such principles reasonably 
reflect the costs of producing the subject merchandise, and are in 
accordance with the GAAP of its home country. See, e.g., Canned 
Pineapple Fruit from Thailand: Final Determination of Sales at Less 
Than Fair Value (Canned Pineapple from Thailand), 60 FR 29553, 29559 
(June 5, 1995); Certain Stainless Steel Welded Pipe from the Republic 
of Korea; Final Determination of Sales at Less Than Fair Value, 57 FR 
53693, 53705 (November 12, 1992); and Furfuryl Alcohol from South 
Africa: Final Determination of Sales at Less Than Fair Value, 60 FR 
22550, 22556 (May 8, 1995) (``The Department normally relies on the 
respondent's books and records prepared in accordance with the home 
country GAAP unless these accounting principles do not reasonably 
reflect the COP of the merchandise''). Normal accounting practices 
provide an objective standard by which to measure costs, while allowing 
respondents a predictable basis on which to compute those costs. 
However, in those instances where it is determined that normal 
accounting practices result in an unreasonable allocation of production 
costs, the Department will make certain adjustments or may use 
alternative methodologies that more accurately capture the costs 
incurred. See, e.g., New Minivans from Japan; Final Determination of 
Sales at Less Than Fair Value, 57 FR 21937, 21952 (May 26, 1992).
    In the instant proceeding, therefore, the Department examined 
whether the respondents' normal recycled resin accounting methodology 
results in costs of producing the subject merchandise (finished PET 
film) that reasonably reflect its cost of production. Notably, we found 
that a characteristic of the PET film production process is that a 
substantial amount of film becomes unusable during production. The PET 
film production process generally takes place in two stages. In the 
first stage, a mixture of basic chemicals and special additives are 
used to crate VCs. Both Cheil and SKC produce several different types 
of VCs, each from a specific chemical recipe designed to promote 
certain physical attributes in the finished PET film product.
    In the second production stage, one or more VC types are measured 
and mixed with recycled material. The mixture of VC and recycled 
material is then melted. The molten polymer is extruded onto a chilled 
casting drum, where it spreads into a continuous polymer film. From the 
casting drum the film passes through a series of stretching machines. 
As the finished film cools, it is wound onto a master roll. The master 
rolls of finished film undergo quality inspection for various physical 
characteristics. Films that fail this inspection are either sold as 
off-quality PET film or recycled.
    As previously stated, the PET film manufacturing process and 
finished film quality standards are such that substantial quantities of 
recyclable waste film are generated. This film is recycled as a raw 
material input to the production process for PET film. Each type of PET 
film has a maximum amount of recycled materials that can be added while 
still allowing the film to meet its quality requirements. We note that 
the respondents use different processes for recycling the waste film 
and different methods of accounting for the recycled materials. (See 
recycled raw materials accounting memorandum, August 17, 1995). 
However, each company's method is similar in that they assign 
significantly less cost to the recycled material than they do to the 
original VC.
    Under its normal cost accounting system, SKC attributes to its 
recycled film only the costs related to recycling. SKC assigns no costs 
to the waste film used in the recycling process. Thus, SKC records as 
the cost of recycled material, only the labor and overhead costs 
incurred for shredding the film and reprocessing it.
    Cheil recycled film is treated as a by-product of the film 
production process and valued at its NRV. Cheil's NRV represents the 
revenues received (less disposal costs) for recycled material sold as 
filler for mattresses and toys. Cheil deducts the pellets' NRV from the 
cost of producing the good PET film output.
    On March 20, 1996, the CIT issued its decision in the appeal of the 
underlying investigation in this proceeding, E.I. Dupont de Nemours & 
Co., et al. versus United States, Slip. Op. 96-56, Court No. 91-07-
00487 (March 20, 1996) (Dupont II). The CIT's decision recognized the 
above facts with respect to the production of PET film and each 
respondent's accounting for recycled materials. In light of those 
facts, the CIT found that:

    [petitioners'] argument that pellets should be costed like 
virgin chip because they are functionally equivalent defies common 
sense and arithmetic logic. The reason that PET film production 
utilizes recycled material is that it is cheaper to recycle scrap 
film than to manufacture virgin chip; this being the case, assigning 
pellets the cost of virgin chip would overstate the actual costs of 
PET film production. Dupont II, at 9.

    The CIT further noted that the record did not support the 
allegation that Cheil manipulated the usage rate of pellet in order to 
shift costs away from PET film exported to the United States.
    The CIT also rejected petitioners' arguments concerning SKC's 
accounting practices. The Court noted that the

[[Page 35180]]

