00-16107. Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Certain Expandable Polystyrene Resins From the Republic of Korea

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

EFFECTIVE DATE:

June 26, 2000.

FOR FURTHER INFORMATION CONTACT:

Valerie Ellis at [phone] or Charles Riggle at [phone], Import Administration, Room 1870, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230.

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) by the Uruguay Round Agreements Act (URAA). In addition, unless otherwise indicated, all citations to Department of Commerce (Department) regulations refer to the regulations codified at 19 CFR part 351 (April 1999).

Preliminary Determination

We preliminarily determine that certain expandable polystyrene resins (EPS) from the Republic of Korea (Korea) are being sold, or are likely to be sold, in the United States at less than fair value (LTFV), as provided in section 733 of the Act.

Case History

On November 22, 1999, the Department received a petition on certain EPS from Korea filed, in proper form by BASF Corporation, Huntsman Expandable Polymers Company LC, Nova Chemicals Inc., and Styrochem U.S., Ltd., (collectively, the petitioners).^[1] On December 1 and 3, 1999, the Department received amendments to the petition.

On December 13, 1999, the Department initiated an antidumping investigation of EPS from Korea. See Initiation of Antidumping Duty Investigations: Certain Expandable Polystyrene Resins from Indonesia and the Republic of Korea, 64 FR 71112 (December 20, 1999) (Initiation Notice). Since the initiation of the investigation, the following events have occurred:

On January 7, 2000, the United States International Trade Commission (ITC) preliminarily determined that there is a reasonable indication that imports of the subject merchandise are materially injuring the U.S. industry. See Certain Expandable Polystyrene Resins from Indonesia and Korea, 65 FR 2429 (January 14, 2000).

On January 31, 2000, the Department issued antidumping questionnaires to Cheil Industries, Inc. (Cheil) and Shinho Petrochemical Co., Ltd. (Shinho). See Selection of Respondents section of this notice. The respondents submitted their initial responses to the questionnaire in March and April 2000. After analyzing these responses, we issued supplemental questionnaires to the respondents. We received timely responses to these supplemental questionnaires.

On April 13, 2000, the Department published a Federal Register notice postponing until June 20, 2000, the deadline for the preliminary determination in this and in the companion investigation involving Indonesia. See Notice of Postponement of Preliminary Antidumping Duty Determinations: Certain Expandable Polystyrene Resins from Indonesia and the Republic of Korea, 65 FR 19872 (April 13, 2000). On April 13, 2000, the petitioners alleged that both Cheil and Shinho were selling EPS in the home market at prices below their respective production costs. See Normal Value Section below.

Postponement of Final Determination and Extension of Provisional Measures

Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant portion of exports of the subject merchandise or, if in the event of a negative determination, a request for such postponement is made by the petitioners. The Department's regulations, at 19 CFR 351. 210(e)(2), require that requests by the respondents for postponement of a final determination be accompanied by a request for extension of provisional measures from a four-month period to not more than six months.

On June 6, 2000 and June 15, 2000, we received requests from the respondents for postponement of the final determination. In the request, the respondents consented to the extension of provisional measures to no longer than six months. Because the preliminary determination in this investigation is affirmative, the respondents filing the requests account for a significant proportion of exports of the subject merchandise, and there is no compelling reason to deny the respondent's request, we have extended the deadline for issuance of the final determination in this case until the 135th day after the date of publication of this preliminary determination in the Federal Register.

Period of Investigation

The period of investigation (POI) is October 1, 1998, through September 30, 1999. This period corresponds to the four most recent fiscal quarters prior to the month of the filing of the petition (i.e., December 1999).

Scope of Investigation

The scope of this investigation includes certain EPS in primary forms; namely, raw material or resin manufactured in the form of polystyrene beads, whether of regular (shape) type or modified (block) type, regardless of specification, having a weighted-average molecular weight of between 160,000 and 260,000, containing from 3 to 7 percent blowing agents, and having bead sizes ranging from 0.4 mm to 3 mm.

Specifically excluded from the scope of this investigation are off-grade, off-specification expandable polystyrene resins.

The covered merchandise is found in the Harmonized Tariff Schedule of the United States (HTSUS) subheading 3903.11.00.00. Although this HTSUS subheading is provided for convenience and customs purposes, the written description of the merchandise is dispositive.

