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[Federal Register Volume 66, Number 36 (Thursday, February 22, 2001)]
[Notices]
[Pages 11140-11144]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-4406]

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DEPARTMENT OF COMMERCE

International Trade Administration

[A-588-836]

Polyvinyl Alcohol from Japan: Preliminary Results of Antidumping 
Duty Administrative Review

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

ACTION: Notice of preliminary results of antidumping duty 
administrative review.

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SUMMARY: In response to a request by the petitioner, Air Products and 
Chemicals,

[[Page 11141]]

Inc.,\1\ the Department of Commerce is conducting an administrative 
review of the antidumping duty order on polyvinyl alcohol from Japan. 
This review covers one manufacturer/exporter, Kuraray Co., Ltd. 
(``Kuraray''). The period of review is May 1, 1999, through April 30, 
2000.
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    \1\ On January 19, 2001, counsel for Air Products and Chemicals, 
Inc. (``Air Products'') stated that Air Products' PVA business was 
sold to Celanese Ltd.
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    We preliminarily determine that sales of subject merchandise have 
been made below normal value. If these preliminary results are adopted 
in our final results of administrative review, we will instruct the 
Customs Service to assess antidumping duties on all appropriate 
entries. Interested parties are invited to comment on these preliminary 
results.

EFFECTIVE DATE: February 22, 2001.

FOR FURTHER INFORMATION CONTACT: Barbara Wojcik-Betancourt, at (202) 
482-0629, or Brian Smith, at (202) 482-1766, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW., Washington, DC 20230.

SUPPLEMENTARY INFORMATION:

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930, as amended 
(``the Act''), by the Uruguay Round Agreements Act (``URAA''). In 
addition, unless otherwise indicated, all references are made to the 
Department of Commerce's (``the Department's'') final regulations at 19 
CFR Part 351 (April 2000).

Background

    On May 14, 1996, the Department published in the Federal Register 
an antidumping duty order on polyvinyl alcohol (``PVA'') from Japan (61 
FR 24286). On May 16, 2000, the Department published in the Federal 
Register, a notice advising of the opportunity to request an 
administrative review of this order for the period May 1, 1999, through 
April 30, 2000 (65 FR 31141). On May 31, 2000, we received a request 
from the petitioner, Air Products and Chemicals, Inc. (``petitioner''), 
to conduct an administrative review of Kuraray. On June 1, 2000, we 
received a letter from the petitioner asking the Department to correct 
the period of review (``POR'') for this review, which was incorrectly 
stated in the petitioner's May 31, 2000, letter requesting initiation 
of the administrative review. On July 7, 2000, we published a notice of 
initiation of this review for Kuraray (65 FR 41942).
    On July 5, 2000, the Department issued an antidumping questionnaire 
to Kuraray. Because the Department disregarded sales that failed the 
cost test in the last completed review for Kuraray (see Notice of Final 
Results of the First Antidumping Duty Administrative Review: Polyvinyl 
Alcohol from Japan, 65 FR 50182 (August 17, 2000)) (``Final Results of 
Polyvinyl Alcohol from Japan''), the Department had reasonable grounds 
to believe or suspect that Kuraray's sales of the foreign like product 
may have been made at prices below the cost of production (``COP''), as 
provided by section 773(b)(2)(A)(ii) of the Act. Therefore, pursuant to 
section 773(b)(1) of the Act, we initiated an investigation to 
determine whether Kuraray made home market sales during the POR at 
prices below its COP, and required Kuraray to respond to the COP 
section of the questionnaire issued in July 2000. The Department 
received Kuraray's responses to the questionnaire in August and 
September 2000.
    We issued a supplemental questionnaire to Kuraray in November 2000. 
A response to the supplemental questionnaire was received in December 
2000.

