Polyvinyl Alcohol From Taiwan: Preliminary Results of Third Antidumping Duty Administrative Review and Intent Not To Revoke Order in Part

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Notice of preliminary results of third antidumping duty administrative review and intent not to revoke order in part.

SUMMARY:

In response to a request by Chang Chun Petrochemical Co., Ltd., a producer and exporter of polyvinyl alcohol from Taiwan, the Department of Commerce is conducting an administrative review of the antidumping duty order on polyvinyl alcohol from Taiwan. The period of review is May 1, 1998, through April 30, 1999.

We preliminarily find that sales of subject merchandise have not been made below normal value. If these preliminary results are adopted in our final results of administrative review, we will instruct the Customs Service not to assess antidumping duties on entries for which the importer-specific rate is less than de minimis (i.e., less than 0.50 percent). Furthermore, we preliminarily intend not to revoke the antidumping duty order with respect to subject merchandise produced and also exported by Chang Chun Petrochemical Co., Ltd. because its sales were not made in commercial quantities (see 19 CFR 351.222(e)); see Intent Not to Revoke section of this notice. Interested parties are invited to comment on these preliminary results.

EFFECTIVE DATE:

June 6, 2000.

FOR FURTHER INFORMATION CONTACT:

Brian Ledgerwood, at (202) 482-3836, or Brian Smith, at (202) 482-1766, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, 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 (“the Act”), as amended, 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 (1999).

Case History

On May 14, 1996, the Department published in the Federal Register an antidumping duty order on polyvinyl alcohol (“PVA”) from Taiwan. See 61 FR 24286. On May 19, 1999, the Department published a notice providing an opportunity to request an administrative review of this order for the period May 1, 1997, through April 30, 1998 (64 FR 27235). On May 27, 1999, we received a timely request for an administrative review from Chang Chun Petrochemical Co. (“Chang Chun”). In addition, Chang Chun requested that the Department revoke the antidumping duty order with respect to it. On June 30, 1999, we published a notice of initiation of this review for Chang Chun (64 FR 35124).

On July 8, 1999, we issued an antidumping questionnaire to Chang Chun. Because, the Department disregarded sales that failed the cost test in the last completed review for Chang Chun (see Notice of Final Results of Second Antidumping Duty Administrative Review: Polyvinyl Alcohol from Taiwan, 64 FR 32024 (June 15, 1999)), the Department had reasonable grounds to believe or suspect that Chang Chun'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 Chang Chun made home market sales during the period of review (“POR”) at prices below its COP, and required Chang Chun to respond to the COP section of the questionnaire issued in July 1999.

The Department received Chang Chun's response in August 1999. We issued supplemental questionnaires to Chang Chun in September and November 1999. Responses to these questionnaires were received in October and November 1999, respectively.

On November 15, 1999, the Department requested submissions of factual information regarding revocation of the antidumping order in part. Such submissions and rebuttal comments were received from the petitioner, Air Products and Chemicals, Inc., and Chang Chun in December 1999. On January 14, 2000, the Department issued to Chang Chun a supplemental questionnaire on the information it submitted pertaining to revocation. Chang Chun submitted its supplemental revocation response on February 4, 2000.

On January 21, 2000, the Department published a notice postponing the preliminary results of this review until May 30, 2000 (65 FR 3418). On February 9, 2000, the Department requested confirmation from the Customs Service that it had not made any adverse findings with respect to the classification of PVA exported to the United States from Taiwan by Chang Chun. On February 16, 2000, the U.S. Customs Service confirmed that although it had conducted an investigation on Chang Chun's shipments, it found no violations (see memorandum to the file, dated March 14, 2000). Pursuant to section 782(i)(2) of the Act, the Department verified Chang Chun's response from February 21 through March 3, 2000. On April 27, 2000, the Department issued its verification report.

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, 1998, through April 30, 1999.

Verification

As provided in section 782(i)(2) of the Act, we verified information provided by Chang Chun. We used standard verification procedures, including on-site inspection of the manufacturer's facilities and examination of relevant sales and financial records. Our verification results are outlined in the verification reports placed in the case file (see the Department's April 27, 2000, verification report (hereafter “verification report”) for further discussion).

Fair Value Comparisons

To determine whether sales of the subject merchandise to the United States were made at prices below normal value, we compared the export price to normal value as described below. In accordance with section 777A(d)(2) of the Act, we compared the export price 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). Where there were no sales of the foreign like product made in the ordinary course of trade, we compared the export price of those transactions to the constructed value of that merchandise (see section 773(a)(4) of the Act).