Selection of Respondents

Section 777A(c)(1) of the Act directs the Department to calculate individual dumping margins for each known exporter and producer of the subject merchandise. However, section 777A(c)(2) of the Act gives the Department discretion, when faced with a large number of exporters/producers, to limit its examination to a reasonable number of such companies if it is not practicable to examine all companies. Where it is not practicable to examine all known producers/exporters of subject merchandise, this provision permits the Department to investigate either: (1) A sample of exporters, producers, or types of products that is statistically valid based on the information available at the time of selection, or (2) exporters and producers accounting for the largest volume of the subject merchandise that can be reasonably examined.

We examined producer-specific data accounting for total POI exports of EPS resin from Korea. We identified five companies who exported EPS to the U.S. during the POI. Due to constraints on our time and resources, we found it impracticable to examine all five of them. Therefore, because their combined export volume accounted for the vast majority of all exports from Korea, we selected Cheil and Shinho as the mandatory respondents. For a more detailed discussion of respondent selection in this investigation, see Memorandum to Gary Taverman: Selection of Respondents, dated January 13, 2000.

Product Comparisons

Pursuant to section 771(16) of the Act, all products produced by the respondents that are within the scope of the investigation and were sold in the comparison market during the POI were considered to be foreign like products. We have relied on six criteria to match U.S. sales of subject merchandise to comparison-market sales of the foreign like product: color, whether modified with flame retardants, expected minimum density, bead size, blowing agent level and molecular weight. In this case, for all sales comparisons, we have relied on matches of identical merchandise.

Fair Value Comparisons

To determine whether sales of EPS from Korea were made in the United States at LTFV, we compared the export price (EP) or constructed export price (CEP) to the normal value (NV), as described in the Export Price and Constructed Export Price and Normal Value sections of this notice. In accordance with section 777A(d)(1)(A)(i) of the Act, we calculated POI weighted-average EPs and CEPs for comparison to POI weighted-average NVs.

Export Price and Constructed Export Price

In accordance with section 772 of the Act, we calculated either EP or CEP, depending on the nature of each sale. Section 772(a) of the Act defines EP as the price at which the subject merchandise is first sold before the date of importation by the exporter or producer outside the United States to an unaffiliated purchaser in the United States, or to an unaffiliated purchaser for exportation to the United States. Section 772(b) of the Act defines CEP as the price at which the subject merchandise is first sold in the United States before or after the date of importation, by or for the account of the producer or exporter of the merchandise, or by a seller affiliated with the producer or exporter, to an unaffiliated purchaser, as adjusted under sections 772(c) and (d) of the Act.

We made company-specific adjustments as follows:

Cheil

We based EP and CEP on CIF and FOB prices to unaffiliated customers in the United States. We made deductions from the starting price, where appropriate, for movement expenses including international freight, U.S. customs duties, and miscellaneous movement charges.

We have reclassified as CEP sales all sales of subject merchandise involving “commissionaires” because the sale to the first unaffiliated customer (which is facilitated by the commissionaire) is made in the United States. Accordingly, as the starting price, we have relied on the invoice price charged to the first unaffiliated customer by the commissionaire.^[2]

For sales through commissionaires, we have reduced the starting price by the amount of commissions charged by the commissionaires to Cheil, as well as the other expenses incurred by the commissionaire which were not included in the commission (i.e., additional expenses which were paid by Cheil). Consistent with the Department's past practice, we have not made a deduction for CEP profit, because the commissions charged by the commissionaires include an amount for the commissionaire's profit. See Fresh Atlantic Salmon from Chile; Preliminary Determination of Sales at Less than Fair Value and Postponement of Final Determination (Salmon) 63 FR 2664, 2667 (January 16, 1998) and Certain Fresh Cut Flowers from Colombia; Final Results and Partial Rescission of Antidumping Duty Administrative Review (Flowers), 62 FR 53287, 53295 (October 14, 1997). Finally, pursuant to section 772(d)(1) of the Act, we reduced the CEP by the amount of credit expenses.

We note that evidence on the record in this investigation indicates that Cheil and one of its commissionaires, Samsung America, Inc. (SAI), may be affiliated. Both companies are members of the Samsung Group, and Cheil stated that it shared common directors with the parent company of SAI. While we intend to examine this issue further, for the preliminary determination we have treated Cheil and SAI as unaffiliated.