Scope of Review

    The product covered by this review is PVA. PVA is a dry, white to 
cream-colored, water-soluble synthetic polymer. This product consists 
of polyvinyl alcohols hydrolyzed in excess of 85 percent, whether or 
not mixed or diluted with defoamer or boric acid. Excluded from this 
review are PVAs covalently bonded with acetoacetylate, carboxylic acid, 
or sulfonic acid uniformly present on all polymer chains in a 
concentration equal to or greater than two mole percent, and PVAs 
covalently bonded with silane uniformly present on all polymer chains 
in a concentration equal to or greater than one-tenth of one mole 
percent. PVA in fiber form is not included in the scope of this review.
    The merchandise under review is currently classifiable under 
subheading 3905.30.00 of the Harmonized Tariff Schedule of the United 
States (``HTSUS''). Although the HTSUS subheading is provided for 
convenience and customs purposes, our written description of the scope 
is dispositive.

Period of Review

    The POR is May 1, 1999, through April 30, 2000.

Fair Value Comparisons

    To determine whether the respondent's sales of the subject 
merchandise 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, as described below. In 
accordance with section 777A(d)(2) of the Act, we compared, where 
appropriate, the export prices and CEPs of individual transactions to 
the monthly weighted-average price of sales of the foreign like product 
made in the ordinary course of trade (see section 773(a)(1)(B)(i) of 
the Act).

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced by Kuraray covered by the description in the ``Scope 
of the Review'' section, above, to be foreign like products for 
purposes of determining appropriate product comparisons to U.S. sales. 
We compared U.S. sales to sales made in the home market within the 
contemporaneous window period, which extends from three months prior to 
the U.S. sale until two months after the sale. Where there were no 
sales of identical merchandise made in the home market in the ordinary 
course of trade, we compared U.S. sales to sales of the most similar 
foreign like product made in the ordinary course of trade. In making 
the product comparisons, we matched foreign like products based on the 
physical characteristics reported by the respondent in the following 
order: viscosity, hydrolysis, particle size, tackifier, defoamer, ash, 
color, volatiles, and visual impurities.

Export Price and Constructed Export Price

    During the POR, Kuraray sold subject merchandise to the U.S. market 
(1) directly through its wholly-owned U.S. affiliate (Kuraray America 
Inc.); (2) through Kuraray America via its wholly-owned home market 
affiliate (Kuraray Trading Co., Ltd.) (hereafter referred to as Kuraray 
Trading); or (3) directly through unaffiliated Japanese trading 
companies.
    We examined the facts surrounding the U.S. sales process for those 
U.S. sales which Kuraray made through its affiliates. Based on the 
evidence on the record, we found that Kuraray either sells the subject 
merchandise directly to its U.S. affiliate or through Kuraray Trading, 
which in turn sells the subject merchandise to the U.S. affiliate. For 
U.S. sales made only through its U.S.

[[Page 11142]]