reason SKC uses a ``zero value'' for the material cost of RC is that 
``SKC did not subtract the value of pellets resulting from PET film 
production runs from the accounting cost of producing PET film; 
therefore, there was no basis for adding any pellet value back into the 
accounting cost of PET film manufactured with pellet material input.'' 
Dupont II, at 10. While the CIT determined that the Department's 
refusal to address SKC's methodology for valuing pellet was proper 
under the scope of the remand, it indicated that even if such 
instructions ``had been part of the remand order, SKC's methodology is 
reasonable and fully accounts for the value of'' its recycled resin. 
Dupont II, at 11.
    In this review, we continue to find that Cheil and SKC have 
reasonably valued RC. We determined that although differing in 
approach, both methodologies reasonably capture the cost of producing 
PET film. As previously noted, every PET film production run uses both 
virgin chip and recycled material. The scrap film resulting from each 
production run is recycled into subsequent production passes. Each 
respondent's method of accounting for the recycled material is used in 
the normal course of business and is GAAP-consistent.
    We examined Cheil's and SKC's books and records and found that each 
company relies on its recycled resin methodology in the normal course 
of business and has done so for at least the last several years. We 
further found that each respondent's allocation methodology is 
consistent with GAAP practiced in Korea.
    We disagree with petitioners' argument that the cost basis for 
recycled materials should be the purchase price of the raw material. 
The record in this case demonstrates that recycled resin is not the 
functional equivalent of VC, since the production process degrades the 
chemicals and introduces contaminants into the process. Thus, while 
recycled material can be used in place of VC within certain limits, 
recycled resin and VC are not completely equivalent.
    We also do not accept petitioners' contention that SKC's 
methodology is economically unreasonable. SKC's methodology fully 
accounts for all costs because each type of film is charged with the 
cost of the material consumed in its production (as well as the 
material which will be reused in later production runs). Thus, all 
production costs are fully charged to the subject merchandise.
    We also disagree with petitioners' arguments that Cheil's NRV 
should be disallowed because it is not representative of a market 
value. Despite the fact that Cheil's recycled film purchasers use the 
pellets in less demanding processes, there is no evidence that these 
transactions do not represent a fair valuation for this material. 
Moreover, we note that a petitioner also makes sales of recycled film 
chips or pellets to manufacturers of pillows and carpet. This company 
indicated that it sells the recycled chip at a price significantly less 
than the cost to manufacture VC. In addition, the company explained 
that it had recently adopted a costing methodology based on the 
relative sales value of RC that is similar to that used by Cheil. (See 
plant tour memorandum, April 5, 1995.)
    Comment 2: Petitioners contend that Cheil and SKC have understated 
their costs and overstated their U.S. selling prices by misrepresenting 
the quantities of film that they produce and sell, and that the 
quantity of films actually shipped are not the quantities of film 
actually billed. Petitioners assert that since producers will be 
penalized if they include too little film on a roll, producers will 
generally include more film on a roll than they actually invoice. 
Petitioners assert that exhibits collected as part of the verifications 
for the second and third reviews of Cheil and SKC support their 
assertion that SKC and Cheil are providing more film on a roll than 
they have actually reported to the Department. Petitioners additionally 
contend that the verification exhibits collected in these reviews 
provide further evidence that reported costs are incorrect because the 
sales and production quantities used to derive those costs and prices 
are either ``conceptionally inappropriate'' or ``simply wrong.'' 
Petitioners assert that the production quantities reported by Cheil 
fail to account for losses occurring in the second slitting process. 
Petitioners suggest that SKC's shifting of the reporting period form 1/
1/93-12/31/93 to 7/1/93-6/30/94 for the third administrative review 
distorted the valuation of RCs and scrap. Petitioners assert that Cheil 
may have distorted its costs through a similar shifting of the 
reporting period.
    SKC and Cheil contend that the Department verified reported 
production quantities. SKC and Cheil assert that there is no evidence 
on the record supporting petitioners' assertion that production 
quantities were understated or that either company shipped more film on 
a roll than was reported in SKC's or Cheil's responses.
    Department's Position: We disagree with petitioners because there 
is no evidence on the record to support their claim that either Cheil 
or SKC understated their production quantities, or that either company 
shipped more PET film on a roll than the customer ordered. During these 
verifications, we traced reported production of PET film to the PET 
film production records of Cheil and SKC. Our trace of production 
quantities for Cheil accounted for the amount of film (sold exclusively 
to third countries) that underwent second slitting. (See Cheil July 28, 
1995 second review period verification report at page 5; Cheil January 
26, 1996 third review period verification report at page 3.) The 
Department also verified the production quantities reported by SKC. 
(See SKC July 28, 1995 second review period verification report at page 
15; SKC February 27, 1996 third review period verification report at 
page 10.)
    Moreover, we disagree with the petitioners' assertion that Cheil's 
and SKC's valuation of RC and scrap was distorted because they shifted 
the reporting period. The Department directed Cheil and SKC to report 
costs for the third review period from July 1, 1993 through June 30, 
1994, rather than for the calendar year January 1, 1993 through 
December 31, 1993, so that the period for reporting COP/CV information 
would more closely correspond to the time frame covered by the third 
review. We have not allowed either Cheil or SKC to manipulate to their 
advantage the period for reporting cost information.
    Comment 3: Petitioners note that the language used to determine 
whether below-cost sales were made over an extended period of time for 
Cheil and Kolon fails to identify such sales of merchandise that were 
sold in less than three months of each period of review. Petitioners 
contend that this programming error exists for each of the respondents 
included in these reviews.
    Department's Position: We agree. For each of the respondents 
included in these reviews, we have amended our computer programs to 
exclude from FMV below-cost sales that were sold in less than three 
months of the PORs and that made over an extended period of time.
    Comment 4: Petitioners contend that the Department erred in 
adjusting Cheil's home market price for pre-sale inland freight from 
its factory to its warehouse. Petitioners contend that this deduction 
contravenes Ad Hoc Comm. of AZ-NM-TX-FL Producers of Gray Portland 
Cement v. United States, 13 F.3d 398, 401 (Fed. Cir. 1994).
    Cheil contends that Departmental practice is to treat pre-sale 
inland freight as a direct expense in instances where

[[Page 35181]]

products are channeled or customized for certain buyers.
    Department's Position: We disagree with petitioners. As noted in 
Canned Pineapple Fruit from Thailand, in Ad Hoc Committee, the Court 
ruled that the Department could not use its inherent authority to 
deduct home market pre-sale movement expenses. Instead, we will adjust 
for these expenses under the circumstance-of-sale provision as long as 
we determine that these expenses are directly related to the sales 
under investigation. The Department generally treats pre-sale movement 
expenses as direct where those expenses ``involve products channeled or 
customized'' for certain buyers (Id. at 29563). Because Cheil knew the 
identity of its customer and the product specifications of that 
customer prior to the shipment of film from the factory to the 
warehouse, we have treated Cheil's pre-sale inland freight as a direct 
selling expense. This is consistent with our position in past segments 
of this proceeding. (See Polyethylene Terephthalate Film, Sheet, and 
Strip from the Republic of Korea; Final Determination of Sales at Less 
than Fair Value 56 FR 16300, 16303 (April 21, 1991) (Final 
Determination)).
    Comment 5: Petitioners contend that certain sales that Cheil has 
characterized as ``samples'' were sold in significant volume and should 
be included in the Department's calculations. Petitioners contend that 
Cheil's failure to report these sales mandates use of the best 
information available for Cheil.
    Cheil contends that the Department verified that its zero-priced 
samples were not commercially valued. Cheil contends that the 
Department's decision to exclude there sales was consistent with past 
Departmental practice.
    Department's Position: We do not consider Cheil's zero-priced 
samples to be sales within the meaning of the antidumping law. This is 
consistent with the position taken in Granular Polytetrafluoroethylene 
Resin from Japan; Final Results of Antidumping Duty Administrative 
Review (PTFE from Japan) 58 FR 50343, 50345 (September 27, 1993), in 
which we did not include zero-priced samples in our calculations 
because the samples were used for product evaluation purposes rather 
than for commercial consumption.
    During the PORs Cheil provided a limited number of zero-priced 
samples to the United States. Cheil provided full documentation that 
the shipments were not commercially valued, and were for product 
evaluation purposes only. Accordingly, we did not include these zero-
priced samples in our analysis.
    Comment 6: Petitioners assert that Cheil has failed to report 
related-party commissions associated with its U.S. sales. Petitioners 
assert that these expenses are directly related to U.S. price.
    Cheil contends that the mark-up between the price charged by Cheil 
to its U.S. subsidiary and the price charged by Cheil's U.S. subsidiary 
to Cheil's U.S. customer is not a ``commission.'' Cheil notes that a 
commission is ``a sum or percentage allowed to agents, sales 
representatives, etc., for their services.'' (See Timken Co. v. United 
States, 37 F.3d 1470, 1478 (Fed. Cir. 1994).) To receive a commission, 
Cheil argues that a commissionaire must make a sale on another party's 
behalf. Because there is no evidence on the record suggesting that 
Cheil's U.S. subsidiary solicits sales for Cheil, or engages in any 
activity to generate sales on Cheil's behalf, Cheil argues that the 
mark-up between the price charged by Cheil to its U.S. subsidiary and 
the price charged by Cheil's U.S. subsidiary to Cheil's U.S. customer 
is not a ``commission'' within the meaning of the antidumpting law.
    Department's Position: We agree with Cheil. Because Cheil's U.S. 
subsidiary did not solicit sales for Cheil, we do not consider the 
mark-up between the price charged by Cheil to its U.S. subsidiary and 
the price charged by Cheil to Cheil's U.S. customer to be a commission 
within the meaning of the antidumping law.
    Comment 7: Petitioners assert that the Department should use 
quality control criteria values (QCCVs) rather than product codes to 
match Cheil's home market and U.S. sales. Petitioners contend that 
matching sales through QCCVs would be less susceptible to manipulation.
    Cheil asserts that use of QCCVs instead of product codes would 
result in comparisons of home market merchandise that is less similar 
to the merchandise sold in the United States.
    Department's Position: We disagree with petitioners. As noted in 
Antifriction Bearings (Other than Tapered Roller Bearings) and Parts 
Thereof from France, et. al., 57 FR 28360, 28366, (June 24, 1992) our 
policy is to ``maintain a stable, normal and predictable approach'' 
with regards to model match, and not to alter that methodology unless 
compelling reasons exist. In these reviews we have used the same 
methodology for matching Cheil's home market sales that we employed in 
the less than fair value (LTFV) investigation and in the first review. 
There is no evidence on the record to suggest that use of product codes 
has enabled Cheil to manipulate the matching of home market sales.
    Finally, we note that use of QCCVs would in several instances 
result in the matching of merchandise that is less similar to the U.S. 
merchandise than would the product codes submitted by Cheil. In one 
instance this dissimilarity would result in the comparison of a product 
that is coated with a product that is non-coated, and in another 
instance this would result in comparison of merchandise that is of 
different chemical compositions.
    Comment 8: Petitioners contend that the Department should calculate 
the credit period for Cheil's U.S. sales from the date of shipment from 
Cheil's factory to the U.S. customer rather than from the date of 
export shipment from Korea. Petitioners also assert that the Department 
should require Cheil to provide the actual date of payment for those 
U.S. sales for which Cheil had not received payment at the time that 
Cheil prepared its U.S. response.
    Cheil contends that the Department should recalculate Cheil's 
inventory carrying cost expenses, if it decides to recalculate the 
credit period from the date of shipment from Cheil's factory.
    Department's Position: In these final results we have followed our 
normal policy and calculated the U.S. credit period beginning with the 
date that the merchandise leaves the factory. (See Antifriction 
Bearings (Other than Tapered Roller Bearings) and Parts Thereof from 
France, et. al., 60 FR 10900, 10916, (February 28, 1995).) We have also 
recalculated Cheil's inventory carrying costs to avoid double counting 
of Cheil's credit expenses. Because we noted no significant 
discrepancies between payment term and the date that Cheil actually 
received payment, we used payment terms to calculate Cheil's U.S. 
credit expense for those U.S. sales for which Cheil had not received 
payment at the time that it prepared its response.
    Comment 9: Petitioners contend that the Department should adjust 
U.S. sales for advertising and promotion expenses that Cheil incurred 
on its U.S. sales.
    Cheil contends that it had no direct advertising or sales promotion 
expenses during the PORs.
    Department's Position: We disagree with petitioners. In response to 
our questionnaire and our request for supplemental information, Cheil 
indicated that it had no direct promotion or advertising expenses 
during the periods of review, and there is no contrary evidence on the 
record. Since all of Cheil's sales were PP transactions and there were 
no commissions incurred for home market