Shinho

We based EP on FOB and CFR prices to unaffiliated customers in the United States. We made deductions from the starting price, where appropriate, for movement expenses including international freight, U.S. customs duty, and miscellaneous movement charges.

Normal Value

A. Selection of Comparison Markets

Section 773(a)(1) of the Act directs that NV be based on the price at which the foreign like product is sold in the home market, provided that the merchandise is sold in sufficient quantities (or value, if quantity is inappropriate) and that there is no particular market situation that prevents a proper comparison with the EP or CEP transaction. The statute contemplates that quantities (or value) will normally be considered insufficient if they are less than five percent of the aggregate quantity (or value) of sales of the subject merchandise to the United States. Both respondents had viable home markets, and they reported home market sales data for purposes of the calculation of NV. Adjustments made in deriving the NVs for each company are described in detail in Calculation of Normal Value Based on Home Market Prices and Calculation of Normal Value Based on Constructed Value, below.

B. Cost of Production Analysis

Based on allegations originally submitted by the petitioners on April, 13, 2000, and in accordance with section 773(b)(2)(A)(i) of the Act, we found reasonable grounds to believe or suspect that EPS sales made in Korea were made at prices below the cost of production (COP). See Memorandum to Gary Taverman, Petitioners' Allegation of Sales Below Cost of Production for Cheil Industries, Inc., May 12, 2000 and Memorandum to Gary Taverman, Petitioners' Allegation of Sales Below Cost of Production for Shinho Petrochemical Co, Ltd., May 12, 2000. As a result, the Department is conducting an investigation to determine whether the respondents made sales in the home market at prices below their respective COPs during the POI within the meaning of section 773(b) of the Act. Given that the responses to the COP section of the questionnaire are not due until June 23, 2000, we will include our analysis of sales below cost in our final determination.

C. Calculation of Normal Value Based on Home Market Prices

Cheil

We calculated NV based on delivered prices and made deductions from the starting price, where appropriate, for inland freight. In addition, we made circumstance of sale (COS) adjustments for direct expenses (i.e., credit expenses), in accordance with section 773(a)(6)(C)(iii) of the Act.

Shinho

We calculated NV based on delivered prices and made deductions from the starting price, where appropriate, for inland freight. In addition, we made COS adjustments for direct expenses (i.e., credit expenses), in accordance with section 773(a)(6)(C)(iii) of the Act. Although Shinho claimed to have short-term borrowing during part of the POI, we found that when Shinho was reorganized in October 1998, only eight days after the beginning of the POI, all of the company's short-term debt was converted to long-term debt. No documentation was provided to support the short-term interest rate claimed by Shinho, and we were unable to confirm either that rate, or the existence of any short-term borrowing, in Shinho's audited financial statements. Accordingly, we recalculated Shinho's imputed home market credit using a published rate from the June 2000 issue of International Financial Statistics, published by the International Monetary Fund. For a more detailed discussion of Shinho's imputed credit rate, see Calculation Memorandum to Charles Riggle dated June 20, 2000.

D. Level of Trade

In accordance with section 773(a)(1)(B) of the Act, to the extent practicable, we determined NV based on sales in the comparison market at the same level of trade (LOT) as the EP or CEP transaction. The NV LOT is that of the starting-price sales in the comparison market or, when NV is based on constructed value (CV), that of the sales from which we derive SG&A expenses and profit. For EP, the U.S. LOT is also the level of the starting-price sale, which is usually from the exporter to the importer. For CEP, the LOT is the level of the constructed sale from the exporter to the importer.

To determine whether NV sales are at a different LOT than EP or CEP, we examined stages in the marketing process and selling functions along the chain of distribution between the producer and the unaffiliated 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 NV is based and comparison-market sales at the LOT of the export transaction, we make a LOT adjustment pursuant to section 773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV 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 NV and CEP affects price comparability, we adjust NV pursuant to 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).

In implementing these principles in this investigation, we examined information from the respondent regarding the marketing stages involved in the reported home market, EP and CEP sales, including a description of the selling activities performed by the respondents for each channel of distribution. In identifying levels of trade for EP and home market sales, we considered the selling functions reflected in the starting price before any adjustments. For CEP sales, we considered only the selling activities reflected in the price after the deduction of expenses and profit pursuant to section 772(d) of the Act.