affiliate, the U.S. customer contacts Kuraray's U.S. affiliate, who 
then places the order with Kuraray. Kuraray arranges for delivery of 
the goods from Japan to the unaffiliated U.S. customer and issues its 
invoice to its U.S. affiliate for payment of the goods. Even though 
Kuraray's U.S. affiliate does not have a warehouse, it takes title to 
the goods once it pays Kuraray for the goods. The U.S. affiliate then 
issues its sales invoice to the unaffiliated U.S. customer and collects 
payment for the goods (see pages 11 and 12, and 16 through 18, and 
Exhibits A.3.a.-1, A.3.a.-2 and A.3.c, of the August 31, 2000, 
antidumping questionnaire response).
    For U.S. sales made through Kuraray Trading to the U.S. affiliate, 
the U.S. affiliate still transmits the U.S. customer's order to 
Kuraray. However, Kuraray sells the goods to Kuraray Trading in Japan. 
Kuraray Trading then issues the U.S. affiliate its sales invoice. 
Kuraray Trading arranges for delivery of the goods from Japan to the 
unaffiliated U.S. customer, and the U.S. affiliate takes title to the 
goods once it pays Kuraray Trading for the goods. The U.S. affiliate 
also issues its sales invoice to the unaffiliated U.S. customer and 
collects payment for the goods (see pages 11 and 12, and 16 through 18, 
and Exhibits A.3.a.-1, A.3.a.-2 and A.3.c, of the August 31, 2000, 
antidumping questionnaire response). Therefore, based on the facts on 
this record, the Department preliminarily determines that these sales 
were made ``in the United States'' within the meaning of section 772(b) 
of the Act, and, thus, should be treated as CEP transactions (see AK 
Steel Corp., et al. v. United States, 226 F.3d 1361, 1374 (Fed. Cir 
2000)).
    For Kuraray's U.S. sales not made in the United States (i.e., not 
made through its U.S. affiliate), we calculated EP based on the 
reported packed FOB price between Kuraray and the unaffiliated trading 
company in Japan. We made deductions, as appropriate, from the starting 
price for foreign inland freight from the plant to the port of 
exportation, foreign warehousing expenses, foreign inland insurance, 
and foreign brokerage and handling expenses, in accordance with section 
772(c)(2)(A) of the Act.
    For Kuraray's U.S. sales made in the United States through its U.S. 
affiliate, we based CEP on packed CIF or delivered prices to 
unaffiliated purchasers in the United States. We made deductions, where 
appropriate, for foreign inland freight from the plant to the port of 
exportation, foreign inland insurance, foreign brokerage and handling 
expenses, international freight, palletization charges, foreign 
warehousing expenses, U.S. brokerage and handling expenses, U.S. 
Customs duties (which include harbor maintenance and merchandise 
processing fees), and U.S. inland freight expenses (freight from port 
to the customer), in accordance with section 772(c)(2)(A) of the Act.
    In accordance with section 772(d)(1) of the Act, we deducted from 
CEP direct and indirect selling expenses that were associated with 
Kuraray's economic activities occurring in the United States. We also 
deducted from CEP an amount for profit, in accordance with section 
772(d)(3) of the Act.

Normal Value

    In order to determine whether there was a sufficient volume of 
sales in the home market to serve as a viable basis for calculating 
normal value (i.e., the aggregate volume of home market sales of the 
foreign like product is five percent or more of the aggregate volume of 
U.S. sales), we compared the respondent's volume of home market sales 
of the foreign like product to the volume of U.S. sales of the subject 
merchandise, in accordance with 19 CFR 351.404(b). We determined that 
the quantity of foreign like product sold in the exporting country was 
sufficient to permit a proper comparison with the sales of the subject 
merchandise to the United States because Kuraray made sales in its home 
market which were greater than five percent of its sales in the U.S. 
market. Therefore, in accordance with section 773(a)(1)(B)(i) of the 
Act, we based normal value on home market sales in Japan.