Product Comparisons

In accordance with section 771(16) of the Act, we considered all products produced by Chang Chun 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 Chang Chun in the following order: viscosity, hydrolysis, particle size, tackifier, defoamer, ash, color, volatiles, and visual impurities. For those U.S. sales of PVA for which there were no comparable foreign market sales in the ordinary course of trade (i.e., sales within the contemporaneous window which were made at prices above the COP), we compared U.S. sales to the constructed value, in accordance with section 773(a)(4) of the Act.

Export Price

In accordance with sections 772(a) and (c) of the Act, we calculated an export price for all of Chang Chun's sales since the merchandise was sold directly to the first unaffiliated purchaser in the United States prior to importation, and because constructed export price (“CEP”) methodology was not otherwise warranted based on the facts of record. We calculated export price based on the packed, CIF price to unaffiliated purchasers in, or for exportation to, the United States. We made deductions from the starting price for domestic inland freight, foreign brokerage and handling, international freight, and marine insurance in accordance with section 772(c)(2)(A) of the Act. We made the following adjustments to Chang Chun's U.S. expense data based on our verification findings: (1) we corrected the reported amounts for packing expenses; and (2) we corrected invoice-specific information with respect to marine insurance and bank charges (see pages 16-21 and 29 of the verification report for further discussion).

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 Chang Chun's volume of home market sales of the foreign like product to its volume of U.S. sales of the subject merchandise, in accordance with 19 CFR 351.404(b). For Chang Chun, we determined that the quantity of foreign like product sold in the exporting country was sufficient to permit a proper comparison with the sales of the subject merchandise to the United States because Chang Chun had sales in its home market which were greater than five percent of its sales in the U.S. market. Therefore, in accordance with section 773(a)(1)(B)(i) of the Act, we based normal value on sales in Taiwan.

Based on our verification findings, we made the following adjustments to Chang Chun's reported home market expense data: (1) we corrected the reported amounts for credit expenses and packing expenses; and (2) we corrected invoice-specific information with respect to the quantity for one sales transaction (see pages 4, 15-16 and 30 of the verification report and May 30, 2000, preliminary results calculation memorandum for further discussion).

Level of Trade

In accordance with section 773(a)(1)(B)(i) 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 export price 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.

To determine whether normal value sales are at a different LOT than export price, 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 an LOT adjustment under section 773(a)(7)(A) of the Act. See Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from South Africa, 62 FR 61731, 61732-33 (November 19, 1997).

As in previous reviews, Chang Chun reported one channel of distribution for its U.S. and home market sales. Based on our analysis of the selling functions, we found that the selling activities performed in both the home market and the United States (e.g., freight and delivery arrangements) were similar. Therefore, we determined that sales in both markets are at the same LOT and consequently no LOT adjustment is warranted. (See Final Results of Antidumping Duty Administrative Review: PVA From Taiwan, 63 FR 32810, 32812 (June 16, 1998)).

Cost of Production (“COP”)

As we stated in the Case History section, because we disregarded sales below the COP for Chang Chun in the last completed segment of the proceeding (i.e., the second administrative review), we had reasonable grounds to believe or suspect that Chang Chun's sales of the foreign product under consideration for the determination of normal value in this review may have been made at prices below the 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 a COP investigation of sales by Chang Chun 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, SG&A expenses, and packing costs. We relied on the submitted COPs, correcting the reported amounts for general and administrative expenses and factory overhead based on our verification findings (see pages 29-30 of the verification report for further discussion). In addition, we adjusted the joint production costs between PVA and acetic acid using the relative sales value of each product calculated on the basis of a two-year period prior to the period of the less-than-fair-value (“LTFV”) investigation (see May 30, 2000, preliminary results calculation memorandum and Final Results of Second Antidumping Duty Administrative Review: PVA From Taiwan; 64 FR 32024, 32025 (June 15, 1999)).

Chang Chun purchased a major input (i.e., vinyl acetate monomer (“VAM”)) used in the production of PVA from an affiliated party. Pursuant to 19 CFR 351.407(b), we applied the major input rule to determine the value of the VAM. Under the major input rule, we normally will determine the value of a major input purchased from an affiliated person based on the higher of: (1) the price paid by the exporter or producer to the affiliated person for the major input; (2) the amount usually reflected in sales of the major input in the market under consideration; or (3) the cost to the affiliated person of producing the major input. In this case, we used the transfer price of VAM from Chang Chun's affiliate, which was higher than the market price or the affiliate's COP.