[[Page 35182]]

sales, the issue of whether Cheil had indirect advertising or sales 
promotion expenses is moot because in PP transactions we do not adjust 
for indirect selling expenses, absent commissions in the other market.
    Comment 10: SKC contends that the Department's reallocation of its 
manufacturing costs between A- and B-grade film is contrary to 
Department practice and unreasonably overstates SKC's B- grade film 
costs. SKC asserts that B-grade film cannot be used by its normal PET 
film customers, and should not bear the same cost as A-grade film. SKC 
contends that the Department's allocation of cost to B-grade film 
should reflect the economic value of the products manufactured. SKC 
argues that B-grade film is a by-product of PET film rather than a co-
product, and that B-grade film is an unavoidable consequence of 
manufacturing A-grade film. SKC contends that it seeks to minimize the 
production of B-grade film, and that B-grade film does not undergo 
significant processing prior to sale. SKC asserts that sales of B-grade 
film constitute a small (less than 10 percent) and declining portion of 
its PET film revenues.
    SKC notes that in Canned Pineapple from Thailand, The Department 
did not use physical measures to allocate joint products but rather 
used an allocation methodology that recognized the significantly 
different economic values of the products. Based on the dissimilarity 
of A-grade and B-grade film, SKC contends that the Department's joint 
allocation of costs between these two products is economically 
unreasonable.
    SKC further asserts that it valued B-grade film in accordance with 
its longstanding practice. SKC contends that the Department has 
consistently rejected the use of physical allocation methodologies in 
cases where the one joint product has a significantly lower economic 
value than the other product. SKC cites to Elemental Sulphur from 
Canada: Final Results of Antidumping Finding Administrative Review, 61 
FR 8239, 8241-8243 (March 4, 1996) (Sulphur), and Oil Country Tubular 
Goods from Argentina, Final Determination of Sales at Less than Fair 
Value, 60 FR 33539, 33547 (June 28, 1995), as two such cases where the 
Department did not use physical measures to allocate costs. SKC 
contends that the Department's general practice is to use a company's 
normal accounting system unless that system results in an unreasonable 
allocation of costs. SKC further argues that the Department's 
methodology of allocating yield losses equally between A-grade and B-
grade film produces absurd results because the methodology allocates 
expenses associated with one type of scrap to another part of scrap. 
SKC also contends that the physical defects inherent in B-grade film 
compel SKC to (1) sell B-grade film for non-PET film applications, and 
(2) assign B-grade film a lower value than A-grade film.
    SKC asserts that the Department's decision to allocate yield losses 
equally between A-grade and B-grade film conflicts with the model-match 
and cost test methodologies employed in these reviews. SKC notes that 
for model-match purposes, the Department restricted comparisons of U.S. 
B-grade film to home market sales of B-grade film. SKC asserts that the 
Department cannot ignore differences between A-grade and B-grade film 
for purposes of its cost analysis.
    Finally, SKC asserts that the Department should accept its cost 
methodology even if the Department determines that B-grade film is a 
co-product rather than a by-product of A-grade film. SKC asserts that 
its cost system is consistent with the Ipsco Appeal decision, since, 
unlike Ipsco, SKC does not rely upon sales value to allocate costs. SKC 
asserts that this is consistent with the methodology employed by the 
Department in Polyvinyl Alcohol from Taiwan, 61 FR 14064 (March 29, 
1996). (See Memorandum to Chris Marsh from Art Stein, September 27, 
1995.)
    Petitioners argue that the Department was correct in equalizing the 
yield loss that SKC experienced between A-grade and B-grade films. 
Petitioners contend that allocating all yield loss to A-grade film 
would result in a misallocation of SKC's costs, an improper use of 
below-cost sales in the Department's margin calculations, and an 
understatement of margins for SKC's sales of slitted B-grade film.
    Petitioners point out that in various submissions filed in the 
course of the initial investigation, respondents as a group (including 
SKC) stated that the essential facts in the administrative proceedings 
underlying the Ipsco Appeal are indistinguishable from the facts in 
this case.
    Petitioners contend that the Department's reallocation reflects the 
mandate of the Ipsco Appeal, and also the realities of PET film 
production. Petitioners explain that from a batch of resin, a single 
production run will generate a given amount of A-grade film and a given 
amount of B-grade film. Regardless of the quality of film, the actual 
costs of producing a run of film are borne equally. Petitioners 
maintain that it takes the same volume of raw materials and the same 
processing effort to make A-grade film as B-grade film.
    Petitioners argue that the fact that the Ipsco Appeal involved oil 
country tubular goods instead of PET film is irrelevant. Petitioners 
maintain that B-grade PET film is not a by-product of the PET film 
production process, but is PET film. B-grade PET film is used in PET 
film applications, and is generated from the same production run as A-
grade film using the same materials and processes. Petitioners 
therefore conclude that SKC's A-grade and B-grade film must bear the 
same costs.
    Department's Position: We believe that A-grade and B-grade PET film 
have identical production costs and we have relied on equal costing for 
this final determination. The CIT's decision in the remand of the 
underlying investigation (Dupont II) affirmed the Department's remand 
calculation of the cost of production for prime and off-grade film 
(i.e., A-grade and B-grade film). Dupont II, at 6-7. The CIT determined 
that our recalculation of Cheil's and SKC's production costs was 
reasonable. As we explained in the remand, we recalculated the cost of 
off-grade film to reflect actual costs by allocating production costs 
based on actual production quantities.
    Moreover, our use of an equal costing methodology in this 
proceeding is based on substantial evidence and is otherwise in 
accordance with law. In the instant reviews, the A-grade and B-grade 
film undergo an identical production process, involving an equal amount 
of material and fabrication expenses. The only difference in the 
resulting A- and B-grade film is that at the end of the manufacturing 
process a quality inspection is performed during which some of the film 
is classified as high quality A-grade product, while other film is 
classified as lower quality B-grade film. The identification of 
different grades of merchandise does not transform the manufacturing 
process into a joint production process which would require the 
allocation of costs.
    SKC mischaracterizes the continuous production process of PET film 
as joint processing. A joint production process occurs when ``two or 
more products result simultaneously from the use of one raw material as 
production takes place.'' (See Management Accountants' Handbook, 
Keeler, et. al., Fourth Edition at 11:1.) The essential point of a 
joint production process is that ``the raw material, labor, and 
overhead costs prior to the initial split-off can be allocated to the 
final product only in some arbitrary, although necessary, manner,'' Id. 
In this case, the costs attributable to PET film yield losses can 
clearly be allocated to