Level of Trade/CEP Offset

    In accordance with section 773(a)(7) of the Act, to the extent 
practicable, we determined normal value based on sales in the 
comparison market at the same level of trade (``LOT'') as the EP or CEP 
transaction. The normal value LOT is that of the starting-price sales 
in the comparison market or, when normal value is based on constructed 
value, that of the sales from which we derive selling, general and 
administrative (``SG&A'') expenses and profit. For export price, the 
LOT is also the level of the starting-price sale, which is usually from 
the exporter to the importer. For CEP, it is the level of the 
constructed export sale from the exporter to the affiliated importer.
    To determine whether normal value sales are at a different LOT than 
export price or CEP, we examine stages in the marketing process and 
selling functions along the chain of distribution between the producer 
and the customer. If the comparison-market sales are at a different 
LOT, and the difference affects price comparability, as manifested in a 
pattern of consistent price differences between the sales on which 
normal value is based and comparison-market sales at the LOT of the 
export transaction, we make a LOT adjustment under section 773(a)(7)(A) 
of the Act. Finally, for CEP sales, if the normal value level is more 
remote from the factory than the CEP level and there is no basis for 
determining whether the difference in the levels between normal value 
and CEP affects price comparability, we adjust normal value under 
section 773(a)(7)(B) of the Act (the CEP offset provision). See Notice 
of Final Determination of Sales at Less Than Fair Value: Certain Cut-
to-Length Carbon Steel Plate from South Africa, 62 FR 61731 (November 
19, 1997).
    We note that the U.S. Court of International Trade (``CIT'') has 
held that the Department's practice of determining LOT for CEP 
transactions after CEP deductions is an impermissible interpretation of 
section 772(d) of the Act. See, e.g., Borden, Inc., v. United States, 4 
F. Supp. 2d 1221, 1241-42 (CIT 1998) (Borden); and Micron Technology, 
Inc. v. United States, 40 F. Supp. 2d 481 (CIT 1999). The Department 
believes, however, that its practice is in full compliance with the 
statute. On June 4, 1999, the CIT entered final judgement in Borden on 
the LOT issue. See, i.e., Borden, Inc. v. United States, Court No. 96-
08-01970, Slip Op. 99-50 (CIT June 4, 1999). The government has filed 
an appeal of Borden, which is currently pending before the U.S. Court 
of Appeals for the Federal Circuit. Consequently, the Department has 
continued to follow its normal practice of adjusting CEP under section 
772(d) prior to starting a LOT analysis, as articulated by the 
Department's regulations at section 351.412.
    In this case, Kuraray reported two customer categories (i.e., 
distributors and end users) and three channels of distribution (sales 
through unaffiliated distributors to end users, direct sales to end 
users, and sales through its affiliate to end users) for its home 
market sales. In its response, Kuraray claims that its sales to 
unaffiliated home market customers (i.e., end users and distributors) 
are at the same LOT as its sales made through affiliated customers 
because Kuraray provides the same selling services to its unaffiliated 
and affiliated customers. Specifically, Kuraray identified the 
following selling services to both types of customer: (1) Salespeople 
visits; (2) inventory maintenance; (3) after-sale service and technical 
advice; (4) advertising; (5)

[[Page 11143]]

freight and delivery; and (6) handling of rejected merchandise. Based 
on our review of the record evidence, we agree with the respondent's 
claim that all home market sales are at the same LOT (see exhibit 
A.3.c. of the August 31, 2000, submission).
    Kuraray had both EP and CEP sales in the U.S. market. Kuraray 
reported that its EP sales were made through one channel of 
distribution (i.e., sales through unaffiliated Japanese trading 
companies to U.S. end users). Kuraray also reported that its CEP sales 
were made through two channels of distribution (i.e., sales through its 
U.S. affiliate via its home market affiliate and sales through its U.S. 
affiliate only), which we have treated as one LOT because there is no 
apparent difference in the selling functions performed by Kuraray (see 
exhibit A.3.c. of the August 31, 2000, submission). In analyzing 
Kuraray's selling activities for its EP sales, we found that the EP 
sales involved basically the same selling functions associated with the 
home market LOT described above (i.e., inventory maintenance, freight 
and delivery, and handling of rejected merchandise). Therefore, based 
upon this information, we preliminarily determine that the LOT for all 
EP sales is the same as that in the home market.
    For sales which we categorized as CEP sales, after making the 
appropriate deductions under section 772(d) of the Act, we found that 
the remaining expenses associated with selling activities performed by 
Kuraray are limited to general and administrative expenses that are 
reflected in the CEP price. In contrast, the normal value prices 
include selling expenses attributable to selling activities performed 
by Kuraray for the home market, such as sales support, freight and 
delivery functions (see exhibit A.3.c. of the August 31, 2000, 
submission). Accordingly, we have concluded that CEP is at a different 
LOT from the normal value LOT.
    We then examined whether a LOT adjustment or CEP offset may be 
appropriate. In this case, Kuraray only sold at one LOT in the home 
market; therefore, there is no information available to determine a 
pattern of consistent price differences between the sales on which 
normal value is based and the comparison market sales at the LOT of the 
export transaction, in accordance with the Department's normal 
methodology as described above (see Final Results Polyvinyl Alcohol 
from Japan; and Porcelain-on-Steel Cookware from Mexico Final Results 
of Administrative Review, 65 FR 30068 (May 10, 2000), and accompanying 
Decision Memorandum at Comment 6). Further, we do not have information 
which would allow us to examine pricing patterns based on respondent's 
sales of other products, and there are no other respondents or other 
record information on which such an analysis could be based. 
Accordingly, because the data available do not provide an appropriate 
basis for making a LOT adjustment, but the LOT in the home market is at 
a more advanced stage of distribution than the LOT of the CEP, we made 
a CEP offset adjustment in accordance with section 773(a)(7)(B) of the 
Act.

