[Federal Register Volume 62, Number 10 (Wednesday, January 15, 1997)]
[Notices]
[Pages 2081-2130]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-923]
[[Page 2081]]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-427-801, A-428-801, A-475-801, A-588-804, A-559-801, A-412-801]
Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, Germany, Italy, Japan, Singapore, and the
United Kingdom; Final Results of Antidumping Duty Administrative
Reviews
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty administrative
reviews.
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SUMMARY: On July 8, 1996, the Department of Commerce (the Department)
published the preliminary results of administrative reviews of the
antidumping duty orders on antifriction bearings (other than tapered
roller bearings) and parts thereof (AFBs) from France, Germany, Italy,
Japan, Singapore, and the United Kingdom. The classes or kinds of
merchandise covered by these orders are ball bearings and parts thereof
(BBs), cylindrical roller bearings and parts thereof (CRBs), and
spherical plain bearings and parts thereof (SPBs). The reviews cover 27
manufacturers/exporters. The period of review (the POR) is May 1, 1994,
through April 30, 1995.
Based on our analysis of the comments received, we have made
changes, including corrections of certain inadvertent programming and
clerical errors, in the margin calculations. Therefore, the final
results differ from the preliminary results. The final weighted-average
dumping margins for the reviewed firms are listed below in the section
entitled ``Final Results of the Reviews.''
EFFECTIVE DATE: January 15, 1997.
FOR FURTHER INFORMATION CONTACT: The appropriate case analyst, for the
various respondent firms listed below, of Import Administration,
International Trade Administration, U.S. Department of Commerce,
Washington, D.C. 20230; telephone: (202) 482-4733.
France
Andrea Chu (Intertechnique, SNFA, SNR), Hermes Pinilla (Franke
GmbH, Hoesch Rothe Erde, Rollix Defontaine), Matthew Rosenbaum (SKF),
or Kris Campbell.
Germany
Thomas Barlow (Torrington Nadellager), Davina Hashmi (INA), Chip
Hayes (NTN Kugellagerfabrik), Hermes Pinilla (Franke GmbH, Hoesch Rothe
Erde and Rollix Defontaine), Matthew Rosenbaum (SKF), Thomas Schauer
(FAG), Kris Campbell, or Richard Rimlinger.
Italy
Matthew Rosenbaum (SKF), Mark Ross (FAG), Kris Campbell or Richard
Rimlinger.
Japan
J. David Dirstine (Koyo Seiko), Chip Hayes (NTN), Michael Panfeld
(NPBS), Mark Ross (Asahi Seiko), Thomas Schauer (NSK Ltd.), or Richard
Rimlinger.
Singapore
Lyn Johnson (NMB/Pelmec) or Richard Rimlinger.
United Kingdom
Andrea Chu (Hoffman U.K.), Hermes Pinilla (NSK-RHP), Matthew
Rosenbaum (Rose Bearing Co., Ltd.), Thomas Barlow (Timken-UK), or Kris
Campbell.
SUPPLEMENTARY INFORMATION:
The Applicable Statute
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (the Tariff Act), are references to the provisions
effective January 1, 1995, the effective date of the amendments made to
the Tariff Act by the Uruguay Round Agreements Act (URAA). In addition,
unless otherwise indicated, all citations to the Department's
regulations are to the current regulations, as amended by the interim
regulations published in the Federal Register on May 11, 1995 (60 FR
25130).
Background
On July 8, 1996, the Department of Commerce (the Department)
published the preliminary results of administrative reviews of the
antidumping duty orders on antifriction bearings (other than tapered
roller bearings) and parts thereof (AFBs) from France, Germany, Italy,
Japan, Singapore, and the United Kingdom (61 FR 35713). The reviews
cover 27 manufacturers/exporters. The period of review (the POR) is May
1, 1994, through April 30, 1995. We invited parties to comment on our
preliminary results of review. At the request of certain interested
parties, we held public hearings as follows: General Issues, August 16,
1996, Germany, August 20, 1996, and Japan, August 19, 1996. The
Department has conducted these administrative reviews in accordance
with section 751 of the Tariff Act.
Scope of Reviews
The products covered by these reviews are AFBs and constitute the
following classes or kinds of merchandise: ball bearings and parts
thereof (BBs), cylindrical roller bearings and parts thereof (CRBs),
and spherical plain bearings and parts thereof (SPBs). For a detailed
description of the products covered under these classes of kinds of
merchandise, including a compilation of all pertinent scope
determinations, see the ``Scope Appendix,'' which is appended to this
notice of final results.
Use of Facts Available
In accordance with section 776 of the Tariff Act, we have
determined that the use of the facts available is appropriate for a
number of firms. For a discussion of our application of facts
available, see the ``Facts Available'' section of the Issues Appendix.
Sales Below Cost in the Home Market
The Department disregarded sales below cost for the following firms
and classes or kinds of merchandise:
------------------------------------------------------------------------
Class or kind of
Country Company merchandise
------------------------------------------------------------------------
France.......................... SKF............... BBs
SNR............... BBs
Germany......................... FAG............... BBs, CRBs, SPBs
INA............... BBs, CRBs
SKF............... BBs, CRBs, SPBs
Italy........................... FAG............... BBs
Japan........................... Asahi Seiko....... BBs
Koyo.............. BBs, CRBs
Nachi............. BBs, CRBs
NSK............... BBs, CRBs
NTN............... BBs, CRBs, SPBs
Singapore....................... NMB/Pelmec........ BBs
United Kingdom.................. NSK-RHP........... BBs, CRBs
------------------------------------------------------------------------
Changes Since the Preliminary Results
Based on our analysis of comments received, we have made certain
corrections that changed our results. We have corrected certain
programming and clerical errors in our preliminary results, where
applicable. Any alleged programming or clerical errors with which we do
not agree are discussed in the relevant sections of the Issues
Appendix.
Analysis of Comments Received
All issues raised in the case and rebuttal briefs by parties to
these concurrent administrative reviews of AFBs are addressed in the
``Issues Appendix'' which is appended to this notice of final results.
[[Page 2082]]
Final Results of Reviews
We determine that the following percentage weighted-average margins
exist for the period May 1, 1994, through April 30, 1995:
------------------------------------------------------------------------
Company BBs CRBs SPBs
------------------------------------------------------------------------
France
------------------------------------------------------------------------
Franke GmbH............................ 1 66.42 (3) (3)
Hoesch Rothe Erde...................... (2) (3) (3)
Intertechnique......................... 1.55 (2) (2)
Rollix Defontaine...................... (2) (3) (3)
SKF.................................... 17.23 (2) 42.79
SNFA................................... 66.42 18.37 (3)
SNR.................................... 2.37 2.50 (2)
------------------------------------------------------------------------
Germany
------------------------------------------------------------------------
FAG.................................... 30.68 23.17 12.11
Franke GmbH............................ 1 132.25 (3) (3)
Hoesch Rothe Erde...................... (2) (3) (3)
INA.................................... 20.57 19.12 (2)
NTN.................................... 18.38 (2) (2)
Rollix & Defontaine.................... (2) (3) (3)
SKF.................................... 2.92 10.22 7.84
Torrington Nadellager.................. (2) 76.27 (3)
------------------------------------------------------------------------
Italy
------------------------------------------------------------------------
FAG.................................... 5.15 (2) (3)
SKF.................................... 2.97 (3) (3)
------------------------------------------------------------------------
Japan
------------------------------------------------------------------------
Asahi Seiko............................ 2.65 (3) (3)
Koyo Seiko............................. 18.90 3.88 1 0.00
NPB.................................... 45.83 (2) (2)
NSK Ltd................................ 12.81 22.42 (2)
NTN.................................... 4.01 3.76 1.06
------------------------------------------------------------------------
Singapore
------------------------------------------------------------------------
NMB Singapore/Pelmec Ind............... 2.44 (3) (3)
------------------------------------------------------------------------
United Kingdom
------------------------------------------------------------------------
NSK-RHP................................ 20.25 25.01 (3)
Hoffman U.K............................ 61.14 48.29 (3)
Rose Bearings.......................... 61.14 48.29 (3)
Timken Bearings........................ (2) (2) (3)
------------------------------------------------------------------------
1 No shipments or sales subject to this review. Rate is from the last
relevant segment of the proceeding in which the firm had shipments/
sales.
2 No shipments or sales subject to this review. The firm has no
individual rate from any segment of this proceeding.
3 No review.
Cash Deposit Requirements
To calculate the cash deposit rate for each exporter, we divided
the total dumping margins for each exporter by the total net value for
that exporter's sales for each relevant class or kind to the United
States during the review period under each order.
In order to derive a single deposit rate for each class or kind of
merchandise for each respondent (i.e., each exporter or manufacturer
included in these reviews), we weight-averaged the export price and
constructive export price (CEP) deposit rates (using the export price
and CEP respectively, as the weighting factors). To accomplish this
where we sampled CEP sales, we first calculated the total dumping
margins for all CEP sales during the review period by multiplying the
sample CEP margins by the ratio of total weeks in the review period to
sample weeks. We then calculated a total net value for all CEP sales
during the review period by multiplying the sample CEP total net value
by the same ratio. We then divided the combined total dumping margins
for both export price and CEP sales by the combined total value for
both export price and CEP sales to obtain the deposit rate.
We will direct Customs to collect the resulting percentage deposit
rate against the entered Customs value of each of the exporter's
entries of subject merchandise entered, or withdrawn from warehouse,
for consumption on or after the date of publication of this notice.
Entries of parts incorporated into finished bearings before sales
to an
[[Page 2083]]
unaffiliated customer in the United States will receive the exporter's
deposit rate for the appropriate class or kind of merchandise.
Furthermore, the following deposit requirements will be effective
upon publication of this notice of final results of administrative
reviews for all shipments of AFBs entered, or withdrawn from warehouse,
for consumption on or after the date of publication, as provided by
section 751(a)(1) of the Tariff Act: (1) The cash deposit rates for the
reviewed companies will be the rates shown above, except that for firms
whose weighted-average margins are less than 0.5 percent and therefore
de minimis, the Department shall require a zero deposit of estimated
antidumping duties; (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
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 (4)
the cash deposit rate for all other manufacturers or exporters will
continue to be the ``All Others'' rate for the relevant class or kind
and country made effective by the final results of review published on
July 26, 1993 (see Final Results of Antidumping Duty Administrative
Reviews and Revocation in Part of an Antidumping Duty Order, 58 FR
39729 (July 26, 1993), and, for BBs from Italy, see Antifriction
Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From
France, et al: Final Results of Antidumping Duty Administrative
Reviews, Partial Termination of Administrative Reviews, and Revocation
in Part of Antidumping Duty Orders, 61 FR 66472 (December 17, 1996).
These rates are the ``All Others'' rates from the relevant LTFV
investigations.
These deposit requirements shall remain in effect until publication
of the final results of the next administrative reviews.
Assessment Rates
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. Because sampling
and other simplification methods prevent entry-by-entry assessments, we
will calculate wherever possible an exporter/importer-specific
assessment rate for each class or kind of AFBs.
1. Export Price Sales
With respect to export price sales for these final results, we
divided the total dumping margins (calculated as the difference between
normal value (NV) and export price) for each importer by the total
number of units sold to that importer. We will direct Customs to assess
the resulting unit dollar amount against each unit of merchandise in
each of that importer's entries under the relevant order during the
review period. Although this will result in assessing different
percentage margins for individual entries, the total antidumping duties
collected for each importer under each order for the review period will
be almost exactly equal to the total dumping margins.
2. Constructed Export Price Sales
For CEP sales (sampled and non-sampled), we divided the total
dumping margins for the reviewed sales by the total entered value of
those reviewed sales for each importer. We will direct Customs to
assess the resulting percentage margin against the entered Customs
values for the subject merchandise on each of that importer's entries
under the relevant order during the review period. While the Department
is aware that the entered value of sales during the POR is not
necessarily equal to the entered value of entries during the POR, use
of entered value of sales as the basis of the assessment rate permits
the Department to collect a reasonable approximation of the antidumping
duties which would have been determined if the Department had reviewed
those sales of merchandise actually entered during the POR.
This notice also serves as a 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 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 notice also serves as the only reminder to parties subject to
administrative protective orders (APO) of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with 19 CFR 353.34(d). Failure to
comply is a violation of the APO.
These administrative reviews and this 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: January 6, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
Scope Appendix Contents
A. Description of the Merchandise
B. Scope Determinations
Issues Appendix Contents
Abbreviations
Comments and Responses
1. Assessment
2. Facts Available
3. Discounts, Rebates, and Price Adjustments
4. Circumstance-of-Sale Adjustments
A. Technical Services and Warranty Expenses
B. Commissions
C. Credit
D. Indirect Selling Expenses
E. Other Selling Expenses
5. Level of Trade
6. Cost of Production and Constructed Value
A. Cost-Test Methodology
B. Research and Development
C. Profit for Constructed Value
D. Affiliated-Party Inputs
E. Inventory Write-off
F. Interest Expense Offset
G. Other Issues
7. Further Manufacturing
8. Packing and Movement Expenses
9. Affiliated Parties
10. Samples, Prototypes and Ordinary Courses of Trade
11. Export Price and Constructed Export Price
12. Programming
13. Duty Absorption and Reimbursement
14. Miscellaneous Issues
A. U.S. Sales Completeness
B. Pre-Final Reviews
C. Certification of Conformance to Past Practice
D. Country of Origin
Scope Appendix
A. Description of the Merchandise
The products covered by these orders, antifriction bearings (other
than tapered roller bearings), mounted or unmounted, and parts thereof
(AFBs), constitute the following classes or kinds of merchandise:
1. Ball Bearings and Parts Thereof
These products include all AFBs that employ balls as the roller
element. Imports of these products are classified under the following
categories: antifriction balls, ball bearings with integral shafts,
ball bearings (including radial ball bearings) and parts thereof, and
housed or mounted ball bearing units and parts thereof. Imports of
these products are classified under the following Harmonized Tariff
Schedule
[[Page 2084]]
(HTS) subheadings: 4016.93.10, 4016.93.50, 6909.19.5010, 8482.10.10,
8482.10.50, 8482.80.00, 8482.91.00, 8482.99.05, 8482.99.10, 8482.99.35,
8482.99.70, 8483.20.40, 8483.20.80, 8483.30.40, 8483.30.80, 8483.90.20,
8483.90.30, 8483.90.70, 8708.50.50, 8708.60.50, 8708.70.6060,
8708.93.6000, 8708.99.06, 8708.99.3100, 8708.99.4000, 8708.99.4960,
8708.99.50, 8708.99.58, 8708.99.8015, 8708.99.8080.
2. Cylindrical Roller Bearings, Mounted or Unmounted, and Parts Thereof
These products include all AFBs that employ cylindrical rollers as
the rolling element. Imports of these products are classified under the
following categories: antifriction rollers, all cylindrical roller
bearings (including split cylindrical roller bearings) and parts
thereof, housed or mounted cylindrical roller bearing units and parts
thereof.
Imports of these products are classified under the following HTS
subheadings: 4016.93.10, 4016.93.50, 6909.19.5010, 8482.50.00,
8482.80.00, 8482.91.00, 8482.99.25, 8482.99.6530, 8482.99.6560,
8482.99.70, 8483.20.40, 8483.20.80, 8483.30.40, 8483.30.80, 8483.90.20,
8483.90.30, 8483.90.70, 8708.50.50, 8708.60.50, 8708.99.4000,
8708.99.4960, 8708.99.50, 8708.99.8080.
3. Spherical Plain Bearings, Mounted or Unmounted, and Parts Thereof
These products include all spherical plain bearings that employ a
spherically shaped sliding element, and include spherical plain rod
ends.
Imports of these products are classified under the following HTS
subheadings: 6909.19.5010, 8483.30.40, 8483.30.80, 8483.90.20,
8483.90.30, 8485.90.00, 8708.99.4000, 8708.99.4960, 8708.99.50,
8708.99.8080.
The HTS item numbers are provided for convenience and Customs
purposes. They are not determinative of the products subject to the
orders. The written description remains dispositive.
Size or precision grade of a bearing does not influence whether the
bearing is covered by the orders. These orders cover all the subject
bearings and parts thereof (inner race, outer race, cage, rollers,
balls, seals, shields, etc.) outlined above with certain limitations.
With regard to finished parts, all such parts are included in the scope
of these orders. For unfinished parts, such parts are included if (1)
they have been heat treated, or (2) heat treatment is not required to
be performed on the part. Thus, the only unfinished parts that are not
covered by these orders are those that will be subject to heat
treatment after importation.
The ultimate application of a bearing also does not influence
whether the bearing is covered by the orders. Bearings designed for
highly specialized applications are not excluded. Any of the subject
bearings, regardless of whether they may ultimately be utilized in
aircraft, automobiles, or other equipment, are within the scope of
these orders.
B. Scope Determinations
The Department has issued numerous clarifications of the scope of
the orders. The following is a compilation of the scope rulings and
determinations the Department has made.
Scope determinations made in the Final Determinations of Sales at
Less than Fair Value; Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof from the Federal Republic of Germany (AFBs
Investigation of SLTFV), 54 FR 19006, 19019 (May 3, 1989):
Products Covered
Rod end bearings and parts thereof
AFBs used in aviation applications
Aerospace engine bearings
Split cylindrical roller bearings
Wheel hub units
Slewing rings and slewing bearings (slewing rings and slewing
bearings were subsequently excluded by the International Trade
Commission's negative injury determination (see International Trade
Commission: Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof from the Federal Republic of Germany, France, Italy,
Japan, Romania, Singapore, Sweden, Thailand and the United Kingdom, 54
FR 21488, (May 18, 1989))
Wave generator bearings
Bearings (including mounted or housed units, and flanged or
enhanced bearings) ultimately utilized in textile machinery
Products Excluded
Plain bearings other than spherical plain bearings
Airframe components unrelated to the reduction of friction
Linear motion devices
Split pillow block housings
Nuts, bolts, and sleeves that are not integral parts of a
bearing or attached to a bearing under review
Thermoplastic bearings
Stainless steel hollow balls
Textile machinery components that are substantially advanced
in function(s) or value
Wheel hub units imported as part of front and rear axle
assemblies; wheel hub units that include tapered roller bearings; and
clutch release bearings that are already assembled as parts of
transmissions
Scope rulings completed between April 1, 1990, and June 30, 1990
(see Scope Rulings, 55 FR 42750 (October 23, 1990)):
Products Excluded
Antifriction bearings, including integral shaft ball bearings,
used in textile machinery and imported with attachments and
augmentations sufficient to advance their function beyond load-bearing/
friction-reducing capability
Scope rulings completed between July 1, 1990, and September 30,
1990 (see Scope Rulings, 55 FR 43020 (October 25, 1990)):
Products Covered
Rod ends
Clutch release bearings
Ball bearings used in the manufacture of helicopters
Ball bearings used in the manufacture of disk drives
Scope rulings completed between April 1, 1991, and June 30, 1991
(see Notice of Scope Rulings, 56 FR 36774 (August 1, 1991)):
Products Excluded
Textile machinery components including false twist spindles,
belt guide rollers, separator rollers, damping units, rotor units, and
tension pulleys
Scope rulings published in Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof; Final Results of
Antidumping Administrative Review (AFBs I), 56 FR 31692, 31696 (July
11, 1991):
Products Covered
Load rollers and thrust rollers, also called mast guide
bearings
Conveyor system trolley wheels and chain wheels
Scope rulings completed between July 1, 1991, and September 30,
1991 (see Scope Rulings, 56 FR 57320 (November 8, 1991)):
Products Covered
Snap rings and wire races
Bearings imported as spare parts
Custom-made specialty bearings
Products Excluded
Certain rotor assembly textile machinery components
Linear motion bearings
Scope rulings completed between October 1, 1991, and December 31,
1991 (see Notice of Scope Rulings, 57 FR 4597 (February 6, 1992)):
[[Page 2085]]
Products Covered
Chain sheaves (forklift truck mast components)
Loose boss rollers used in textile drafting machinery, also
called top rollers
Certain engine main shaft pilot bearings and engine crank
shaft bearings
Scope rulings completed between January 1, 1992, and March 31, 1992
(see Scope Rulings, 57 FR 19602 (May 7, 1992)):
Products Covered
Ceramic bearings
Roller turn rollers
Clutch release systems that contain rolling elements
Products Excluded
Clutch release systems that do not contain rolling elements
Chrome steel balls for use as check valves in hydraulic valve
systems
Scope rulings completed between April 1, 1992, and June 30, 1992
(see Scope Rulings, 57 FR 32973 (July 24, 1992)):
Products Excluded
Finished, semiground stainless steel balls
Stainless steel balls for non-bearing use (in an optical
polishing process)
Scope rulings completed between July 1, 1992, and September 30,
1992 (see Scope Rulings, 57 FR 57420 (December 4, 1992)):
Products Covered
Certain flexible roller bearings whose component rollers have
a length-to-diameter ratio of less than 4:1
Model 15BM2110 bearings
Products Excluded
Certain textile machinery components
Scope rulings completed between October 1, 1992, and December 31,
1992 (see Scope Rulings, 58 FR 11209 (February 24, 1993)):
Products Covered
Certain cylindrical bearings with a length-to-diameter ratio
of less than 4:1
Products Excluded
Certain cartridge assemblies comprised of a machine shaft, a
machined housing and two standard bearings
Scope rulings completed between January 1, 1993, and March 31, 1993
(see Scope Rulings, 58 FR 27542 (May 10, 1993)):
Products Covered
Certain cylindrical bearings with a length-to-diameter ratio
of less than 4:1
Scope rulings completed between April 1, 1993, and June 30, 1993
(see Scope Rulings, 58 FR 47124 (September 7, 1993)):
Products Covered
Certain series of INA bearings
Products Excluded
SAR series of ball bearings
Certain eccentric locking collars that are part of housed
bearing units
Scope rulings completed between October 1, 1993, and December 31,
1993 (see Scope Rulings, 59 FR 8910 (February 24, 1994)):
Products Excluded
Certain textile machinery components
Scope rulings completed after March 31, 1994:
Products Excluded
Certain textile machinery components
Scope rulings completed between October 1, 1994 and December 31,
1994 (see Scope Rulings, 60 FR 12196 (March 6, 1995)):
Products Excluded
Rotek and Kaydon--Rotek bearings, models M4 and L6, are
slewing rings outside the scope of the order.
Scope rulings completed between April 1, 1995 and June 30, 1995
(see Scope Rulings, 60 FR 36782 (July 18, 1995)):
Products Covered
Consolidated Saw Mill International (CSMI) Inc.--Cambio
bearings contained in CSMI's sawmill debarker are within the scope of
the order.
Nakanishi Manufacturing Corp.--Nakanishi's stamped steel
washer with a zinc phosphate and adhesive coating used in the
manufacture of a ball bearing is within the scope of the order.
Scope rulings completed between January 1, 1996 and March 31, 1996
(see Scope Rulings, 61 FR 18381 (April 25, 1996)):
Products Covered
Marquardt Switches--Medium carbon steel balls imported by
Marquardt are outside the scope of the order.
Scope rulings completed between April 1, 1996 and June 30, 1996
(see Scope Rulings, 61 FR 40194 (August 1, 1996)):
Products Excluded
Dana Corporation--Automotive component, known variously as a
center bracket assembly, center bearings assembly, support bracket, or
shaft support bearing, is outside the scope of the order.
Issues Appendix
Company Abbreviations
Asahi--Asahi Seiko
FAG Germany--FAG Kugelfischer Georg Schaefer KGaA
FAG Italy--FAG Italia S.p.A.; FAG Bearings Corp.
Hoesch--Hoesch Rothe Erde AG
INA--INA Walzlager Schaeffler KG; INA Bearing Company, Inc.
Koyo--Koyo Seiko Co. Ltd.
NMB/Pelmec--NMB Singapore Ltd.; Pelmec Industries (Pte.) Ltd.
NPB--Nippon Pillow Block Manufacturing Co., Ltd.; Nippon Pillow Block
Sales Co., Ltd.; FYH Bearing Units USA, Inc.
NSK--Nippon Seiko K.K.; NSK Corporation
NSK-RHP--NSK Bearings Europe, Ltd.; RHP Bearings; RHP Bearings, Inc.
NTN Germany--NTN Kugellagerfabrik (Deutschland) GmbH
NTN--NTN Corporation; NTN Bearing Corporation of America; American NTN
Bearing Manufacturing Corporation
Rollix--Rollix Defontaine, S.A.
SKF France--SKF Compagnie d'Applications Mecaniques, S.A. (Clamart);
ADR; SARMA
SKF Germany--SKF GmbH; SKF Service GmbH; Steyr Walzlager
SKF Italy--SKF Industrie; RIV-SKF Officina de Villar Perosa; SKF
Cuscinetti Speciali; SKF Cuscinetti; RFT
SKF UK--SKF (UK) Limited; SKF Industries; AMPEP Inc.
SKF Group--SKF-France; SKF-Germany; SKF-UK; SKF USA, Inc.
SNFA--SNFA Bearings, Ltd.
SNR France--SNR Nouvelle Roulements
Torrington--The Torrington Company
Other Abbreviations
COP--Cost of Production
COM--Cost of Manufacturing
CV--Constructed Value
CEP--Constructed Export Price
NV--Normal Value
HM--Home Market
HMP--Home Market Price
ICC(s)--Inventory Carrying Costs
ISE(s)--Indirect Selling Expenses
OEM--Original Equipment Manufacturer
POR--Period of Review
PSPA--Post-Sale Price Adjustment
SAA--Statement of Administrative Action
URAA--Uruguay Round Agreements Act
[[Page 2086]]
AFB Administrative Determinations
AFBs LTFV Investigation--Final Determinations of Sales at Less than
Fair Value; Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof from the Federal Republic of Germany, 54 FR 19006
(May 3, 1989).
AFBs I--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof from the Federal Republic of Germany; Final Results
of Antidumping Duty Administrative Review, 56 FR 31692 (July 11, 1991).
AFBs II--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al.; Final Results of Antidumping
Duty Administrative Reviews, 57 FR 28360 (June 24, 1992).
AFBs III--Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From France, et al.; Final Results of
Antidumping Duty Administrative Reviews and Revocation in Part of an
Antidumping Duty Order, 58 FR 39729 (July 26, 1993).
AFBs IV--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews, Partial Termination of Administrative Reviews,
and Revocation in Part of Antidumping Duty Orders, 60 FR 10900
(February 28, 1995).
AFBs V--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews and Partial Termination of Administrative
Reviews, 61 FR 66472 (December 17, 1996).
CIT AFB Decisions
FAG v. United States, Slip Op. 95-158 (CIT 1995) (FAG I).
FAG Kugelfischer Georg Schaefer KGAa v. United States, 932 F. Supp
315 (CIT 1996) (FAG II).
FAG UK Ltd. v. United States, Slip Op. 96-177 (CIT 1996) (FAG III).
Federal Mogul Corp. v. United States, 813 F. Supp 856 (CIT 1993)
(Federal Mogul I).
Federal Mogul Corp. v. United States, 839 F. Supp 881 (CIT 1993),
vacated, 907 F. Supp 432 (1995) (Federal Mogul II).
Federal Mogul Corp. v. United States, 884 F. Supp 1391 (CIT 1993)
(Federal Mogul III).
Federal Mogul Corp. v. United States, 17 CIT 1015 (CIT 1993)
(Federal Mogul IV).
Federal Mogul Corp. v. United States, 924 F. Supp 210 (CIT 1996)
(Federal Mogul V).
Koyo Seiko Co., Ltd. v. United States, 796 F. Supp 1526 (CIT 1992)
(Koyo).
NPBS v. United States, 903 F. Supp 89 (CIT 1995) (NPB).
NSK Ltd. v. United States, 910 F.Supp 663 (CIT 1995) (NSK I).
NSK Ltd. v. United States, 896 F.Supp 1263 (CIT 1995) (NSK II).
NSK Ltd. v. United States, 919 F.Supp 442 (CIT 1996) (NSK III).
NTN Bearing Corporation of America v. United States, 903 F. Supp 62
(CIT 1995) (NTN I).
NTN Bearing Corporation of America v. United States, 905
F.Supp.1083 (CIT 1995) (NTN II).
SKF USA Inc. v. United States, 876 F. Supp 275 (CIT 1995) (SKF).
The Torrington Company v. United States, 818 F.Supp 1563 (CIT 1993)
(Torrington I).
The Torrington Company v. United States, 832 F.Supp. 379 (CIT 1993)
(Torrington II).
The Torrington Company v. United States, 881 F.Supp 622 (CIT 1995)
(Torrington III).
The Torrington Company v. United States, 926 F. Supp 1151 (CIT
1996) (Torrington IV).
CAFC AFB Decisions
NTN Bearing Corp. v. United States, 74 F.3d 1204 (CAFC 1995) (NTN
III).
The Torrington Company v. United States, 44 F. 3d 1572 (CAFC 1994)
(Torrington V).
The Torrington Company v. United States, 82 F.3d 1039 (CAFC 1996)
(Torrington VI).
1. Assessment
Comment: NMB/Pelmec argues that, in calculating the assessment rate
in this review, the Department should use the statute and regulations
in effect as of December 31, 1994, rather than the antidumping statute
effective as of January 1, 1995. It notes that the Statement of
Administrative Action (H.R. Doc. 316, Vol. 1, 103d Cong., 2d sess.
(1994)) (SAA) states that ``there are two express exceptions to the
general transition rule in Article 18.3. In the case of refund
procedures under Article 9.3, national authorities will use the rules
in effect at the time of the most recent determination or review
applicable to the calculation of dumping margins,'' citing the SAA at
819. NMB/ Pelmec argues that this exception must be interpreted to mean
that the assessment rate should be calculated using the same rules
which were used to calculate the original deposit rate for entries
subject to the review or refund procedure. It contends that, because
the most recent cash-deposit determination which applied to the entries
during the 1994/95 administrative review was AFBs IV, the assessment
rate for the 1994/95 entries should also be determined using the
statute and regulations in effect as of December 31, 1994. Therefore,
NMB/Pelmec asserts, the Department should calculate the assessment rate
under the prior law by making an exporter's-sales-price-offset
adjustment, by including any below-cost sales in the calculation of
profit for CV, and by not making a CEP-profit adjustment to U.S. sales.
Torrington maintains that the U.S. practice is not inconsistent
with Article 18.3.1 and that the Department should apply the new law to
calculate assessment rates for this review period. It notes that,
because refund instructions will not be provided to Customs until after
this review is completed, the final results for this review will be the
``most recent determination or review'' as referred to by Article
18.3.1.
Department's Position: We agree with Torrington. In this case, the
``most recent review'' for purposes of refund procedures is the final
results for 1994/95 review. Therefore, the rules applicable to the
calculation of dumping margins for the 1994/95 review are the
provisions of the statute effective January 1, 1995 and the
regulations, as amended by the interim regulations effective May 11,
1995 (see SAA at 819 and 895).
2. Facts Available
We determine, in accordance with section 776(a) of the Tariff Act,
that the use of facts available as the basis for the weighted-average
dumping margin is appropriate for SNFA, Hoffman U.K., and Rose
Bearings, all with respect to BBs and CRBs, for Torrington Nadellager
with respect to CRBs only, and for SKF France with respect to SPBs
only, because these firms did not respond to our antidumping
questionnaire. We find that these firms have withheld ``information
that has been requested by the administering authority.'' Furthermore,
we determine that, pursuant to section 776(b) of the Tariff Act, it is
appropriate to make an inference adverse to the interests of these
companies because they failed to cooperate by not responding to our
questionnaire. For the weighted-average dumping margins of these firms,
we have used the highest rate from any prior segment of the respective
proceeding as adverse facts available. Such data is considered
secondary information within the meaning of section 776(c) of the
Tariff Act.