[[Page 35183]]

the production of specific types of PET film.
    SKC argues incorrectly that its method of accounting for lesser 
quality product is consistent with the Ipsco Appeal. Ipsco Appeal 
involved the Department's use of an appropriate methodology for 
allocating costs between two grades of steel pipe. These two grades of 
steel pipe were distinguished on the basis of quality. Ipsco Appeal, 
965 F.2d at 1058. The same production inputs for materials, labor, and 
overhead went into the manufacturing lot that yielded both grades of 
pipe. Id. Given these facts, in our final determination we allocated 
production costs equally between those two grades of pipe. We reasoned 
that because they were produced at the same time, on the same 
production lines, and following the identical manufacturing process, 
the two grades of pipe in fact had identical production costs. Id.
    SKC's reliance on Sulphur, Canned Pineapple Fruit from Thailand, 
and Polyvinyl Alcohol from Taiwan is misplaced. Those cases relate 
primarily to by-product/co-product costing methodologies. In none of 
the cases cited by SKC were both products within the scope of the same 
antidumping order. The PET film production process produces two 
finished products, both of which are salable, and both of which are PET 
film products. B-grade PET film (like A-grade film) is sold as PET film 
and consumed as PET film. By contrast, the resulting joint products or 
by-products in the cases cited by SKC were of a different class or kind 
of merchandise than the products that the manufacturer set out to 
produce. Pineapple shells, cores, and ends are made into pineapple 
juice. Natural gas is not of the same class or kind as elemental 
sulphur, nor are polyvinyl alcohol and methyl acetate. Moreover, we 
note that in the ordinary course of business SKC treats methanol, and 
not B-grade film, as the by-product of the PET film production process. 
Accounting literature identifies by-products as separate and distinct 
products, not grades of the same product. Unlike the chemical reaction 
that occurs in the production of polyvinyl alcohol resulting in the by-
product methyl acetate, B-grade film is not a by-product. Theoretically 
the production of B-grade film is avoidable since the PET film 
manufacturing process need not result in poor quality product.
    Finally, SKC's argument that matching A- and B-grade film to 
identical merchandise necessitates that each of these models have a 
unique cost is without merit. Two products that are not ``identical'' 
for model-match purposes may indeed have the same costs. For purposes 
of determining COP/CV, however, we must account for all of the costs 
associated with the production of the merchandise.
    Comment 11: Petitioners contend that SKC understated the cost of 
extending credit to Anacomp on its U.S. sales. Petitioners contend that 
the credit terms offered to Anacomp by SKC do not constitute a normal 
extension of credit between buyer and seller, but rather involve an 
``incentive to finance Anacomp's film purchases at below market 
rates.'' Further, petitioners argue that the antidumping statute does 
not contemplate a circumstance-of-sale adjustment to U.S. price for 
interest payments that offset credit risk. Finally, petitioners argue 
that if the Department accepts the Anacomp payments as interest income, 
it should ``impute SKC's interest expense'' using an interest rate that 
is the ``equivalent of the market rate sales to Anacomp.''
    SKC contends that petitioners have offered no grounds for reversing 
the Department's previous decision to offset interest income against 
SKC's imputed credit expense.
    Department's Position: We disagree with petitioners because, as 
noted in the first review of this order, ``* * * failure to adjust for 
SKC's interest income received from Anacomp would overstate SKC's U.S. 
credit expense, and distort our dumping analysis.'' (See Polyethylene 
Terephthalate Film, Sheet, and Strip from the Republic of Korea, Final 
Results of Antidumping Administrative Review (Final Results of the 
First Review), 60 FR 42835, 42838 (August 17, 1995). During our 
verification of SKC we determined that SKC and Anacomp adhered to all 
of the terms of the ``Master Supply Agreement'' which governed the 
payment of interest income to SKC. We also verified the amount of 
interest income received by SKC. Accordingly, in these final results we 
have continued to make an offset for interest income as we did in the 
preliminary results of this review.
    Comment 12: Petitioners note that Kolon Industries (Kolon) did not 
include home market sales of scrap film in its sales listing because 
``this scrap is not PET film.'' Petitioners contend that Kolon has 
failed to substantiate its claim that these scrap sales were not of PET 
film.
    Kolon asserts that the scrap material is not PET film. Kolon 
contends that the material consists of (1) molten PET material that is 
deposited in the filters of the extruder before the molten PET material 
is extruded onto the cooling drum and formed into sheet and film, and 
(2) shredded trimmings from the film production process. Because the 
scrap material is not PET film, Kolon argues that it is not within the 
scope of the order.
    Department's Position: We agree with Kolon. Because the scope of 
the antidumping order is limited to PET ``film, sheet and strip,'' and 
this material is not PET film, we have not included these scrap sales 
in our calculations.
    Comment 13: Petitioners contend that the Department should include 
Kolon's U.S. sample sales in its margin calculations. Petitioners 
contend that while the Department has the authority to omit zero-price 
samples if the samples were not used for commercial consumption, that 
exception does not apply for Kolon since those sales were consumed 
commercially. Petitioners note that the Department included Kolon's 
zero-price samples in its calculations for the first review.
    Kolon contends that the Department should exclude these zero-price 
samples from its analysis. Kolon notes that in PTFE from Japan, the 
Department excluded such transactions even though the merchandise was 
not returned to the manufacturer. Kolon contends that the Department's 
decision to include zero-price sales in its first period analysis was 
based upon ``the incorrect belief that there is no evidence on the 
record that Kolon's U.S. sample sales are destroyed or rendered 
unusable.'' Kolon contends that the nature of PET film requires the 
tester to unwind the film, and to usually coat the film, stamp it, or 
use it on a machine. Kolon contends that such testing, by its nature, 
renders the PET film unusable.
    Department's Position: As noted in response to Comment 5, in PTFE 
from Japan we determined that zero-priced transactions were not 
``sales'' within the meaning of the antidumping law because the zero-
priced samples were used for product evaluation purposes rather than 
commercial consumption. In the Final Results of the First Review, we 
indicated that PTFE from Japan was not applicable because there was no 
evidence on the record that Kolon's U.S. samples were destroyed or 
rendered unusable. (See Final Results of First Review, at 42841.)
    However, the record in these reviews demonstrates that Kolon 
provided the zero-priced samples for product evaluation and testing 
purposes rather than commercial consumption. Kolon stated that its one 
shipment of zero-priced samples during the third review was used for 
product testing. Moreover, we find that record evidence shows that like 
PTFE resin, the nature of PET film