Cost of Production Analysis

    Pursuant to section 773(b)(1) of the Act, we initiated a COP 
investigation of sales made by Kuraray in the home market.

A. Calculation of COP

    In accordance with section 773(b)(3) of the Act, we calculated the 
weighted-average COP, by grade, based on the sum of the cost of 
materials and fabrication, general and administrative (``G&A'') 
expenses, and packing costs. We relied on the submitted COP data except 
for the following: (1) we adjusted Kuraray's reported per-unit costs to 
account for the overstatement of acetic acid amounts; and (2) we 
adjusted Kuraray's reported labor cost for one product where Kuraray 
failed to report a value (i.e., a positive value) (see Preliminary 
Results Calculation Memorandum from Team to the File, dated January 30, 
2001).

B. Test of Home Market Prices

    We compared the weighted-average COP to the comparison-market sales 
of the foreign like product, as required under section 773(b) of the 
Act, in order to determine whether these sales had been made at prices 
below the COP within an extended period of time in substantial 
quantities, and whether such prices were sufficient to permit the 
recovery of all costs within a reasonable period of time. On a grade-
specific basis, we compared the COP to the comparison-market prices, 
less any applicable movement charges, discounts, and direct and 
indirect selling expenses.

C. Results of the COP Test

    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of the respondent's sales of a given product were made at 
prices below the COP, we did not disregard any below-cost sales of that 
product because we determined that the below-cost sales were not made 
in ``substantial quantities.'' Where 20 percent or more of the 
respondent's sales of a given product were made at prices below the 
COP, we disregarded the below-cost sales because such sales were found 
to be made within an extended period of time in ``substantial 
quantities,'' in accordance with sections 773(b)(2)(B) and (C) of the 
Act, and because the below-cost sales of the product were at prices 
which would not permit recovery of all costs within a reasonable period 
of time, in accordance with section 773(b)(2)(D) of the Act.
    Based on this test, we excluded from our analysis certain 
comparison-market sales of PVA products that were made at below-COP 
prices (see Preliminary Results Calculation Memorandum from Team to the 
File, dated January 30, 2001).

Price-to-Price Comparisons

    We calculated normal value based on both packed, FOB or delivered 
prices Kuraray charged to its unaffiliated purchasers in Japan and 
packed, FOB or delivered prices Kuraray Trading charged to its 
unaffiliated purchasers in Japan. We made adjustments to the starting 
price for discounts, where appropriate. We also made deductions, where 
appropriate, for inland freight (i.e., plant to warehouse and warehouse 
to customer), inland insurance and warehousing expenses, pursuant to 
section 773(a)(6)(B) of the Act.
    For all comparisons, we made a circumstance-of-sale adjustment, 
where appropriate, for differences in credit expenses, pursuant to 
section 773 (a)(6)(C)(iii) of the Act and 19 C.F.R. 351.410(c).
    For comparisons to CEP sales, we also deducted from normal value 
the lesser of comparison-market indirect selling expenses and indirect 
selling expenses deducted from CEP (the CEP offset), pursuant to 
section 773(a)(7)(B) of the Act and 19 CFR 351.412(f).
    For comparisons to both export price and CEP sales, we made 
adjustments to normal value for differences in packing expenses, in 
accordance with section 773(a)(6) of the Act. We also made adjustments 
to normal value, where appropriate, for differences in costs 
attributable to differences in the physical characteristics of the 
merchandise, pursuant to section 773(a)(6)(C)(ii) of the Act and 19 CFR 
351.411.