Cheil. In the home market, Cheil reported only one channel of distribution, which was to end users. In the U.S. market, Cheil reported sales through two channels of distribution, one involving sales to a distributor and the second involving sales to end users through commissionaires.

In determining whether separate levels of trade actually existed between the U.S. EP sales and home market sales, we examined the chains of distribution and customer categories reported in the home market and in the United States. Cheil's sales to end users in the home market and to the United States appear to be made at different points in the chain of distribution. We further examined the selling functions related to those sales. Cheil arranged inland Korean freight and provided technical services and warranties for the end user customers in the home market and the distributor in the U.S. market. For the home market customers, Cheil also made frequent contacts and visits and provided inventory maintenance to end user customers in the home market. On this basis, it appears that the LOT of Cheil's home market sales involves significantly more selling functions than the LOT of the EP sales, and that the distinctions constitute a difference in level of trade between sales in the two markets. Nonetheless, we are unable to make a LOT adjustment. This is due to the fact that there is only one LOT for home market sales. Cheil does not sell subject merchandise in the home market at the same LOT as that of its EP sales, and there are no other data on the record that would allow the Department to establish whether there is a pattern of consistent price differences between sales at different levels of trade in the comparison market. Therefore, an LOT adjustment is not possible for comparisons of EP sales to home market sales.

Cheil also made CEP sales through its commissionaires to end-users. In determining whether separate levels of trade actually existed between the U.S. CEP sales and home market sales, we examined the chains of distribution and customer categories reported in the home market and in the United States. Cheil's sales to end users in the home market and the importers/commissionaires in the U.S. market appear to be made at different points of the chain of distribution. We further examined the selling functions related to these sales. As noted above, in determining levels of trade for CEP sales, we consider only the selling activities reflected in the price after the deduction of expenses and profit under section 772(d) of the Act. Cheil arranges for Korean inland freight and provides frequent contacts and visits for U.S. end user customers involved in the CEP transactions and for home market end users. It also provides warranties, technical advice and arrangements for freight to end user customers in both markets. After making CEP deductions from the end user price, we have effectively deducted the portion of the price which accounts for the following services to the end users involved in CEP sales: the provision of warranties and technical advice and frequent contacts and visits with end user customers. At the CEP level, the only remaining selling function is Cheil's arrangement of Korean inland freight. On this basis, we found that the LOT of Cheil's home market sales involves significantly more selling functions than the LOT of the CEP sales.

Based on our review of the selling functions related to CEP and home market sales, we have determined that Cheil's home market sales are made at a different, and more advanced, stage of marketing than the LOT of the CEP sales. Nonetheless, we are unable to make a LOT adjustment. This is due to the fact that there is only one LOT for home market sales. Cheil does not sell subject merchandise in the home market at the same LOT as that of the CEP, and there are no other data on the record that would allow the Department to establish whether there is a pattern of consistent price differences between sales at different levels of trade in the comparison market. Accordingly, while we determined that a LOT adjustment may be appropriate for CEP sales, for the reasons stated above, we are unable to make such an adjustment. Instead, we have made a CEP offset to NV in accordance with section 773(a)(7)(B) of the Act. This offset is equal to the amount of indirect expenses incurred in the comparison market not exceeding the amount of the deductions made from the U.S. price in accordance with 772(d)(1)(D) of the Act.

Shinho. In the home market, Shinho reported sales to end users as its only channel of distribution. In the U.S. market, Shinho reported sales to distributors as its only channel of distribution.

Shinho has claimed that its home market sales, which are all made to end-users, are at a different, more advanced LOT than the company's EP sales to distributors. For EP sales, Shinho processes orders and provides partial arrangements for the freight. For home market sales, Shinho processes orders and provides partial arrangements for freight. It also provides for some financing and some limited technical services for home market sales. At this time, we do not have enough information to determine whether home market sales were made at a different LOT than the EP sales. However, even if we were able to determine that Shinho's home market sales are made at a different LOT than the EP sales, we would be unable to make a LOT adjustment. This is due to the fact that there is only one LOT for home market sales. Shinho does not sell subject merchandise in the home market at the same LOT as that of its EP sales, and there are no other data on the record that would allow the Department to establish whether there is a pattern of consistent price differences between sales at different levels of trade in the comparison market. Therefore, a LOT adjustment is not possible for comparisons of EP sales to home market sales.