[[Page 35184]]

is such that once it has been tested, it cannot be re-used. Therefore, 
consistent with PTFE from Japan, we did not include Kolon's zero priced 
samples in our analysis.
    Comment 14: Petitioners contend that Kolon incorrectly used home 
market adjustments applicable to other reviews in compiling its second 
and third review responses. Petitioners contend that such a methodology 
results in inconsistencies.
    Kolon contends that it did not revise sales data that it had 
reported in previous questionnaires in order to avoid inconsistencies 
from one review to the next.
    Department's Position: We disagree with petitioners. It is the 
Department's longstanding practice to base USP and FMV price 
comparisons on reasonably contemporaneous sales of similar merchandise. 
(See Certain Forged Steel Crankshafts from the United Kingdom, 56 FR 
5975, 5976 (February 14, 1991).) In compliance with our instructions, 
during the second review Kolon reported data for its sales for the 
period from December 1991 through July 1993. For the third review, in 
order to ensure contemporaneous matches, we requested data on sales for 
the period December 1992 through July 1994. Kolon complied with our 
request and did not make any revisions to the sales and adjustment data 
that is had previously reported in prior reviews. Because revising 
these data previously submitted would result in inconsistencies for 
identical sales, we determine that Kolon's approach is a reasonable 
methodology to avoid such inconsistencies.
    Comment 15: Petitioners content that Kolon has incorrectly omitted 
labor and overhead expenses from its calculation of home market packing 
expenses. Petitioners contend that this error results in an 
understatement of FMV.
    Kolon contends that its cost accounting system does not permit it 
to retrieve the labor and overhead costs attributable to packing.
    Department's Position: We disagree with the petitioners. In Kolon's 
cost accounting system, because packing and labor costs for PET film 
are recorded in a single cost center, Kolon cannot separate the 
specific amount of labor and overhead expenses that are attributable to 
packing from the labor and overhead expenses that are attributable to 
the production of PET film. Moreover, since the merchandise that Kolon 
sold in the home market and the United States is identical, the labor 
and overhead expenses attributable to packing (were Kolon able to 
isolate them) would have no effect upon the calculations.
    Comment 16: Petitioners contend that expenses associated with 
replacing defective film for Kolon's home market customers do not 
qualify as indirect selling expenses. Furthermore, rather than 
directly-related selling expenses, petitioners argue that these 
replacement shipments should be included in Kolon's home market sales 
listing.
    Kolon argues that, consistent with past practice, the Department 
properly treated the costs associated with defective film as indirect 
selling expenses.
    Kolon contents that it reported the movement expenses incurred on 
its ESP transactions with as much specificity as possible.
    Department's Position: We disagree with the petitioners. The cost 
of replacing defective film is properly classified as a warranty cost 
rather than as new sale since these expenses are associated with 
replacing defective merchandise that had previously been sold. Kolon's 
accounting records do not separately record the costs for replacing 
defective film. Because the warranty expenses can not be isolated to 
specific sales, Kolon properly treated these expenses as indirect 
selling expenses. (See, e.g., Color Television Receivers from Korea; 
Final Results of Antidumping Duty Administrative Review, 51 FR 41365, 
41377 (November 14, 1986).)
    Comment 17: Petitioners argue that Kolon should be required to 
report Korean inland freight on a transaction-specific basis where 
Kolon's accounting records would permit such reporting. Petitioners 
contend that for certain exporter's sales price (ESP) transactions, 
Kolon could provide transaction-specific movement expenses.
    Kolon contents that it reported the movement expenses incurred on 
its ESP transactions with as much specificity as possible.
    Department's Position: We disagree with the petitioners. We accept 
Kolon's approach of allocating movement expenses as reasonable. 
Generally, the Department will accept a party's alternative methodology 
for allocating expenses if the party's normal accounting records do not 
permit it to provide data in the format requested and the party 
provides data in a manner that approaches the Department's preferred 
methodology as close as its records will allow. We have stated that we 
will allow this alternative methodology as long as we determine that it 
is reasonable. (See Antifriction Bearings (Other than Tapered Roller 
Bearings) and Parts Thereof from the Federal Republic of Germany, 56 FR 
31692, 31715 (July 11, 1991). In calculating its U.S. movement expenses 
Kolon did not use a single average expense for inland freight. Kolon 
attempted to match each ESP sale to the particular entry. Since ESP 
merchandise was sold from inventory, however, Kolon could not normally 
tie a particular ESP sale to an individual entry. Therefore, Kolon 
allocated movement expenses to the particular group of entries on which 
that merchandise could have entered. We verified Kolon's data and have 
no evidence that Kolon's methodology is unreasonable.
    Comment 18: Petitioners argue that to the extent that the lower 
U.S. interest rate was available to the borrower, the Department should 
use that rate to calculate Kolon's home market credit expense. 
Petitioners assert that the Department should follow the precedent 
established in LMI La Metalli Industriale, S.p.A. v. United States, 912 
F.2d 455 (Fed. Cir. 1990), (LMI) wherein the Department applied the 
lowest rate available to the borrower to calculate U.S. and home market 
interest expenses.
    Kolon contends that U.S. dollar interest rates only measure the 
time value of money for dollars. Kolon argues that the U.S. interest 
rate cannot be used to determine the opportunity cost of a delayed 
payment in another currency, such as Korean won.
    Department's Position: We disagree with the petitioners. We have 
used Kolon's calculation of U.S. and Home market credit expenses in 
these final results because Kolon's calculation of credit expenses is 
consistent with `reasonable business behavior' and because we find that 
Kolon's actual borrowing experience is the best indicator of Kolon's 
cost of extending credit. LMI requires us to use `usual and reasonable 
business behavior' to calculate credit expenses. Kolon based its 
calculation of both home market and U.S. credit expenses on its actual 
borrowings in the home market and the United States. In the home 
market, Kolon used the interest expenses incurred in Korea to represent 
its interest expense. In the United States, Kolon used the interest 
rate charged on borrowings by its U.S. subsidiary because the U.S. 
subsidiary was the entity that bore the cost of delayed payment from 
the customer.
    Comment 19: Petitioners argue that Kolon should be required to 
provide customer- or transaction-specific U.S. rebates where such 
information is available in Kolon's accounting records. Petitioners 
contend that the Department should apply second-tier best