Preliminary Results of Review

    As a result of this review, we preliminarily determine that the 
following margin exists for the period May 1, 1999, through April 30, 
2000:

[[Page 11144]]

------------------------------------------------------------------------
                                                                 Margin
                    Manufacturer/exporter                      (percent)
------------------------------------------------------------------------
Kuraray Co., Ltd.............................................       4.87
------------------------------------------------------------------------

    Pursuant to 19 CFR 351.224(b), the Department will conduct 
disclosure within five days after the date of publication of this 
notice. Any interested party may request a hearing within 30 days of 
publication. Any hearing, if requested, will be held 44 days after the 
date of publication or the first business day thereafter.
    Issues raised in hearings will be limited to those raised in the 
respective case briefs and rebuttal briefs. Case briefs from interested 
parties and rebuttal briefs, limited to the issues raised in the 
respective case briefs, may be submitted not later than 30 days and 37 
days, respectively, from the date of publication of these preliminary 
results. Parties who submit case briefs or rebuttal briefs in this 
proceeding are requested to submit with each argument (1) a statement 
of the issue and (2) a brief summary of the argument. Parties are also 
encouraged to provide a summary of the arguments not to exceed five 
pages and a table of statutes, regulations and cases cited.
    The Department will issue the final results of this administrative 
review, including the results of its analysis of issues raised in any 
such written briefs or at the hearing, if held, not later than 120 days 
after the date of publication of this notice.
    Interested parties who wish to request a hearing or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, Room B-099, within 30 days of the 
date of publication of this notice. The request should contain: (1) The 
party's name, address and telephone number; (2) the number of 
participants; and (3) a list of issues to be discussed.

Cash Deposit and Assessment Requirements

    The final results of this review shall be the basis for the 
assessment of antidumping duties on entries of merchandise covered by 
this review and for future deposits of estimated duties.
    The Department shall determine and the Customs Service shall assess 
antidumping duties on all appropriate entries. The Department will 
issue appropriate appraisement instructions directly to the Customs 
Service upon completion of this review. For Kuraray, for duty 
assessment purposes, we intend to calculate importer-specific 
assessment rates by aggregating the dumping margins calculated for all 
U.S. sales to each importer and dividing this amount by the total 
entered value of the same sales of subject merchandise for each 
importer. In accordance with 19 CFR 351.106(c)(2), we will instruct the 
Customs Service to assess antidumping duties on all appropriate entries 
covered by this review if any importer-specific assessment rate 
calculated in the final results of this review is above de minimis 
(i.e., at or above 0.50 percent).
    Furthermore, the following deposit requirements will be effective 
upon publication of the final results of this antidumping duty 
administrative review for all shipments of PVA from Japan, entered, or 
withdrawn from warehouse, for consumption on or after the publication 
date, as provided by section 751(a) of the Act: (1) The cash deposit 
rate for Kuraray will be the rate established in the final results; (2) 
if the exporter is not a firm covered in this review, a prior review, 
or the original less-than-fair-value (``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 (3) 
the cash deposit rate for all other manufacturers or exporters will 
continue to be 77.49 percent, the ``All Others'' rate made effective by 
the LTFV investigation. These requirements, when imposed, shall remain 
in effect until publication of the final results of the next 
administrative review.
    This notice serves as a preliminary reminder to importers of their 
responsibility under 19 CFR 351.402(f)(2) to file a certificate 
regarding the reimbursement of antidumping duties prior to liquidation 
of the relevant entries during this review period. Failure to comply 
with this requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This administrative review and notice are in accordance with 
sections 751(a)(1) and 777(i) of the Act and 19 CFR 351.213. Effective 
January 20, 2001, Bernard T. Carreau is fulfilling the duties of the 
Assistant Secretary for Import Administration.

    Dated: January 30, 2001.
Bernard T. Carreau,
Deputy Assistant Secretary, AD/CVD Enforcement II.
[FR Doc. 01-4406 Filed 2-21-01; 8:45 am]
BILLING CODE 3510-DS-P
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