Currency Conversions

We made currency conversions in accordance with section 773A of the Act. The Department's preferred source for daily exchange rates is the Federal Reserve Bank. Section 773A(a) of the Act directs the Department to use a daily exchange rate in order to convert foreign currencies into U.S. dollars unless the daily rate involves a fluctuation. It is the Department's practice to find that a fluctuation exists when the daily exchange rate differs from the benchmark rate by 2.25 percent. The benchmark is defined as the moving average of rates for the past 40 business days. When we determine a fluctuation to have existed, we substitute the benchmark rate for the daily rate, in accordance with established practice.

Verification

In accordance with section 782(i) of the Act, we intend to verify information to be used in making our final determination.

Suspension of Liquidation

In accordance with section 733(d) of the Act, we are directing the Customs Service to suspend liquidation of all entries of EPS from the Republic of Korea, except for Cheil (which has a de minimis weighted-average margin), that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the Federal Register. We are also instructing the Customs Service to require a cash deposit or the posting of a bond equal to the weighted-average amount by which the NV exceeds the EP or CEP, as indicated in the chart below. These instructions suspending liquidation will remain in effect until further notice.

The weighted-average dumping margins are as follows:

Exporter/producer	Weighted-average margin percentage
Cheil	1.80
Shinho	5.14
All Others	5.14
1 De minimis.

Section 735(c)(5)(A) of the Act directs the Department to exclude all zero and de minimis weighted-average dumping margins, as well as dumping margins determined entirely under facts available under section 776 of the Act, from the calculation of the “All Others” rate. Accordingly, we have excluded the de minimis dumping margin for Cheil from the calculation of the “all others” rate.

In accordance with section 733(f) of the Act, we have notified the ITC of our determination. If our final antidumping determination is affirmative, the ITC will determine whether these imports are materially injuring, or threaten material injury to, the U.S. industry. The deadline for that ITC determination would be the later of 120 days after the date of this preliminary determination or 45 days after the date of our final determination.

Public Comment

For the investigation of EPS from Korea, case briefs must be submitted no later than 30 days after the publication of this notice in the Federal Register. Rebuttal briefs must be filed within five business days after the deadline for submission of case briefs. A list of authorities used, a table of contents, and an executive summary of issues should accompany any briefs submitted to the Department. Executive summaries should be limited to five pages total, including footnotes. Further, we would appreciate it if parties submitting written comments would provide the Department with an additional copy of the public version of any such comments on diskette. Section 774 of the Act provides that the Department will hold a hearing to afford interested parties an opportunity to comment on arguments raised in case or rebuttal briefs, provided that such a hearing is requested by any interested party. If a request for a hearing is made in an investigation, the hearing will tentatively be held two days after the deadline for submission of the rebuttal briefs, at the U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230. Parties should confirm by telephone the time, date, and place of the hearing 48 hours before the scheduled time.

Interested parties who wish to request a hearing, or to participate if one is requested, must submit a written request within 30 days of the publication of this notice. Requests should specify the number of participants and provide a list of the issues to be discussed. Oral presentations will be limited to issues raised in the briefs.

We will make our final determination no later than 135 days after the date of publication of this notice.

This determination is issued and published pursuant to sections 733(d) and 777(i)(1) of the Act.

Dated:June 20, 2000.

Roland L. MacDonald,

Acting Assistant Secretary for Import Administration.

Footnotes

1.  A petition was also filed at the same time on EPS from Indonesia.

2.  We have not, as proposed by Cheil, used as the starting price the amount invoiced by the respondent to the commissionaires. The Department does not typically consider a commissionaire to be the respondent's customer, since the commissionaire simply facilitates a transaction between the respondent and its actual customer. In fact, the Department applied adverse facts available in the case of a respondent that had reported U.S. sales to a company that, as was determined at verification, was a commissionaire. In that case, the Department stated that the respondent should have reported the sale to the actual customer, and made an adverse inference due to the respondent's failure to do so. See Certain Welded Stainless Pipe from Taiwan 62 FR 37543, 37544 (July 14, 1997). In this case, the commissionaires' role in the sale of the product is to facilitate matters such as receiving orders, invoicing and collection of payment. The respondent negotiates terms directly with its actual customers, ships the merchandise directly to the customers, and handles all after-sale inquiries.