B. Test of Home Market Prices

We compared the weighted-average COP, adjusted where appropriate, to the comparison market sales of the foreign like product, as required under section 773(b) of the Act, in order to determine whether these sales had been made at prices below the COP within an extended period of time in substantial quantities, and whether such prices were sufficient to permit the recovery of all costs within a reasonable period of time. On a grade-specific basis, we compared the revised 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), 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 within the POR. For those U.S. sales of PVA for which there were no comparable home market sales in the ordinary course of trade, we compared export price to constructed value in accordance with section 773(a)(4) of the Act.

D. Calculation of Constructed Value

In accordance with section 773(e) of the Act, we calculated constructed value based on the sum of Chang Chun's cost of materials, fabrication, SG&A (including interest expenses), U.S. packing costs, and profit.

In accordance with section 773(e)(2)(A) of the Act, we based SG&A and profit on the amounts incurred and realized by Chang Chun in connection with the production and sale of the foreign like product in the ordinary course of trade for consumption in Taiwan. We used the weighted-average home market selling expenses for this purpose.

Price-to-Price Comparisons

We calculated normal value based on packed, FOB or delivered prices to unaffiliated purchasers in Taiwan. We made adjustments to the starting price for returns, where appropriate. We also made deductions, where appropriate, for inland freight—which included inland insurance—pursuant to section 773(a)(6)(B) of the Act. In addition, we made adjustments for differences in costs attributable to differences in the physical characteristics of the merchandise in accordance with section 773(a)(6)(C)(ii) of the Act and 19 CFR 351.411, as well as for differences in circumstances-of-sale (“COS”) in accordance with section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410. We made COS adjustments by deducting home market direct selling expenses (i.e., credit expenses) and adding U.S. direct selling expenses (i.e., credit expenses and bank charges). Finally, we deducted home market packing costs and added U.S. packing costs in accordance with section 773(a)(6) of the Act.

Price to Constructed Value Comparisons

Where we compared export price to constructed value, we made COS adjustments by deducting from constructed value the weighted-average home market direct selling expenses and adding the U.S. direct selling expenses, in accordance with section 773(a)(8) of the Act and section 19 CFR 351.401(c).

Intent Not To Revoke

On May 27, 1999, Chang Chun requested that, pursuant to 19 CFR 351.222(b), the Department revoke the antidumping duty order on PVA from Taiwan, with respect to merchandise that it produces and exports, at the conclusion of this administrative review. Chang Chun submitted along with its revocation request a certification stating that: (1) the company sold subject merchandise at not less than normal value during the POR, and that in the future it would not sell such merchandise at less than normal value (see 19 CFR 351.222(e)(1)(i)); (2) the company has sold the subject merchandise to the United States in commercial quantities during each of the past three years (see 19 CFR 351.222(e)(1)(ii)); and (3) the company agrees to immediate reinstatement of the order, if the Department concludes that the company, subsequent to revocation, has sold the subject merchandise at less than normal value (see 19 CFR 351.222(b)(1)(iii)).

On November 9, 1999, the petitioner opposed the request for revocation, arguing that the antidumping order is necessary to offset dumping and that Chang Chun will sell subject merchandise at less than normal value if the order is revoked. At the request of the Department, both the petitioner and Chang Chun submitted comments on Chang Chun's request for revocation (see December 7, and December 14, 1999, revocation submissions submitted by the parties).

The Department “may revoke, in whole or in part” an antidumping duty order upon completion of a review under section 751 of the Act. While Congress has not specified the procedures that the Department must follow in revoking an order, the Department has developed a procedure for revocation that is described in 19 CFR 351.222. This regulation requires, inter alia, that a company requesting revocation in part must submit the following: (1) a certification that the company has sold the subject merchandise at not less than normal value in the current review period and that the company will not sell at less than normal value in the future; (2) a certification that the company sold the subject merchandise in each of the three years forming the basis of the request in commercial quantities; and (3) an agreement to immediate reinstatement of the order if the Department concludes that the company, subsequent to the revocation, has sold subject merchandise at less than normal value. (See 19 CFR 351.222(e)(1)). Upon receipt of such a request, the Department may revoke an order, in whole or in part, if it concludes that all three criteria mentioned above have been met. See 19 CFR 351.222(b)(2). See Final Results of the Antidumping Duty Administrative Review: Silicon Metal From Brazil, 65 FR 7497, 7498, (February 15, 2000) (hereafter “Silicon Metal From Brazil”).

Chang Chun submitted the required certifications and agreement. However, after applying the three criteria outlined in section 351.222(b) of the Department's regulations, and after considering the comments of the parties and all of the evidence in the record, we have preliminarily determined that one of the Department's requirements for revocation has not been met. Specifically, although we preliminarily find that Chang Chun has demonstrated three consecutive years of sales at not less than normal value, we also preliminarily find that, based on Chang Chun's U.S. shipment data, its sales to the United States have not been made in commercial quantities during each of the three review periods at issue, in accordance with 19 CFR 351.222(d) and 351.222(e)(1)(ii).