Section 776(c) of the Tariff Act provides that the Department
shall, to the extent practicable, corroborate secondary information
from
[[Page 2087]]
independent sources reasonably at its disposal. The Statement of
Administrative Action (SAA) provides that ``corroborate'' means simply
that the Department will satisfy itself that the secondary information
to be used has probative value (see H.R. Doc. 316, Vol. 1, 103d Cong.,
2d sess. 870 (1994)).
To corroborate secondary information, the Department will, to the
extent practicable, examine the reliability and relevance of the
information to be used. However, unlike for other types of information,
such as input costs or selling expenses, there are no independent
sources for calculated dumping margins. Thus, in an administrative
review, if the Department chooses as total adverse facts available a
calculated dumping margin from a prior segment of the proceeding, it is
not necessary to question the reliability of the margin for that time
period. With respect to the relevance aspect of corroboration, however,
the Department will consider information reasonably at its disposal as
to whether there are circumstances that would render a margin not
relevant. Where circumstances indicate that the selected margin is not
appropriate as adverse facts available, the Department will disregard
the margin and determine an appropriate margin (see, e.g., Fresh Cut
Flowers from Mexico; Final Results of Antidumping Duty Administrative
Review, 61 FR 6812, 6814 (February 22, 1996) (Fresh Cut Flowers) (where
the Department disregarded the highest margin as adverse best
information available because the margin was based on another company's
uncharacteristic business expense resulting in an unusually high
margin)).
In this case, for SKF France, SNFA, Torrington Nadellager, Hoffman
U.K. and Rose Bearings, we have used the highest rate from any prior
segment of the respective proceeding as adverse facts available. These
rates are the highest available rates and no evidence exists in the
record that indicates that the selected margins are not appropriate as
adverse facts available.
We also determine, in accordance with section 776(a) of the Tariff
Act, that the use of facts available as the basis for the weighted-
average dumping margin is appropriate for NPB because, despite the
Department's attempts to verify necessary information provided by NPB,
the Department could not verify the information as required under
section 782(i) of the Tariff Act. Furthermore, section 782(e) of the
Tariff Act authorizes the Department to decline to consider information
that is submitted by an interested party that is necessary to the
determination under certain circumstances, such as when such
information is so incomplete that it cannot serve as a reliable basis
for reaching the applicable determination or when such information
cannot be verified.
Generally, and in the process of verification, the Department's
analysis of the completeness of a respondent's U.S. sales database is
essential because the database is used to calculate the dumping duties.
Where we have allowed for reduced reporting but determine that U.S.
sales are missing from the database, we are especially concerned about
the reliability and accuracy of any margin we might calculate. An
incomplete U.S. and HM sales database is normally sufficient to render
a respondent's response inadequate for the purpose of calculating a
dumping margin. See, e.g., Persico Pizzamiglio, S.A. v. United States,
Slip Op. 94-61 (CIT 1994) (Persico) (upholding the Department's use of
best information available for a respondent who was unable to
demonstrate the completeness of its U.S. sales at verification).
It is our practice to examine at verification only a selected
subset of the reported U.S. sales, a practice that the CIT has upheld.
See Bomont Industries v. United States, 733 F.Supp. 1507, 1508 (CIT
1990) (``verification is like an audit, the purpose of which is to test
information provided by a party for accuracy and completeness. Normally
an audit entails selective examination rather than testing of an entire
universe''); see also Monsanto Co. v. United States, 698 F. Supp. 275,
281 (CIT 1988) (``verification is a spot check and is not intended to
be an exhaustive examination of the respondent's business'').
Generally, we assume that the selected subset of U.S. sales is
representative of the entire universe of U.S. sales.
Where we find discrepancies in this subset, we judge the effect on
the unexamined portion of the response. Where we determine that U.S.
sales are misreported (in critical areas, such as model number and
further-manufacturing status) in a selected subset, we are particularly
concerned about the reliability and accuracy of any margin or duties we
might calculate from the database.
In addition, the Department's identification of further-
manufactured sales is essential in order for the Department to conduct
two critical portions of its analysis. First, in the course of the
Department's model matching analysis, the unique model number
associated with a particular model determines the appropriate home
market model to match to the U.S. sale. Second, in determining the
adjustments to CEP, we are dependent on the data a respondent provides
in order for us to identify whether to deduct such costs of further
manufacturing. In fact, section 772(d)(2) of the Tariff Act requires us
to reduce the price we use to establish CEP by ``the cost of any
further manufacture or assembly.'' Thus, our questionnaire requires
that respondents identify further-manufactured sales and provide a
unique code to identify the bearing model as entered on a sale-by-sale
basis. The questionnaire also requires that the cost of further
manufacturing be reported on a model-specific basis.
Despite our efforts at verification, we were unable to verify
information which is necessary and must be verified in order for us to
make a determination under section 751 of the Tariff Act. Specifically,
we were unable to verify the data NPB provided concerning its U.S. and
HM sales. Most significantly, we found that NPB's U.S. and HM databases
were incomplete. In this case, we examined at verification the sales
reported for three of the six sample weeks and found missing U.S. sales
in all three weeks. As we have indicated above, incompleteness of these
databases, particularly the incompleteness of the U.S. sales database,
was crucial and was a factor which, by itself, was an adequate basis
for our determination to use facts available.
We also found that NPB's U.S. database was inaccurate. In a
supplemental response, NPB reported that only 12 models entered the
United States as housed models during the POR. Yet at verification,
during which we selected, at random, a limited number of entry
documents, we discovered an additional five models that entered as
housed models during the POR. NPB's U.S. sales listing contained sales
of these five models. However, NPB reported that these sales entered as
unhoused bearings that were further-manufactured in the United States.
The contradiction between NPB's entry documents and its response
prompted us to elicit support for its further-manufacturing claim.
While records NPB provided do demonstrate that some assembly did take
place during the POR, these same records document assembly that
occurred six months after the last of the five U.S. sales. NPB could
not support its claim that further manufacturing occurred prior to the
selected sales, nor did NPB provide evidence of entries of unhoused
bearings prior to the dates of sale. Therefore, NPB could not support
the designation of these sales as being
[[Page 2088]]
further-manufactured merchandise. See United States Sales Verification
Report, dated June 13, 1996. Because we reviewed a limited number of
randomly-selected entry documents and U.S. sales, we must conclude
that, had we examined all possible documentation, we would have found
additional models and sales that were incorrectly reported as further-
manufactured merchandise. Because we found NPB's reporting of this
information to be inaccurate, we cannot calculate CEP properly as
directed by section 772(d) of the Tariff Act nor can we match
approximately two-thirds of NPB's sales to the correct HM model.
Thus we have determined that although NPB provided information we
requested which was necessary in order for the us to perform our
analysis, the information could not be verified as required by section
782(i) of the Tariff Act. Thus, in accordance with section 782(e)(2) of
the Tariff Act, we have declined to consider information submitted by
NPB because it could not be verified. Because we were unable to verify
necessary information, in addition to the fact that NPB failed to
support its designation of certain sales as being further-manufactured
merchandise, we were unable to employ our normal antidumping analysis.
Under section 776(a) of the Tariff Act, we are required, in reaching
our determination, to use facts available because we could not verify
NPB's data. Thus, for NPB, we have determined that it is appropriate to
select from the facts otherwise available to the Department.
In selecting from among the facts otherwise available, the
Department is authorized, under section 776(b) of the Tariff Act, to
use an inference that is adverse to the interests of a party if the
Department finds that the party has failed to cooperate by not acting
to the best of its ability to comply with (the Department's) request
for information. We examined whether NPB had acted to the best of its
ability in responding to our requests for information, such as U.S.
sales data. We took into consideration the fact that, as an experienced
respondent in reviews of the AFBs orders, its ability to comply with
our requests for information could be distinguished from, for example,
the ability of a less experienced company. Thus, NPB can reasonably be
expected to know which types of essential data we request in each
review under this order, and to be conversant with the form and manner
in which we require submission of the data. We note that NPB committed,
in this review, some of the same errors and discrepancies regarding the
completeness and accuracy of its sales databases that it made in
previous reviews of the instant order.
In addition to taking into account the experience of a respondent,
the Department may find it appropriate to examine whether the
respondent has control of the data which the Department is unable to
verify or rely upon. The record reflects that NPB was in control of the
data which was vital to our dumping calculations and which we were
unable to verify or rely upon. See analysis memorandum from Holly A.
Kuga to Joseph A. Spetrini, dated June 27, 1996.
An additional factor we have considered, is the extent to which NPB
might have benefitted from its own lack of cooperation. The SAA states
that ``[w]here a party has not cooperated, [the Department] may employ
adverse inferences about the missing information to ensure that the
party does not obtain a more favorable result by failing to cooperate
than if it had cooperated fully.'' Id. at 870. In accordance with our
policy, we considered the overall effect of NPB's errors. In this case,
we have determined that the use of the flawed response would have
yielded a more favorable margin for NPB. See analysis memorandum from
Holly A. Kuga to Joseph A. Spetrini, dated June 27, 1996.
In light of NPB's familiarity with the annual review process under
the order on AFBs from Japan, its control of the necessary data, and
the potential benefits it may have received, we have determined that
NPB failed to act to the best of its ability in providing the data we
requested. Therefore, in accordance with section 776(b) of the Tariff
Act, we have, on the basis of the record in this case, determined that
it is appropriate for us to make the adverse inference authorized under
that subsection of the statute. Accordingly, for these final results,
we continue to base NPB's margin on adverse facts available.
In selecting a margin which would appropriately reflect our
decision to use adverse facts available for NPB, we examined the rates
applicable to ball bearings from Japan throughout the course of the
proceeding. As adverse facts available, we have selected a rate of
45.83 percent, which reflects the all-others rate from the Less Than
Fair Value (LTFV) investigation and is a rate which we have applied to
NPB in previous proceedings under the old law concerning AFBs from
Japan. Given NPB's level of participation in this segment of the
proceeding, we determine that this rate is sufficiently adverse to
encourage full cooperation in future segments of the proceeding.
As indicated above, section 776(c) of the Tariff Act requires the
Department to corroborate secondary information used as facts available
to the extent practicable. ``Secondary information is information
derived from the petition that gave rise to the investigation or
review, the final determination concerning the subject merchandise, or
any previous review under section 751 concerning the subject
merchandise.'' SAA at 870. Because the facts available applied to NPB
for this review is secondary information within the meaning of section
776(c) of the Tariff Act, we have, in accordance with section 776(c),
corroborated this information with independent sources.
As noted above in our discussion of corroboration with regard to
other respondents, the SAA provides that ``corroborate'' means simply
that the Department will satisfy itself that the secondary information
to be used has probative value (see SAA at 870). After reviewing the
record, we are satisfied that this information has probative value
because it includes the average of calculated margins from the LTFV
investigation of this order. Thus, we have determined that information
and inferences which we have applied are reasonable to use under the
circumstances of this review. See SAA at 869. Furthermore, there is no
reliable evidence on the record indicating that this selected margin is
not appropriate as adverse facts available. (See, e.g., Fresh Cut
Flowers.)
Comment: NPB contends that the Department erred in assigning it a
margin based on adverse facts available. NPB contends the following:
(1) It classified all U.S. housed, unhoused, and further-manufactured
models properly; (2) it reported its U.S. sales properly; (3) errors in
its reporting of certain U.S. sales and adjustments are limited and
correctable; and (4) it reported nearly all of its home market sales
properly. NPB argues that, although it did make some errors in its
response, the errors are small in number and are determinable in
extent. NPB requests that the Department use that portion of its
response which is free of errors and, if it still finds NPB's reporting
of further-manufactured items in error, limit its application of facts
available to the U.S. sales of five particular models the Department
identified as improperly reported in its verification report. Moreover,
NPB contends that application of adverse facts available is not
appropriate because NPB acted to the best of its ability.
NPB notes that the dominant issue in the Department's analysis
memorandum
[[Page 2089]]
of June 27, 1996, regards NPB's reporting of housed, unhoused, and
further-manufactured models. NPB contends that all of its U.S. sales
are CEP sales, and, as such, the questionnaire required NPB to report
its sales to the first unaffiliated customer during the POR and not its
entries of the merchandise during the POR. NPB states that
approximately one-third of NPB's U.S. sales are of unhoused bearings
and are imported as such, and that it sells the vast majority of the
remaining sales as housed bearings which are further-manufactured from
unhoused bearings. NPB contends that it reported both of these
categories of U.S. sales properly. NPB asserts that only five models
(which the Department discovered at verification had entered the United
States as housed models) are in dispute. NPB contends that its
reporting of sales of the five models is appropriate. NPB argues that,
because a bearing imported as a housed unit and a bearing that is
imported as an unhoused unit and further-manufactured into a housed
unit are physically indistinguishable, it is impossible to determine
whether the particular merchandise withdrawn from inventory for sale
was imported as a housed bearing or was further manufactured into a
housed bearing without tracing the particular merchandise to a
particular U.S. Customs entry. NPB argues that it cannot make such a
link and contends that the Department has recognized that, generally,
it cannot tie sales to entries, citing AFBs III at 28360.
Because the five models, which NPB contends were imported as both
housed and unhoused models, contain ``bearings exported to the United
States prior to any further processing in the United States,'' and
because each model which underwent a further-manufacturing process
contains ``bearings exported to the United States prior to any further
processing in the United States,'' NPB asserts that it identified each
of these five models properly as further-manufactured models. NPB
states that the Department's analysis memorandum, dated June 27, 1996,
failed to cite any statute, regulation, or questionnaire instruction
that required NPB to report otherwise. Moreover, NPB contends that it
provided ``assembly audit lists'' that demonstrate that there was some
further manufacturing of these models during the POR. Therefore, NPB
contends that it responded properly to the questionnaire.
Torrington argues that the Department is statutorily required to
use facts available in cases where it is unable to verify the accuracy
of the information respondent submits and may apply an adverse
assumption if it determines that the firm has not complied to the best
of its ability. Torrington asserts that, as a whole, the number and
significance of NPB's errors and omissions constitute a failed
verification, noting that the most serious of NPB's deficiencies was
the Department's inability to verify the completeness of the HM and
U.S. sales databases. Torrington asserts that the complete and accurate
reporting of sales databases goes to the heart of the antidumping
proceeding, citing Federal-Mogul IV at 1020. Further, Torrington states
that in AFBs II, the Department applied best information available to
NPB because NPB failed to report a substantial number of its HM sales.
Torrington contends that both the significance and number of omissions
and errors with NPB's response in this review call for a similar
result, citing NPB at 93-95.
Moreover, Torrington argues that, because NPB had control of the
data requested in the Department's questionnaire and, given that NPB
has participated in many previous reviews and is knowledgeable of the
correct data to report, NPB did not act to the best of its ability.
Torrington requests that the Department apply a margin based on adverse
facts available for the final results.
Department's Position: We agree with Torrington. In this case, we
are required to use facts available because we were unable to verify
NPB's response. Furthermore, in using facts available, we are
authorized to employ an inference adverse to the interests of NPB
because we have determined that NPB has failed to act to the best of
its ability in responding to our requests for necessary information.
Thus, for these final results, as adverse facts available, we have
selected a rate of 45.83 percent, which reflects the all-others rate
from the LTFV investigation and is a rate which we have applied to NPB
in previous proceedings under the old law concerning AFBs from Japan.
As stated above, in light of NPB's level of participation in this
segment of the proceeding, we determine that this rate is sufficiently
adverse to encourage full cooperation in future segments of the
proceeding.
We disagree with NPB's view that it reported its U.S. sales
correctly, that errors in its reporting of certain U.S. sales and
adjustments are limited and correctable, and that it reported nearly
all of its home market sales properly. As we have stated above, it is
our practice to examine at verification only a selected subset of the
reported U.S. sales, a practice that the CIT has upheld. See Bomont
Industries v. United States, 733 F.Supp. 1507, 1508 (CIT 1990); see
also Monsanto Co. v. United States, 698 F. Supp. 275, 281 (CIT 1988).
As discussed above, we assume that the randomly selected subset of U.S.
sales is representative of the entire universe of U.S. sales. In this
case, we found discrepancies and omissions in this subset. Thus, in
accordance with our normal practice, we judged the effect on the
unexamined portion of NPB's response. Because we determined that U.S.
sales had been omitted, we are concerned about the reliability and
accuracy of any margin or duties we might calculate from NPB's
database. We reiterate that an incomplete U.S. and HM sales database is
normally sufficient to render a respondent's response inadequate for
the purpose of calculating a dumping margin. See, e.g., Persico
Pizzamiglio, S.A. v. United States, Slip Op. 94-61 (CIT 1994) (Persico)
(upholding the Department's use of best information available for a
respondent who was unable to demonstrate the completeness of its U.S.
sales at verification).
We also disagree with NPB's assertion that it classified all
housed, unhoused, and further-manufactured models properly. NPB was
unable to support its designation of certain U.S. sales as further-
manufactured sales. See U.S. Sales Verification Report, dated June 13,
1996 at 9. We also disagree with NPB that it was required to report its
further-manufactured sales in a sales-specific manner.
As explained above, identification of further-manufactured sales is
essential in order for the Department to conduct two critical portions
of its analysis. First, the unique model number determines the
appropriate home market model to match to the U.S. sale. (In this case,
NPB reported HM sales of models that matched both the ``housed''
bearings and the ``unhoused'' bearings.) Second, in determining the
price adjustments to calculate CEP, we are dependent on the data NPB
provides to identify whether to deduct such costs of further
manufacturing. Section 772(d)(2) of the Tariff Act requires us to
reduce the price we use to establish CEP by ``the cost of any further
manufacture or assembly * * *.'' Our questionnaire requires that
respondents identify further-manufactured sales and provide a unique
code to identify the bearing model as entered on a sale-by-sale basis.
The questionnaire also requires that the cost of further manufacturing
be reported on a model-specific basis. Thus, contrary to NPB's
assertion, we have determined that NPB had an
[[Page 2090]]
obligation to identify and report this data on a sales-specific basis.
NPB suggests that its misreportings are limited to the five
particular models that we discovered at verification. However, as we
have indicated above, because we reviewed a limited number of randomly-
selected entry documents, we must conclude that, had we examined all
possible documentation, we would have found additional models and sales
that were incorrectly reported as further-manufactured merchandise.
Moreover, because NPB did not identify the unique model number on a
sale-specific basis correctly, we are unable to match approximately
two-thirds of NPB's U.S. sales of housed models to an appropriate NV or
calculate CEP properly.
As we have indicated above, in this case, inaccuracy of NPB's
databases, particularly the inaccuracy of its U.S. sales database, was
crucial and was a factor which, by itself, was an adequate basis for
our determination to use facts available. However, our attempted
verifications yielded additional flaws in NPB's response, providing
further bases for our decision to employ facts available. For example,
we found that NPB did not report a particular type of price adjustment
for sales to its largest HM customer, and that NPB understated entered
values and thus under-reported all adjustments to CEP that were
allocated by entered value. (For a complete listing of all flaws, see
the analysis memorandum from Holly A. Kuga to Joseph A. Spetrini, dated
June 27, 1996. For a more detailed discussion of NPB's post-preliminary
arguments and our position on these flaws, see analysis memorandum
dated January 3, 1997.)
Because of the gravity and the magnitude of the flaws in NPB's
response, we have determined that NPB's information is unverifiable,
and that there is no record evidence demonstrating that errors in NPB's
reporting of certain of its U.S. sales are limited and correctable.
Accordingly, we disagree with NPB's view on this issue. Thus, as
explained above, we must use facts available in determining a margin
for NPB, as required under section 776(a) of the Tariff Act.
We also disagree with NPB that an adverse inference is not
warranted in determining a margin for NPB because, as required under
section 776(b), we find that NPB has not acted to the best of its
ability in responding to our requests for information. As noted above,
NPB has participated in numerous reviews and verifications in this
proceeding and is aware of the type of information we require. However,
NPB has failed to provide two fundamental elements of a response: a
complete sales listing and correct identification of further-
manufactured sales and models. The identification of further-
manufactured sales and their unique model numbers (as entered) is not a
new requirement of the URAA. Contrary to NPB's assertions, the fact
that NPB could not support its reporting of this critical information
cannot be attributed to one of the ``subtle changes'' in the
antidumping law which, as NPB suggests, prevented it from knowing which
data to report. Nor was the questionnaire vague in this regard.
Likewise, the complete reporting of U.S. and HM sales is not a new
concept under the URAA. Furthermore, we note that NPB made numerous
other errors in its response that worked in its favor. See the analysis
memorandum from Holly A. Kuga to Joseph A. Spetrini, dated June 27,
1996.
As we have indicated above, in accordance with our policy, we
considered the overall effect of the errors to ensure that NPB does not
obtain a more favorable result by failing to cooperate than if it had
cooperated fully. Thus, an additional factor we have considered is the
extent to which NPB might have benefited from failing to cooperate
fully if we had not made our determination on the basis of facts
available. See SAA at 870. In this case, we have determined that the
use of the flawed response would have yielded a more favorable margin
for NPB. See analysis memorandum from Holly A. Kuga to Joseph A.
Spetrini, dated June 27, 1996. Furthermore, no comments have dissuaded
us from our view that NPB has failed to act to the best of its ability
in responding to our requests for necessary information. Thus, in
disagreement with NPB's view, for these final results, we have applied
adverse facts available to NPB in accordance with section 776(c) of the
Tariff Act.
3. Discounts, Rebates, and Post-Sale Price Adjustments (PSPAs)
We have accepted claims for discounts, rebates, and other billing
adjustments as direct adjustments to price if we determined that the
respondent, in reporting these adjustments, acted to the best of its
ability and that its reporting methodology was not unreasonably
distortive. We did not treat such adjustments as direct (or indirect)
selling expenses, but rather as direct adjustments necessary to
identify the correct starting price. While we prefer that respondents
report these adjustments on a transaction-specific basis (or, where a
single adjustment was granted for a group of sales, as a fixed and
constant percentage of the value of those sales), we recognize that
this is not always feasible, particularly given the extremely large
volume of transactions involved in these AFBs reviews. It is
inappropriate to reject allocations that are not unreasonably
distortive in favor of facts otherwise available where a fully
cooperating respondent is unable to report the information in a more
specific manner. See section 776 of the Tariff Act; see also Facts
Available, above. Accordingly, we have accepted these adjustments when
it was not feasible for a respondent to report the adjustment on a more
specific basis, provided that the allocation method the respondent used
does not cause unreasonable inaccuracies or distortions.
In applying this standard, we have not rejected an allocation
method solely because the allocation includes adjustments granted on
merchandise that is not subject to these reviews (out-of-scope
merchandise). However, such allocations are not acceptable where we
have reason to believe that respondents did not grant such adjustments
in proportionate amounts with respect to sales of out-of-scope and in-
scope merchandise. We have made this determination by examining the
extent to which the out-of-scope merchandise included in the allocation
pool is different from the in-scope merchandise in terms of value,
physical characteristics, and the manner in which it is sold.
Significant differences in such areas may increase the likelihood that
respondents did not grant price adjustments in proportionate amounts
with respect to sales of in-scope and out-of-scope merchandise. While
we carefully scrutinize any such differences between in-scope and out-
of-scope sales in terms of their potential for distorting reported per-
unit adjustments on the sales involved in our analysis, it would not be
reasonable to require that respondents submit sale-specific adjustment
data on out-of-scope merchandise in order to prove that there is no
possibility for distortion. Such a requirement would defeat the purpose
of permitting the use of reasonable allocations by respondents that
have cooperated to the best of their ability.
Where we have found that a company has not acted to the best of its
ability in reporting the adjustment in the most specific and non-
distortive manner feasible, we have made an adverse inference in using
the facts available with respect to this adjustment, pursuant to
section 776(b) of the Tariff Act. With respect to HM adjustments, in
accordance with the CAFC's decision in
[[Page 2091]]
Torrington VI (at 1047-51), we have not treated improperly allocated HM
price adjustments as if they were indirect selling expenses (ISEs), but
we have instead disallowed downward adjustments in their entirety.
However, we have included positive (upward) HM price adjustments (e.g.,
positive billing adjustments that increase the final sales price) in
our analysis of such companies. The treatment of positive HM billing
adjustments as direct adjustments is appropriate because disallowing
such adjustments would provide an incentive to report positive billing
adjustments on an unacceptably broad basis in order to reduce NV and
margins. That is, if we were to disregard positive billing adjustments,
which would be upward adjustments to NV, respondents would have no
incentive to report these adjustments in the most specific and non-
distortive manner feasible. See AFBs V at 66498.
Comment 1: Torrington asserts that some respondents reported home-
market discounts, rebates, and PSPAs by allocating amounts across all
sales, or across all sales to a given customer, even when some sales
were not entitled to the adjustment. Torrington contends that the CAFC,
in Torrington VI at 1047-51, ruled that direct PSPAs must be reported
on a sale-specific basis before the Department can make a downward
adjustment to foreign market value (now normal value), and that the
Department may not make an indirect-selling-expense adjustment for
improperly allocated direct expenses. Torrington contends that the new
statute does not change the CAFC's rulings and, therefore, the
Department should deny all rebates, discounts, and PSPAs that
respondents did not report on a transaction-specific basis or which
they did not allocate in such a manner as to be tantamount to reporting
on a transaction-specific basis.
Koyo, NSK, NSK/RHP, SKF Germany, SKF France, and SKF Italy argue
that the Department should make adjustments to NV so long as the
allocation methodology is reasonable. Koyo, SKF Germany, SKF France,
and SKF Italy argue further that the SAA at 823-24 indicates that the
Department will accept allocations of certain direct expenses when
transaction-specific reporting is not feasible. SKF Germany, SKF
France, and SKF Italy also contend that denial of such adjustments,
when the party acted to the best of its ability and the data can be
used without undue difficulties, would be the unlawful use of adverse
inferences in applying facts available, while Koyo argues that the
denial of such adjustments would be unjustly punitive. Koyo also argues
that the Department should not disallow an improperly allocated
downward adjustment while allowing the same adjustment if it increases
NV and contends that the CIT rejected such an approach in Torrington IV
at 1151.
FAG Germany, FAG Italy, INA, NTN Japan, and NTN Germany contend
that they reported such adjustments on a transaction-specific basis.
Department's Position: We agree with Koyo, NSK, NSK/RHP, SKF
Germany, SKF France, and SKF Italy in part. As discussed in the
introductory remarks to this section, our practice is to accept these
adjustments when it was not feasible for a respondent to report the
adjustment on a more specific basis, provided that the allocation
method the respondent used does not cause unreasonable inaccuracies or
distortions. We agree with Torrington, however, that when we find that
a respondent has allocated a HM discount, rebate, or PSPA in a
distortive manner or if we determine that a respondent has not acted to
the best of its ability, then we should deny such adjustments rather
than treat them as an indirect expense.
In our view, Torrington VI is of limited relevance to this issue
because the CAFC did not address the propriety of the allocation
methods respondents used in reporting the price adjustments in
question. Although the CAFC appeared to question whether price
adjustments constituted expenses at all (see Torrington VI at n.15), it
merely held that, assuming the adjustments were expenses, they had to
be treated as direct selling expenses rather than indirect selling
expenses. The CAFC did not address appropriate allocation
methodologies.
However, we disagree with Koyo that we should not treat positive HM
billing adjustments as direct adjustments. As discussed in our
introductory remarks above, the treatment of positive HM billing
adjustments as direct adjustments is appropriate because disallowing
such adjustments would provide an incentive to report positive billing
adjustments on an unacceptably broad basis in order to minimize
margins.
Comment 2: NSK and Torrington submitted comments regarding the
treatment of NSK's HM lump-sum rebates (REBATE2H). NSK argues that the
Department's treatment of this rebate as an indirect expense in the
preliminary results was incorrect and requests that the Department
treat this adjustment as a direct expense. NSK asserts that the CIT has
determined, pursuant to the CAFC's decision in Torrington VI, that this
expense is a direct expense (citing The Timken Co. v. United States,
Slip Op. 96-86 at 38 (CIT 1996)).
NSK argues that it did not grant this adjustment on a product-
specific or transaction-specific basis and that the rebate does not
relate to specific sales to a customer. NSK notes that it allocated
this adjustment by summing all such POR rebates by customer and
dividing this amount by total POR sales to the customer. NSK contends
that its allocation methodology accurately apportions the adjustment
between subject and non-subject merchandise because, although NSK used
a customer-specific factor, the ratio of subject to non-subject
merchandise purchased by its customers was relatively constant
throughout the POR. NSK notes that it submitted evidence to support its
contention that this ratio was relatively constant during the POR in
its response to the Department's supplemental questionnaire. NSK argues
that the Department accepted this approach in principle in the 1992/93
review but did not allow the adjustment due to the small number of
customers for which NSK provided information regarding sales of subject
versus non-subject merchandise. NSK contends that, in the current
review, it submitted such information for a substantially larger number
of customers.
NSK suggests that its situation should not be confused with that of
another respondent, Koyo, which granted PSPAs on a product-specific
basis but reported them on an aggregate basis. NSK argues that its
reporting methodology is customer-specific by necessity, not because of
imprecise record-keeping, and, for the reasons described above, is not
distortive. Finally, NSK argues that, at a minimum, the Department
should treat PSPAs respondents granted to certain customers that only
purchased subject merchandise during the POR as direct expenses.
Torrington responds to NSK's arguments, claiming that NSK's
description of the allocation methodology for this expense demonstrates
that NSK's reporting is not consistent with a ``fixed and constant''
allocation, which the Department and the CIT have held is necessary for
an allocation of such expenses to be accepted (citing AFBs IV at 10929
and Torrington I at 1578-79). Torrington also contends that the
Department should reject NSK's argument that the Department should, at
a minimum, allow a direct adjustment for those customers who purchased
only subject merchandise during the POR for the same reasons.
Torrington argues that, even if certain customers purchased
[[Page 2092]]
only subject merchandise during the POR, NSK's allocation fails to
target those specific sales related to the PSPAs or to report the
specific PSPA amounts actually incurred by those sales and is,
therefore, distortive.
In its affirmative brief, Torrington argues that, because NSK
failed to report lump-sum rebates on a transaction-specific basis or as
a fixed and constant percentage of the sales on which the rebates were
granted, the Department should disallow the adjustment entirely.
Torrington suggests three reasons for rejecting NSK's lump-sum rebates
as an adjustment to NV. First, citing Torrington VI at 1050, Torrington
argues that the CAFC has stated that expenses that are directly related
to particular sales cannot be treated as ISEs. Therefore, Torrington
contends, because NSK did not report PSPAs on the basis on which they
were incurred, the Department cannot deduct them as direct adjustments
to NV and, because expenses that are direct in nature cannot be treated
as indirect expenses, the Department has no choice but to make no
adjustment to NV for this item.
Second, Torrington argues that NSK failed to demonstrate that it
paid all reported PSPAs on sales of subject merchandise. Torrington
argues that the Department has previously rejected NSK's argument that
an analysis of certain customers' sales sufficiently indicates that all
customers receiving PSPAs had stable purchasing patterns and states
that the Department should reject NSK's assertion that ``relatively
constant'' purchasing patterns constitute the basis for a reasonable
allocation. Torrington asserts that the CIT has held repeatedly that
the Department may not ``use a methodology which allows for the
inclusion of [PSPAs] and rebates on out-of-scope merchandise in
calculating adjustments to FMV'' (citing Torrington I at 1578-79).
Third, Torrington argues that NSK did not demonstrate that all
PSPAs were contemplated at the time of sale. Torrington argues that NSK
itself stated that, in certain instances, lump-sum amounts were paid
retroactively and that, therefore, NSK has not shown that the terms of
these rebates were known at the time of sale. Torrington argues that
the Department's policy is to allow rebates only when the terms of sale
are predetermined (citing AFBs IV at 10932).