[[Page 35185]]

information available to those sales for which Kolon has reported 
rebates, but did not quantify the rebate on a transaction- or customer-
specific basis.
    Kolon contends that it did not provide transaction-specific rebates 
because such a methodology would not capture rebates that were granted 
after the preparation of the response. Kolon contends that its 
methodology of dividing total rebate expense during the POR by total 
PET film sales is not distortive, and was adopted so that Kolon would 
not understate its rebate expense.
    Department's Position: We agree with petitioners that our normal 
policy is to calculate discounts or rebates on a transaction- or 
customer-specific basis. (See Antifriction Bearings (Other than Tapered 
Roller Bearings) and Parts Thereof from France, et. al., 58 FR 39729, 
39762 (July 26, 1993). In reporting its rebate expense for the first 
review of this order, however, Kolon discovered that a number of 
rebates were paid several months after Kolon filed its questionnaire 
response for that review. To avoid understating its rebate expenses in 
these reviews, Kolon divided the total rebate amount granted on PET 
film sold during the POR by the total U.S. sales of PET film during the 
period. Because we did not ask Kolon to provide customer-specific 
rebates, and because there is no evidence on the record suggesting that 
Kolon's allocation of rebates is manipulative, we have used Kolon's 
calculation of rebate expense in these reviews.
    Comment 20: Petitioners contend that the Department should make an 
adjustment to PP for post-sale warehousing expenses incurred on Kolon's 
PP sales.
    Kolon contends that the Department's normal practice is to treat 
post-sale warehousing expense as direct only if the expense can be tied 
to particular sales. Kolon asserts that in this case, the after-sale 
expense does not vary with specific sales. Consistent with past 
practice, Kolon argues that the Department should treat these 
warehousing expenses as indirect.
    Department's Position: We disagree with the petitioners. During the 
PORs Kolon maintained a warehouse as its Korean factory. The expenses 
associated with maintaining that warehouse were fixed and did not vary 
with individual sales. Accordingly, we properly treated these expenses 
as indirect selling expenses. See Professional Electric Cutting Tools 
and Professional Electric Standing/Grinding Tools from Japan: Final 
Determination of Sales at Less Than Fair Value, 58 FR 30144, 30147-
30148 (May 26, 1993).
    Comment 21: Petitioners contend that in its margin calculations the 
Department overstated the value of STS Corporation's (STC) further-
processed sales by using the wrong variable to represent the quantity 
sold.
    Department's Position: We agree and have adjusted our calculations 
accordingly.
    Comment 22: Cheil contends that the Department should use the 
transfer price paid to a related supplier to represent the material 
cost of EG in the Department's second record period calculations. Cheil 
contends that Departmental practice is to accept transfer prices where 
direct or indirect ownership is less than 50 percent between buyer and 
seller. Cheil notes that the equity interest between Cheil and its 
supplier of EG was much less than 50 percent, and asserts that there is 
no evidence that Cheil had control over its suppliers.
    Petitioners claim that the Department was correct in its 
determination that Cheil is related to one of its suppliers of EG and 
that the Department correctly adjusted Cheil's COP/CV calculations to 
reflect its supplier's cost of producing EG.
    Department's Position: We agree with petitioners that Cheil is 
related to one of its suppliers of EG. Section 773(e)(4)(F) of the 
Tariff Act of 1930, as amended, defines ``related parties'' as ``two or 
more persons directly or indirectly controlling, controlled by, or 
under common control with, any person'' (emphasis added). Cheil has 
stated that it was a member of the Samsung Group, which is a group of 
companies under common management control. (See Cheil September 27, 
1993 Questionnaire Response at Exhibit 1, E.I. Dupont de Nemours, et. 
al. v. United States, 841 F. Supp. 1237, 1247-48 (CIT 1993).) The 
Samsung Group owns more than 50 percent of Cheil's supplier of EG. By 
virtue of these relationships, we consider that both Cheil and its 
supplier are under common control by the Samsung Group. Therefore, they 
are related parties within the meaning of Sec. 773(e)(4)(F).
    Based on this relationship, we tested the transactions between 
Cheil and its related supplier of EG. During verification we collected 
a schedule that reported the production costs of the related supplier. 
The schedule indicated that the product cost of EG exceeded the average 
price paid by Cheil. (See Memorandum to Chris Marsh from Art Stein, 
p.3, September 7, 1995.) Accordingly, consistent with our general 
practice, we relied on the supplier's cost as the value for EG in PET 
film production.
    Comment 23: Cheil contends that the Department should subtract its 
short-term interest income from its interest expense to derive Cheil's 
net interest expense. Cheil asserts that the record indicates that its 
interest income was clearly short-term in nature. Cheil contends that 
the methodology which it employed in these reviews to derive net 
interest expense is identical to that which was accepted by the 
Department in the fair value investigation and the first review of this 
case. Cheil contends that the Department may not depart from its 
established practice without explaining its basis for so long. Finally, 
Cheil asserts that there is no statutory or regulatory basis for 
denying interest income as an offset to interest expense because that 
interest income is restricted.
    Petitioners claim that the Department correctly denied Cheil's 
claimed short-term interest income offset because the income generating 
assets were pledged as collateral for loans. Petitioners note that the 
Department's standard questionnaire allows the respondent to reduce its 
interest expense by any interest income earned on short-term 
investments of its working capital. Petitioner contends that the assets 
that were collateralized have, in effect, been transformed from short-
term to long-term assets.
    Department's Position: We have disallowed Cheil's claimed offset of 
short-term interest income against interest expense. We allow an offset 
for interest expense only with interest income from short-term 
investments. (See Certain Corrosion-Resistant Carbon Steel Flat 
Products and Certain Cut-to-Length Carbon Steel Plat from Canada, 61 FR 
13815, 13819 (March 28, 1996).) While this interest income was 
classified as ``short-term'' in Cheil's financial statements, the 
financial statements indicate that the assets are ``pledged for 
collateral for borrowings,'' and ``are restricted as to use and are not 
subject to immediate withdrawal.'' (See notes (3) and (5) to Cheil's 
1992 audited financial statements, Section A Questionnaire Response, 
September 27, 1993). Because these assets are not readily available to 
Cheil, we consider it inappropriate to treat them as short-term 
investments of working capital.
    Comment 24: Cheil, Kolon, and STC contend that the Department 
should make a tax-neutral adjustment to U.S. price for home market 
taxes which were forgiven by virtue of export of the product to the 
United States.
    Department's Position: We agree. In light of the CAFC's decision in 
Federal Mogul Corp. v. United States, 63 F. 3d 1572 (Fed. Cir. 1995) 
the Department