In particular, data on the record indicate that Chang Chun's sales of PVA to the U.S. market during the second POR (i.e., U.S. sales examined during the second administrative review of this proceeding) do not serve as an adequate basis for finding commercial quantities when compared to the total U.S. sales volume during the POI. (See May 22, 2000, memorandum to the file regarding corrections to the verification report, including commercial quantities data noted therein.)

Therefore, we have determined that the requirements for revocation have not been met because Chang Chun has not made sales to the United States in commercial quantities during the second segment of this proceeding. Based on our examination of these facts at verification and our review of Chang Chun's sales practices, we find that, consistent with Department practice, we do not have a sufficient basis to conclude that the de minimis dumping margin calculated for Chang Chun for the second administrative review is reflective of the company's normal commercial experience. See, e.g., Silicon Metal from Brazil, 65 FR at 7498 (finding that because sales and volume figures were so small the Department could not conclude that the reviews reflected what the company's normal commercial experience would be absent the discipline of an antidumping duty order). Because Chang Chun has not met the commercial quantities requirement, we have not examined the issue of the likelihood of future dumping (see Silicon Metal from Brazil, 65 FR at 7505).

Chang Chun attempts to explain that the significant decrease in its sales volume during the second administrative review period was due to the alleged effect of the antidumping duty cash deposit rate required on its U.S. shipments of PVA as a result of the LTFV investigation prior to the publication of the final results of the first administrative review of the order on PVA from Taiwan (63 FR 32810, June 16, 1998). Chang Chun states that the LTFV cash deposit rate was the major factor affecting its substantial reduction in U.S. sales during the second POR (i.e., 5/1/97—4/30/98). (See verification report at page 29 and 30.) Whether this is the case or not does not detract from the record evidence which unequivocally demonstrates that the volume of such sales was far below the volume of Chang Chun's sales prior to the imposition of the discipline of the antidumping duty order. Moreover, it is the volume of these sales (not Chang Chun's alleged reasons for their size in this case) that is the focus of the Department's analysis with respect to whether they can be considered to be in commercial quantities.

Based on the foregoing analysis, we have preliminarily determined that Chang Chun has not met one of the threshold requirements for revocation (i.e., sales in commercial quantities during the three consecutive PORs). We therefore preliminarily intend not to revoke the order, with respect to PVA produced and also exported by Chang Chun, if these preliminary findings are affirmed in our final results.

Preliminary Results of Review

As a result of this review, we preliminarily determine that the following margin exists for the period May 1, 1998 through April 30, 1999:

Pursuant to 19 CFR 351.224(b), the Secretary will disclose to the parties to the proceeding the calculations performed in connection with this review, within five days after the date of publication of the preliminary results of this review. 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 subsequently issue the final results of this administrative review, including the results of its analysis of issues raised in any such written briefs or at the hearing, if held, not later than 120 days after the date of publication of this notice.

Interested parties who wish to request a hearing or to participate if one is requested, must submit a written request to the Assistant Secretary for Import Administration, Room B-099, within 30 days of the date of publication of this notice. 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 the 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. Upon completion of this review, the Department will issue appraisement instructions directly to the Customs Service.

If these preliminary results are adopted in the final results, we will instruct the Customs Service to assess antidumping duties on all appropriate entries covered by this review for which any importer-specific assessment rates calculated in the final results of this review are above de minimis (i.e., at or above 0.5 percent), in accordance with 19 CFR 351.106(c)(2). For assessment purposes, we intend to calculate importer-specific assessment rates for the subject merchandise 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 sales examined.

Furthermore, the following deposit requirements will be effective upon completion of the final results of this antidumping duty review for all shipments of PVA from Taiwan, entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of this administrative review, as provided by section 751(a) of the Act: (1) no cash deposit will be required for PVA from Taiwan that is produced by Chang Chun (unless the margin established for the company in the final results of this review is above de minimis); (2) for exporters not covered in this review, but covered in the LTFV investigation or prior reviews, the cash deposit rate will continue to be the company-specific rate from the LTFV investigation or the prior review; (3) if the exporter is not a firm covered in this review, a prior review, or the original LTFV investigation, but the manufacturer is, the cash deposit rate will be the rate established for the most recent period for the manufacturer of the merchandise; and (4) the cash deposit rate for all other manufacturers or exporters will continue to be 19.21 percent, the “All Others” rate made effective by the LTFV investigation. These requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.

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.