NSK responds that the Department verified NSK's lump-sum rebates
and that the Department found no discrepancies in the data which it
examined. Second, NSK argues that it has fully explained the
circumstances under which it grants lump-sum PSPAs and that
Torrington's argument that NSK did not show that the rebates were
contemplated at the time of sale is not supported by the record and has
been previously rejected by the Department.
Department's Position: We agree with NSK that we should treat its
lump-sum rebates as a direct adjustment to NV. Although NSK allocates
these rebates on a customer-specific basis, we determine that NSK acted
to the best of its ability in reporting this information using
customer-specific allocations. Our review of the information NSK
submitted and our findings at verification indicate that, given the
lump-sum nature of this adjustment, the fact that NSK's records do not
readily identify a discrete group of sales to which each rebate
pertains, and the extremely large number of POR sales NSK made, it is
not feasible for NSK to report this adjustment on a more specific
basis.
We also do not find that the customer-specific POR-allocation
methodology NSK used shifts expenses incurred on sales of out-of-scope
merchandise to sales of in-scope merchandise or that it is otherwise
unreasonably distortive. NSK submitted evidence to support its
contention that the ratio of subject to non-subject merchandise
purchased by its customers was relatively constant throughout the POR.
We examined this evidence and found that it adequately supported NSK's
contention.
Further, our analysis of the record evidence and our findings at
verification give us no reason to believe that NSK is more likely to
grant these rebates on sales of non-subject merchandise than it is on
sales of subject merchandise. In this regard, we note that, as with
other respondents in these reviews, NSK is primarily in the business of
selling bearings, some of which are within the scope of the AFB
antidumping orders and others of which are non-subject merchandise. In
addition, we have not found that the subject and non-subject
merchandise NSK sold varies significantly in terms of value, physical
characteristics, and the manner in which it is sold and, therefore, we
find that it is likely that NSK granted this adjustment in
proportionate amounts with respect to sales of out-of-scope and in-
scope merchandise.
Regarding the relevance of the holding of the CAFC in Torrington
VI, see our response to comment 1, above.
Comment 3: Torrington argues that the Department improperly allowed
a direct adjustment to NV for NSK's return rebates (REBATE1H).
Torrington contends that NSK grants return rebates on individual
transactions and that NSK did not report return rebates on a
transaction-specific basis or as a fixed and constant percentage of
sales. Torrington argues that, because NSK failed to tie actual rebate
amounts to the particular transactions to which they relate, the
Department should not make any adjustment to NV for return rebates
(citing Torrington VI at 1050).
NSK responds that the Department properly deducted return rebates
as a direct adjustment to NV. NSK notes that its methodology allocates
return rebates on a part-number and customer-specific basis and that
the Department fully verified its methodology. NSK also argues that
Torrington raised this issue prior to the preliminary results and the
Department rejected its argument at that time. NSK states that
Torrington has offered no new arguments in its case brief.
Department's Position: We disagree with Torrington. Initially, we
note that we consider NSK's return rebates to be a promotional expense,
as opposed to a price adjustment, because NSK grants these rebates to
promote sales made by distributors. As such, NSK incurred this expense
on behalf of NSK's customers. Because NSK has shown that this expense
relates directly to the products under review, we consider it to be a
direct selling expense. Further, the company has demonstrated that it
has reported this expense on a model-specific and customer-specific
basis, which satisfies our standard for treatment of promotional
expenses as direct selling expenses. See our response to comment 2 of
section 4.B (Commissions), below, and AFBs V at 66503. Therefore, we
have made a direct adjustment to NV for NSK's return rebates for the
final results. With regard to the relevance of Torrington VI, see our
response to comment 1, above.
Comment 4: Torrington argues that the Department should use actual
1995 rebates instead of the estimated 1995 U.S. rebates reported by
NSK, FAG Germany, and FAG Italy. Torrington notes that, at
verification, NSK submitted, and the Department verified, actual rebate
percentages. Torrington also contends that improving economic activity
in the United States may result in higher U.S. rebates granted than
estimated. Torrington argues that the Department should use, therefore,
the actual rebate information it gathered from NSK at verification and
should request FAG to provide updated U.S. rebate information for use
in the final results.
NSK argues that the Department examined the actual rebate
percentages at verification in order to determine whether NSK's
estimated rebates were reasonable. NSK notes that it was
[[Page 2093]]
unable to report actual 1995 rebates in its original response because
its response was due prior to the end of 1995. NSK argues that its
estimated rebates were reasonably calculated and that the Department
should use them for the final results.
FAG argues that, because the response had to be filed before the
end of 1995, rebates ultimately paid on 1995 sales had to be estimated.
FAG argues that its methodology conforms to the Department's practice
and was fully verified by the Department.
Department's Position: We disagree with Torrington. The purpose of
examining the actual rebates at verification was to determine the
accuracy of the responses. Verification is not normally an appropriate
venue for the submission of new factual information, and we generally
collect and use information gleaned at verification only when minor
discrepancies are found or when we believe a respondent's methodology
may not have been reasonable. In this case, verification was an
opportunity to determine whether the companies' estimates represented a
reasonable approximation of their experience in granting rebates. Our
conclusion was that there was no reason to believe that the actual data
would differ significantly from the estimates. For instance, as a
result of verifying NSK's response, we determined that while the rebate
percentages were overestimated for some customers and underestimated
for others, on balance NSK's estimates were a reasonable reflection of
its actual experience and that any distortion caused by such estimates
would be insignificant. Torrington's proposal would convert
verification, which is an opportunity to check the accuracy of
information previously submitted, into a data-gathering exercise.
In fact, the actual information concerning rebates granted in 1995
is not generally available until approximately the end of the first
quarter of 1996, after the end-of-year 1995 rebates are granted and
recorded in the companies' records. A requirement that respondents
calculate actual per-unit rebate amounts for 1995 sales using this data
would be unreasonable, given the stage in the proceeding at which the
actual 1995 data becomes available.
Furthermore, in NSK's case, although we have the data to replace
the estimated rebates with actual rebates, the change to our
calculations, given the advanced stage of the review, would impose an
unreasonable burden upon both us and respondents with no significant
increase in accuracy in light of the results of our verification.
Therefore, we have relied on NSK's estimated rebates.
Moreover, while we have the discretion to solicit new information
at any time during an administrative review, we generally do so only
when we learn of information not on the record that has the potential
of having a substantial impact on the margin. See Certain Fresh Cut
Flowers from Colombia; Final Results of Antidumping Duty Administrative
Reviews, 61 FR 42833, 42837 (August 19, 1996).
Therefore, for the reasons stated above, we have used these
companies' estimated rebates on 1995 sales for the final results, as we
have with respondents generally in these reviews.
Comment 5: Torrington argues that the Department should disallow
the following HM PSPAs reported by SKF Germany: early-payment discounts
(EARLYPYH), support rebates (REBATE2H), and downward home-market
billing adjustments (BILLAD2H). Torrington makes the following general
comments regarding these adjustments: (1) section 782(e) of the Tariff
Act, previously cited by SKF Germany, provides the rules governing when
the Department may reject a response due to systematic difficulties,
which is not the case here; (2) the language in the proposed
regulations concerning when the Department may allow allocations does
not govern this situation because the items at issue are price
adjustments, not direct selling expenses; and (3) even assuming such
proposed regulatory language did apply, SKF Germany's allocations are
sufficiently distortive as not to meet the standard for allowing such
allocations.
With respect to early-payment discounts, Torrington states that,
because SKF Germany's reporting method fails to identify early payment
discounts actually taken on subject merchandise, the Department should
deny these adjustments to NV. Torrington argues that disproportionately
greater amounts may be paid on out-of-scope merchandise than on in-
scope, resulting in the mis-allocation of out-of-scope discounts to
subject merchandise. The Department, according to Torrington, should
continue to reject this claim, as it did in AFBs IV.
With respect to support rebates, Torrington states that SKF Germany
reported them on a customer-specific basis only because these rebates
are earned on sales by SKF Germany's customer rather than by SKF
Germany and cannot be associated with specific SKF Germany
transactions. Torrington claims that there is no evidence that
distributors were allowed these rebates as a result of poor sales
results on subject merchandise as distinct from products not covered by
the antidumping order, and suggests that this evidence is clearly
necessary under what Torrington refers to as the ``Torrington VI
rule.'' Torrington argues that SKF Germany cannot claim that any poor
sales results which may be experienced by distributors on resales of
SKF Germany products necessarily justify rebates allocated to given
classes or kinds. According to Torrington, the Department rejected the
same claim by SKF Germany in the 1992/93 review (citing AFBs IV and
Torrington VI).
With respect to billing adjustment 2, Torrington argues that SKF
Germany's claim for an adjustment cannot be allowed because its
reporting is inconsistent with the so-called Torrington VI rule.
Torrington argues further that, because this is the sixth
administrative review, SKF Germany has had ample time to modify its
record-keeping system to permit the reporting of accurate amounts.
Torrington adds that the Department rejected the same basic claim in
AFBs IV. Torrington contends that, to avoid a benefit to respondent,
the Department should only reject the downward adjustments to NV for
billing adjustment 2. Torrington also asserts that the Department
should reject SKF Germany's argument, in which it cites the Final
Results of Redetermination Pursuant to Court Remand (August 14, 1995)
at 18-19, in The Torrington Company v. United States, Ct. No. 92-07-
00483, that the Department must either accept SKF Germany's reporting
as is or reject all reported adjustments. Torrington claims that this
ruling is not applicable because the Court's remand instructions that
SKF Germany develop a methodology to remove billing adjustments would
not be possible here.
Torrington argues that the Department should also reject SKF
Germany's argument, in its May 24, 1996 submission, that selective
rejection of the reported billing adjustment 2 is an unlawful use of an
adverse inference. Torrington contends that, because this provision is
limited to the selection of facts among facts otherwise available it
does not detract from the Department's authority to reject certain
information provided by the respondent while retaining other
information, also provided by the respondent.
SKF Germany responds that, in the preliminary results, the
Department treated SKF Germany's reported early-payments discounts,
support rebates and billing adjustment 2 correctly as direct
adjustments to price. According to SKF Germany, Torrington is mistaken
[[Page 2094]]
in relying on Torrington VI. SKF Germany claims that the CAFC did not
hold that the Department must reject allocations of direct expenses.
Moreover, SKF Germany argues, the Torrington VI decision is not
relevant under the new law, because the SAA indicates that the
Department will accept allocations of certain direct expenses when
transaction-specific reporting is not feasible, citing the SAA at 823-
24. In addition, according to SKF Germany, the Department indicated in
its explanation to the proposed regulations, 61 FR 7329, that it will
balance the difficulties of reporting transaction-specific expenses
against the potential inaccuracies of reporting on an allocated basis.
SKF Germany argues that, if the Department rejects the adjustments, it
would be acting contrary to section 782(e) of the statute that
information not meeting all of the Department's requirements must still
be accepted if timely, verifiable, reliable, the party acted to the
best of its ability, and the data can be used without undue
difficulties. SKF Germany states that Torrington's position that
allocations involving upward adjustments to comparison-market prices
must be included in the NV calculation would contravene this section of
the statute. SKF Germany adds that the Department rejected a similar
suggestion by Torrington in a remand determination in the appeal of the
1990/91 administrative review of AFBS, citing Final Results of
Redetermination Pursuant to Court Remand (August 14, 1995) at 18-19
filed in The Torrington Co. v. United States, Ct. No. 92-07-00483. SKF
Germany states that allocations may be necessary and appropriate and
that rejection of such reporting would mean that actual expenses
incurred on the subject merchandise or foreign like product would not
be captured in the antidumping calculation. SKF Germany argues that,
even if the Torrington VI decision still applies under the new law, the
Department should treat all PSPAs as direct adjustments if reasonably
reported.
SKF Germany argues further that, with respect to early payment
discounts, the Department has found that transaction-by-transaction
reporting is simply not possible because of the manner in which
customers take those discounts. SKF Germany states that the Department
has verified SKF Germany's reporting of this adjustment, and respondent
claims that it could not have reported the discounts on a more specific
basis.
SKF Germany argues that, with respect to its allocated rebates, the
Department has found that transaction-by-transaction reporting is
simply not possible due to their very nature. SKF Germany argues
further that, with respect to its allocated billing adjustments, the
Department has found that transaction-by-transaction reporting is
simply not possible because the involved adjustments related to
multiple transactions and, therefore, it could not have reported the
adjustments more specifically. SKF Germany adds that the Department
verified its reporting of these adjustments.
SKF Germany argues, citing Final Results of Redetermination
Pursuant to Court Remand (August 14, 1995) at 18-19 filed in The
Torrington Co. v. United States, Ct. No. 92-07-00483, that the lesson
of the court's remand order and the Department's response thereto is
that when an adjustment is denied it is denied; it is not allowed in
part. In addition, SKF Germany asserts that the Department rejected
Torrington's argument that SKF Germany would receive a ``windfall
benefit'' if the Department denied all of SKF Germany's billing
adjustments 2 as opposed to denying only the downward price
adjustments, in that same remand.
Department's Position: We agree with SKF Germany regarding early
payment discounts, support rebates, and billing adjustment 2. SKF
Germany reported these adjustments to the best of its ability. SKF
Germany did not report these adjustments on a transaction-specific
basis due to their very nature and we find that SKF Germany's
methodology is not unreasonably distortive. Further, there is no
information on the record that would lead us to believe that these
adjustments were not granted in proportionate amounts with respect to
sales of out-of-scope and in-scope merchandise. Torrington's argument
that SKF's allocations is distortive is purely speculative.
SKF Germany calculated customer-specific averages of its early-
payment discounts for the periods January 1994 through December 1994
and January 1995 through April 1995. See SKF Germany's September 26,
1995 questionnaire response at pages 28-29. Our examination of its
records and our findings at verification indicate that it is not
feasible for SKF Germany to allocate this adjustment more specifically,
given the large volume of transactions involved, the level of detail
contained in SKF's normal accounting records, and the time constraints
imposed by the statutory deadlines under which all parties must
operate. We are satisfied that this reporting methodology reflects the
nature in which SKF Germany does business and that SKF Germany reported
early-payment discounts to the best of its ability, and that its
methodology is not unreasonably distortive. Regarding the relevance of
the holding of the CAFC in Torrington VI, see our response to comment
1, above.
Due to the nature of support rebates, transaction-specific
reporting is not feasible. While Torrington argues that there is no
evidence that distributors were allowed these rebates as a result of
poor sales results on subject merchandise, as distinct from products
not covered by orders, we do not believe SKF Germany's allocation to be
distortive, as we believe that such adjustments were granted in
proportionate amounts with respect to sales of out-of-scope
merchandise. SKF Germany grants these rebates to distributors/dealers
to ensure that they obtain a minimum profit level on sales to select
customers. Hence, because SKF Germany does not issue these rebates
based on specific sales to the distributor/dealers, SKF Germany cannot
report transaction-specific rebate amounts. Therefore, we find that SKF
Germany's reporting methodology is not unreasonably distortive and that
SKF Germany responded to the best of its ability.
With respect to billing adjustment 2, SKF Germany reported billing
adjustments not associated with a specific transaction. These
adjustments included credit or debit notes that SKF Germany issued
relating to multiple invoice lines. SKF Germany could not tie these
adjustments to a specific transaction because the billing adjustments
reported in this field were part of credit or debit notes, issued to
the customer, that related to multiple invoices, products, or multiple
invoice lines. In these cases, the most feasible reporting methodology
that SKF Germany could use was a customer-specific allocation, given
the large volume of transactions involved in these AFBs reviews and the
time constraints imposed by the statutory deadlines. For these reasons,
we find that this methodology is not unreasonably distortive.
As mentioned in the introductory remarks at the beginning of this
section, we agree with Torrington that, when we reject a respondent's
allocation, we should only reject the downward adjustments to NV.
However, since we are accepting the reporting of SKF Germany's billing
adjustments, Torrington's argument is not applicable.
Comment 6: Torrington argues that the Department should apply a
five-percent upward adjustment to all of SKF
[[Page 2095]]
France's HM sales because SKF France did not report billing adjustments
of less than five percent of gross unit price (BILLAD2H). Torrington
notes that billing adjustments are invoice-specific and can either
decrease or increase price. Torrington states that it was not
appropriate for SKF France to decide what amounts are insignificant for
purposes of 19 CFR 353.59(a). Further, according to Torrington, the
fact that reporting is inconvenient is not an excuse for failing to
report all amounts on a sale-by-sale basis. Torrington states that
adverse inferences are appropriate because SKF France refused to supply
the information. In response to SKF France's argument made in a
submission during these reviews that its failure to report was
detrimental to SKF France as the total net value of billing adjustments
would have decreased NV, Torrington answers that the total net value of
the adjustment is irrelevant.
Torrington asserts that the statutory changes introduced by the
URAA do not diminish or invalidate the standard articulated by
Torrington VI. Torrington contends that the statutory provision upon
which SKF France relies in its pre-preliminary comments, section
782(e), addresses the situation where systemic difficulties exist with
a response, and does not apply here. In this case, Torrington asserts,
the Department may reject the response in favor of facts available. The
amended statute, according to Torrington, makes clear that the
Department should accept a response only if the response was timely,
verifiable, and reliably complete, if the respondent acted to the best
of its ability, and if the information can be used without undue
difficulties. Torrington asserts that these requirements are not met in
this case.
Torrington argues that the above-discussed grounds for rejection
also apply to Steyr sales, to which SKF France allocated billing
adjustments on the basis of customer numbers. Torrington requests that
the Department draw adverse inferences and adjust all Steyr prices
upward by five percent as facts available.
SKF France asserts that the Department, in the preliminary results,
correctly rejected Torrington's argument regarding adverse facts
available for SKF France's and Steyr's billing adjustment 2. SKF France
claims that there is no basis for the Department to reject SKF France's
reporting methodology, and notes that it has reported this adjustment
in the same manner in prior reviews and the Department verified and
accepted this approach in the 1992/93 review.
Regarding Steyr, SKF France argues that although the Department,
pursuant to the CIT's decisions, has disallowed similar billing
adjustments in the 1992/93 review of AFBs, the URAA and the SAA require
a different result in this review. Under the new statute, SKF France
contends, the Department is required to accept information that may not
meet all of the Department's requirements, provided certain conditions
are met. SKF France claims that Steyr reported billing adjustments
using the most specific reporting method feasible, given the manner in
which the adjustment are incurred and recorded in the normal course of
business. SKF further claims that it acted to the best of its ability
in reporting these adjustments and that the use of these adjustments
would cause no undue difficulty to the Department. In addition,
according to SKF France, the SAA indicates that the Department will
accept allocations of certain expenses when transaction-specific
reporting is not feasible and requires the Department to balance the
difficulties of reporting transaction-specific expenses against the
potential inaccuracies of reporting on an allocated basis. SKF France
argues that, in light of the recent decision by the CAFC in The
Torrington Co. v. United States, Ct. Nos. 95-1210-1211 (CAFC 1996), and
the SAA's directive to consider allocated expenses, it is imperative
that the Department retain the discretion to consider how respondents
report a price adjustment, given that respondent's ordinary business
practices and the nature of the specific adjustment rather than simply
reject all allocated expenses.
SKF France states that it would be inappropriate for the Department
to increase Steyr's prices by five percent as facts available, and
notes that the Department rejected a similar suggestion by Torrington
to apply an adverse inference and selectively accept certain billing
adjustments in a remand determination in the appeal of the 1990/91
administrative review of AFBs (citing Final Results of Redetermination
Pursuant to Court Remand (August 14, 1995) at 18-19 filed in The
Torrington Co. v. United States, Ct. No. 92-07-00483). Further,
according to SKF France, even if the Department determines not to
accept Steyr's reporting of billing adjustments, a five-percent across-
the-board upward price adjustment would amount to an unlawful use of an
adverse inference. SKF France states that, according to the URAA, an
adverse inference is only permitted when a party has failed to
cooperate by not acting to the best of its ability (citing 782(e) of
the statute). SKF France claims that it cooperated fully with the
Department and has acted to the best of its ability with respect to its
reporting of billing adjustment 2.
Department's Position: We agree with SKF France regarding billing
adjustment 2 for SKF France and Steyr. According to SKF France's
February 16, 1996 supplemental questionnaire response at pages 36-37,
it generally uses the field for billing adjustment 2 for SKF France to
include those billing adjustments that were less than five percent of
the gross unit price and less than 1,000 French Francs. However, in
this case SKF France reported zero values in this field, as it has for
previous reviews, because it found the total value of these adjustment
to be insignificant. There is nothing on the record to suggest that
SKF's information is inaccurate. This policy of disregarding
insignificant adjustments is consistent with our policy in prior
reviews.
Regarding Steyr's billing adjustments as reported in billing
adjustment 2, it was not feasible for SKF France to allocate these
adjustments other than on a customer-specific basis because they relate
to multiple invoices or multiple invoice lines. Due to the non-
transaction-specific nature of the expense, the volume of HM
transactions reported by SKF, and the time constraints imposed by the
statutory deadlines, we believe that SKF France reported billing
adjustments for Steyr to the best of its ability. Further, even though
SKF France included out-of-scope merchandise in the allocation of the
adjustment, we have no reason to believe that such adjustments were not
granted in proportionate amounts with respect to sales of out-of-scope
and in-scope merchandise. Hence, we believe that the customer-specific
allocation that SKF France used for Steyr's adjustments is not
unreasonably distortive.
Comment 7: Torrington contends that the Department should disallow
all of INA's claimed downward billing adjustments in calculating NV
because INA provided only a brief description of its home market
billing adjustments which did not indicate whether the adjustments were
limited to in-scope merchandise. Torrington argues that the CAFC held
that direct PSPAs must be reported on a sale-specific basis before the
Department can make a downward adjustment in calculating NV (citing
Torrington VI at 1047-1051).
INA responds that it reported product- and invoice-specific billing
adjustments in accordance with the instructions in the Department's
original questionnaire. INA contends that the
[[Page 2096]]
Department verified that it reported home market billing adjustments
properly and cites to the verification report. INA states that there is
no basis to disregard downward home market billing adjustments in
calculating NV.
Department Position: We disagree with Torrington. INA reported this
adjustment on an invoice-specific basis. Where INA had more than one
transaction on an invoice, INA used the same fixed and constant
percentage for all transactions on the invoice. Therefore, we determine
that this is the equivalent of reporting the adjustments on a
transaction-specific basis. Furthermore, we verified INA's HM billing
adjustment and found no discrepancies (Memo from Analyst to File,
Verification of HM Sales Information Submitted by INA Walzlager
Schaeffler KG, at 4, Exhibit 9, June 28, 1996). We have allowed,
therefore, both INA's reported upward and downward home market billing
adjustments.
Comment 8: Torrington argues that Koyo reported its home market
rebates on a customer-specific basis, even though they were incurred on
an invoice-specific basis. Torrington maintains that the Department's
policy states clearly that it only accepts rebates, discounts, and
price adjustments as direct adjustments if respondents report actual
amounts for each transaction.
In rebuttal, Koyo argues that it reported its rebate expenses in
this review in the same manner as it has in past reviews and that the
Department has repeatedly verified and accepted the claimed expense
(citing Home Market Verification Report of Koyo Seiko dated April 16,
1996).
Department's Position: We agree with Koyo. During the verification
of Koyo's rebates, we noted that, once a distributor participating in
the rebate program had purchased a pre-established amount of sales,
Koyo applied a pre-established percentage rebate to all sales to that
distributor. Therefore, reporting the percentage is the equivalent of
reporting its rebates on a transaction-specific basis because the
rebate was granted as a fixed and constant percentage of all affected
sales. We also note that, even under the old law, we would have found
Koyo's methodology to be permissible. See AFBs V at 66498. Therefore,
we determine that Koyo acted to the best of its ability and that its
response methodology is not unreasonably distortive.
Comment 9: Torrington argues that, although the Department accepted
Koyo's billing adjustment (BILLADJ1H) in the preliminary results, it
should deny Koyo's downward or negative billing adjustments. Torrington
states that post-sale price adjustments must be reported on a sale- or
model-specific basis, if incurred on those bases. Torrington contends
that Koyo failed the standard set forth in Torrington VI. Torrington
recommends that the Department deny negative HM billing adjustments and
include positive billing adjustments in the antidumping analysis.
Torrington further suggests that, since Koyo did not report positive
billing adjustments on a transaction-specific basis, the Department
should not use the reported positive billing amounts but should apply,
as partial facts available, Koyo's highest reported positive billing
adjustment to all sales involving positive adjustments.
Koyo acknowledges that it reported billing adjustments using
customer-specific allocations. Koyo maintains, however, that in
Torrington VI the CAFC held that an expense incurred as a direct
expense must be reported as a direct expense, even if allocated. Koyo
maintains further that this holding conforms with the decision in
Smith-Corona Group v. United States, 713 F.2d 1568, 1580 (CAFC 1983),
in which the CAFC, when looking at customer-specific rebates, held that
an allocation methodology did not deprive the rebates of their direct
relationship to the sales under consideration.
Department's Position: We agree with Koyo that we should treat its
billing adjustment as a direct adjustment to NV. We determined at the
home market verification that in preparing its response to the
Department Koyo summed, on a customer-specific basis, the amount of
this adjustment, which was only granted on in-scope merchandise, and
then allocated the customer-specific total expense over in-scope
merchandise on a customer-specific basis. Koyo acted to the best of its
ability in reporting this information using customer-specific
allocations. Information in Koyo's responses and our findings at the
home market verification indicate that, although Koyo does not maintain
this information on an invoice-specific basis, the customer-specific
allocation methodology it used to report this expense to the Department
was not unreasonably distortive. With regard to Torrington's discussion
of the CAFC's decision in Torrington VI, see our response to Comment 1.
Comment 10: Torrington contends that the Department should
disregard the U.S. early payment discounts that NMB/Pelmec reported,
and instead use the highest discount rate for all transactions or the
highest rate any other respondent reported in these proceedings.
Torrington argues that the Department should only accept the reporting
of U.S. discounts if NMB/Pelmec reported actual transaction-specific
amounts. Torrington states that NMB/Pelmec reported U.S. early payment
discounts on a customer-specific basis.
NMB/Pelmec argues that its methodology accurately reflects the
early payment discounts it granted. It claims that its records show
that it granted the discount rates to each customer on all or virtually
all sales. NMB/Pelmec also claims that its records show that customers
always took the discount because the amount of discounts it actually
granted to each customer relative to total sales to each customer
comports with the discount rate it offered. NMB/Pelmec notes that it
used this method, as verified by the Department, in two prior reviews.
NMB/Pelmec notes that, because it reported a discount on all sales to
eligible customers at the customer's rate, any distortion caused by
this allocation would be to NMB/Pelmec's detriment .
Department's Position: We agree with NMB/Pelmec. We have found that
NMB/Pelmec's reporting methodology for early-payment discounts is not
unreasonably distortive. NMB/Pelmec granted discounts at a fixed and
constant percentage of the value of all sales to each eligible
customer. Therefore, reporting the percentage is the equivalent of
reporting its rebates on a transaction-specific basis. Therefore, we
determine that NMB/Pelmec acted to the best of its ability and that its
response methodology is not unreasonably distortive. We also note that,
even under the pre-URAA law, we would have found NMB/Pelmec's
methodology to be permissible. See AFBs V at 66498.
Comment 11: Torrington states that the Department's verification
report indicates that, as a result of a new contract INA entered into
with two of its U.S. customers, there were several retroactive price
changes to certain prices INA reported. Torrington contends, however,
that the verification exhibit reveals that the record is incomplete
with respect to this issue. Torrington requests that the Department
correct the reported sales information to reflect the change in price.
Torrington also states that the Department should require INA to
develop the record to include a full explanation of the nature of the
contracts into which it entered, and to reflect the corrections in the
database, including quantities, price, transaction dates and part
numbers. Torrington states that it is necessary to
[[Page 2097]]
further develop the record because changes to price as a result of
retroactive price adjustments call into question the reliability of all
reported U.S. sales.
INA responds that the Department verified all information
concerning the revisions to some prices for U.S. customers. In
addition, INA states that, as the Department noted in its verification
report, the sales affected by the retroactive price adjustments were
limited to the sales transactions that INA presented to the
verification team at the outset of verification.
Department Position: We agree with respondent and are satisfied
that, given our thorough examination at verification, the record is
complete with respect to this issue. We included the corrected
retroactive price adjustments we received from respondent at
verification in our preliminary analysis because, in our verification
of these adjustments, we found that there were no price adjustments on
other transactions (verification report, at 1). Therefore, we do not
question the reliability of INA's reported U.S. sales and for these
final results, we have adjusted the U.S. database to reflect these
price changes.
Comment 12: Torrington asserts that the Department should disallow
NTN's HM billing adjustments to NV. Petitioner cites the CAFC's
decision in Torrington VI that adjustments of this sort are, by their
nature, indirect and may not be allocated across all sales. Torrington
claims that NTN's description of billing adjustments in its
questionnaire response is unclear as to whether the adjustment is
product-and invoice-specific. Petitioner contends that NTN has not met
its burden of proof of establishing entitlement to the adjustment.
NTN counters that it did not allocate the adjustment broadly across
all sales and that the Department verified the accuracy of the
adjustment and the methodology NTN used to report it. NTN maintains the
Department was correct in accepting the adjustment in the preliminary
results and should do so for the final results.
Department's Position: We disagree with Torrington. NTN's reporting
methodology was consistently customer-and product-specific for billing
adjustments. As a result of our verification of NTN's HM sales, we
found that NTN reported the great majority of billing adjustments on a
transaction-specific basis. As stated in our introductory remarks to
this section, we prefer transaction-specific amounts for these kinds of
adjustment claims. Because NTN acted to the best of its ability in
reporting the adjustment and its allocations are not unreasonably
distortive, we have accepted the reported adjustments for the final
results.
Comment 13: Torrington contends that NTN Germany's HM discounts and
rebates should be rejected in the calculation of NV. Petitioner
maintains that these adjustments are direct adjustments that respondent
has improperly reported on a customer-specific basis. Torrington claims
that respondent has reported its discount adjustment incorrectly based
on information in the public version of the home market verification
report for the 1992-93 administrative review. Because the adjustments
are not reported on a transaction-specific basis, petitioner argues
that the Department must reject them.
NTN Germany counters that it has reported its discounts and rebates
in a consistent and accurate manner in each administrative review and
that the Department should accept them as reported in this review.
Department's Position: We disagree with Torrington. NTN Germany
explained in its response that the adjustments were based on agreements
with customers for eligible products. Resulting total amounts for each
customer were allocated to sales to the customer. Based on NTN
Germany's response and information on the record from verifications of
previous reviews, we believe respondent has acted to the best of its
ability in reporting the adjustments and its allocations are not
unreasonably distortive.
4. Circumstance-of-Sale Adjustments
4.A. Technical Services and Warranty Expenses. Comment 1:
Torrington argues that the Department should reject NSK's claim for an
adjustment to NV for technical service expenses. Torrington asserts
that NSK's description of these expenses indicates a direct
relationship to specific transactions, despite NSK's claim that it
could not isolate technical services for specific sales. Citing
Torrington VI at 1050, Torrington argues that NSK cannot claim direct
expenses as an indirect adjustment merely because it is inconvenient
for NSK to report them on the same basis on which they were incurred.
Torrington also argues that NSK's reported technical service expense
does not distinguish between that paid on subject merchandise and that
paid on non-subject merchandise.
NSK contends that, while it provides technical service with respect
to specific customers or even to specific part numbers, it does not
incur expenses on that basis. NSK argues that the expenses referred to
by Torrington are expenses such as salaries, benefits, rent, utilities,
and depreciation and can be characterized as fixed expenses. NSK also
argues that, because such expenses are ISEs, NSK is under no burden to
remove such expenses as might theoretically relate to sales of non-
subject merchandise because such expenses are incurred to support NSK's
sales generally.