[[Page 35186]]

has changed its treatment of home market consumption taxes. Where 
merchandise exported to the United States is exempt from the 
consumption tax, the Department will add to the U.S. price the absolute 
amount of such taxes charged on the comparison sales in the home 
market. We have adjusted our calculations accordingly.
    Comment 25: Cheil contends that the Department should include 
indirect selling expenses in its calculation of COP.
    Department's Position: We agree. Since indirect selling expenses 
were included in the price compared to COP, we have included indirect 
selling expenses in our calculation of COP.
    Comment 26: Cheil contends that the Department should include duty 
drawback in the home market price that is compared to COP.
    Department's Position: We agree. Duty drawback was applicable to 
Cheil's local export sales. Accordingly, when comparing the home market 
price to COP, we have included the duty drawback incurred on Cheil's 
``local export'' sales.
    Comment 27: Cheil contends that in calculating profit the 
Department should not use net price rather than gross price.
    Department's Position: We agree. Because profit represents the 
arithmetic difference between sales revenue and the expenses incurred 
in realizing that revenue, we have used Cheil's home market price net 
of adjustments to calculate home market profit.
    Comment 28: Cheil contends that in its second review period 
calculations, the Department used an incorrect amount for differences 
in merchandise (difmer). Cheil further contends that the Department 
erroneously added rather than subtracted difmer from FMV in the second 
review period. Finally, Cheil contends that since its difmer claim is 
denominated in Korean won, the Department should convert difmer into 
U.S. dollars prior to adding this amount to an FMV stated in dollars.
    Department's Position: We agree and have adjusted our calculations 
accordingly.
    Comment 29: Cheil contends that the Department should exclude 
direct selling expenses from its CV calculations because they are 
comprised exclusively of movement expenses.
    Department's Position: We agree and have excluded these expenses 
from our calculation of CV.
    Comment 30: Cheil and SKC contend that the Department double-
counted packing in its CV calculations.
    Department's Position: We agree and have revised our CV 
calculations to eliminate the double-counting of packing expenses.
    Comment 31: Cheil, SKC, and STC contend that for U.S. sales which 
were compared to CV, the Department should make an addition to U.S. 
price for duty drawback. Cheil, SKC, and STC contend that this 
adjustment is necessary because they included these duties in the cost 
of manufacture (COM) component of CV.
    Department's Position: We agree. Because Cheil, SKC, and STC 
included import duties in their calculation of COM, we have made an 
addition to U.S. price in these final results for duty drawback.
    Comment 32: Kolon contends that for comparisons to CV, home market 
inventory carrying costs would be included in the pool of indirect 
selling expenses.
    Department's Position: We agree. In these final results we included 
inventory carrying costs in the pool of indirect selling expenses.
    Comment 33: SLC argues that the Department should accept the price 
charged to SKC by its related supplier of DMT and TPA. SKC notes that 
the equity interest between SKC and its supplier of DMT and TPA was 
much less than 50 percent, and asserts that there is no evidence that 
SKC has control over its supplier. SKC asserts that it demonstrated 
that its purchases of DMT and TPA were at arms-length. SKC also asserts 
that it purchased DMT and TPA at ``market prices.'' SKC further 
contends that a proper analysis of the cost of producing DMT and TPA 
provides no evidence that prices for these materials were below cost.
    Petitioners contend that the Department correctly adjusted SKC's 
COP/CV calculations to reflect the supplier's cost of producing DMT and 
TPA. Petitioners contend that SKC and its supplier are related within 
the meaning of the antidumping law because an equity relationship 
exists between SKC and that supplier.
    Department's Position: We agree with petitioners that SKC is 
related to one of its suppliers of DMT and TPA. During the PORS, SKC 
owned more than a 5 percent interest in its supplier. (See SKC October 
12, 1993 questionnaire response at Sec. VIII at 18, and SKC October 11, 
1994 questionnaire response Sec. VIII at 21.) Thus, pursuant to 
Sec. 773(e)(4)(E) of the statute, these parties are related.
    Based on this relationship, we tested the transactions between SKC 
and its related supplier. Analysis of these prices indicated that the 
transfer price between SKC and its supplier was less than the 
supplier's cost of producing DMT and TPA. During our verification of 
SKC, we met with the supplier, who furnished us with a copy of the 
detailed inventory statement from its financial statement. The 
inventory statement listed the total and per-unit cost of goods sold in 
the supplier's finished inventory.
    SKC's supplier suggested that selling, general and administrative 
expenses, and interest expense should be based on the cost of goods 
sold (COGS) from the supplier's income statement. We calculated the 
full cost of producing DMT and TPA based on that methodology. We then 
compared these costs to the average monthly transfer prices reported on 
attachments 4 and 5 of SKC's March 13, 1995 submission, and determined 
that the supplier's cost for TPA exceeded the average transfer price 
charged to SKC. We also determined that the supplier's cost for DMT 
exceeded the average transfer price charged to SKC. (See Memorandum to 
Chris Marsh from Paul McEnrue, August 18, 1995, at page 3.) 
Accordingly, consistent with our general practice, we relied on the 
supplier's cost as the value for TPA and DMT purchased from related 
suppliers.
    Comment 34: SKC asserts that if the Department does not use the 
prices charged to SKC from a related supplier, the Department should 
ensure that it relies upon a reasonable estimate of the supplier's 
cost. SKC argues that the Department used an erroneous rate for SG&A 
expenses in its analysis of the cost of producing DMT and TPA. SKC also 
asserts that the Department in its third review calculations 
erroneously compared the prices for DMT and TPA charged by all of its 
suppliers for these materials, rather than the prices paid by SKC to 
its related suppler.
    Petitioners argue that the calculation methodology reflects a 
reasonable and proper exercise of the Department's discretion. 
Petitioners note that the methodology was proposed by SKC's related 
supplier in the second review. Petitioners maintain that SKC, unhappy 
with the results, proffered an alternative methodology in the third 
review to achieve more favorable results. Petitioners argue that the 
Department should reject SKC's request for changes since it failed to 
substantiate why a change in mehtodology would be appropriate.
    Department's Position: For the third review we changed the SG&A 
rate used in our analysis of SKC's cost of DMT and TPA. Prior to 
verification, we requested supplemental information for the third 
review. Specifically; we asked SKC to document that its purchases of 
major inputs were at arm's length. Based on the information provided by 
SKC,

[[Page 35187]]