Department's Position: We disagree with Torrington. We have
examined the information on the record and have concluded that, based
on NSK's description, its home market technical service expense (such
as the salaries and benefits of technical service employees) is a fixed
expense and does not vary with sales volumes. Therefore, we conclude
that they are of an indirect nature. We further agree with NSK that,
due to the nature of ISEs, NSK need not segregate such expenses between
those paid on subject and non-subject merchandise.
Comment 2: Torrington argues that the Department should treat NSK's
U.S. technical service expense as a direct expense instead of an
indirect expense. Torrington asserts that NSK admitted that it did
incur direct technical service expenses in the United States but
claimed that allocation of direct technical service expense resulted in
a de minimis factor, instead aggregating them with its indirect
technical service expense. Citing AFBs IV at 10911, Torrington contends
that, when a respondent fails to report U.S. technical service expenses
in direct and indirect portions, it is the Department's practice to
treat the expenses as a direct adjustment to CEP.
NSK argues that it attempted to identify which portion of its
technical service expenses is direct and which is indirect, and it
found that it had no direct technical service expenses which it could
identify. NSK asserts that its technical service expenses are salaries,
repairs, maintenance, and the like, which NSK asserts the Department
has routinely recognized as indirect expenses. Finally, NSK contends
that the Department has always treated its technical service expenses
as an indirect expenses and Torrington has offered no reason for the
Department to reverse itself.
Department's Position: We agree with NSK. In its response to our
questionnaire, NSK identified certain technical service expenses which
NSK said could be considered direct in nature. After examining these
expenses, which are separately identified in NSK's Proprietary Exhibit
C-12, we concluded that reclassifying these expenses as direct would
have no material impact
[[Page 2098]]
on the margin calculation. See NSK Ltd. Final Analysis Memorandum,
dated December 17, 1996. Therefore, we have treated all of NSK's U.S.
technical service expenses as indirect expenses for the final results.
Comment 3: Torrington argues that the Department should reject FAG
Germany's reported HM direct warranty expense because the expense was
allocated over all sales, regardless of model, class or kind, or
customer. Citing Federal-Mogul V at 220, Torrington contends that the
CIT has affirmed the Department's practice of rejecting direct
deductions to foreign market value (now NV) for warranty and technical
service expense because, although they were not incurred as a fixed
percentage of sales value, they were allocated over all sales.
FAG argues that it allocated variable warranty costs over subject
merchandise only, that it explained its allocation in its response, and
that the Department verified its direct warranty expense. FAG argues
that the court case Torrington cites is inapposite because in that case
the allocations were made over both subject and non-subject
merchandise.
Department's Position: We agree with FAG Germany. Similar to
discounts and rebates (see item 3, above), we have accepted claims for
home market direct selling expenses as direct adjustments to price if
we determined that the respondent reported the expense: (1) on a
transaction-specific basis; (2) as a fixed and constant percentage of
the value of sales on which it was incurred; or (3) on an allocated
basis, provided that it was not feasible for the respondent to report
the expense on a more specific basis and the allocation does not cause
unreasonable inaccuracies or distortions (e.g., if granted
proportionately on sales of out-of-scope versus in-scope merchandise).
We have disallowed any allocated HM direct selling expense which did
not meet this standard pursuant to Torrington V.
We find that FAG Germany has reported its HM variable warranty
expenses in the most feasible manner possible. The Department has long
recognized that it is not possible to tie POR warranty expenses to POR
sales, since the warranty expenses can be incurred on pre-POR sales.
Likewise, FAG may not incur warranty expenses on POR sales until a
future time period. Therefore, warranty expenses generally cannot be
reported on a transaction-specific basis and an allocation is
necessary. FAG Germany allocated its warranty expenses related to sales
of scope merchandise and its methodology is not unreasonably
distortive. Accordingly, we have treated FAG's reported HM direct
warranty adjustment as a direct adjustment to NV.
Comment 4: Torrington argues that the Department should disallow
Koyo's HM ISE-offset claim because the company failed to report direct
warranty expenses separately in the manner in which it incurred them.
Torrington, citing Torrington VI at 1047-1051, maintains that direct
expenses, if not reported in the manner in which they are incurred,
must be denied altogether.
Koyo responds that its methodology for reporting its warranty
expenses in this review is the same as that it used in a number of
previous reviews of the orders on AFBs and tapered roller bearings.
Koyo further states that the Department has verified and accepted
Koyo's methodology in previous reviews and has never raised any
complaints regarding Koyo's treatment of warranties.
Department's Position: We disagree with Torrington. In general, it
is not possible to tie POR warranty expenses to POR sales, since the
warranty expenses are incurred on pre-POR sales. Further, Koyo
calculated a warranty expense factor based on the ratio of total
warranty claims to total bearing sales, as in AFBs III (at 39743), in
AFBs IV (at 10910), and in AFBs V (at 66485), where Koyo used the same
allocation methodology. In these reviews, we also find that Koyo's
allocation of warranty expenses is not unreasonably distortive, and we
have accepted them for these final results.
Comment 5: Torrington requests that the Department deny an
adjustment to NV for FAG Italy's reported HM technical service expense,
arguing that the company failed to report the adjustment in the manner
the Department requested. Torrington contends that FAG Italy averaged
total HM direct technical service expenses over all POR sales instead
of on a customer-specific basis as requested by the Department.
Moreover, Torrington claims that the Department should not treat the
claimed HM technical service expense as an indirect expense because the
expense is direct in nature, citing Torrington VI at 1050-1051 in
support of its argument that the Department may not treat direct
expenses as indirect.
FAG Italy argues that it properly calculated and reported its HM
technical service expenses and that the Department lawfully permitted
the adjustment to NV as it has in all prior reviews of these AFB
orders. In support of the Department's treatment of the HM technical
service expenses as direct, FAG Italy states that the expenses are
variable and that they are dependent only upon sales of the merchandise
under review. In conclusion, FAG Italy contends that Torrington's
reference to Torrington VI is inappropriate because the adjustments at
issue in that case were indirect expenses allocated over all sales
(scope and non-scope) whereas FAG Italy's HM technical service expenses
are direct and are only allocated over scope merchandise.
Department's Position: We agree with FAG Italy. In our
questionnaire, we instructed FAG Italy to report the technical service
expenses directly related to sales of the foreign like product, less
any reimbursement received from the customer. In its questionnaire
response, FAG Italy stated that it first subtracted the fees that it
received from its customers from the pool of technical service expenses
and allocated the remainder by dividing by the ``applicable home market
sales.'' This reporting methodology is consistent with FAG Italy's
accounting and record-keeping systems and is an accurate representation
of the company's technical service expenses. Since FAG Italy's
reporting of this information is the most specific that is feasible and
is not unreasonably distortive, we have accepted the company's HM
variable technical service expenses as a direct adjustment to NV.
Comment 6: Torrington states that SNR's response indicates that it
allocated HM warranty expenses over both scope and non-scope
merchandise, despite the Department's verification report indicating
that the expenses were allocated over sales of scope merchandise only.
Torrington urges the Department to ensure for the final results that HM
warranty expenses were properly allocated and have not been overstated.
SNR asserts that the Department verified its direct warranty
expenses, which it limited to returns of scope products and allocated
over sales of only scope products. Therefore, SNR concludes, the
Department found its HM warranty expenses to be properly allocated and
not overstated.
Department Position: We agree with SNR that it allocated only HM
warranty expenses related to scope products over scope products. As we
indicated in the verification report, we verified those warranty
expenses and did not find any discrepancies.
4.B. Commissions. Comment 1: Torrington argues that the Department
should reject NSK's claimed adjustment to NV for commissions paid for
delivery on behalf of NSK. Torrington notes that NSK summed all
commissions paid to a
[[Page 2099]]
commissionaire for deliveries and allocated that amount over total NSK
sales to the commissionaire. Torrington contends that it is not evident
that NSK actually incurred commissions on all sales to the
commissionaire. Torrington also argues that the total commissions and
the total sales to the customer include commissions paid on sales of
non-subject merchandise, which is contrary to law, citing Torrington I
at 1579. Finally, Torrington argues that, even if the Department
permits an adjustment for such commissions, the Department should
disregard those commissions NSK paid to affiliated commissionaires
because NSK failed to demonstrate that they were made at arm's length.
NSK argues that the Department correctly deducted commissions for
delivery on behalf of NSK as a direct expense. NSK argues that the
proposed regulations for implementing the URAA allow respondents to
allocate expenses if transaction-specific reporting is not feasible, as
long as the allocation is not distortive (citing Antidumping Duties;
Countervailing Duties; Proposed Rule, 61 FR 7308, 7330, 7381 (February
27, 1996) (proposed Sec. 351.401(g) and commentary)). NSK contends that
its records are not maintained on a transaction-specific basis and,
therefore, it cannot report HM commission expenses on a transaction-
specific basis. NSK claims that its allocation methodology is non-
distortive.
Department's Position: We disagree with Torrington. We conclude
that, although NSK may not have allocated these commissions on the same
basis that they were incurred, the allocation methodology is
sufficiently accurate that whatever distortion may exist will have no
material impact on NSK's margin. As we noted in the home market
verification report, NSK calculated customer-specific factors by
dividing the total commission paid to a commissionaire by the sum of
the sales that generated the commission. See Home Market Verification
Report dated April 26, 1996, at page five. As the allocation is
customer-specific, there is no possibility of shifting expenses from
one customer to another. Moreover, because NSK allocated these
commissions over only those sales that actually incurred such
commissions, there is no possibility that NSK reported commissions for
sales which did not incur them. Finally, for business proprietary
reasons discussed in the analysis memorandum, we conclude that there is
no possibility that NSK included in its reporting any commissions paid
on non-subject merchandise. See NSK Ltd. Final Analysis Memorandum,
dated December 17, 1996. For these reasons we disagree with Torrington,
and we conclude that NSK's allocation methodology is not unreasonably
distortive and that NSK acted to the best of its ability in reporting
these commissions. Therefore, we determine that a direct adjustment to
NV for commissions for delivery on behalf of NSK is appropriate.
We agree with Torrington that we should disregard commissions that
NSK paid to affiliated commissionaires for delivery on behalf of NSK.
As discussed in the final results analysis memorandum, we conclude that
the commissions NSK paid to affiliated commissionaires were not made at
arm's-length. See NSK Ltd. Final Analysis Memorandum, dated December
17, 1996.
Comment 2: Torrington argues that the Department should reject
NSK's claim for an adjustment to NV for distributor-incentive
commissions. Torrington notes that the Department treated this as a
direct adjustment to NV for the preliminary results even though NSK
requested that these commissions be treated as ISEs. Torrington argues
that NSK failed to demonstrate that these commissions do not include
payments it made on non-subject merchandise or that it, in fact, paid
any commissions on subject merchandise. Torrington also claims that
NSK's allocation methodology is distortive, because the possibility
exists that it claimed an adjustment on sales for which it paid no
commission. Torrington asserts that the Department disallowed this
expense in AFBs IV, as well as in Tapered Roller Bearings from Japan,
56 FR 64720, 64723 (1993), and was affirmed by the CIT in NSK III.
Finally, Torrington argues that, even if the Department permits an
adjustment for such commissions for the final results, the Department
should disregard commissions NSK paid to affiliated commissionaires.
NSK argues that the Department should continue to treat
distributor-incentive commissions as a direct expense. NSK contends
that, while the Department rejected its distributor-incentive
commissions in AFBs IV, it later treated such commissions as a direct
expense and this practice was affirmed in Torrington IV.
Department's Position: We agree with Torrington that we should not
treat distributor-incentive commissions as a direct adjustment to NV.
Our treatment of these commissions as a direct adjustment for the
preliminary results was an inadvertent error on our part. As NSK
explained in its supplemental response, ``this expense is earned on the
basis of the distributor's resale, rather than on NSK's sale to the
distributor.'' See NSK's response to our supplemental questionnaire,
dated December 7, 1995. We later verified this information. See NSK
home market verification report, dated April 26, 1996. We conclude that
NSK did not incur this expense directly on its sales to its customers.
Based on the nature of this expense, we conclude that it is not really
a commission. Rather, we agree with NSK's characterization in its
supplemental response that distributor-incentive commissions are an
indirect promotional expense as opposed to a price adjustment because
NSK grants these ``commissions'' to promote sales made by distributors.
We disagree with Torrington that we should disregard distributor-
incentive commissions NSK paid to affiliated commissionaires. As
discussed in the final results analysis memorandum, we conclude that
the commissions NSK paid to affiliated commissionaires were made at
arm's length. Therefore, we have adjusted NV for these commissions. See
NSK Ltd. Final Analysis Memorandum, dated December 17, 1996.
4.C. Credit. Comment 1: Torrington argues that the Department
should adjust NSK's HM credit expense calculations by excluding
discounted notes. Torrington argues that discounted notes are not part
of an unpaid balance but rather represent paid amounts, albeit at a
discount, during the month. Torrington argues that the burden is on NSK
to demonstrate that it did not include notes that had been paid, and
contends that NSK did not demonstrate this on the record. Therefore,
Torrington argues, the Department should either exclude discounted
notes from NSK's credit-expense calculation or use the lowest credit
expense NSK reported for all HM sales during the POR.
NSK argues that the Department verified that, while NSK included
unpaid notes receivable in its credit calculation, it did not count
notes receivable that had been paid. NSK also argues that it used the
term ``discounted'' to differentiate one specific type of notes
receivable from other types.
Department's Position: We disagree with Torrington. While
discounted notes do not technically represent an unpaid balance, NSK
does not obtain the use of the entire balance owed by the customer for
the note. When a company discounts a note through a bank, the bank
typically assesses a charge or fee for discounting the note. Therefore,
when discounting a note
[[Page 2100]]
through a bank, the company incurs a cost for obtaining a smaller
amount of money than that to which it would be entitled had it held
onto the note until maturity. NSK calculated the interest rate for its
discounted notes in a manner similar to that which it did for other
loans. At verification, we found that NSK does incur discounted-note
expenses, and we determined in our analysis of NSK's reported HM credit
expense that respondent accounted for discounted notes properly in its
methodology.
Comment 2: Torrington comments that FAG Germany improperly added
one credit day in calculating credit expense for HM sales, by claiming
that, under operating procedures common to the German banking system,
there is a lag in the availability of funds in Germany which does not
exist in the United States. Torrington contends that, even if the
alleged banking delay was supported by the record, it would apply to
all payments in Germany, whether completed upon delivery or after the
expiration of an agreed-upon term. Thus, Torrington argues, the one-day
period allegedly required by the bank to process the payment is no more
relevant to the imputed credit expense calculation than, for example, a
respondent's own administrative delays. Torrington argues that the
Department should recalculate FAG Germany's reported home market credit
expense by reducing the time between sale and payment by one day.
FAG Germany argues that, in accordance with specific procedures
which the Department verified, it does not technically receive payment
from its customers until the day after its banks actually received the
customer's check or transfer. FAG Germany contends that, in accordance
with Departmental reporting requirements, it reports all expenses on
the same basis in which they are incurred, and that, where funds are
not available in FAG's accounts until one day after deposit by German
law and practice, it has legitimately incurred an extra day of credit
costs.
Department's Position: We agree with FAG. As we noted in the HM
verification report, we analyzed several credit notes, promissory
notes, and short-term loan agreements to determine the accuracy of
FAG's submission and found no discrepancies. Therefore, we found that
FAG reported its dates of payment in its response accurately. Had FAG
not justified the extra day reported in the home market at
verification, we would have noted it and adjusted FAG's HM credit
expenses accordingly. As this was not the case, we have accepted FAG's
HM credit expenses as reported.
Comment 3: Torrington contends that the Department should not
accept FAG Italy's HM credit expense data that the company provided
after verification unless the Department is fully satisfied that the
amounts are accurate. Torrington notes that, at verification, the
Department discovered FAG Italy had failed to report credit amounts for
certain HM customer codes. Torrington's concern is that when FAG Italy
submitted the credit expense information on the record after
verification it may have overstated its customers'' actual credit
expenses. Torrington requests that the Department compare the average
credit expenses FAG Italy reported after verification to the average
credit expenses it reported originally to ensure that the new credit
expense figures typify FAG Italy's experience.
FAG Italy contends that it reported accurately the missing credit
expenses discovered at verification. FAG Italy notes that its
inadvertent reporting error affected very few transactions and argues
that Torrington's concern about the credit expenses being over-reported
is unfounded since the Department successfully verified the calculation
of the missing HM credit expenses and the data used therein.
Department's Position: We agree with FAG Italy that it reported
accurately the missing HM credit expenses we discovered at
verification. To test whether FAG Italy reported these expenses
accurately in its revised database, we compared the average credit
expenses the company reported after verification to the average credit
expenses it reported originally. We found that the new credit expenses
typify FAG Italy's experience and we made the adjustment to NV for the
final results.
Comment 4: Torrington argues that the Department should ensure that
it deducts NSK-RHP's credit expense on all relevant U.S. sales.
Torrington claims that NSK-RHP did not report a U.S. credit expense for
those sales for which it was unable to determine the appropriate date
of payment. Torrington states further that, in response to Torrington's
pre-preliminary comments, NSK-RHP asserted that the Department should
calculate the credit expense based on the due date of respondent's
supplemental response, January 11, 1996, which was the last time NSK-
RHP submitted data. Torrington claims that NSK-RHP left the credit
expense for certain U.S. sales blank even though the information was
subsequently available. Torrington proposes that an appropriate amount
for credit expense for such sales should be based on the number of days
from shipment to the date of the preliminary results.
Torrington states that, with respect to those U.S. sales for which
INA did not report a payment date, the Department should estimate a
payment period, for the purpose of calculating credit expenses, based
on the difference between the date of sale and the date of the final
results of review.
NSK-RHP argues that the Department instructed NSK-RHP to leave the
date of payment variable blank for all transactions for which NSK-RHP
or its affiliated companies could not determine the date of payment.
NSK-RHP contends that it followed the Department's instructions and has
cooperated fully with the Department's requests for information and,
thus, use of adverse facts available is inappropriate in this case.
NSK-RHP concludes by stating that the Department calculated its credit
expense correctly for the preliminary results.
INA agrees with Torrington that the Department should estimate a
credit period for U.S. sales without a payment date but disagrees with
Torrington's proposed methodology. INA contends that the period
Torrington proposes is arbitrary and an application of adverse facts
available, for which there is no basis. Instead, INA argues, the
Department should apply the methodology it employed in other cases,
where the Department calculated a surrogate credit period based on the
average number of days between the date of sale and the date of payment
for all U.S. sales.
Department's Position: We agree with Torrington that NSK-RHP did
not provide date of payment information for those U.S. sales for which
it contends that it could not determine the date of payment. However,
the record illustrates that, as is the case with INA, NSK-RHP completed
this field for as many transactions as possible and left it blank for
only those transactions in which it could not determine the date of
payment as instructed in our original questionnaire at page C-11, field
12.0.
Under section 776(a)(1), the Department shall use the facts
otherwise available in reaching its final determination when the
necessary information is not on the record. Because the final date of
payment is not known for certain transactions for these respondents, we
must resort to facts otherwise available in determining a reasonable
period of time for calculating credit expenses. We agree with
Torrington that we should estimate a payment period for those sales for
which NSK-RHP and INA did not
[[Page 2101]]
provide the date of payment. However, we disagree with Torrington's
recommendation that we use the number of days from shipment to the date
of the preliminary results as a surrogate. This treatment would
constitute an adverse inference and is not warranted by the facts of
this case. Therefore, for these final results, we used the average
credit period for all transactions with reported shipment and payment
dates as a surrogate for the actual credit period in calculating credit
expenses for those sales without a known date of payment. See Final
Determination of Sales at Less Than Fair Value: Certain Pasta From
Italy, 61 FR 30332 (June 14, 1996).
Comment 5: Torrington argues that the Department should ensure that
SKF France has reported appropriate payment dates for HM sales.
Torrington contends that SKF France identified the payment date as the
date the payment is deposited in SKF's bank and that this date may be
several days after the date which the customer actually paid SKF.
Torrington asserts that, if the Department cannot determine that SKF
France reported the actual payment date, it should apply a facts-
available approach, such as an estimate of the number of days between
receipt of check and deposit in the bank, and adjust the credit expense
accordingly.
SKF France argues that the Department has verified and accepted SKF
France's credit expense calculation, as well as its record-keeping and
accounting payment on invoices. SKF France adds that it linked the
invoice number to the dates of payment electronically such that, in all
but a very few instances, it reported the actual payment date.
Department's Position: We agree with SKF. We have no reason to
believe that SKF France reported payment dates for HM sales
inappropriately. Torrington does not offer any evidence that SKF
France's reported payment date is not the actual date SKF France
received payment. Further, as SKF France stated in its September 26,
1995 response, only in a few cases did it not report the actual payment
date. Where SKF France could not identify the actual payment date it
used an average customer-specific or company-specific accounts-
receivable days-outstanding date. See SKF France's questionnaire
response at 48. Hence, we are satisfied that SKF France's reporting of
its HM payment date is not unreasonably distortive.
Comment 6: Torrington contends that, based on information in NTN's
financial statements, respondent has under-reported the days
outstanding for the calculation of U.S. credit expenses. Petitioner
provides analysis of the financial statements as applied to sampled
sales and suggests that the Department recompute the expense.
Department's Position: We disagree with Torrington. We examined
credit expenses at our verification of the U.S. response. NTN reported
customer-specific days outstanding on payments rather than transaction-
specific days outstanding. Although there were instances of slight
variation from the customer-specific days outstanding to the
transaction-specific days outstanding, the reported outstanding periods
were largely accurate and reasonably reflect the days outstanding basis
for the calculation.
4.D. Indirect Selling Expenses. Comment 1: Torrington contends
that INA's method of calculating its U.S. ISE ratio (selling expenses
incurred on sales of imported merchandise to total sales of imported
merchandise) is distortive. Torrington asserts that INA's records do
not allow for a distinction to be made between selling expenses on
imported merchandise and selling expenses on U.S.-produced merchandise.
Torrington states that some of the cost centers, for which INA applied
ratios to total expenses accumulated in each cost center to obtain an
estimated amount for expenses attributable to import sales, were
associated with U.S.-produced merchandise. Torrington also states that,
for many cost centers, INA was unable to calculate a specific ratio.
Torrington concludes that the Department should reject INA's reported
U.S. ISE rate and recalculate it based on total expenses and sales.
INA agrees with Torrington's proposal that the Department
recalculate the U.S. ISE rate based on total expenses and sales of
produced and imported merchandise. INA provides proposed revised rates
which it states are based on corrected data it submitted to the
Department in its supplemental questionnaire response.
Department Position: We disagree with Torrington's assertion that
INA's U.S. ISE ratio is distortive. We verified the calculation of this
expense thoroughly and were satisfied with INA's methodology. As we
indicated in the verification report, INA applied a specific ratio for
those cost centers for which INA maintains separate records in its
monthly sales detail. For those cost centers for which it was unable to
calculate a more specific ratio, INA applied general ratios to total
expenses associated with U.S.-produced merchandise. We believe that
INA's method of allocating its U.S. ISEs is not unreasonably distortive
and have relied on it for the final results.
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). See also Furfuryl Alcohol from South Africa: Final
Determination of Sales at Less Than Fair Value, 60 FR 22550, 22556 (May
8, 1995) (``(t)he Department normally relies on the respondent's books
and records prepared in accordance with the home country GAAP unless
these accounting records do not reasonably reflect the COP of the
merchandise'). The CIT has upheld the Department's use of expenses
recorded in a 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., Laclede
Steel Co. v. United States, Slip Op. 94-160 at 22 (CIT 1994). 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 determines
that a company's normal accounting practices result in a 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 this case, we are satisfied that INA's calculations
reasonably reflect its ISEs. The fact that INA calculated a general
ratio for only some of its cost centers does not prevent us from
reasonably using the data provided to us by INA concerning its ISEs.
Thus, the application of facts available is not warranted; we have not
recalculated INA's reported U.S. ISEs.
Comment 2: Torrington contends that the Department should modify
its calculation of INA's U.S. ISEs incurred in the country of
exportation in order to reflect the addition of certain cost centers
INA reported in its supplemental questionnaire response.
INA asserts that the Department included the revised U.S. ISE rate
in the preliminary results and that this rate is
[[Page 2102]]
actually higher than the U.S. ISE rate that would result under
Torrington's proposed methodology.
Department Position: We disagree with Torrington. As stated in
response to Comment 1, we disagree with the view that we should adopt
Torrington's methodology for recalculating U.S. ISEs (see Comment 1 of
this section). Moreover, INA is correct in its assertion that we
included the revised U.S. ISEs in the preliminary results calculations.
Because no party has adequately supported an alternative methodology,
we have no basis for determining that our preliminary results
calculations were not reasonable. Accordingly, we have maintained this
revision of INA's U.S. ISEs for the final results of review.
Comment 3: Torrington contends that the Department's verification
report indicates that INA did not allocate its domestic ISE ratio on
the same basis as its export ISE ratio. Torrington argues that, as a
result, INA has overstated its domestic ISEs because, while the
denominator for the export ISE ratio includes all export sales, the
denominator for the HM ISE ratio does not include all domestic sales.
In addition, Torrington cites to the Department's verification report
as support for its argument that the numerator of the domestic ISE
ratio includes costs that are not selling expenses. Torrington asserts
that, by including such expenses, INA has overstated the numerator of
this ratio. Torrington contends that, if it is feasible, the Department
should recalculate the domestic ISE ratio; otherwise, Torrington
argues, the Department should reject the reported HM ISEs.
INA responds that it reported home market indirect selling expenses
properly. INA takes issue with Torrington's assertion that the
Department's verification report stated that INA's allocation of its
domestic indirect selling expenses is inconsistent with its allocation
of export selling expenses. INA explains that it determined the sales
and expenses of the enterprise that produces the subject merchandise in
the home market on a consolidated basis, eliminating transactions
between the HM entities which comprise the HM manufacturing entity. INA
states that the consolidated entities do not include those outside the
home market because such entities are not associated with the
enterprise that manufactures subject merchandise; rather, they are
customers of the enterprise. INA also takes issue with Torrington's
assertion that the numerator of the ratio INA used to allocate domestic
ISEs includes costs which are not selling expenses. INA contends that,
in calculating the numerator amount, it excluded those categories that
it reported under other classifications (in accordance with the
Department's instructions in the questionnaire), and those which were
not applicable to HM sales. INA states that it classified the remaining
cost centers as domestic selling expenses as directed by the
questionnaire.
Department Position: We disagree with Torrington. As we indicated
in response to comment 1, in determining whether to adhere to an
individual firm's recording of costs, an important factor is whether we
are satisfied that its reporting reasonably reflect the expenses being
examined. In this case, we find that INA's methodology is not
distortive. Indeed, we examined INA's reporting methodology for ISEs
thoroughly at verification. Based on our examination, we are satisfied
that INA's allocation of its domestic ISEs is consistent with its
allocation of its export selling expenses.
Comment 4: Torrington argues that the Department should adjust
NSK's claimed HM ISEs to disallow a certain expense included in the
pool of ISEs. Torrington argues that, although NSK did not report how
it calculated this expense, NSK claimed this expense as a direct
adjustment to foreign market value (FMV) in prior reviews. Torrington
contends that NSK incurred this expense on specific transactions and
that, pursuant to Torrington VI at 1050, the Department cannot treat it
as an indirect expense. Torrington also argues that NSK's allocation is
distortive because it is not reported on the basis on which it is
incurred and that NSK's allocation does not distinguish between subject
and non-subject merchandise.
NSK argues that the Department has determined in prior reviews that
the expense is not incurred directly on sales NSK made. NSK contends
that it reported this expense in a manner consistent with the
Department's prior rulings on this expense.
Department's Position: We disagree with Torrington and, for these
final results, have treated all of NSK's claimed HM ISEs as indirect
expenses. In determining whether to treat these and other expenses at
direct or indirect expenses, we examined whether they vary with the
quantity of subject merchandise sold (see Zenith Electronics Corp. v.
United States, 77 F.3d 426, 431 (CAFC 1996)), or were related to a
particular sale (see Torrington Co. v. United States, 68 F.3d 1347,
1353 (CAFC 1995). This analysis did not lead us to conclude that, as
argued by Torrington, NSK incurred the ISEs on specific transactions.
Thus, although the proprietary nature of this expense makes it
impossible to give a full discussion of this issue in this notice, we
note that it is evident from the record that NSK did not incur this
expense directly on sales to its customers. This issue is discussed
further in NSK's analysis memorandum. See NSK Ltd. Final Analysis
Memorandum, dated December 17, 1996. Therefore, we conclude that the
expense is not related directly to any sales NSK reported in its HM
sales database and it is proper to treat it as an indirect expense.
Comment 5: Torrington argues that the Department should treat NSK's
U.S. advertising expense as a direct expense instead of as an indirect
expense. Torrington contends that NSK did not adequately prove that its
advertising expenses were indirect, stating that NSK did not provide
examples of U.S. advertising and that the Department did not examine
examples of NSK's U.S. advertising in the course of verification.
NSK argues that the Department has rejected similar arguments made
by Torrington in prior reviews and argues that its catalogs and show
exhibits are not aimed at the customer's customer and, therefore, are
indirect in nature.
Department's Position: We agree with NSK. For advertising to be
treated as a direct expense, it must be incurred on products under
review and assumed on behalf of the respondent's customer; that is, it
must be shown to be directed toward the customer's customer. See AFBs I
at 31725. The examples of U.S. advertising submitted by NSK are not
specific to bearings but instead are general in nature, as NSK
suggests. NSK's supplemental response dated December 7, 1995, at page
56, described the advertising expenses that NSK incurs. We examined
these expenses and determined that they are not aimed at the customer's
customer. Therefore, we are satisfied that NSK's U.S. advertising
expenses are indirect. With regard to the catalogs, it is apparent that
they are not aimed at any particular customers or group of customers.
While NSK's customers' customers may have used some catalogs, it is not
evident that only the customers' customers used them or that the
catalogs were targeted for the customers' customer. With regard to the
show exhibit expense, it is clear from information on the record that
this expense was aimed at NSK's customers and not to the customers'
customer. Finally, other NSK advertising expenses, such as hats and
shirts that carry NSK's logo, are ``image'' advertising and not aimed
at any customer or group of customers. The
[[Page 2103]]
record in this review reflects that NSK's U.S. advertising expenses are
indirect in nature. Therefore, we conclude that none of these
advertising expenses are direct in nature and have treated them as ISEs
for these final results.
Comment 6: Torrington contends that FAG Germany never explained its
HM ISE-allocation methodology in any of its responses and that the
Department recognized this failure in its verification report.
Torrington contends that, although the Department included an
explanation of the allocation methodology in its verification report,
the explanation applies to only one of the legal entities that comprise
FAG KGS. Torrington claims that, although FAG Germany indicated that it
used the same methodology for the other entities, the Department's
verification report appears to refute FAG Germany's claim.
Torrington argues that FAG Germany's failure to provide an
explanation deprives the domestic interested party of an adequate
opportunity to comment on the claimed expenses and distorts the
investigative process. Torrington contends that there are a number of
unexplained inconsistencies in FAG Germany's allocation methodology.
Torrington argues that the Department should reject FAG Germany's
reported ISEs and apply, as facts available, a single expense rate
based on the lowest of the several expense rates FAG Germany reported.
FAG Germany argues that it did explain its allocation methodology
in both its original response and its supplemental response and that
the Department verified its methodology completely without finding any
discrepancies. FAG Germany contends that it used the same methodology
for all entities comprising FAG KGS and notes that the Department's
verification report states that ``because FAG used the same allocation
methodology for each entity, [its] discussion below details the
Department's trace only through that documentation provided for [FAG
Automobiltechnik AG],'' citing FAG Germany Home Market Verification
Report at 7. FAG Germany also argues that Torrington was afforded
adequate opportunity to comment on the claimed expenses. Finally, in
response to Torrington's argument that there are unexplained
inconsistencies in FAG Germany's methodology, respondent notes that the
Department found no discrepancies at verification.
Department's Position: We agree with FAG Germany. While it is true
that respondent did not explain the allocation methodology fully in its
original response, we examined FAG Germany's methodology in detail at
verification and described the methodology in the verification report.
In addition, we took exhibits supporting our findings at verification.
Based upon the record, inclusive of the verification report and
exhibits, we determined that FAG Germany's allocation of ISEs was not
unreasonably distortive.
In response to Torrington's assertions that (1) although the
Department included an explanation of the allocation methodology in its
verification report, the explanation applies only to one of the legal
entities that comprise FAG KGS, and (2) although FAG Germany indicated
that it used the same methodology for the other entities, the
Department's verification report appears to refute FAG Germany's claim,
we point out that the Department's verification report states that
``because FAG Germany used the same allocation methodology for each
entity, our discussion below details the Department's trace only
through that documentation provided for (one of the legal entities).''
In other words, we used the same verification process for each entity
we examined, but set out the steps in detail for only one of the
entities.
With regard to Torrington's contention that it was deprived of an
adequate opportunity to comment on the claimed expenses, we note that
we gave Torrington the same opportunity to comment on any facet of our
preliminary results that all interested parties receive. Moreover,
Torrington's counsel received proprietary versions of the verification
report and exhibits under administrative protective order. Therefore,
Torrington was not deprived of an adequate opportunity to comment on
this aspect of the review.
Comment 7: Torrington contends that FAG Germany's and FAG Italy's
reporting methodology for U.S. ISEs does not accurately reflect selling
expenses on the reviewed U.S. sales because the allocation methodology
includes expenses on sales of FAG Canada to U.S. customers. Torrington
requests that the Department reject FAG Germany's and FAG Italy's
reported U.S. ISEs and recalculate the adjustment based on U.S. sales
and U.S. selling expenses only.
FAG Germany and FAG Italy contend that their U.S. ISE calculation
methodology properly includes certain expense and sales data relating
to FAG U.S.'s facilitation of sales by FAG Canada to the U.S. market.
They contend that it is not possible for FAG U.S. to isolate expenses
it incurred in providing the sales support to FAG Canada. FAG Germany
and FAG Italy note that the Department verified their data and
allocation methodology for U.S. ISEs with no discrepancies noted and
that the Department accepted the same methodology in previous reviews.
Department's Position: We disagree with Torrington. After reviewing
the allocation methodology FAG Germany and FAG Italy used, we have
determined that it reasonably reflects the companies' U.S. ISEs. FAG
Germany and FAG Italy reported that it was impossible to segregate the
ISEs which FAG U.S. incurred on its own sales from those it incurred in
support of FAG Canada's sales to the United States. We found nothing in
the response or at verification to contradict this statement.
This being the case, were we to recalculate respondents' U.S. ISE
factors by excluding FAG Canada's sales and expenses, we would
effectively overstate the ISE factors by not allocating the expenses
over all of the sales on which they were incurred. Therefore, we must
include FAG Canada's sales in the calculation. In order to avoid
distortions, we have also included a portion of FAG Canada's ISEs
applicable to its U.S. sales. To not include these expenses would
effectively dilute the ISE factor because, while all sales incurring
the expense would be included, not all of the expenses FAG U.S.
incurred would be included in the calculation. Therefore, given FAG
Germany's and FAG Italy's factual situation, the ISE allocation
methodology they employed is appropriate.
Comment 8: Torrington argues that the Department incorrectly
accepted certain of Koyo's claimed HM ISEs, stating that Koyo did not
provide a full explanation as to why these expenses are considered ISEs
rather than general administrative expenses. Torrington identifies
these expenses as follows: benefits and directors fees, tax and rate,
maintenance, environment and safety control, cleaning, quality control,
fuel and maintenance of forklifts, intellectual property, enterprise
tax, and a miscellaneous category.
Koyo maintains that it reported its HM ISEs as it has in previous
reviews and that the Department has verified its ISEs on various
occasions and accepted the reported expenses, with the exception of the
bad-debt allowance, in all past reviews.
Department's Position: We agree with Koyo. As reported in our
verification report, Koyo's methodology of calculating allocation
factors reflected the nature of the expenses involved. See Verification
Report of February 23, 1995 at 10. During verification, Koyo's
management provided an explanation of
[[Page 2104]]
these ISE items. When we verified these various ISE items, we not only
tied all selected expenses to source documents but we also examined the
nature of these items and found that they were related to the sales of
subject merchandise. Based on the discussions and the findings at
verification, we conclude that Koyo properly included these expenses as
ISEs.
Comment 9: Torrington claims that the Department should disallow
downward adjustments to U.S. ISEs for interest incurred by respondents
when borrowing to finance deposits for estimated antidumping duties.
Torrington relies on the Department's decision in AFBs IV (at 10918) to
support its position.
Koyo counters that the issue is directly comparable to the
Department's policy of not deducting antidumping duty deposits from
CEP, given that these do not bear a relationship to the actual dumping
duties owed. Koyo argues that it is likewise inappropriate for the
Department to deduct expenses incurred for the purpose of making those
deposits, such as the interest incurred to finance the deposits.
Department's Position: We disagree with Torrington that we should
disallow this downward adjustment for interest expenses respondents
incurred when borrowing to finance cash deposits of estimated
antidumping duties, and we consider it proper to allow the downward
adjustment to U.S. ISEs. The Department considers these expenses to be
comparable to expenses for legal fees related to antidumping
proceedings. The expenses were incurred only because of the existence
of the antidumping duty orders and respondents' involvement therein.
Therefore, the expenses cannot be categorized as selling expenses. It
is the Department's longstanding practice not to treat expenses related
to the dumping proceedings as selling expenses. For example, in Color
Television Receivers From the Republic of Korea, 58 FR 50336, the
Department stated that such expenses ``are not expenses incurred in
selling merchandise in the United States.'' The CIT recognized this
line of reasoning in Daewoo Electronics Co. v United States, 712 F.
Supp. 931 (CIT 1989) (Daewoo), when it concluded that the
classification of such expenses as selling expenses subject to
deduction from price ``would create artificial dumping margins and
might encourage frivolous claims * * * which would result in increased
margins.'' Respondents incurred these expenses as part of the process
attendant to the antidumping duty orders; had the antidumping duty
orders not existed, respondents would not have incurred these expenses.
By their nature, such expenses are not a selling expense, and we should
not deduct them from CEP.
We clarified our position on this issue in our Results of
Redetermination Pursuant to Court Remand, Slip Op. 96-37, which we
submitted to the CIT on September 20, 1996. In that remand the
Department was ordered to explain its acceptance of the downward
adjustment to NTN's ISEs in AFBs III. In the redetermination we
determined that the interest expenses to finance cash deposits were not
borne, directly or indirectly by NTN's U.S. subsidiary firm, to sell
the subject merchandise in the United States. The interest expenses at
issue, like legal fees, are an expenditure which respondents actually
incurred, but clearly did not incur in selling AFBs to the United
States. Consequently, these expenses were not eligible to be deducted
from CEP under section 772(e) of the Tariff Act. We also stated that we
believed that we erred in not allowing the offset to U.S. ISEs in AFBs
IV. For these reasons we consider it reasonable to accept this offset
to U.S. ISEs for these final results.
We believe that the adjustment should be allowed, whether a
respondent limits its calculation to only those interest expenses
incurred on cash deposits during the period under review or calculates
a cumulative adjustment which reflects not only the interest expenses
incurred on cash deposits made during the period being reviewed but the
interest expenses incurred during the POR on cash deposits made in
previous review periods as well. When a respondent finances cash
deposits it incurs a financing expense which reflects the opportunity
costs which arise when funds are used to pay cash deposits rather than
in other interest-yielding financial arrangements. Because the monies
used to fund cash deposits for a given POR are unavailable until final
antidumping duties are assessed for that POR, this opportunity cost
will accrue until liquidation. For example, if a respondent pays cash
deposits for entries during a particular POR but antidumping duties are
not assessed on entries for several years, the financing costs of
funding the cash deposits will not only be incurred in the POR but will
be incurred until actual duties are assessed at the time of
liquidation. As a result, an interest expense associated with the cash
deposits made in the POR will be incurred during subsequent review
periods. While a cumulative adjustment amount does affect a
respondent's margin, dumping cannot be distorted or obscured when an
adjustment is made for an expense attributable to an antidumping duty
order. In fact, if we fail to allow the adjustment, we risk calculating
margins which are overstated due to our failure to take into account an
expense attributable solely to an order.
In addition, the Department considers the acceptance of a
cumulative adjustment amount to be consistent with the statute. We do
not regard cash deposits as actual antidumping duties paid at the time
of importation for which subsequent adjustments for over-and under-
payment are coupled with interest payments to approximate as closely as
possible the payment of actual duties at time of import. We have long
maintained the position that ``duty deposits are not actual antidumping
duties but estimates of future dumping liability'' (see AFBs IV at
10900). We have expressed the identical position in another antidumping
proceeding, stating that ``the cash deposit requirements are estimates
of antidumping duties. The actual dumping margins applicable * * * will
be reflected in final assessment'' (see Tapered Roller Bearings, Four
Inches or Less in Outside Diameter, and Certain Components Thereof From
Japan, 55 FR 38720 (September 20, 1990)). The CIT and CAFC have
consistently recognized that a distinction exists between cash deposits
and actual antidumping duties and that cash deposits are only estimates
of final antidumping duties. For example, when ruling on the issue of
whether the Department must calculate the cash deposit and antidumping
duty rates using an identical methodology, the CAFC stated in The
Torrington Company and Federal-Mogul Corp. v. United States, Court
Number 94-1117 (January 13, 1995), that ``(s)ection 1675(a)(2) does not
require the same methodology of calculation for assessment rates and
cash deposits rates * * * Moreover, Title 19 bases the cash deposits
rate on estimated antidumping duties on future entries * * * Thus,
Title 19 requires only cash deposit estimates, not absolute accuracy.
This estimate need only be reasonably correct pending the submission of
complete information for an actual and accurate assessment * * * No
evidence compels this court to find that deriving cash deposit rates
from entered values leads to a more accurate estimation of future
duties * * *'' (emphasis added). Therefore, cash deposits are clearly
not payments of actual antidumping duties and, by allowing a cumulative
adjustment, the Department is treating the interest expenses
respondents
[[Page 2105]]
incurred on cash deposits as expenses attributable solely to the
antidumping duty orders.
Comment 10: Torrington claims that NTN's adjustments to selling
expenses for expenses of affiliated firms have distorted the allocation
of expenses to scope and non-scope merchandise. Petitioner believes
NTN's method of initially allocating the affiliates'' expenses was
flawed and understates NTN's ISEs for AFBs. Torrington asserts that the
Department should add the affiliates'' expenses back into the pool of
expenses before allocation to NTN's U.S. sales.
Department's Position: We disagree with Torrington. We examined
NTN's allocation methodologies and expenses associated with affiliated
firms at the verification of the U.S. response. We found these to be
accurately compiled and NTN's allocation is not unreasonably
distortive. Therefore, we have accepted NTN's allocation for these
final results.
Comment 11: Torrington contends that the Department should reject
NTN's allocation of certain U.S. ISEs based on level of trade.
Petitioner notes that the Department rejected this methodology in AFBs
IV as bearing no relationship to the way in which NTN incurred
expenses.
NTN responds that the Department has verified its methodology at
several verifications and found it to be reasonable. Therefore, NTN
believes that the Department should accept the methodology.
Department's Position: We agree with Torrington. In AFBs III (and
subsequently in AFBs IV at 10940 and AFBs V at 66489) we determined
that the methods NTN used for allocating its ISEs did not bear any
relationship to the manner in which it incurred the expenses in
question, thereby leading to distorted allocations. The CIT upheld this
decision in NTN Bearing Corp. v. United States, 905 F. Supp. 1083,
1094-95 (1995). Further, we found that the allocations NTN calculated
according to levels of trade were misplaced and that it could not
conclusively demonstrate that its ISEs vary across levels of trade. In
the course of this review respondent did not provide sufficient
evidence demonstrating that its selling expenses are attributable to
levels of trade. Therefore, we have recalculated NTN's expenses to
represent selling expenses for all U.S. sales for the final results.
Comment 12: Torrington states that the Department found that SNR
had allocated depreciation expenses to all sales but, in fact, the
respondent did not include them in the ISEs it reported for U.S. sales.
Accordingly, Torrington contends, the Department should ensure that SNR
has reported all U.S. ISEs and should reallocate a portion of the
depreciation expenses SNR incurred in the home market to its U.S.
sales.
SNR contends that, although the company failed to allocate a
portion of its depreciation expenses to U.S. sales, the error was
harmless. SNR states that these expenses, incurred in France, are
indirect and the Department has not deducted such expenses in
calculating CEP. SNR proposes that, if the Department decides to deduct
such indirect selling expenses as part of U.S. ISEs incurred in the
home market, the Department can derive a per-unit amount by the formula
SNR provided in its rebuttal brief. SNR further notes that the
depreciation expenses are de minimis and can be disregarded under 19
CFR 353.59(a).
Department Position: We agree with Torrington that SNR's
depreciation expenses allocated to its U.S. sales should be part of
ISEs we deduct from CEP. We verified SNR's response and, based on our
findings at verification, we have made this deduction for our final
results.
4.E. Other Selling Expenses. Comment 1: NSK/RHP argues that the
Department should deduct other HM direct selling expenses from NV. NSK/
RHP notes that, in a supplement to its questionnaire response, it
provided an explanation for direct selling expenses which separate cost
centers incurred in selling to OEM-Automotive, OEM-Industrial, and AM
customers. NSK/RHP explains further that the reported expenses are for
selling activities for specific customers. NSK/RHP asserts that, since
the Department never questioned whether these expenses are direct
selling expenses, the Department should deduct them from NV for the
final results.
Torrington contends that the Department should not deduct NSK/RHP's
other HM direct selling expenses from NV, claiming that the record
contains inconsistent information. Torrington maintains that NSK/RHP
must prove that the expenses are direct. However, Torrington contends
that, due to contradictions in the submitted data, the record fails to
support NSK/RHP's claim for an adjustment. In support of its argument
for not making the adjustment, Torrington also notes that NSK/RHP's HM
sales data was not subject to verification.
Department's Position: We agree with NSK/RHP. Although we chose not
to verify NSK/RHP's HM sales data, Torrington has not provided, nor is
there evidence on the record to support Torrington's claim that NSK/
RHP's information on other HM direct selling expenses is not accurate
and complete. Therefore, we have deducted NSK/RHP's other HM direct
selling from NV for these final results.
5. Level of Trade
As set forth in section 773(a)(7) of the Tariff Act and in the SAA
at 829-831, to the extent practicable, we have determined NV based on
sales at the same level of trade as the export price or CEP. When we
were unable to find comparison sales at the same level of trade as the
export price or CEP, we compared the sales in the United States to
sales at a different level of trade in the comparison market. We
determined the level of trade of export price sales on the basis of the
starting prices of sales to the United States. We based the level of
trade of CEP sales on the price in the United States after making the
CEP deductions under section 772(d) but before making the deductions
under section 772(c). Where HM prices served as the basis for NV, we
determined the NV level of trade based on starting prices in the NV
market. Where NV was based on CV, we determined the NV level of trade
based on the level of trade of the sales from which we derived SG&A and
profit for CV.
In order to determine whether sales in the comparison market are at
a different level of trade than the export price or CEP, we examined
whether the comparison sales were at different stages in the marketing
process than the export price or CEP. We made this determination on the
basis of a review of the distribution system in the comparison market,
including selling functions, class of customer, and the level of
selling expenses for each type of sale. Different stages of marketing
necessarily involve differences in selling functions, but differences
in selling functions, even substantial ones, are not alone sufficient
to establish a difference in the level of trade. Similarly, as further
discussed in our response to Comment 2, below, while customer
categories such as ``distributor'' and ``wholesaler'' may be useful in
identifying different levels of trade, they are insufficient in
themselves to establish that there is a difference in the level of
trade. See Certain Corrosion-Resistant Carbon Steel Flat Products and
Certain Cut-to-Length Carbon Steel Plate from Canada: Preliminary
Results of Antidumping Duty Administrative Review, 61 FR 51891, 51896
(October 4, 1996).
While we conducted a similar analysis in the preliminary results,
we limited our inquiry to the selling functions incurred by respondents
at
[[Page 2106]]
each level of trade. See Preliminary Results at 35718-35723. As noted,
for these final results we have included in our analysis the class of
customer and the level of selling expenses at each marketing stage in
addition to selling functions. However, the inclusion of these
additional factors in our analysis has not changed our identification
of the levels of trade involved in sales in the U.S. and comparison
markets, nor has it resulted in a change in our findings concerning
which levels, for each respondent, are at a more advanced stage in the
distribution process. Our discussion of the specific selling functions
that we examined, as well as our company-specific findings in this
regard, are contained in the preliminary results.
As in the preliminary results, where we established that the
comparison sales are at a different level of trade than the sales to
the United States, we made a level-of-trade adjustment if we were able
to determine that the difference in level of trade affected price
comparability. The effect on price comparability must be demonstrated
by a pattern of consistent price differences between sales at the two
relevant levels of trade in the comparison market.
We were able to quantify such price differences and make a level-
of-trade adjustment for certain comparisons involving export price
sales, in accordance with section 773(a)(7)(A). For such sales, the
same level of trade as that of the U.S. sales existed in the home
market but we could only match the U.S. sale to HM sales at a different
level of trade because there were no usable sales of the foreign like
product at the same level of trade. Therefore, we determined whether
there was a pattern of consistent price differences between these
different levels of trade in the home market. We made this
determination by comparing, for each model sold at both levels, the
average net price of sales made in the ordinary course of trade at the
two levels of trade. If the average prices were higher at one of the
levels of trade for a preponderance of the models, we considered this
to demonstrate a pattern of consistent price differences. We also
considered whether the average prices were higher at one of the levels
of trade for a preponderance of sales, based on the quantities of each
model sold, in making this determination. We applied the average
percentage difference to the adjusted NV as the level-of-trade
adjustment.
We were unable to quantify such price differences in other
instances involving comparisons of sales made at different levels of
trade. First, with respect to CEP sales, the same level of trade as
that of the CEP did not exist in the home market for any respondent. We
also did not find the same level of trade in the home market for some
export price sales. Therefore, for comparisons involving these sales,
we could not determine whether there was a pattern of consistent price
differences between the levels of trade based on respondent's HM sales
of merchandise under review.
In such cases, we looked to alternative sources of information in
accordance with the SAA. The SAA provides that ``if information on the
same product and company is not available, the [level-of-trade]
adjustment may also be based on sales of other products by the same
company. In the absence of any sales, including those in recent time
periods, to different levels of trade by the exporter or producer under
investigation, Commerce may further consider the selling expenses of
other producers in the foreign market for the same product or other
products.'' SAA at 830. Accordingly, where necessary, we examined the
alternative methods for calculating a level-of-trade adjustment. In
these reviews, however, we did not have information that would allow us
to apply these alternative methods.
In those situations where we were unable to quantify a level-of-
trade adjustment based on a pattern of consistent price differences,
and in which the U.S. sales were export price sales, the statute
requires no further adjustments in regard to level of trade. However,
with respect to CEP sales for which we were unable to quantify a level-
of-trade adjustment, we granted a CEP offset where the comparison sales
were at a more advanced level of trade than the sales to the United
States, in accordance with section 773(a)(7)(B) of the Tariff Act.
Comment 1: Torrington argues that the Department improperly
analyzed U.S. levels of trade for purposes of level-of-trade
adjustments and CEP offsets by reference to what are in effect ex-
factory export transactions instead of CEP resale transactions.
Torrington argues that the statute makes resale transactions to
unaffiliated purchasers the relevant sales for identifying the U.S.
levels of trade, not ex-factory sales to the U.S. affiliate. In this
regard, Torrington first notes that the statute requires a finding of
differences in levels of trade between the ``constructed export price''
and NV before making a level-of-trade adjustment or a CEP offset
(citing section 773(a)(7)(A) of the Tariff Act). Torrington claims
that, in turn, the focus of the statutory definition of ``constructed
export price,'' which defines CEP as ``the price at which the subject
merchandise is first sold * * * in the United States * * * to a
purchaser not affiliated with the producer or exporter, as adjusted * *
*,'' is on resale transactions in the United States, not on the
transaction between the home market parent and the U.S. subsidiary
(citing section 772(b) of the Tariff Act).
Torrington suggests that, in the preliminary results, the
Department implicitly recognized the incorrectness of its level-of-
trade/CEP offset approach by comparing, for matching purposes, HM sales
to U.S. sales based on the distribution channel (customer category) of
the unaffiliated U.S. purchaser in all instances, including CEP
comparisons. (In Comment 2, below, Torrington requests that the
Department explain the legal basis for matching sales in this manner.)
FAG Germany, FAG Italy, INA, NSK, SKF France, SKF Germany, SKF
Italy, SNR, Koyo, and NMB/Pelmec respond that the statutory definition
of CEP does not support Torrington's argument that the appropriate U.S.
level of trade is that of the U.S. affiliate to the unaffiliated
customer. While respondents agree with Torrington that the Department
must compare the level of trade of the ``CEP'' with that of sales made
in the home market in the level-of-trade analysis, they disagree that
the statutory definition of ``CEP'' focuses on the resale to the
unaffiliated customer. Rather, they suggest that a complete reading of
the definition in section 772(b) reveals that the CEP is the resale
price as adjusted for U.S. selling expenses and profit. Respondents
contend, therefore, that the Department correctly excluded selling
functions related to such U.S. expenses in its analysis of the level of
trade of the CEP for the preliminary results.
Koyo takes issue with Torrington's argument that, by matching sales
using the customer category of the unaffiliated U.S. customer, the
Department is implicitly acknowledging that its level-of-trade analysis
was in error. Koyo instead contends that the statute does not preclude
matching U.S. and home market sales, to the extent possible, based on
parallel channels of distribution. Koyo argues that this practice
achieves the statutory mandate of making ``fair comparisons'' and that
it is well within the Department's authority to adopt such a
methodology.
NTN Japan and NTN Germany agree with Torrington that the
transaction to the first unaffiliated party in the United States should
determine the level of trade.
[[Page 2107]]
Department's Position: We disagree with Torrington, NTN Japan, and
NTN Germany. The statutory definition of ``constructed export price''
contained at section 772(d) of the Tariff Act indicates clearly that we
are to base CEP on the U.S. resale price as adjusted for U.S. selling
expenses and profit. As such, the CEP reflects a price exclusive of all
selling expenses and profit associated with economic activities
occurring in the United States. See SAA at 823. These adjustments are
necessary in order to arrive at, as the term CEP makes clear, a
``constructed'' export price. The adjustments we make to the starting
price, specifically those made pursuant to section 772(d) of the Tariff
Act (``Additional Adjustments for Constructed Export Price''), normally
change the level of trade. Accordingly, we must determine the level of
trade of CEP sales exclusive of the expenses (and concomitant selling
functions) that we deduct pursuant to this sub-section.
Contrary to Torrington's assertions, this approach does not result
in a reliance on what is in effect an ex-factory transfer price to the
U.S. affiliate in our level-of-trade analysis. First, we note for
clarity that transfer prices do not enter into our analysis because the
CEP is a calculated price derived from the resale price. More
importantly, Torrington's argument suggests inaccurately that the
deductions we make under section 772(d) involve all direct and indirect
selling expenses. As noted above, these deductions remove only expenses
associated with economic activities in the United States. Thus, CEP is
not a price exclusive of all selling expenses because it contains the
same type of selling expenses as a directly observed export price.
Comment 2: Torrington argues that the Department erred by
identifying levels of trade by reference to selling activities
performed by the seller rather than functions performed by buyers.
Torrington contends that the statute assigns independent meaning to the
expression ``level of trade'' which is separate from the expression
``selling activities.'' Torrington then claims that the SAA does not
require a different interpretation, despite a statement suggesting that
a ``difference in the level of trade'' is equivalent to ``a difference
between the actual functions performed by the sellers at the different
levels of trade'' (citing SAA at 829). Torrington suggests that this
statement contrasts starkly with other relevant SAA statements that
indicate that ``level of trade'' has a meaning separate and apart from
``selling activities.'' Specifically, Torrington notes that the SAA
speaks in terms of selling merchandise ``to'' different levels of
trade, and suggests that it is meaningless to speak of different
activities involved in selling ``to'' different activities. Finally,
Torrington argues that the Department's focus on selling activities is
susceptible to manipulation by respondents.
Torrington proposes that the Department should determine levels of
trade by conducting its analysis along traditional lines; that is, the
Department should focus on the functions of unaffiliated buyers in the
market under consideration. In order to establish a basis for any
level-of-trade adjustment, Torrington asserts, respondents should be
required to demonstrate that different levels of trade exist, that
different selling activities are involved at the levels, and that the
differences are reflected in differences in price patterns. Torrington
suggests that, if the Department retains the methodology it employed
for the preliminary results, it should at least clarify the legal
underpinning of that methodology; specifically, it should explain why
it compared sales on the basis of the U.S. resale level of trade
instead of the CEP level of trade. Torrington does not disagree with
this approach but argues, as it did in Comment 1, above, that it
appears to be an attempt to avoid distortive results inherent in the
Department's methodology.
FAG Germany, FAG Italy, INA, NSK, NTN Japan, NTN Germany, SKF
France, SKF Germany, SKF Italy, and SNR argue that nothing in the
statute or SAA refers to functions performed by buyers in identifying
levels of trade and that the Department's interpretation of the statute
and SAA are proper. Koyo argues that the Department did not in fact
equate level of trade with selling activities, but that the Department
considered existing channels of distribution and determined, based on
selling functions, that some channels constituted a different level of
trade than other channels. Koyo suggests that this methodology is
consistent with Final Determination of Sales at Less Than Fair Value:
Certain Pasta from Italy, 61 FR 30326, 30335 (June 14, 1996).
Department's Position: We agree, in part, with Torrington.
Torrington is correct that levels of trade are not defined solely in
terms of selling functions. However, we disagree with Torrington that
we should determine levels of trade by focusing primarily on buyer
functions. We also disagree that, for CEP sales, the relevant ``buyer''
in the level-of-trade analysis is the unaffiliated U.S. customer.
While neither the statute nor the SAA defines level of trade, we
agree with Torrington that the structure of the relevant provision in
the statute (section 773(a)(7)(A)) uses the term ``level of trade'' as
a concept distinct from selling activities. Specifically, this sub-
section allows for a level-of-trade adjustment where there is a
difference in levels of trade and that difference ``involves'' the
performance of different selling activities. The SAA (at 829) also
ascribes a meaning to level of trade that suggests that an analysis of
selling activities alone is insufficient to establish the level of
trade by suggesting that the Department could reasonably find that two
sales with some common selling activities were nonetheless made at
different levels of trade.
However, although the identity of the customer is an important
indicator in identifying differences in levels of trade, the existence
of different classes of customers, as well as different functions
performed by such customers, is not sufficient to establish a
difference in the levels of trade. Accordingly, we consider the class
of customer as one factor, along with selling functions and the selling
expenses associated with these functions, in determining the stage of
marketing, i.e., the level of trade associated with the sales in
question.
Although we consider customer identity in determining levels of
trade, we disagree with Torrington that, for CEP sales, the relevant
customer in our level-of-trade analysis is the unaffiliated U.S.
customer. Rather, it is the customer at the level of the CEP (i.e., the
U.S. affiliate for all companies with CEP sales in these reviews) for
the reasons provided in our response to Comment 1, above.
Although we have not considered the customer category of
unaffiliated U.S. purchasers in determining the level of trade of the
CEP, we have considered the customer category of unaffiliated U.S.
purchasers in matching CEP sales to HM sales (none of which are at the
same level of trade as the level of the CEP), i.e., in determining the
CEP offset. See our response to Comment 7 for an explanation of the
basis of this aspect of our methodology.
Comment 3: Torrington argues that the Department should require
respondents to make a sale-by-sale demonstration of their level-of-
trade claims. Torrington argues that CEP and NV are prices in specific
sales transactions and that, even to a given customer, each sale does
not necessarily involve the same activities. Torrington contends that,
because no respondent attempted to identify selling activities on a
sale-by-sale basis, the Department should reject all claimed level-of-
trade adjustments and CEP offsets.
[[Page 2108]]
FAG Germany, FAG Italy, INA, Koyo, NMB/Pelmec, NSK, NTN Japan, NTN
Germany, SKF France, SKF Germany, SKF Italy, and SNR contend that
Torrington's suggested standard of a sale-by-sale demonstration would
be impossible given the number of transactions that respondents make
and is required neither by the statute nor the SAA.
Department's Position: We disagree with Torrington that levels of
trade must be demonstrated on a sale-by-sale basis. Given the
complexity of this case, combined with the many thousands of
transactions that respondents report, it would be impossible to make
such a demonstration within statutory deadlines. This would effectively
neutralize the level-of-trade aspect of the statute. Further, there is
nothing in the statute or SAA indicating that determining levels of
trade on the basis of identifiable groups of sales is inappropriate.
Comment 4: Torrington argues that the statute requires that level-
of-trade adjustments may only be granted where it is established that
there is a difference in prices ``due to'' the different functions
performed by sellers involved. Torrington contends that no respondent
demonstrated that differences in prices were due to differences in
selling functions and, citing the response of one respondent, suggests
that factors other than selling functions (such as competition) drive
prices more than do selling functions. Torrington argues that the
burden is on respondents to demonstrate that differences in prices are
due to differences in selling functions and that, because no respondent
has made such a showing, the Department should reject all claimed
level-of-trade adjustments and CEP offsets.
Koyo, NMB/Pelmec, NSK, NTN Japan, NTN Germany, SKF France, SKF
Germany, SKF Italy, and SNR argue that there is no ``due to'' standard
for a level-of-trade adjustment as Torrington suggests. Respondents
argue that a level-of-trade adjustment should be made when two facts
are proven: (1) that different selling functions exist at each claimed
level of trade, and (2) that there are price differences between
claimed home market levels of trade.
Department's Position: We disagree with Torrington. The adoption of
Torrington's proposed ``due to'' standard would impose an independent
causation requirement upon both the level-of-trade-adjustment and CEP-
offset provisions. Such a requirement is neither required by the
statute nor administratively feasible.
Although Torrington is correct that the level-of-trade adjustment
provision of the statute (section 773(a)(7) of the Tariff Act) requires
a finding of price differences between the export price or CEP and NV
``due to'' differences in the levels of trade, Torrington's analysis
ignores the fact that this provision provides a specific means of
establishing this price effect: namely, based on a pattern of
consistent price differences between sales at different levels of trade
in the home market (or third country). As noted by respondents, in
order to grant a level-of-trade adjustment, we must find that the
export price or CEP sale (as appropriate) was made at a different level
than that of the NV sale and that this difference involved (1)
different selling activities, and (2) affected price comparability
based on a pattern of consistent price differences between sales at
different levels of trade in the home market (or third country). See
section 773(a)(7)(A) of the Tariff Act. There is no causation
requirement independent of the ``effect on price comparability''
requirement noted above. We note further that the statute merely
requires that the price differences be ``wholly or partly due'' to
differences in levels of trade; it does not require a determination of
the exact price effect caused by level-of-trade differences and it
would not be possible to do so, given the variety of market forces that
affect the sales price of each transaction we review.