and for the reasons noted in response to Comment 33, we have revised 
our calculations of the supplier's cost of producing DMT and TPA for 
the third review period.
    SKC also attempted to supply this information for the second review 
period. The information, however, was provided outside the time 
constraints of 19 CFR 353.31(a)(1)(ii), and was not provided in 
response to our request. Therefore, we did not use this untimely and 
unverified information in our second review period calculations.
    Comment 35: SKC contends that if the Department does adjust RC 
costs, it should calculate a uniform cost for VCs and for RCs. SKC 
asserts that such an approach would be preferable to calculating the 
cost of RC as the full cost of the scrap film plus the cost of 
recycling.
    Department's Position: As noted in our response to Comment 1, 
because we did not adjust RC costs, this issue is moot.
    Comment 36: For the third review SKC argues that the Department 
should adjust its COM for certain period costs. SKC asserts that these 
period costs could not be determined until the end of its fiscal year. 
SKC assets that correction of these period costs is necessary in order 
to ensure that the Department's cost calculations reflect the most 
complete and accurate data available.
    Department's Position: We agree, and for the final results of the 
third review we have adjusted the COM of all products to reflect the 
final, audited cost results.
    Comment 37: SKC asserts that for the second that third reviews, the 
Department erroneously used CV for all U.S. sales that had sufficient 
home market comparisons. SKC asserts this error resulted from the 
Department's erroneous reading of SKC's product concordance.
    Department's Position: We agree with SKC that we misread its 
product concordance in our preliminary results. In these final results 
we amended our calculations to match U.S. sales with home market sales 
of identical merchandise according to the concordance data provided by 
SKC.
    Comment 38: SKC asserts that due to a spreadsheet formula error, 
the Department overstated the COM for products SM30/12 and SS01/12 in 
the second review.
    Department's Position: We agree, and for the final results of the 
second review we have recalculated the COMs of these products.
    Comment 39: SKC asserts that in these reviews the Department 
erroneously overstated home market profit by failing to include selling 
expenses in COP.
    Department's Position: We agree. In these final results we have 
included SKC's selling expenses in our calculation of home market 
profit.
    Comment 40: SKC contends that the Department erroneously included 
inventory carrying costs in CV for purchase price (PP) sales.
    Department's Position: We agree with SKC that inventory carrying 
costs should be excluded from CV for comparisons with PP sales, and we 
have amended our calculations accordingly.
    Comment 41: SKC asserts that the Department overstated CV financing 
expenses in these reviews by not including notes receivable in the 
calculation of the financing expense offset.
    Department's Position: We agree and have added notes receivable in 
the offset used to calculate net finacning expenses for CV.
    Comment 42. SKC asserts that for the third administrative review 
the Department erroneously used COMs for the second review for products 
SS01/12 and SS01/15.
    Department's Position: We agree and have amended these final 
results accordingly.
    Comment 43: STC asserts that the Department should exclude aberrant 
U.S. sales of obsolete merchandise from its margin analysis. STC 
contends that the CIT determined in American Permac, Inc. v. the United 
States, 783 F. Supp. 1421 (CIT 1992) that the Department had the 
discretion to exclude such U.S. sales.
    Department's Position: We disagree with STC. As noted in the Final 
Results of the First Review, there is no provision in the statute for 
the exclusion of U.S. sales based upon those U.S. sales being 
``aberrant'' or outside the ordinary course of trade (See Final Results 
of First Review, (42842).) Therefore, we have included these sales in 
our calculations.
    Comment 44: STC asserts that if the Department includes sales of 
obsolete merchandise in its margin calculations for the third review, 
it should compare them to comparable home market sales, even if such 
sales were below cost. STC asserts that the legislative history of the 
sales-below-cost provision and the SAA accompanying the Uruguay Round 
support the use of below-cost sales of obsolete merchandise in the 
calculation of FMV.
    Department's Position: We disagree with STC. As explained in our 
preliminary determination, all comparable home market sales were 
excluded because they were below cost. Section 773(b) of the Act 
explicitly mandates the exclusion of below cost sales if such sales 
have been made in substantial quantities over an extended period of 
time and are not at prices which permit recovery of all costs within a 
reasonable period of time in the normal course of trade. Because the 
language of the statute unambiguously requires the exclusion of all 
below cost sales that have satisfied the listed criteria, it is 
unnecessary to resort to the legislative history for further guidance. 
See Davis v. Michigan Dep't. of Treasury, 489 U.S. 803, 808, n.3 (1989) 
(``Legislative history is irrelevant to the interpretation of an 
unambiguous statute.'').
    Moreover, it is a primary tenet of statutory construction that, if 
possible, legislative history must be read to be consistent with the 
meaning of a clear statutory mandate. See Sutherland Stat. Const. 
Sec. 48.06 (5th ed. 1992). Therefore, the references to obsolete and 
end-of-model year merchandise in the legislative history of the COP 
provision merely provide examples of instances when below cost sales 
may not satisfy the statute's criteria of being made in substantial 
quantities over an extended period of time and at prices which permit 
recovery of costs.
    Therefore, because we determined that STC's below-cost sales 
satisfied the statutory criteria for exclusion, we complied with the 
clear statutory mandate to disregard STC's below cost sales, including 
these sales of obsolete merchandise. When necessary, we have used CV, 
in accordance with section 773(b).
    Comment 45: STC contends that the Department should correct its 
calculation of profit for value-added sales by adjusting for movement 
expenses.
    Department's Position: We agree and have adjusted our calculations 
accordingly.
    Comment 46: STC contends that for third period ESP sales compared 
to CV, the Department should include inventory carrying costs in the 
pool of indirect selling expenses.
    Department's Position: We agree that inventory carrying costs 
should be included in the pool of indirect selling expenses for the 
calculation of CV when used as the comparison for ESP sales. We have 
adjusted our calculations accordingly.

Final Results of Review and Revocation in Part

    Upon review of the comments submitted, the Department has 
determined that the following margins exist for the periods indicated:

[[Page 35188]]



------------------------------------------------------------------------
                                                                Margin  
                      Company                        Period    (percent)
------------------------------------------------------------------------
Cheil.............................................     92-93           0
Cheil.............................................     93-94        0.01
Kolon.............................................     92-93        0.11
Kolon.............................................     92-93        0.12
SKC...............................................     92-93        5.89
SKC...............................................     93-94        0.52
STC...............................................     92-93        0.47
STC...............................................     93-94        0.93
------------------------------------------------------------------------

    Based upon the information submitted by Cheil during these reviews 
and the first administrative review, we further determine that Cheil 
has met the requirements for revocation set forth in Sec. 353.25(a)(2) 
and Sec. 353.25(b) of the Department's regulations. Cheil has 
demonstrated three consecutive years of sales at not less than fair 
value and has submitted the certifications required under 19 CFR 
353.25(b)(1). The Department conducted a verification of Cheil as 
required under 19 CFR 353.25(c)(2)(ii).
    On the basis of no sales at less than FMV for a period of three 
consecutive years, and the lack of any indication that such sales are 
likely, the Department concludes that Cheil is not likely to sell the 
merchandise at less than FMV in the future. Therefore, the Department 
is revoking the order with respect to Cheil.
    The Customs Service shall assess antidumping duties on all 
appropriate entries. Individual differences between USP and FMV may 
vary from the percentages stated above. The Department will issue 
appraisement instructions concerning each respondent directly to the 
U.S. Customs Service.
    Furthermore, the following deposit requirements will be effective 
for all shipments of the subject 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 rate for the 
reviewed firms will be the rates outlined above for the third review 
period except for Cheil and Kolon; because Kolon's weighted-average 
margin is de minimis, its cash deposit rate will be zero percent; 
because we are revoking Cheil, no cash deposit will be required for 
Cheil; (2) for previously reviewed or investigated companies not listed 
above, the cash deposit rate will continue to be the company-specific 
rate published for the most recent period; (3) if the exporter is not a 
firm covered in this review, a prior review, or in the original LTFV 
investigation, but the manufacturer is, the cash deposit rate will be 
the rate established for the most recent period for the manufacturer of 
the merchandise; and (4) if neither the exporter nor the manufacturer 
is a firm covered in this or any previous review conducted by the 
Department, the cash deposit rate will be 4.82 percent, the all-others 
rate established in 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 these review periods. 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 protective order is hereby requested. Failure to 
comply with the regulations and the terms of the APO is a sanctionable 
violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR 
353.22.

    Dated: June 26, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-17159 Filed 7-3-96; 8:45 am]
BILLING CODE 3510-DS-M