Comment 5: Torrington asserts that the SAA (at 830) instructs the
Department to ensure that expenses previously deducted from NV are not
deducted a second time through a level-of-trade adjustment, stating
that ``Commerce will ensure that a percentage difference in price is
not more appropriately attributable to differences in the quantities
purchased in individual sales.'' Torrington notes that a number of
respondents admitted that quantities affect price. Torrington argues,
therefore, that because quantities may affect price as much as selling
functions, a level-of-trade adjustment should not be granted.
Koyo, NMB/Pelmec, NSK, NTN Japan, NTN Germany, SKF France, SKF
Germany, SKF Italy, and SNR respond that the SAA language Torrington
cites serves simply as a reminder not to double-count adjustments.
Department's Position: We agree with Torrington that we must not
``double-count'' expenses we deduct from NV. This is why we calculate
level-of-trade adjustments and CEP offsets after making other
adjustments to NV, so that we do not, in effect, deduct expenses such
as rebates or warranty expenses twice. As far as quantity adjustments
are concerned, we made no quantity adjustments for any respondents in
this review. Therefore, no possibility of double-counting quantity
adjustments exists.
Comment 6: Torrington argues that the selling function charts
respondents prepared are inadequately supported by factual evidence.
While Torrington acknowledges that the Department attempted to verify
respondents'' claims, Torrington argues that the evidence the
Department collected does not support all of the assertions respondents
made. Torrington also claims that some of the assertions respondents
made, such as the paucity of reported selling functions between a
respondent and its U.S. affiliate, defy common sense.
FAG Germany, FAG Italy, Koyo, NSK, NTN Japan, NTN Germany, SKF
France, SKF Germany, SKF Italy, and SNR argue that the Department
conducted extensive verification of the information they provided in
the charts to which Torrington refers, and NSK adds that it is less
important whether the Department verified any individual assertion than
that all assertions were subject to verification.
Department's Position: We disagree with Torrington. We have
established an adequate factual base upon which to make determinations
with regard to the levels of trade involved in the sales under review.
As respondents note, we collected voluminous information prior to our
verifications and, at verification, we examined the information
respondents provided in detail. While we did not examine every piece of
information that respondents submitted, it is not our practice, nor is
it possible or required that we do so. See Bomont Industries v. United
States, 733 F.Supp. 1507 (CIT 1990). As NSK suggests, the fact that the
information is subject to verification is a strong incentive for
accurate reporting. In these reviews, we have invested considerable
time and effort at each verification to ensure the accuracy of
respondents' level-of-trade claims and have found no discrepancies with
regard to respondents' reported selling activities.
Comment 7: NSK and NSK/RHP argue that the Department should match
CEP sales to home market OEM sales because home market OEM sales are
the closest home market level of trade to the level of the CEP sales.
NSK and NSK/RHP contend that, because the Department deducts all U.S.
expenses from the sales price to arrive at CEP and because they
reported similar selling activities associated with all sales to the
affiliated reseller in the United States, all CEP
[[Page 2109]]
sales belong to the same level of trade. NSK and NSK/RHP state further
that the CEP level of trade is a different and less-advanced level of
trade than that involved in all home market sales. NSK and NSK/RHP
contend that the statute and SAA direct the Department to identify and
use the HM level of trade that is closest to that involved in the U.S.
sale, since more remote HM levels are associated with higher prices.
NSK and NSK/RHP contend that they and other respondents have
demonstrated that prices to distributors for the aftermarket are higher
than prices to OEM customers in the home market. NSK and NSK/RHP argue
that it follows that the aftermarket level of trade is more remote than
the OEM level of trade, and that the Department must compare CEP sales
to home market OEM sales, excepting only those CEP sales for which no
home market OEM matches exist.
NMB/Pelmec argues that the Department must base NV upon the most
comparable level of trade as the U.S. sale and that HM distributor
sales are the closest level of trade in the home market to CEP sales.
NMB/Pelmec contends that the Department found that HM OEM sales were at
a more advanced level of trade than HM distributor sales and that CEP
sales were less advanced that either HM level of trade. NMB/Pelmec
asserts that the Department's refusal to compare all CEP sales to its
HM distributor level of trade is contrary to law.
Torrington responds to NSK by stating that, because U.S. resale
transactions should be the relevant transactions for identifying level
of trade, CEP sales do not necessarily represent a single level of
trade. Torrington contends further that, even if CEP sales could be
considered a single level of trade, all home market sales must still be
considered and the Department must identify home market groups that
correlate to U.S. transactions to ensure ``apples-to-apples''
comparisons. Finally, Torrington argues that price levels do not define
levels of trade in either the statute or SAA.
Torrington responds to NMB/Pelmec by stating that the Department
did not find that HM OEM sales were more advanced than HM distributor
sales for NMB/Pelmec.
Department's Position: We disagree with NSK and NSK/RHP that we
should prefer HM OEM sales in our matching methodology. We also
disagree with NMB/Pelmec that we should prefer its HM distributor
sales. We have determined that there is a single level of trade of the
CEP for NSK, NSK/RHP, and NMB/Pelmec. For these respondents, and for
respondents with CEP sales generally in these reviews, we usually had
two possible home market levels of trade from which to choose when
comparing CEP sales to home market sales. We concluded from the
evidence on the record that CEP sales are all made at a less-advanced
level of trade than any home market level of trade. See Preliminary
Results at 35718-35723. We then determined which home market sales to
compare with CEP sales.
Where there are no home market sales at the same level of trade as
the U.S. sale, the statute does not require that we match the U.S. sale
to home market sales at the closest level of trade. Under the
circumstances of these reviews, in order to calculate the CEP offset as
accurately as possible, we matched sales in each market likely to
include similar categories of selling expenses--OEM sales in the United
States to OEM sales in the home market and aftermarket sales in the
United States to aftermarket sales in the home market. Thus, we
determined the CEP-offset ``cap'' for home market sales to OEMs on the
basis of the indirect selling expenses for sales in the United States
to OEMs and we determined the CEP-offset cap for aftermarket sales in
the home market on the basis of the indirect selling expenses for
aftermarket sales in the United States.
NSK and NSK/RHP have asserted that we should have compared their
CEP sales to their home market OEM level of trade because it is closer
to the level of the CEP than their aftermarket level of trade;
conversely, NMB/Pelmec contends that we should compare its CEP sales to
its home market distributor sales because such sales are made at a
level of trade that is closer to the level of the CEP. As described
above, under the circumstances presented in these reviews, it is more
appropriate to match CEP sales to HM sales based on the category of the
unaffiliated U.S. customer. Furthermore, these respondents' assertions
are not sufficiently supported by factual evidence. We did not find
that one HM level of trade for either company, or for any respondent in
these reviews, has conclusively more selling functions than another HM
level. Rather, the HM levels of trade each involve different degrees of
various selling functions.
For instance, we found that selling functions at the OEM level
typically emphasize technical services, sales calls to end users, and
price negotiation with the customer, among other services, while
selling functions at the distributor/aftermarket level typically
emphasize advertising, inventory maintenance, and packing. This shows
that the HM levels of trade are different, but it does not demonstrate
that one level is necessarily more advanced than the other. Indeed, the
fact that NSK and NSK/RHP argue that the OEM level is less advanced
than the distributor/aftermarket level, while NMB/Pelmec argues the
reverse, demonstrates the difficulty in ranking these HM levels.
We have concluded therefore that we can make no determination from
the evidence on the record that any home market level of trade is more
or less advanced than any other home market level of trade. The
conclusion we draw from the evidence on the record is, as a general
matter, that levels of trade defined as ``OEM'' are different from, but
not necessarily more or less advanced than, those defined as
``distributor/aftermarket.'' As Koyo points out correctly with regard
to another comment (see Comment 1, above), there is no prohibition or
denigration of such a practice in either the statute or SAA. However,
this still leaves us with an uneven match because the level of trade of
the CEP is less advanced than either home market level of trade.
Therefore, in such cases, because we have no basis upon which to
calculate a level-of-trade adjustment and because the level of trade of
the CEP is less advanced than either home market level of trade, we
have granted a CEP offset.
We also disagree with NSK's and NSK/RHP's assertion that, because
OEM prices are lower than distributor/aftermarket prices, the OEM level
of trade is less advanced than the distributor/aftermarket level of
trade. As described above, we concluded that the OEM level of trade and
the distributor/aftermarket level of trade are different from each
other but neither is more or less advanced than the other. The fact
that OEM prices were higher for some respondents and lower for other
respondents than distributor/aftermarket prices in spite of the
relatively constant selling functions among respondents suggests to us
that our conclusions about the home market levels of trade are correct.
In any event, differences in prices do not determine the existence
of levels of trade. As noted above, we only make level-of-trade
adjustments when there is a difference in prices shown to be wholly or
partly due to differences in levels of trade. The differences in
prices, however, have nothing to do with our determination of whether
different levels of trade exist. We determine whether one level of
trade is more advanced than another on the basis of the selling
functions performed by a
[[Page 2110]]
respondent with respect to the two levels of trade. OEM and
distributor/aftermarket sales are more advanced than the level of trade
of the CEP because comparatively fewer selling functions are associated
with the CEP than are performed for sales to either of the other levels
of trade. This, and not any likelihood that sales to the level of trade
of the CEP may be made at a lower price than sales to the other two
levels of trade, is the basis for our granting a CEP offset.
Comment 8: NTN Japan and NTN Germany argue that it is inconsistent
for the Department to deny NTN a price-based level-of-trade adjustment
merely because there is no home market equivalent to CEP. NTN argues
further that the Department should use the transaction to the first
unaffiliated customer in the United States to determine the level-of-
trade adjustment and that this would be consistent with the
Department's matching methodology. NTN argues that the Department's
approach effectively precludes a level-of-trade adjustment for CEP
sales and contends that there is nothing in the SAA or the legislative
history that specifies that a level-of-trade adjustment can only apply
to export price transactions.
Torrington argues that NTN should not be granted a level-of-trade
adjustment for the reasons given in Torrington's affirmative case
brief. See Comments 1 through 6 of this section, above.
Department's Position: We disagree with NTN Japan and NTN Germany.
As we noted in response to Comment 1, above, the level of trade is
determined for the transaction between the exporter and its affiliated
importer. As with other respondents in these reviews, after we have
deducted the importer's expenses from resale prices pursuant to section
772(d), the level of trade of the CEP was not equivalent to the levels
reported for any HM sales. Because NTN Japan's and NTN Germany's level
of trade of the CEP sales was less advanced than any of their HM
levels, we made a CEP offset to NV for all of NTN Japan's and NTN
Germany's CEP sales.
Comment 9: Koyo argues that it qualified for a level-of-trade
adjustment for CEP sales but that the Department erroneously granted
only a CEP offset. Koyo contends that the Department calculated the
level of trade for CEP sales correctly on the basis of the sale to the
unaffiliated party as adjusted for selling, movement, and other
expenses pursuant to the statute. Koyo argues that it established that
it had different levels of trade in both the United States and the home
market and that it demonstrated that these differences affected price
comparability. Koyo argues that the fact that there is no HM level of
trade analogous to the level of trade of the CEP should not prevent the
Department from making a level-of-trade adjustment. Rather, the
Department should use Koyo's suggested methodology of constructing a
home market level of trade analogous to the adjusted CEP. Koyo argues
that this provides the Department with the data and means necessary to
provide a price-based level-of-trade adjustment for CEP comparisons.
Koyo contends that its suggested methodology implements the relevant
instructions of the URAA properly. Finally, Koyo argues that the
Department's denial of a level-of-trade adjustment for CEP sales
effectively eviscerates the statutory level-of-trade provision, since
there will never be a HM level equivalent to the level of trade of the
CEP.
Torrington argues that Koyo's suggested use of constructed NV is an
attempt to circumvent the statute and should be rejected. Torrington
contends that nowhere does the statute suggest that a level-of-trade
adjustment can be based on constructed HM prices and that, if the data
available do not allow the demonstration required by the statute, then
no level-of-trade adjustment is permitted.
Department's Position: We agree with Torrington. We may not base
level-of-trade determinations or adjustments upon ``constructed,'' or
artificial, HM levels. Koyo's claimed constructed NV levels of trade
are not levels at which Koyo actually sold AFBs in the home market
during the POR. As stated above, we use starting prices in determining
whether different levels of trade exist. There is no statutory basis
for us to ``construct'' levels in the home market or elsewhere. Because
Koyo was unable to show a pattern of consistent price differences
between its level of trade of the CEP and its HM levels, we did not
make a level of trade adjustment for Koyo's CEP sales. However, because
the level of Koyo's CEP was less advanced than any of its HM levels, we
made a CEP offset to NV for all of our comparisons of Koyo's CEP sales.
Comment 10: SNR argues that the Department should have granted it a
level-of-trade adjustment, rather than a CEP offset, for comparisons of
CEP sales to HM distributor sales. SNR notes that the Department
determined correctly that there were two HM levels of trade, which were
both more advanced than CEP. SNR argues, however, that, although the HM
OEM level is more advanced than the level of the CEP, the HM OEM and
CEP are similar, and that the Department should make a level-of-trade
adjustment when comparing CEP sales to HM distributor sales, which SNR
contends are made at a more advanced level of trade. SNR asserts that,
because the OEM level of trade is more advanced than the level of trade
of the CEP, its claim of the price difference between the distributor
level of trade and OEM level of trade is less than it would be were a
HM level of trade equivalent to the level of trade of the CEP. SNR also
argues that it should continue to receive the CEP offset when the
Department compares CEP sales to HM OEM sales.
Torrington argues that SNR is not entitled to its claimed level-of-
trade adjustment because it did not provide supporting evidence for its
contention that the level of trade of the CEP and OEM sales were
similar. Moreover, Torrington contends, the Department did not indicate
that it found the levels of the CEP and OEM sales to be similar.
Department's Position: We disagree with SNR. We found SNR's CEP
level of trade and its home market OEM level of trade to be separate,
distinct levels of trade. There is no HM level of trade analogous to
that of CEP sales. Therefore, there is no basis upon which to calculate
a level-of-trade adjustment. Concerning SNR's suggestion that we grant
a level-of-trade adjustment equal to the difference between HM OEM and
HM distributor sales because OEM sales are allegedly similar to CEP
sales and are, in any event, closer to CEP sales than distributor
sales, we note that SNR demonstrated neither that HM OEM sales are
similar to CEP sales nor that OEM sales are less advanced than
distributor sales. SNR demonstrated only that it had two distinct HM
levels of trade, both of which were more advanced than the level of
trade of the CEP. Therefore, we conclude that a CEP offset is
appropriate for all of SNR's CEP sales.
Comment 11: NTN contends that the Department should make a CEP
offset to NV based on CV in instances where it matches U.S. sales to
CV. NTN claims that NV based on CV is not comparable to the level of
trade of the CEP. Therefore, NTN asserts, those sales are eligible for
a CEP offset. NTN requests that the Department make such an adjustment
for the final results.
Department's Position: We agree with NTN. As noted in the
introductory remarks to this section, where NV was based on CV, we
determined the NV level of trade based on the level of trade of the
sales from which we derived SG&A and profit for CV. Therefore, because
we derived SG&A and profit for CV from home market sales, we
[[Page 2111]]
determined that the NV levels of trade for CV are equivalent to levels
of trade in the home market. Furthermore, we note that the statute, at
section 773(a)(8), permits us to make the same adjustments to NV when
it is based upon CV as we make to NV based upon prices. Thus, for NTN's
CEP sales, we determine that a CEP offset is appropriate when NV is
based upon CV. See our introductory remarks for this section, above,
for a discussion of why we determine that a CEP offset is appropriate
for CEP sales in this case. Finally, we note that we made CEP offsets
to CEP sales we compared to CV in the preliminary results, and we have
not changed this practice for the final results.
6. Cost of Production and Constructed Value
A. Cost-Test Methodology. Comment 1: Torrington argues that the
statute requires the Department to apply two tests to determine whether
sales are below the cost of production and to disregard sales if either
test is met. Torrington contends that below-cost sales must be
disregarded if either: (1) The volume of such sales represents 20
percent or more of the volume of sales during the period of review, or
(2) the weighted-average per-unit price of the sales under
consideration is less than the weighted-average per-unit cost of
production. Torrington contends that the Department only applied the
first test in the preliminary results and argues that the Department
should apply both tests for the final results.
FAG Germany argues that the Department correctly and reasonably
declined to invoke the second substantial-quantities test in its cost
investigation. Respondent contends that the statute does not
specifically direct the Department to use both tests and argues further
that the SAA, at 832, indicates that the second test was meant to be
used in cases involving highly perishable products.
Department's Position: We disagree with Torrington. We first note
that both of the above tests concern only one aspect of the
determination whether to disregard below-cost sales from our analysis,
namely whether sales made at prices below the cost of production were
made in substantial quantities. Neither the statute at section
773(b)(2)(C) nor the SAA require that both tests be performed in any
given proceeding; the SAA in fact indicates that the second test is the
measurement of substantial quantities in cases involving highly
perishable agricultural products (as was the case under the pre-URAA
statute). Not only does this indicate that only one substantial-
quantities test is to be performed, but it also clarifies the
circumstances under which use of the second test is appropriate.
Comment 2: Torrington claims that the Department should default to
NV based on a family match when sales of an identical match are
disregarded as below cost, rather than default to NV based on CV.
Petitioner argues that, because family matches are sales of the foreign
like product, section 773(b)(1) requires the Department to use these
``remaining sales of the foreign like product in the ordinary course of
trade'' in its comparisons to U.S. sales when sales of identical
matches have been disregarded as below cost. Torrington believes that
defaulting to family matches conforms to the Department's long-standing
preference for using sales rather than costs. INA, FAG-Italy, and FAG-
Germany agree with Torrington.
SKF responds that Torrington misconstrues the selection process for
sales comparisons. Respondent points out that the selection of the
foreign like product is conducted prior to, and independently of, the
cost test. SKF explains that section 771(16) of the Tariff Act
authorizes the selection of the foreign like product based on a
comparison of physical characteristics to those of the U.S. merchandise
whereby once a match is determined, that specific home market
merchandise is the single foreign like product. SKF comments that there
is no devolution to a ``second-best'' foreign like product. Therefore,
SKF contends, in AFBs, when there are sales of identical merchandise,
that merchandise is the foreign like product and there is no authority
to then default to a family match, even when the identical match is
disregarded as below cost.
SNR notes that the changes in the language of section 773(b) of the
Tariff Act were made to implement the new twenty-percent cost test in
place of the Department's previous 10-90-10 test. In SNR's view,
Congress did not intend that this change alter the selection of foreign
like product. SNR mirrors SKF's contention that section 771(16) of the
Tariff Act does not sanction a cascade search for foreign like product.
SNR contends that section 771(16) of the Tariff Act identifies
merchandise in the first applicable category as the foreign like
product, not any applicable category of merchandise.
Department's Position: We disagree with Torrington, INA, FAG-Italy,
and FAG-Germany. While our cost-test methodology has changed in
accordance with the new law, our methodology for selecting the foreign
like product has not. Section 771(16) of the Tariff Act directs us to
select the foreign like product ``in the first'' of several categories:
identical in physical characteristics, similar in physical
characteristics and commercial value, or of the same general class or
kind that can be reasonably compared. The Department interprets the
reference in section 773(b)(1)(B) of the Tariff Act to basing NV ``on
the remaining sales of the foreign like product in the ordinary course
of trade'' to mean the selected foreign like product, not a succession
of foreign like products.
We clarified our methodology in AFBs V at 66490-91 when we stated
that, in pre-URAA instances where between ten and ninety percent of
sales of a model are below cost, we disregarded the individual below-
cost sales in calculating foreign market value and we used the
remaining contemporaneous above-cost sales of such models in our
analysis, matching such sales in the same manner that we matched all HM
sales. Where we did not have remaining contemporaneous above-cost sales
of the most physically comparable model, we relied on CV as the basis
for foreign market value. Otherwise, we would have made successive
model matches and allowed the effects of the cost test to play a role
in determining the comparability of merchandise, a criterion not found
in the definition of such or similar merchandise at section 771(15) of
the pre-URAA law.
Similarly, the definition of foreign like product at section
771(15) of the Tariff Act does not include the results of the cost test
as a criterion for comparability. Therefore, when section 773(b) of the
Tariff Act, as amended by the URAA, directs us to rely on CV when ``no
sales made in the ordinary course of trade remain,'' we search our 90/
60-day contemporaneity window to determine whether sales of the best
model for comparison survive the cost test. We have a longstanding
practice of considering sales within 90 days before and 60 days after
the month of the U.S. sale to be acceptable as potential comparators
(see Certain Small Business Telephone Systems and Subassemblies Thereof
form Korea: Final Results of Antidumping Administrative Review, 57 FR
8300 (March 9, 1993); Certain Circular Welded Carbon Steel Pipes and
Tubes from Thailand: Final Results of Antidumping Administrative
Review, 61 FR 1332 (January 19, 1996); AFBs III at 39735). Consistent
with this practice and section 773(b) of the Tariff Act, we have
resorted directly to CV where we have disregarded all contemporaneous
identical HM sales as below cost instead of determining whether
[[Page 2112]]
contemporaneous sales of a less-similar model would survive the cost
test and remain available as comparators.
Comment 3: NSK-RHP argues that the Department should either adjust
COP to exclude credit expenses or not deduct these expenses from home
market prices it uses in the below-cost test. NSK-RHP asserts that,
since the Department deducted credit expense from home market price, it
must make the same deduction from the interest expense it added as part
of the SG&A expenses to NSK-RHP's COP to avoid comparing a home market
price net of credit expenses to a COP that includes this expense.
Torrington argues that the Department should neither adjust COP to
exclude credit expense nor deduct these expenses from the home market
prices it uses in the below-cost test. Torrington suggests that it is
not proper to deduct imputed credit expenses from COP unless the COP
included an amount for imputed credit expenses. Torrington claims that
NSK-RHP fails to demonstrate that the Department included these
expenses in its COP calculations. Also, Torrington contends, the record
does not indicate that the COP that NSK-RHP reported included an amount
for the imputed credit expenses. Torrington states that the Department
should therefore not adjust its methodology.
Department's Position: We agree with NSK-RHP that we should not
deduct credit expenses from home market prices we used in the below-
cost test. We do not adjust for imputed expenses in the COP analysis.
For the final results, we have corrected our calculations and have not
adjusted the HM prices for credit expenses before applying the below-
cost test. In accordance with section 773(b)(3)(B) of the Tariff Act,
which requires that we base COP on actual costs, we have not included
imputed costs, such as the imputed credit expense at issue, in
calculating NSK-RHP's COP. We have included an interest expense in
deriving COP based on actual expenses. Because we include actual
interest expenses in deriving the COP, it is inappropriate to reduce
home market prices that we compare to COP in the below-cost test by the
amount of any imputed expenses.
B. Research and Development. Comment 1: Torrington asserts that the
Department must apply facts available to SNR's R&D costs due to the
lack of more precise information from the respondent. Torrington
alleges that SNR reported R&D as ``general expenses'' in its response
and did not assign R&D on a model-specific basis although SNR's Annual
Report suggests that it incurred product-specific and/or product-line
R&D. Torrington contends that because SNR did not provide R&D on a
model-specific basis, the Department should apply, as facts available,
the highest R&D costs by any other respondent, which will ensure that
none of SNR's bearing models has understated R&D.
SNR responds that Torrington provides no support for its suggestion
that the Department use facts available to restate R&D costs. SNR
argues that it treated R&D as a general expense because the expenses
are of a general nature and the company's records do not segregate
these expenses by product or product line. SNR contends that the
general references in its Annual Report do not suggest that SNR
segregates R&D expenses by product or product line. Moreover, SNR
contends that Torrington did not provide any specific facts to
illustrate that SNR has records to separate R&D expenses on a product-
line basis.
Department's Position: We disagree with Torrington that SNR's
Annual Report's references to certain products indicates that the
company keeps track of R&D expenses on a product-specific basis.
Neither the record nor our verification has provided us with any basis
for concluding that SNR's R&D expenses are recorded on a product-
specific basis. Furthermore, at verification, we did not find that
SNR's R&D allocation methodology was unreasonable, given SNR's record-
keeping practices. Accordingly, for the final results, we have accepted
SNR's reported R&D costs as general expenses.
Comment 2: Torrington suggests that the Department should ensure
that SKF Germany has allocated the R&D expenses of ERC (the SKF group's
basic R&D operation) properly to German merchandise. Torrington argues
that it is not clear that SKF Germany's allocation is a rational
allocation, i.e., that SKF Germany's ownership share is proportional to
the R&D benefit it receives. Torrington notes that the parent company,
AB SKF, holds an ownership interest in ERC, which Torrington contends
could dilute the proportion of expenses attributed to the producing
entities such as SKF Germany. In addition, Torrington claims that the
allocation does not account for differences among several classes or
kinds of products. Torrington suggests that, as facts available, the
Department should allocate the total R&D expense of ERC to each SKF
company, thus ensuring that R&D is not understated for any given
country.
SKF Germany responds that, because the R&D expenses are allocated
based on ownership of the producing companies, no disproportionate
amount could have been allocated to the producing company not under
review, SKF Sverige AB, as Torrington suggests.
Department's Position: We agree with SKF Germany. The CIT has
upheld our use of expenses recorded in a 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 Laclede Steel Co. v. United States, Slip Op. 94-160 at 22
(CIT 1994). In this review, we are satisfied that SKF Germany allocated
ERC expenses properly and Torrington provides no evidence to the
contrary, so we have accepted SKF Germany's methodology, as we have in
prior reviews. As SKF Germany indicated in its May 24, 1996 pre-
preliminary comments, it did not allocate any ERC expenses to the
parent company, AB SKF, but only to the producing companies based on
their proportionate ownership shares in ERC. We have no reason to
believe that this allocation methodology is unreasonable.
C. Profit for Constructed Value. Comment 1: Torrington contends
that the Department improperly included home market sales that failed
the below-cost test, as set forth in section 773(b) of the Tariff Act,
in the calculation of profit for CV. Torrington states that the
Department calculated CV profit pursuant to the ``preferred''
methodology as provided at section 773(e)(2)(A) of the Tariff Act,
which requires that the sales used to calculate profit must be made in
the ordinary course of trade. Torrington claims that sales that fail
the below-cost test are outside the ordinary course of trade, as
defined in section 771(15) of the Tariff Act and, therefore, must be
excluded from the CV-profit calculation.
Torrington states that applying the statute in this manner is the
only way to implement the compromise made in the URAA legislation,
whereby the statutory minima for profit and SG&A were eliminated
subject to the understanding that the Department would generally not
include below-cost sales in the CV-profit calculation. Torrington
contends further that this failure to disregard sales that failed the
below-cost test runs contrary to sections 2.2.1 (ordinary course of
trade) and 2.2.2 (profit for CV) of the Uruguay Round Antidumping
Agreement.
SKF, NSK, SNR, FAG, and NTN respond that the Department properly
included sales that failed the below-cost test in the CV-profit
calculation because this calculation was not made under the authority
of section 773(e)(2)(A), but was instead made pursuant to the
[[Page 2113]]
``alternative'' profit methodologies provided at section 773(e)(2)(B).
These latter methodologies do not require that CV profit be based on
sales made in the ordinary course of trade (alternatives (B)(i) and
(B)(iii)).
SKF and NSK state that section 773(e)(2)(A) is inappropriate in
this case because this section bases the CV profit calculation on sales
of the ``foreign like product,'' which do not exist when NV is based on
CV. SKF argues that, where CV is used because there are no appropriate
identical or family matches, there would be no sales of ``a foreign
like product'' to calculate a profit amount, and notes that the URAA's
specific use of ``a foreign like product'' and the SAA's use of the
words ``particular merchandise'' make clear that the first method for
the calculation of CV profit requires reliance on a narrow universe of
products. SKF and NSK state that the most appropriate methodology is
that established in section 773(e)(2)(B)(i), which requires the use of
company-specific data regarding the same general category of
merchandise. SKF adds that this provision does not require that such
sales be made in the ordinary course of trade.
SNR and FAG state that section 773(e)(2)(A) is inappropriate
because this provision requires that CV profit be based on the ``actual
amounts'' of home market profits realized by respondents, which is not
possible in this case due to sampled home market databases. SNR and FAG
assert that sampled sales do not provide complete actual profits and
cannot be guaranteed as representative of actual profits. SNR and FAG
contend that sections 773(e)(2)(B) (i) and (ii) are inappropriate for
the same reason and recommend the calculation of profit under section
773(e)(2)(B)(iii) (any other reasonable method), which does not require
that CV profit be based on sales made in the ordinary course of trade.
NTN agrees with these respondents that profit amounts in this case
could reasonably be based on the ``alternative'' profit methodologies
established at section 773(e)(2)(B) of the Tariff Act.
INA, FAG, NTN, and NMB/Pelmec contend further that, even if the
Department calculates CV profit pursuant to a provision that requires
the use of sales made in the ordinary course of trade (e.g., section
773(e)(2)(A)), sales that fail the below-cost test are not necessarily
outside the ordinary course of trade. INA and FAG note that the section
771(15) definition of ``ordinary course of trade'' states that the
Department shall consider such sales to be outside the ordinary course
of trade, not that the Department shall conclude that such sales are in
fact outside the ordinary course of trade. FAG and INA note further
that the SAA (at 839) provides that the Department may disregard such
sales in calculating CV profit using the section 773(e)(2)(A)
methodology, not that it shall disregard such sales. INA suggests that
the sales of AFBs that fail the below-cost test are not outside the
ordinary course of trade, as the Department has consistently found that
producers regularly sell AFBs below cost as well as above cost in their
home markets. INA notes further that it is rational for firms to sell
at prices below fully allocated costs, provided that they are above
marginal costs. INA contends that including sales at one end of the
spectrum while excluding sales at the other end of the spectrum (i.e.,
sales transactions with abnormally high profits) would result in
irrational and unrepresentative profit figures, which would be contrary
to the objective set forth in the SAA.
SKF and NTN argue that, if the Department disregards sales that
failed the below-cost test in the calculation of profit for CV, it
should make certain adjustments to the calculation in order to derive a
non-distortive profit rate. SKF requests that the Department include
such sales in the denominator of the calculation and assign a profit
rate of zero to such sales in the numerator. SKF argues that, by doing
so, the Department would ensure that it is using a methodology that
results in a numerator that reflects the ``actual amounts [of profit] *
* * realized'' by foreign producers on sales ``in the ordinary course
of trade.'' In other words, SKF suggests that the Department set profit
for disregarded sales to zero while retaining the full costs of those
sales in the calculation. NTN requests that the Department exclude
sales that earned abnormally high profits from the calculation,
asserting that these sales are also outside the ordinary course of
trade.
Department's Position: We agree with Torrington that we should not
include sales that failed the below-cost test in the calculation of
profit for CV, because these sales fall outside the ordinary course of
trade. As we stated in the preliminary results of review, we have
calculated CV profit using the profit methodology as stated in section
773(e)(2)(A) of the Tariff Act. This provision requires that profit be
based on sales made in the ordinary course of trade which, in turn, do
not include sales that we disregarded as a result of the below-cost
test. See section 771(15) of the Tariff Act. The fact that our
preliminary margin calculations did not reflect our decision to
disregard such sales in the CV-profit calculation was a ministerial
error on our part.
We disagree with SKF and NSK that we do not have any ``foreign like
products'' for use in calculating CV profit, and that we should
therefore calculate profit using one of the alternative profit
calculations contained at section 773(e)(2)(B). Respondents' definition
of the term ``foreign like product'' is overly narrow with respect to
its use in the CV-profit provisions. In applying the ``preferred''
method for calculating profit (as well as SG&A) under section
773(e)(2)(A), the use of aggregate data that encompasses all foreign
like products under consideration for NV represents a reasonable
interpretation of the statute and results in a practical measure of
profit that we can apply consistently in each case. By contrast, an
interpretation of section 773(e)(2)(A) that would result in a method
based on varied groupings of foreign like products, each defined by a
minimum set of matching criteria shared with a particular model of the
subject merchandise, would add an additional layer of complexity and
uncertainty to antidumping proceedings without generating more accurate
results. It would also make the statutorily preferred CV-profit
methodology inapplicable to most cases involving CV.
We also disagree with SNR and FAG that we must base our CV profit
calculation on ``any other reasonable method,'' as provided in section
773(e)(2)(B)(iii), due to a lack of ``actual data'' regarding profit
amounts realized by respondents. Although the home market sales and
cost data that we use in calculating CV profit was provided on a
sampled basis, this does not render such data inappropriate or ``not
actual'' for purposes of this calculation. Pursuant to the statutory
authority provided at section 777A of the Tariff Act, we routinely use
data in our analysis that has been reported on a sampled basis, due to
the large number of reviews that we must conduct as well as the large
number of individual transactions involved therein, particularly in
these AFBs reviews. Sampled data is, nonetheless, actual data regarding
the sales, costs, and profits involved in sales made during the POR. In
fact, we are permitted to use sampled data only when such samples are
statistically valid. Further, an interpretation that sampled data is
not actual data could render alternative CV-profit methodologies,
including the preferred methodology provided at section 773(e)(2)(A),
inappropriate in any case involving sampled home market reporting. As
the statute does not
[[Page 2114]]
explicitly provide for such an automatic elimination of these profit
methodologies in such cases, it is not reasonable to read such an
interpretation into it.
We disagree with INA, FAG, NTN, and NMB/Pelmec that, in calculating
CV profit pursuant to the preferred methodology, we should nonetheless
consider that sales that failed the below-cost test are not outside the
ordinary course of trade in this case. Contrary to respondents'
assertions, the statutory definition of ``ordinary course of trade''
explicitly provides that sales that are disregarded under section
773(b)(1) of the Tariff Act are automatically considered to be outside
the ordinary course of trade. See section 771(15) of the Tariff Act.
Respondents are ascribing a discretionary meaning to the term
``consider'' that does not exist in the context of this provision.
Finally, we disagree with SKF that, in using section 773(e)(2)(A),
we should retain the full costs of disregarded sales while setting
those sales' profits to zero. Because these sales are not in the
ordinary course of trade, the use of partial information from the sales
would distort the profit rate for sales in the ordinary course of
trade. We disagree with NTN that we should consider sales that earned
allegedly abnormally high profits as outside the ordinary course of
trade for the reasons provided in the Samples, Prototypes, and Ordinary
Course of Trade section of these final results.
Comment 2: Torrington argues that the Department should presume
that individual below-cost sales of models for which below-cost sales
comprised between zero and twenty percent of total sales are outside
the ordinary course of trade, and should exclude them from its CV-
profit calculations. Torrington submits that these below-cost sales are
outside the ordinary course of trade unless respondents make a
definitive showing to the contrary, such as for obsolete or end-of-year
merchandise, and states that no such demonstrations were made in this
review.
Respondents disagree with Torrington's suggestion that individual
below-cost sales of models that passed the below-cost test, but for
which certain transactions were identified as below cost, should be
eliminated from the CV-profit calculation. Respondents contend that
section 771(15) identifies only below-cost sales that have been
disregarded under section 773(b)(1) as outside the ordinary course of
trade. Respondents assert that the Department cannot presume that all
below-cost sales are outside ordinary course of trade.
Department's Position: We disagree with Torrington that individual
below-cost sales of models that passed the cost test, but for which
certain transactions were identified as below cost, should be excluded
from the calculation of CV profit. We agree with SKF that these sales
do not meet the criteria of section 771(15) as being outside the
ordinary course of trade.
In calculating CV profit, the automatic exclusion of all below-cost
sales would be contrary to the statute. Although we have included only
sales made in the ordinary course of trade for the reasons stated in
our response to Comment 1, above, the definition of ordinary course of
trade provides that only those below-cost sales that are ``disregarded
under section 773(b)(1)'' of the Tariff Act are automatically
considered to be outside the ordinary course of trade. In other words,
the fact that sales of the foreign like product are below cost does not
automatically trigger their exclusion. Instead, such sales must have
been disregarded under the cost test before we will exclude these sales
from the calculation of CV profit.
Comment 3: FAG Italy and FAG Germany assert that the Department's
methodology for calculating CV profit in the preliminary results was
incorrect for three reasons. The FAG companies first contend that the
Department must calculate CV profit based on home market sales of
merchandise having equivalent commercial value to matching U.S. sales.
FAG claims that reported home market bearings that are equivalent in
commercial value to comparable U.S. bearings are those having an
equivalent actual profit, and any home market sales with rates of
profitability greater than the weighted-average rate of profitability
of reported U.S. sales should be disregarded as outside the ordinary
course of trade. FAG also contends that, in accordance with section
771(16), CV profit must be manufacturer-specific, claiming that this
requires separate CV-profit calculations for each bearing type
manufactured by respondents or purchased by respondents from an
unrelated supplier. Finally, FAG argues that the Department must
calculate CV profit based on the entire selling experiences and pricing
patterns of the company throughout the review period rather than on
only those sales reported in the home market database (citing AFBs IV
at 10959).
Torrington responds that the Department should not revise its
methodology for calculating CV profit as FAG suggests. Torrington
argues that none of the statutory provisions respondents cite provide
that the Department must base CV profit on home market sales of
merchandise having equivalent commercial value to matching U.S. sales.
Torrington contends further that FAG has failed to demonstrate that
home market sales with rates of profitability greater than the
weighted-average rate of profitability of reported U.S. sales are
outside the ordinary course of trade. Torrington asserts that neither
the statute nor the SAA impose such a ``profitability cap.'' Torrington
also disagrees with FAG's contention that the Department must calculate
CV profit for each bearing type manufactured by respondents or
purchased by respondents from unrelated suppliers, arguing that the
statute respondents cite does not support the companies'' position.
Regarding FAG's final argument that the Department should calculate CV
profit based on the entire selling experiences and pricing patterns of
the company throughout the review period, Torrington contends that the
Department's approach of using a sample of the entire selling
experience and pricing patterns (i.e., the home market sales database)
is appropriate and in accordance with the statutory authority to use
sampling techniques.
Department's Position: We agree with Torrington. First, there is no
statutory provision or SAA reference requiring a determination of
equivalent commercial value in the calculation of profit for CV. To the
contrary, the imposition of a CV-profit ``cap'' based on profits
realized on U.S. sales is at odds with the statutory requirement that
we calculate CV using home market SG&A and profit figures for
comparison with U.S. sales. Second, we disagree with FAG that we are
required to calculated manufacturer-specific CV-profit rates as it
suggests. Pursuant to section 773(3)(2)(A) of the Tariff Act, we
calculated profit for the specific exporter, i.e., FAG, being examined.
Therefore, we have computed profit based on all sales of the foreign
like product occurring in the ordinary course of trade. With respect to
FAG's argument that we should base CV profit on the company's entire
POR selling experience, and not on sampled home market sales of the
foreign like product, as noted in our response to Comment 1, we
calculated CV profit using the HM database because the applicable CV-
profit provision (section 773(e)(2)(A)) requires that we calculate
profit based on the actual profit amounts realized on sales of the
foreign like product in the ordinary course of trade.
Comment 4: Asahi contends that the Department's calculation of
profit for CV is incorrect. Asahi states that, if the Department had
applied the arm's-
[[Page 2115]]
length test with an adjustment to prices for differences in level of
trade, the Department would not have eliminated certain sales to
affiliated parties from the profit calculation. Asahi contends that, to
calculate profit correctly, the Department must use all sales Asahi
reported that are at arm's length as determined by an arm's-length test
that includes an adjustment for differences in levels of trade.
Department's Position: We disagree with Asahi. For the reasons
specified in our response to the comment in section 9, we are not
revising the arm's-length test as suggested by Asahi and, therefore,
the universe of sales used in the calculation of profit for CV remains
the same.
D. Affiliated-Party Inputs. Comment 1: NSK argues that the
Department should use the transfer price paid by NSK to affiliated
suppliers for parts instead of the affiliated suppliers' COP data. NSK
argues that the Department has no authority to request COP data from
affiliated suppliers for any inputs. NSK contends that the finding of
below-cost sales in prior reviews does not provide a reasonable basis
to infer that NSK's suppliers are transferring inputs to NSK at prices
below the cost of production. NSK asserts that there is a burden on the
petitioner to come forward with some evidence that input dumping is
occurring before the Department can collect, or use, supplier's cost
information, and NSK comments that the petitioner has never alleged and
the Department has not substantiated that there were reasonable grounds
to believe or suspect that the prices at which NSK purchased major
inputs from affiliated suppliers were less than their costs of
production before the Department requested the cost data. NSK also
argues that the fact that the Department found below-cost sales in
prior reviews suggests that NSK is paying prices at or above market
prices for inputs and, accordingly, has higher costs.
Torrington responds that the Department's request for, and use of,
COP data for parts purchased from affiliated suppliers was proper and
in accordance with law. Torrington asserts that the statute does not
impose the burden upon petitioner to submit evidence that transfer
prices for parts purchased from affiliated suppliers were made at
prices less than their COP. Torrington contends that, because
affiliated-party transfers are a suspect category under the law and
because the foreign manufacturers and their subsidiaries have access to
the best information for purposes of analyzing transfer prices, it has
been the Department's practice to require respondents to submit
evidence concerning affiliated-party inputs since enactment of section
773(e)(3) (now section 773(f)(3)). Torrington also contends that the
Department has rejected this argument in prior reviews and that the
CAFC has upheld the Department in this practice, citing NSK III at 6.
Department's Position: We disagree with NSK. Section 773(f)(2) of
the Tariff Act, which refers to both minor and major inputs, states
that, with regard to calculating COP and CV:
``[a] transaction * * * between affiliated persons may be
disregarded if, in the case of any element of value required to be
considered, the amount representing that element does not fairly
reflect the amount usually reflected in sales of merchandise under
consideration in the market under consideration. If a transaction is
disregarded under the preceding sentence and no other transactions
are available for consideration, the determination of the amount
shall be based on the information available as to what the amount
would have been if the transaction had occurred between persons who
are not affiliated.''
We do not interpret this language to impose any prohibitions or
limitation to the Department's authority to request COP data on inputs
from affiliated suppliers. Further, the CIT, in NSK I, held that
``section 1677b(e)(3) [which corresponds to section 773(f)(3) in the
current law] does not limit Commerce's authority to request COP data
pursuant to section 1677b(e)(2) [which corresponds to section 773(f)(2)
in the current law]'' (NSK I at 669).
We generally use the transfer price of inputs purchased from an
affiliated supplier in determining COP and CV, provided that the
transaction occurred at an arm's-length price. In determining whether a
transaction occurred at an arm's-length price, we generally compare the
transfer price between the affiliated parties to the price of similar
merchandise between two unaffiliated parties. If transactions of
similar merchandise between two unaffiliated parties are not available,
we may use the affiliated supplier's cost of production for that input
as the information available as to what the amount would have been if
the transaction had occurred between unaffiliated parties.
In the case of a transaction between affiliated persons involving a
major input, we will use the highest of the transfer price between the
affiliated parties, the market price between unaffiliated parties, and
the affiliated supplier's cost of producing the major input.
We cannot assume that, because we found below-cost sales in prior
reviews, NSK is paying prices at or above market prices for inputs, as
NSK asserts. Further, the statute does not impose any burden on either
the petitioner or the Department to demonstrate that major inputs were
purchased at below-cost transfer prices, so long as we have other
reasonable grounds to believe or suspect that a respondent purchased
major inputs at below-cost transfer prices. Such grounds exist when we
also have reasonable grounds to believe or suspect that a respondent's
sales of subject merchandise in the home market are or may be occurring
at below-cost prices.
With regard to NSK's situation, we note that we made an error in
our preliminary results. NSK submitted market prices as well as
transfer prices for those inputs which it also purchased from
unaffiliated suppliers. On the basis of our review of this evidence, we
have concluded that the transfer prices were generally not made at
arm's length. Therefore, for the final results, we used the market
price reported for all inputs, unless the market price was below the
transfer price. For major inputs, if both the market price and transfer
price were below cost, we used the cost of production of the input. For
minor inputs, we used the cost of production as a surrogate for market
price only where market prices did not exist. Where NSK reported market
prices from more than one unaffiliated supplier, we used the weighted-
average price of the unaffiliated suppliers' prices as the market
price.
Comment 2: NSK argues that, in the case of a certain affiliated
supplier, the Department should determine that transfer prices of parts
NSK purchased from this supplier fairly reflect market value and use
those prices instead of the COP of those parts, even if it does not
make such a determination with regard to other affiliated suppliers.
NSK argues that affiliation per se does not require the rejection of
transaction prices between affiliated parties and that, even if the
Department cannot be sure whether the amount reflected in the transfer
price fairly reflects market value, it retains the discretion to accept
the transfer price and, further, that the statute does not prescribe
nor prohibit the use of specific methods to determine whether a
transaction price fairly reflects market value. NSK contends that the
situation of the affiliated supplier in question is unique and requests
that the Department recognize that the nature of the affiliation does
not provide a basis for price manipulation or for the affiliated
supplier to favor NSK in any way.
Torrington argues that the Department's reliance on price and cost
[[Page 2116]]
for analyzing arm's-length transactions was proper. Torrington argues
that, if it were true that there was no possibility for price
manipulation between the affiliated supplier and NSK, then NSK's
purchase price for inputs from the supplier would always be above cost
and NSK would have no basis for objecting to the use of those costs.
Torrington also argues that there is nothing in the statute which
requires the Department to consider factors other than price or cost in
determining whether affiliated-supplier inputs reflect fair market
value. Torrington claims that the Department has rejected a similar
argument made by NSK in a prior review and that evidence on the record
supports the Department's determination of arm's-length transactions
between affiliated parties on the basis of price and cost.
Department's Position: We disagree with NSK. Whether the
possibility of price manipulation theoretically exists has no bearing
on our determining whether a sale is made at an arm's-length price.
Although NSK submitted certain evidence, in addition to the price
information we requested, in support of its contention that the prices
were arm's length, we have determined that the prices were not made at
arm's length solely on the basis of the price information NSK
submitted.
Comment 3: NSK contends that certain parts for which the Department
required NSK to submit affiliated suppliers' COP instead of the
transfer price are not major inputs. NSK argues that the statute
provides for the Department to obtain and use COP information only for
major inputs purchased from affiliated suppliers and that major inputs
are defined in the questionnaire as ``an essential component of the
finished merchandise which accounts for a significant percentage of the
total cost of materials, the total labor costs, or the overhead costs
incurred to produce one unit of the merchandise under review.'' NSK
argues that the parts in question do not account for a significant
percentage of the cost of the bearings in which they are used, and that
the Department therefore has no statutory authority to request or use
the COP data for those parts.
Torrington notes that the parts to which NSK refers are major
inputs because they represent significant percentages of the cost of
the bearings in which they are used. Torrington also notes that the
Department has specifically identified one of the parts as a major
input in prior reviews.
Department's Position: We disagree with NSK that one of the part
types to which NSK refers is not a major input, but we agree that the
other part type is a minor input. However, because of the proprietary
nature of the issue, we have discussed our rationale on our treatment
of these parts in the analysis memorandum for these final results of
review. See NSK Ltd. Final Analysis Memorandum, dated December 17,
1996.
We disagree with NSK's contention that the statute restricts our
use of COP information to major inputs. As noted above, section
773(f)(2) places no limitation on the data we may collect to determine
the fair price of major or minor inputs.
Comment 4: Torrington argues that the Department should use NSK-
RHP's transfer prices if those prices are higher than the COP of the
input in question. Torrington recommends that the Department examine
each input and determine whether instances exist where transfer prices
are below cost and, if they are, apply the higher value. Torrington
states that, in response to its pre-preliminary comments, NSK-RHP
asserted that Exhibit S-11 to its supplemental questionnaire response
demonstrates that the transfer prices for the major inputs exceed the
cost of producing the relevant inputs in almost every case. Torrington
requests, therefore, that the Department use the higher of transfer
prices or production costs for the value of affiliated-party major
inputs.
NSK-RHP asserts that, although the Department failed to establish a
reasonable basis under section 773(f)(3) of the Tariff Act by which to
request data about the cost of major inputs respondent purchased from
affiliated parties, NSK-RHP placed this data on the record. NSK-RHP
contends that, if the Department examines this data, it will see that
transfer prices for the major inputs exceed the costs for producing the
relevant inputs in almost every case. Further, for those limited cases
in which transfer prices do not exceed costs, NSK-RHP asserts that the
Department found correctly that it was unnecessary to substitute the
cost data for the transfer prices. NSK-RHP concludes that, if the
Department decides to ignore the restrictions on its authority to
request cost data set by section 773(f)(3) of the Tariff Act, it will
find evidence on record nevertheless that fully supports NSK-RHP's
decision to use, where relevant, the transfer prices for major inputs
it purchased from affiliated parties.
Department's Position: We disagree with NSK-RHP's contention that
we did not establish, under section 773(f)(3) of the Tariff Act, a
reasonable basis to request cost data from affiliated suppliers. As
explained in our response to comment 1 of this sub-section, if we have
reason to believe or suspect that the price paid to an affiliated party
for a major input is below the COP of that input, we may investigate
whether the transfer price is in fact lower than the supplier's actual
COP of that input even if the transfer price reflects the market value
of the input. If the transfer price is below the affiliated supplier's
COP for that input, we may use the actual COP as the value for that
input. In this case, because we have reasonable grounds to believe or
suspect that NSK's HM sales may be occurring at below-cost prices, we
have reasonable grounds to believe or suspect that it purchased major
inputs at below-cost transfer prices. Therefore, for these final
results, we have used the higher of transfer prices or COP for the
value of affiliated-party major inputs.
Comment 5: Torrington contends that INA refused to provide COP and
transfer price information regarding major affiliated inputs as the
Department requested in its supplemental questionnaire. Torrington
asserts that, instead, INA calculated COP and CV on the basis of actual
cost without regard to internal transfer prices. Torrington argues that
INA's calculation inhibits the Department from applying INA's situation
to section 773(f)(3) of the Tariff Act, which requires the Department
to use the highest value among transfer price, cost of production or,
in certain situations, alternative information. Torrington states that
the Department should restate all reported values of affiliated-party
major inputs in accordance with the manner in which INA calculated
internal transfers of finished parts and goods, as indicated in its
supplemental COP/CV response. Torrington also states that, if the
Department is unable to identify the major inputs, it should, in
accordance with Federal-Mogul V at 219, restate all material costs,
which would ensure that no material costs are understated.
INA rebuts Torrington's view that the methodology for reporting all
inputs produced by the home market manufacturing entity, INA-FRG, and
used in the calculation of COP is improper. INA states that INA-FRG, as
a whole, provides the necessary functions for the development,
manufacture, and sale of the subject merchandise. INA states that it
reported the activities of INA-FRG on a consolidated basis which the
Department has approved in all prior reviews of these orders. Further,
INA contends that, since INA-FRG is the producer of subject
merchandise,
[[Page 2117]]
internal transfers between the entities which comprise INA-FRG are
irrelevant. In addition, INA argues that the Department has not
requested any changes in the reporting methodology of INA-FRG and such
a change would not make sense because the INA-FRG entities are
intertwined and entirely interdependent in the production and selling
of subject merchandise.
INA also contends that the manner in which it reported its cost-
accounting system is fully consistent with the Department's
questionnaire instructions. Further, INA states that its reported cost-
accounting system is organized for the complete business, INA-FRG, and
not for the individual entities which comprise INA-FRG. Thus, INA
states, the inter-entity transfers are consolidated. INA also states
that in computing COP and CV, the methodology INA-FRG used is both
current and reflects actual cost accurately. Further, INA argues, it
does not have a cost-accounting system that eliminates inter-entity
transfers, particularly for the voluminous number of articles reported.
INA states that INA-FRG has no system in place to re-establish the data
on transfers or otherwise trace the requested data for the thousands of
models involved and also states that it would not be practicable to
complete such a massive task in the time constraints of an
administrative review. Thus, INA states that it was not unwilling to
provide the information the Department requested, rather, it was not
able to provide such requested information.
Department Position: We agree with Torrington that INA-FRG failed
to provide us with internal transfer prices of major inputs from within
the affiliated entities that comprise INA-FRG. Although INA-FRG
responded to our questionnaire on a consolidated basis, INA-FRG is
comprised of several separate, corporate entities that engage in
activities related to the production and sale of subject merchandise
(see Memo from Analyst to File: Verification of Home Market Sales
Information Submitted by INA Walzlager Schaeffler KG, at 1 and 2, June
28, 1996). Each of the entities has its own accounting system and,
thus, its own method by which it accounts for purchases of inputs from
suppliers and, in particular, affiliated parties. Further, each of the
entities is affiliated in accordance with section 771(33)(F) of the
Tariff Act. Therefore, in accordance with section 773(f)(3), we
requested that INA-FRG submit the per-unit transfer price it charged
for the major input by the affiliated party so that we could determine
the value of the input compared with its COP. While INA-FRG maintains
that it has reported cost information on a consolidated basis in this
and in all previous reviews, we maintain that our request for transfer-
price information is in accordance with the section 773(f) requirement
that we analyze such information to determine the appropriate value for
major inputs.
We requested that INA-FRG provide this transfer-price information
in both our original and supplemental questionnaires. In its response
to our requests for such information, INA-FRG stated that it calculated
COP and CV in this review on the basis of actual cost without regard to
transfer prices. However, given the separateness of the entities and
the fact that each of the entities has its own accounting system, we
maintain our position that, in accordance with the statute and INA-
FRG's own accounting systems, INA-FRG should have provided us with the
transfer prices at issue. Given INA-FRG's failure to provide us with
this requested information, we are restating the material costs of INA-
FRG's cost of manufacturing as facts available, in accordance with
section 776(a)(2)(A) of the Tariff Act.
In its response, INA-FRG stated that it added fifteen percent to
its standard manufacturing costs in order to value internal transfers
of finished parts and finished goods. For each entity of which INA-FRG
is comprised, we calculated the percentage of SG&A plus net interest to
cost of goods sold. For the entity with the lowest percentage of SG&A
plus net interest to cost of goods sold, we calculated the difference
between the fifteen percent and the resulting percentage of SG&A plus
net interest to cost of goods sold. As facts available, we increased
INA-FRG's reported cost of materials by this percentage difference.
Based on INA-FRG's response, we are unable to distinguish between
transactions that represent sales of finished parts and goods from
those which are unfinished parts and goods. We have, therefore, applied
this calculation to all reported material costs.
E. Inventory Write-downs and Write-offs. Comment 1: Torrington
argues that the Department should adjust NSK's reported COP and CV so
as to include both inventory write-offs and write-downs. Torrington,
citing AFBs III at 39756, contends that it is the Department's practice
to consider write-offs and write-downs as constituent parts of the cost
of production.
NSK argues that it reported inventory write-offs and write-downs in
accordance with Japanese GAAP and that it reported write-offs and
write-downs in the same manner as in prior reviews of these orders. NSK
also argues that, even if the Department agrees with Torrington, it
should still decline to adjust NSK's reported G&A factor because the
amount of the write-offs is de minimis under 19 CFR 353.59(a).
Department's Position: We agree with Torrington. We regard NSK's
inventory write-offs and write-downs as part of the fully-absorbed cost
of goods sold which should be included in the calculation of cost of
production. See AFBs III at 39756. Therefore, we have included both
inventory write-offs and write-downs in NSK's reported COP.
Comment 2: Torrington argues that the Department should adjust FAG
Italy's and FAG Germany's reported costs to include inventory write-
downs. Citing Canned Pineapple Fruit from Thailand, 60 FR 29553, 29571
(June 5, 1995), Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, from Japan, 57 FR 4960, 4973 (February 11, 1992), and
Mechanical Transfer Presses from Japan, 55 FR 335, 347 (January 4,
1990), Torrington contends that the write-downs are costs for
antidumping purposes.
FAG Italy and FAG Germany suggest that Torrington has confused
inventory write-downs with inventory write-offs. The respondents
explain that they included inventory write-offs in the reported G&A
expenses, but that they excluded write-downs on the basis that they are
contingent reserves provided for at the end of the accounting year to
account for the possibility that they may not eventually sell some
merchandise for full value. FAG Italy and FAG Germany argue that their
write-downs are not actual costs and only become actual reportable
events for antidumping purposes when they sell the bearing for less
than its inventory value. Respondents state that the realized loss on
the resale is a revenue issue and not a cost issue. FAG Italy and FAG
Germany contend that to increase their costs by the contingent reserve
for write-downs and also use the lower resale value as part of their
per-unit price would constitute double-counting and that the Department
has recognized this in all prior reviews of these orders. FAG Italy and
FAG Germany contend that the cases cited by Torrington are not
dispositive, given the facts in this case. FAG Italy and FAG Germany
note that there is no indication whether the write-downs referred to
were contingent or realized and contend that it is possible that the
cases involved write-offs as opposed to write-downs.
Department's Position: We agree with FAG Italy and FAG Germany that
the cases Torrington cites are inapposite,
[[Page 2118]]
given the facts of this case. We reviewed the record and determined
that the inventory write-downs these respondents reported are not
actual costs but are a provisional reduction-in-inventory value in
anticipation of a lower resale value. FAG Italy's and FAG Germany's
inventory write-downs are, as it appears from the record, not a cost
but a potential loss of revenue that is ultimately reflected in the
sales price. FAG Italy's and FAG Germany's write-downs, then, are not
realized expenses but simply a contingent reduction in how much revenue
the companies expect to make from the sale of the merchandise. Since
these particular inventory write-downs are not a realized expense, and
are not reflected in their accounting of costs of goods in inventory,
we have not included them in the calculation of COP and CV for FAG
Italy and FAG Germany.
F. Interest Expense Offset. Comment: Torrington argues that the
Department should adjust NSK's reported financial expenses for COP and
CV by disallowing NSK's interest income offset. Torrington contends
that the Department requires respondents to demonstrate that interest
income is related to the production of subject merchandise before
allowing an offset to interest expense. Torrington cites Erasable
Programmable Read Only Memories (EPROMS) from Japan, 51 FR 39684
(1986), AFBs IV at 10925-26, Tapered Roller Bearings from Japan, 59 FR
56035, 56045 (1994), and Tapered Roller Bearings from Japan, 58 FR
64720, 64728 (1994), in support of this contention. Torrington argues
that NSK did not substantiate that its reported interest income is
related to the production of subject merchandise and that the
Department adjusted NSK's financing expense in AFBs IV because NSK
failed to make such a demonstration in that review.
NSK argues that the Department's standards for allowing an offset
for interest income have changed since the issuance of the cases
Torrington cites. Citing Certain Corrosion-Resistant Carbon Steel Flat
Products and Certain Cut-to-Length Carbon Steel Plate from Canada, 61
FR 13815, 13819 (March 28, 1996), NSK contends that the Department has
expanded its view of what constitutes an appropriate offset to interest
expense, including interest earned on short-term deposits, advance
payments to suppliers and late payments. NSK claims that its interest-
income offset consists of these types of income and, therefore, the
Department should not make any adjustment to its reported interest
expense.
Department's Position: We disagree with Torrington. We are
satisfied from information on the record that NSK's business records do
not report separately the short-and long-term nature of the interest
income earned by the company and its subsidiaries. NSK's alternative
calculation of its income offset reasonably reflects the short-term
interest income related to production activities and the investment of
working capital. Therefore, we have allowed NSK's offset to interest
expense for interest income.
G. Other Issues. Comment 1: Torrington contends that INA failed to
provide relevant cost information in its supplemental questionnaire
response, such as the reconciliation of standard and actual cost
factors, as well as an itemization of the reported variable and fixed
overhead costs reported for subject merchandise. Torrington argues
that, in light of INA's failure to provide this information, the
Department should explain why it remains satisfied with INA's cost-
reporting methodology. Otherwise, Torrington contends, the Department
should adjust INA's reported data by appropriate facts available.
Department's Position: We disagree with Torrington. INA-FRG
provided detailed responses to our supplemental cost questionnaire
concerning INA's standard and actual cost-accounting system and its
standard cost-revision practice. We are satisfied by INA's explanation
and, therefore, we believe that INA-FRG has provided the necessary cost
information for us to use in our final results.
Comment 2: Torrington argues that the Department should revise
NSK's reported COP and CV by adding an amount for idle-asset
depreciation. Torrington asserts that NSK did not report the
depreciation of idle assets in its COM. Although Japanese GAAP does not
require companies to calculate such depreciation, Torrington contends
that it is the Department's practice to adjust respondents' cost data
if depreciation expense of idle assets is not reported as an element of
production cost. Moreover, Torrington asserts, the CAFC upheld this
practice in NTN III. Torrington argues that, as facts available, the
Department should add the highest amount of depreciation of idle assets
reported by any other respondent to NSK's COP and CV.
NSK contends that it did include in its COM all costs associated
with the depreciation of idle assets and cites its questionnaire
response in support of this contention.
Department's Position: We agree with NSK. It is evident from NSK's
response to our cost questionnaire that it included an amount for idle-
asset depreciation in its COM. Therefore, we do not need to modify
NSK's response with regard to idle-asset depreciation.
Comment 3: Torrington argues that the Department should revise
NSK's reported COP and CV by including losses and gains on the disposal
of fixed assets. Torrington asserts that the Department considers such
losses as a normal cost of production. Torrington suggests that,
because NSK did not specifically identify the amount of expense
associated with the disposal of fixed assets in its non-operating
expenses, the Department should assign a reasonable portion of NSK's
``miscellaneous loss'' to expenses incurred in disposal of fixed assets
as facts available.
NSK argues that its gains and losses as a result of the disposal of
fixed assets are not related to production but are non-operating
expenses and extraordinary gain. NSK argues that such gains and losses
should not be included in its COP data.
Department's Position: We regard gains and losses as a result of
the disposal of fixed assets as a normal cost of production. See AFBs
III at 39756. We reviewed NSK's response and concluded that such gains
or losses, in NSK's case, are related to its production operations.
Since we have no reason to believe that these gains or losses on the
sales of fixed assets do not relate to the general production activity
of NSK as a whole, we included the net amount as a general expense. We
have not done as Torrington suggests, however, because NSK did
specifically report the total amount of gains and losses associated
with the disposal of fixed assets in its non-operating expenses in its
response to our cost questionnaire.
Comment 4: Torrington contends that FAG Germany did not provide
variance rates it actually applied to the 1995 standard costs for all
models produced in 1994 and 1995 and did not provide explanations where
variances differ substantially between 1994 and 1995 production, even
though the Department specifically requested this information.
Torrington notes that FAG Germany alleged that it would be impractical
to provide variances on a model-specific basis and that the
relationship of particular models and variances was more appropriately
reviewed in the context of verification. Torrington contends that
model-specific variance rates are important to test the reasonableness
of FAG Germany's standard costs, and that allowing FAG Germany to
selectively disregard requests for information adversely
[[Page 2119]]
affects the credibility of the Department's investigative process.
Torrington argues that, in light of this failure, the Department should
apply adverse facts available by selecting the highest reported
variance and recalculate reported costs accordingly.
FAG Germany argues that it does not calculate variances in its
cost-accounting system on a model-specific basis but on a cost-center
area-specific basis. FAG Germany contends that all bearings and
components whose sales and costs were reported were produced in one of
the cost-center areas listed in the supplemental response and that it
calculates variance ratios for each cost-center area once per year at
year-end. FAG Germany contends that it provided the precise formulae it
used in the variance calculation and a sample calculation in order to
clarify its methodology. Finally, FAG Germany states that the
Department has verified FAG Germany's standard costs and cost-
submission methodology in prior reviews and the Department has always
accepted the information.
Department's Position: We agree with FAG Germany. Although we
requested model-specific information, FAG Germany does not maintain
variance records on a model-specific basis but rather on a cost center-
specific basis. We reviewed FAG Germany's response and conclude that
reporting such information, in FAG Germany's case, on a cost-center
basis is reasonable because: (1) That is the basis on which it maintain
its records, and (2) the variance ratios do not change for specific
models within a cost-center area in FAG Germany's cost-accounting
system. We reviewed FAG Germany's original response in light of its
supplemental response and found no evidence that FAG Germany had
misrepresented the actual costs of subject merchandise in its response.
Comment 5: Torrington argues that the Department should satisfy
itself that FAG Germany's supplemental explanations of how it
determined and distributed variances is reasonable, and that, if the
Department finds the evidence submitted by FAG Germany to be
inadequate, the Department should reject it.
Department's Position: We have examined FAG Germany's original
response and its supplemental response, and we have concluded that FAG
Germany's reporting methodology reasonably captured the actual costs
incurred in the production of subject merchandise in its response.
Comment 6: Torrington contends that FAG Germany did not adequately
describe how it determined the COP and CV costs for DKFL, the
subsidiary that entered bankruptcy proceedings in July 1993. Torrington
comments that, in its supplemental response, FAG Germany claimed that
it had based its reported costs for the models involved on an average
of 1993 DKFL costs and POR FAG Germany costs and that, because there is
no current DKFL production, FAG Germany had weighted the average based
on the relative sales quantities. Torrington claims that, in a later
submission, FAG Germany asserted that it did not weight-average costs.
Torrington argues that, in light of this contradictory record, the
Department should resort to facts available for all models, not just
sales, which involved DKFL production.
FAG Germany contends that it fully explained its cost-calculation
methodologies in its response and its supplemental response. FAG
Germany claims that it weight-averaged COM data for identical products
made by both DKFL and FAG Germany in all preceding review periods when
DKFL was operating. FAG Germany also states that, in those instances
where DKFL and FAG Germany made identical merchandise in different
periods (that is, when FAG Germany actually produced the identical
merchandise in a POR after DKFL's bankruptcy), it was impossible for
FAG Germany to calculate a weighted-average cost of manufacture for
DKFL and FAG Germany bearings. FAG Germany contends that any attempt to
calculate a weighted-average production cost for DKFL would have
resulted in a distorted cost of manufacture based on different
production periods.
Department's Position: We agree with FAG Germany. We reviewed the
record and found no inconsistencies in FAG Germany's reporting of the
cost of bearings produced by DKFL. Although FAG Germany used two
different methodologies for calculating DKFL costs, one of the
methodologies was an alternate to the other methodology that was only
used when the original methodology (i.e., weight-averaging) was
inappropriate because the bearings were produced during different
periods. We find, therefore, that FAG Germany's reporting methodology
for DKFL costs is appropriate in the context of this review.
Comment 7: NSK and INA argue that the Department should deduct
imputed credit expenses from CV-derived home market prices, as it has
in previous practice. NSK contends that failure to deduct the imputed
expense distorts margins based on CV comparisons and argues further
that the statute and regulations call for an adjustment for differences
in circumstances of sale, which include imputed credit expenses.
Respondent notes that the Department made an adjustment for imputed
credit expenses for CEP in all instances and NV when based on home
market price. According to NSK and INA, the failure to make such an
adjustment when NV is based on CV results in an unfair comparison
between CEP and NV when the Department calculates NV using CV. NSK
contends that the Department's apparent intention to interpret section
773(e)(2)(A) of the Tariff Act as allowing only a respondent's actual
SG&A expenses in the calculation of CV, citing Large Newspaper Printing
Presses and Components Thereof, Whether Assembled or Unassembled, From
Germany, 61 FR 38166, 38187 (July 23, 1996), misconstrues the law. NSK
contends that, while the Department did not explain its rationale in
the preliminary results, it appears that it did not make the deductions
on the basis of the language of the URAA, which states that CV is now
to be calculated using respondent's actual SG&A expenses. NSK argues
that this provision was meant to overrule the prior statutory authority
to use a minimum SG&A expense, but notes that, under prior law, if a
respondent's actual SG&A expenses exceeded the minimum, the Department
always used respondent's actual expenses and still deducted imputed
expenses. NSK notes that the Department's proposed regulations (61 FR
7346) state that ``the Department's practice with respect to
adjustments for direct selling expenses and assumptions of expenses
remains unchanged.''
Torrington argues that the Department should deduct imputed credit
expenses from NV based on CV only when it is apparent that such an
expense is included in the SG&A expenses reported by a respondent.
Absent such a showing, the imputed expense is not an element of the
actual amounts required by section 773(e) of the Tariff Act. Without
the inclusion of the imputed expense in the build-up of SG&A,
Torrington contends there is no basis for making a deduction, since
doing so would understate CV.
Department's Position: We agree with NSK and INA. Under the URAA,
for both COP and CV, the statute provides that SG&A be based on actual
amounts incurred by the exporter for production and sale of the foreign
like product (see sections 773(b) and (e) of the Tariff Act). After
calculating CV in accordance with the statute, we have, in essence, a
NV. Consistent with section 773(a)(8) of the Tariff Act, adjustments to
NV are appropriate when CV is the basis for NV. The Department uses
imputed
[[Page 2120]]
credit expenses to measure the effect of specific respondent selling
practices in the United States and the comparison market. Therefore,
for these final results, we have deducted imputed credit expenses as a
COS adjustment from CV in the calculation of NV.
7. Further Manufacturing
Comment: Torrington comments that the Department excused many
respondents from reporting U.S. further-processing information and that
the Department determined dumping margins for the affected sales on the
basis of the weighted-average dumping margins found on sales of
identical or other subject merchandise sold to unaffiliated customers.
Torrington argues that, under the statute, this method is proper only
if (i) there is a sufficient quantity of non-value-added sales to
provide a reasonable basis for comparison, and (ii) use of such sales
is appropriate. Torrington argues further that the Department failed to
articulate standards for determining whether quantities were sufficient
or how the method was appropriate based on the facts of this record.
Torrington asserts that the Department should either articulate and
justify its standards for excusing reporting of such information or re-
open the record and require full further-manufacturing reporting.
Torrington proposes the following standards: (i) that no more than 10
percent of all U.S. sales, by quantity of the particular model in
question, involve U.S. value added, and (ii) that there be adequate
facts supporting a finding that no reason exists for the Department to
believe that the value-added sales somehow involve larger dumping
margins than the proxy transactions. Torrington concludes that it would
not be appropriate for the Department to use any methodology that would
dilute dumping margins.
FAG, NMB/Pelmec, and SNR contend that requiring a respondent to
report further-manufacturing cost data pursuant to the Department's
questionnaire after that respondent has demonstrated that the amount of
value added in the United States exceeds substantially the cost of the
imported merchandise defeats the clear purpose and design of the
statutory waiver in section 772(e) of the Tariff Act. Citing the SAA,
FAG argues that section 772(e) of the Tariff Act was intended to reduce
reporting burdens on respondents and to reduce analysis and processing
burdens on the Department.
The NTN companies argue that, in demanding the reopening of the
further-processing reporting, Torrington is trying to invalidate the
statute's special rule for further-manufactured merchandise by grafting
extra statutory requirements to a provision meant to simplify, not
complicate, the review process.
Koyo argues that Torrington can point to no error in the
Department's excusing many of the respondents from full reporting of
further-processing data and that the Department applied its discretion
precisely as anticipated by Congress. Koyo also contends that the
Department articulated its standard in the proposed regulations and
that the intent of section 772(e) of the Tariff Act is to reduce the
burden on both respondents and the Department. Koyo argues further that
Torrington's proposed methodology ignores the rationale underlying the
statutory amendment that the simplified reporting methodologies were to
be used in cases in which the value added substantially exceeds the
value of the imported merchandise, and adds that the number of sales
involved does not affect whether the value added in those transactions
is or is not ``substantial.'' Koyo also contends that Torrington's
suggestion that the calculation should be model-specific defeats the
purpose of section 772(e) of the Tariff Act.
SKF argues that, even if the Department agrees with Torrington that
its selection of proxy transactions was somehow flawed, the next
logical and statutorily mandated step is not a full response to the
cost-of-further-manufacturing section of the questionnaire, but rather
to select another method to derive surrogate information. SKF also
argues that, in SKF's case, it is clear that there is a sufficient
quantity of non-further-manufactured sales to provide a reasonable
basis for comparison. Finally, SKF contends that Torrington has
presented no evidence or argument that the Department's practice was
inappropriate and that doing as Torrington suggests would defeat the
purpose of section 772(e) of the Tariff Act.
Finally, the FAG companies assert that requiring the Department to
gather and analyze complete further-processing information after
respondents have satisfied the requirement that value added exceeds
substantially the value of the imported subject merchandise completely
defeats the clear purpose and design of the statutory waiver
subsection.
Department's Position: Section 772(e) of the statute allows us to
determine the CEP of further-processed subject merchandise in a manner
that does not require the calculation and subtraction of U.S. value
added if the U.S. value added is likely to exceed substantially the
value of the imported merchandise (this procedure is identified in the
Tariff Act as the ``special rule''). The statute further provides that,
where there is a sufficient quantity of sales of identical subject
merchandise or other subject merchandise sold to unaffiliated persons
and the use of such sales is appropriate, the Department shall use the
prices of such sales to determine the CEP of the further-processed
subject merchandise. If there is not a sufficient quantity of sales of
identical or other subject merchandise, or if the use of such sales is
inappropriate, the Department may determine the CEP of the further-
processed subject merchandise on any other reasonable basis.
We disagree with Torrington's argument that the test to determine
whether the U.S. value added exceeds substantially the value of the
imported merchandise should be done on a model-by-model basis. The
statute does not require application of the ``special rule'' on a
model-specific basis. Moreover, application on a model-specific basis
would be inconsistent with the purpose of the ``special rule'' as
discussed in the SAA:
* * * for purposes of estimating whether the value added in the
United States is likely to substantially exceed the value of the
imported product, it is the Administration's intent that Commerce
not be required to perform a precise calculation of the value added.
Requiring such a precise calculation would defeat the purpose of the
new rule of saving Commerce the considerable effort of measuring
precisely the U.S. value added.
SAA at 826.
A model-by-model analysis and determination to apply the special
rule would substantially undermine the intent of the provision, which
is to relieve the Department of the burden of a further-manufacturing
analysis. Therefore, for these reviews, we estimated the ratio of value
added to the final sales price on an aggregate class-or-kind basis;
that is, we calculated the value added to imported subject merchandise
in relationship to the sales price to the first unaffiliated customer
for that imported subject merchandise.
We disagree that we should be required, at this time, to articulate
a standard for determining whether quantities of identical or other
subject merchandise are sufficient to provide a reasonable basis for
comparison. We have had limited opportunity to apply the ``special
rule'' and we are reluctant to articulate a standard which might have
applicability beyond these reviews without the benefit of further
experience. For purposes of these
[[Page 2121]]
reviews, however, the Department has found that each of the respondents
to which the ``special rule'' was applied had a sufficient quantity of
non-further-processed sales to provide a reasonable basis of
comparison. In particular, the non-further-processed sales constituted
at least 21 percent of the respondent's total quantity of sales of
subject merchandise and a simple average of 55 percent of all excused
respondents'' total quantity of sales of subject merchandise. In the
context of these reviews, we determine that these percentages provide a
sufficient basis for comparison, particularly because the above
percentages understate the amount of non-further-processed merchandise.
Specifically, the above calculations equate bearing parts, rolling
elements, cages, rings, etc. (which are usually further manufactured in
the United States by the respondents excused from providing further-
processing data) with complete bearings (which are not usually further
manufactured in the United States by the same respondents). Based on
the entered value of entries, we find that non-further-processed
merchandise constituted at least 71 percent of the respondent's total
sales of all subject merchandise and a simple average of 89 percent of
all excused respondents'' sales of subject merchandise. This further
confirms that we had an adequate quantity of non-further-processed
sales for our comparison.
In order to provide an appropriate basis for comparison, the
Department need not find that the non-further-processed sales were
dumped at the same rate as the further-processed sales. To impose such
a requirement would necessitate the Department calculating the actual
dumping margins on the further-processed merchandise, defeating the
purpose of the ``special rule.'' Moreover, Torrington has pointed to no
information on the record which suggests that dumping margins on the
further-processed merchandise differ significantly from the weighted-
average margins of the non-further-processed merchandise. Therefore, we
conclude that excusing certain respondents from providing further-
manufacturing data was consistent with the intent of the special rule
and our calculations are not distorted by our decision not to conduct a
further-manufacturing analysis.
8. Packing and Movement Expenses
Comment 1: FAG Italy contends that the Department unlawfully
reduced CEP for expenses incident to transporting merchandise from the
country of origin (Italy) to Germany for ultimate distribution to the
United States. FAG Italy notes that, pursuant to section 772(c)(2)(A)
of the Tariff Act, the Department has the authority to reduce CEP by
any additional costs, charges or expenses incident to bringing the
subject merchandise from the original place of shipment in the
exporting country to the place of delivery in the United States. FAG
Italy contends that, in accordance with this statutory provision,
Germany is the ``exporting country'' of the reviewed sales and,
therefore, the Department does not have the authority to adjust CEP for
costs incident to bringing the merchandise from the factory in Italy to
the warehouse in Germany.
Torrington contends that the Department properly reduced CEP by all
costs incident to bringing the merchandise from the country of origin
to Germany. Torrington contends that, with respect to the FAG Italy-
produced bearings, Italy remained the exporting country regardless of
whether the bearings were physically in Italy, Germany, or the United
States. Torrington asks that the Department disregard the alleged
differences, suggested by FAG Italy, between the statutory terms
``exporting country'' and the ``country of origin.''
Department Position: We disagree with FAG Italy that Germany is the
``exporting country'' of the reviewed sales, and for the final results
we have adjusted CEP for costs incident to bringing merchandise from
its factory in Italy to the warehouse in Germany. For calculating CEP
in our review of FAG Italy's subject merchandise, Germany is the
intermediary country and not the exporting country. Since FAG Italy is
the producer and exporter of subject merchandise, Italy is both the
``country of origin'' and the ``exporting country.''
Section 771(28) of the Tariff Act defines ``exporter or producer''
to include both the exporter of the subject merchandise and the
producer of the same subject merchandise to the extent necessary to
accurately calculate the total amount incurred and realized for costs,
expenses, and profits in connection with production and sale of the
merchandise. Since FAG Italy is both the exporter of the subject
merchandise and the producer of the same subject merchandise, we have
deducted from CEP all costs incident to transporting the merchandise
from FAG Italy's factory in Italy to the company's warehouse in the
United States.
Comment 2: Torrington argues that the Department has allowed Koyo
to report aggregated air- and ocean-freight expenses. Torrington
contends that the Department should require Koyo to report air-freight
expenses on a model-or customer-specific basis or apply expense data
obtained at verification as facts available.
Koyo responds that the Department has repeatedly rejected
Torrington's arguments on this issue in previous reviews. According to
Koyo, the Department's verification report for this review supports its
contention that, although it tracks its costs of air freight, Koyo is
unable to tie individual air shipments to particular sales to unrelated
customers in the United States.
Department's Position: We agree with Koyo. The manner in which Koyo
records these expenses in its accounting system, and the reporting of
these expenses, has not changed from the 1993/94 review. As in the
1993/94 review, we determine that Koyo is not able to provide air-
freight on a transaction-specific basis. At the U.S. sales verification
we verified Koyo's air-and ocean-freight expense data successfully and
found that the use of aggregated expense data in the allocations was
not unreasonably distortive. Therefore, we have accepted Koyo's
reporting of these movement expenses for the final results.
Comment 3: Torrington asserts that the Department must be satisfied
that SKF France reported HM packing costs properly before using these
expenses to adjust NV in the final results. Torrington notes that SKF
France based its reporting on standard costs from its cost and
financial accounting system. Torrington claims that it is not clear
whether SKF France's standard-cost system yields sufficiently precise
results for direct reporting of packing expense on a model-by-model
basis. Thus, Torrington maintains the reporting of these expenses might
not be acceptable in accordance with Torrington VI (at 1050-1051), in
which the CAFC ruled that companies must report direct expenses
accurately and not allocate them broadly across sales. Torrington
suggests that, if the Department is not satisfied with SKF France's
reporting of HM packing expenses, it should use as facts available the
packing expenses of another producer.
SKF France contends that Torrington's concern about the expenses
being broadly allocated is without basis and notes that the Department
has accepted the same reporting methodology in all prior AFB reviews.
In addition, SKF France claims that Torrington is misreading Torrington
VI. SKF France contends that the CAFC did not prohibit companies from
allocating direct expenses broadly across sales, but instead held that,
when companies allocate direct expenses, the expenses
[[Page 2122]]
must not lose their direct nature, i.e., the Department should not
treat them as indirect selling expenses.
Department's Position: We agree with SKF France. In our
supplemental questionnaire we requested SKF France to provide a
worksheet listing, for all packing materials, the average cost of each
material and how much of each material it used. In response, SKF France
explained that it could not provide the information in the manner
requested since it is not available in its accounting records. SKF
France explained that its packing-expense methodology relies on costs
recorded in the company's cost-accounting and financial-accounting
systems and that it allocates this information to the reported
bearings. SKF France reported packing costs in a manner consistent with
how it records the expenses in its accounting system. Moreover, we have
no reason to believe that the reporting methodology is distortive of
SKF France's actual experience, and we note that Torrington has not
provided evidence indicating otherwise. This is the same methodology
that SKF France used in each prior completed review, and we see no
reason to reject it now; this reporting methodology is consistent with
SKF France's accounting and record-keeping systems and leads to an
accurate representation of the company's packing cost. Therefore, for
the final results we used the company's HM packing costs to adjust NV.
Comment 4: Torrington claims that the Department should reject
NTN's HM pre-sale and post-sale transportation expenses because NTN did
not adequately describe the adjustments in its response. Torrington
maintains that respondents are obligated to support all claims for
adjustments in great detail and that, since NTN has not done this, the
Department should deny the adjustments. NTN disagrees with Torrington
and requests that the Department accept its movement expenses for the
final results.
Department's Position: We disagree with Torrington. We examined
NTN's movement expenses at the HM verification and, during this
process, the respondent provided us with a complete description of the
data and allocation methodology it used to report the adjustments and
we found no discrepancies. See the August 14, 1996, HM verification
report for NTN. Furthermore, we determined that the reporting of the
adjustments is accurate, given NTN's financial records, and is not
unreasonably distortive. Therefore, we have accepted NTN's HM movement
expenses for the final results.
9. Affiliated Parties
Comment: Asahi contends that the Department incorrectly performed
the arm's-length test as it did not take into account differences in
levels of trade. Asahi points out that it provided information on price
differences between levels of trade in its questionnaire response and
that the Department verified this data.
Department's Position: We disagree with Asahi. The arm's-length
test compares, at the same level of trade, the price of foreign like
products sold to affiliated parties to the price of the same products
sold to unaffiliated parties. See Certain Flat-Rolled Carbon Steel
Products from Canada, 58 FR 37099 (July 9, 1993), and Certain
Corrosion-Resistant Carbon Steel Flat Products from Germany, 60 FR
65264 (December 19, 1995). We did not use Asahi's sales to a certain
affiliated party in the calculation of NV because there were no
unaffiliated party sales at the same level of trade for making such
comparisons and, therefore, we were unable to analyze whether prices to
this affiliated party were at arm's length.
A level-of-trade adjustment is based on differences in prices at
two home market levels of trade. Even if we were to consider a level-
of-trade adjustment as part of the arm's-length test, basing the
adjustment on price differences where one side of the analysis is based
solely on untested affiliated-party sales would defeat the purpose of
the arm's-length test. In such a case, the level-of-trade adjustment
would include not only differences in prices associated with the sales
at different levels of trade, but would also include the amount of any
difference in prices associated with the party's affiliated status.
Therefore, we have not made a level-of-trade adjustment in order to
conduct an arm's-length test on the affiliated-party sales.
10. Samples, Prototypes, and Ordinary Course of Trade
We do not exclude HM or U.S. sales from our review solely on the
basis of their designation as ``samples'' or ``prototypes,'' but we do
exclude such transactions if they meet certain criteria. With respect
to HM sales, we may exclude sales designated as samples or prototypes
from our analysis pursuant to section 773(a)(1) of the Tariff Act where
we determine that those sales were not made in the ordinary course of
trade, as defined by section 771(15). With respect to U.S. sales, there
is no parallel ``ordinary course of trade'' provision allowing for the
exclusion of sample or prototype sales from the U.S. database. See
Floral Trade Council of Davis, Cal. v. United States, 775 F. Supp.
1492, 1503 n.18 (CIT 1991). Except in the case of sampling, we will
only exclude U.S. sales from our review in unusual situations, i.e.,
where those sales are unrepresentative and extremely distortive. See,
e.g., Chang Tieh Indus. Co. v. United States, 840 F. Supp. 141, 145-46
(CIT 1993) (exclusion of sales may be necessary to prevent fraud on the
Department's proceedings). See also AFBs II at 28395 and AFBs III at
39744, 39775.
We acknowledge that we may exclude small quantities of U.S. sales
in investigations; however, we do not follow the same policy in
reviews. This is because, under the statute, the Department is required
in an administrative review to calculate an amount of duties to be
assessed on all entries of subject merchandise and not merely to
establish a cash deposit rate.
The CIT recently upheld our treatment of samples and prototypes in
FAG III. In that case, the court recognized the limitations on our
authority to exclude U.S. sales in an administrative review. The CIT
upheld our procedural requirements for establishing whether a sale is a
true sample, which requires the respondents to establish that: (1)
Ownership of the merchandise has not changed hands, or (2) the sample
was returned to the respondent or destroyed in the testing process. Id.
at 11, citing Granular Polytetrafluoroethylene Resin from Japan, 58 FR
50343, 50345 (September 27, 1993). Therefore, the fact that merchandise
is sold at a very low price or even priced at zero is not sufficient to
establish that the sale is a sample. We require additional evidence
that sales are true samples before we will exclude them from the home
market or U.S. sales database.
Comment 1: SKF Germany and SKF Italy argue that the Department has
the discretion to exclude sample sales from both the U.S. and HM
databases and should do so for the final results. These SKF companies
assert that they have demonstrated that their reported sample sales in
both the U.S. market and the HM are samples and, therefore, they should
be excluded.
Torrington argues that the Department should deny SKF Germany's and
SKF Italy's requests to exclude their sample and prototype sales from
the U.S. or HM databases. Torrington notes that the Department properly
did not exclude such sales in its preliminary results of review.
Department's Position: We agree with Torrington. As we noted above,
merely designating a sale as a ``sample'' does not entitle a respondent
to exclusion of that sale from the database. The respondent must
provide evidence to
[[Page 2123]]
prove its claim that the designated sales are actually sample sales.
Further, the sales must meet the criteria discussed above in order to
merit exclusion as U.S. sample sales, and must demonstrate that HM
``sample'' sales are outside the ordinary course of trade. In this
instance, SKF Germany and SKF Italy failed to provide any evidence to
support their sample-sale claims. Therefore, we have continued to
review and calculate margins on the basis of SKF Germany's and SKF
Italy's sample sales.
Comment 2: NSK and NSK-RHP argue that the Department should exclude
from the U.S. sales database free samples given away in the United
States. Respondents contend that the Department must apply the ordinary
meaning of ``sale'' to the antidumping law, which involves not only the
transfer of ownership, but also the payment, or promise, of
consideration. Respondents claim that they provided extensive
documentation to support their claim that samples provided at no charge
did not constitute sales.
Respondents also contend that the act of providing free samples
with the expectation that respondents might eventually become one of
the customer's suppliers is not sufficient to constitute legal
consideration. Finally, respondents argue that excluding free samples
does not create a loophole in the antidumping law. Citing Torrington IV
at 1039, respondents argue that the Department asserted that, for
purposes of calculating antidumping duties, the Department reviews
sales, not entries. Respondents contend that the Department violates
its duty to determine dumping margins as accurately as possible when it
fails to recognize the normal business practice of giving away free
samples as a promotional expense and instead calculates dumping margins
as if the free samples constituted sales.
Torrington responds that the Department properly included
respondent's free samples, or zero-priced sales, in the U.S. sales
database and should continue to do so for the final results. Torrington
argues that the statute directs the Department to review each entry of
the subject merchandise, citing section 751(a) of the Tariff Act.
Torrington asserts that to exclude free samples given away in the
United States would create a loophole whereby respondents could
eliminate dumping margins by raising prices on their merchandise and
then providing free samples or gifts in consideration for the sales.
Torrington states that the Department has previously rejected
respondents' arguments and that this rejection has been upheld by the
CIT, citing NSK III at 6-7.
Department's Position: We disagree with respondents. Respondents
failed to demonstrate either that ownership of the merchandise has not
changed hands or that the sample was returned to the respondents or
destroyed in a testing process (see discussion at the beginning of this
section). Therefore, we have continued to review and calculate margins
on the basis of respondents' claimed samples. With regard to
respondents' argument that the ``samples'' are not true ``sales,'' we
note that we cannot accept a sample-sales claim simply on the basis of
designation. Unless respondent demonstrates that a transaction meets
our criteria for consideration of a sample, we treat claimed sample
transactions with no price as zero-priced sales. Furthermore, as noted
above, were we to accept respondents' argument that the alleged samples
are not actually sales per se, we would be allowing a loophole that
respondents could use to mask dumping.
Comment 3: FAG Italy requests that the Department exclude sample/
prototype transactions from the U.S. sales database when calculating
the antidumping margin. FAG Italy argues that the Department has
consistently held that where merchandise is not sold within the meaning
of section 772 of the Tariff Act, the transaction is not a sale for
antidumping purposes. FAG Italy notes that section 772 defines CEP
sales as the price at which merchandise is sold or agreed to be sold in
the United States and claims that, since all sample transactions were
zero-priced, these transactions cannot be considered CEP sales, despite
the Department's treatment of them as such in the preliminary results.
In conclusion, FAG Italy refers to the Department's description of
sales outside the ordinary course of trade in the SAA and contends
that, under the new law, the Department has the discretion to treat
zero-priced sample transactions as outside the ordinary course of
trade.
Torrington contends that the Department should treat FAG Italy's
alleged U.S. sample sales as sales for the margin analysis. Torrington
notes that the Department has determined in the past that there is
neither a statutory nor a regulatory basis for excluding any U.S. sales
from review, citing AFBs I at 31713, AFBs II at 28394-95, AFBs III at
39776, and AFBs IV at 10947.
Torrington also notes that, in past reviews, the Department only
excluded sample transactions where there was no transfer of ownership
between the exporter and the U.S. purchaser. FAG Italy, Torrington
contends, neither demonstrated nor claimed that it retained ownership
of any sample bearings.
Department's Position: We agree with Torrington that we should
include FAG Italy's U.S. sample transactions in our analysis. Except
under the limited circumstances discussed at the beginning of this
section, there is no statutory basis for excluding U.S. sales from
review. Since FAG Italy failed to demonstrate either of the two
criteria required for the exclusion of sample transactions from the
U.S. sales database, we included these transactions in the U.S. sales
database we used to calculate margins for the final results. Moreover,
as discussed above, although we have the discretion to set aside home
market sales that are outside the ordinary course of trade, this
statutory criterion does not apply to U.S. sales.
Comment 4: NTN claims that the Department should exclude home
market sales outside the ordinary course of trade, which it defines as
sample sales and sales with abnormally high profits. NTN argues further
that the SAA lists sales made at aberrational prices as a category of
sales not in the ordinary course of trade. NTN contends that both the
SAA and the proposed regulations classify these sales as sales outside
the ordinary course of trade which the Department should disregard for
the purposes of calculating NV in order to avoid unrepresentative
results.
Torrington argues that NTN has failed to meet its burden of
demonstrating that the sales in question were outside the ordinary
course of trade. Furthermore, Torrington states that, given the lack of
evidence on the record, NTN's argument that the Department should have
excluded sales with ``abnormally high profits'' from the home market
database is irrelevant. In conclusion,Torrington asserts that, given
the evidence of record, NTN did not meet its burden of demonstrating
that such sales were outside the ordinary course of trade.
Department's Position: We disagree with NTN. We have determined
that NTN's characterization of its reported data is not substantiated
by the administrative record. NTN's sales information merely identifies
certain sales as home market sample sales and other sales with
``abnormally high profits'' as not in the ordinary course of trade. NTN
examined only quantity and frequency of sales in determining which
sales to report as outside the ordinary course of trade. NTN's
supplemental questionnaire response provided no additional information;
it simply identified the sales as having been made
[[Page 2124]]
outside the ordinary course of trade. As stated above, the fact that a
respondent identifies sales as sample and prototype sales does not
necessarily render such sales outside the ordinary course of trade.
Verification of the designation of certain sales as samples merely
proves that respondent identified sales recorded as samples in its own
records. Such evidence does not indicate that such sales were made
outside the ordinary course of trade for purposes of calculating NV in
these reviews. In addition, the Department noted at the home market
verification of NTN's data that the firm was unable to substantiate
that all sales coded as samples were sample sales. Accordingly, we have
included NTN's sample sales in the calculation of NV.
Comment 5: Koyo argues that the Department matched U.S. sales of
one model to a home market model which it sold outside the normal
course of trade and which also does not meet the criteria of a foreign
like product as defined by the antidumping statute. Koyo first states
that the HM model is produced to unusual product specifications.
Second, Koyo argues, the HM bearing was sold aberrational prices.
Furthermore, Koyo argues that the HM model is not a foreign like
product because it is not identical in physical characteristics and is
not like the U.S. model being compared to it because of a different
end-use.
Torrington argues that Koyo did not provide data to support its
claim and that the Department should reject Koyo's claim.
Department's Position: We disagree with Koyo. In spite of Koyo's
arguments, this model and the respective bearing family meet the
matching criteria as outlined in the Department's questionnaire. Also,
the difference-of-merchandise adjustment for the family to which we
matched the U.S. model does not exceed plus or minus 20 percent of the
U.S. model's COM. The Department has long held that U.S. and home
market models are similar where the difference between the U.S. and
home market models' variable COMs is less than 20 percent of the U.S.
model's COM. See Policy Bulletin 93/1, September 1, 1993. Koyo has not
demonstrated how the model's costs can meet our 20-percent test yet be
so dissimilar. Moreover, sales of models at high prices is insufficient
to establish a sale outside the ordinary course of trade. See Final
Results of Antidumping Duty Administrative Reviews; Tapered Roller
Bearings and Parts Thereof, Finished or Unfinished, From Japan and
Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and
Components Thereof, From Japan, 58 FR 64720 (December 9, 1993).
11. Export Price and Constructed Export Price Methodology
Comment 1: Torrington states that, in a radical departure from old-
law practice, the Department failed to make deductions when calculating
CEP for export selling expenses which respondents incurred in the home
market in selling subject merchandise to the United States. Torrington
states that the Department also did not consistently deduct inventory
carrying costs respondents incurred in the home market on U.S. sales
when calculating CEP. Torrington notes that, under the pre-URAA
statute, the Department deducted all selling expenses incurred in
exporting to the United States. Torrington argues that the new law is
not intended to change the Department's practice with respect to the
calculation of export price or constructed export price and that the
SAA at 824 and 828 and the Senate Report (S. Rep. No. 103-412, 103d
Cong., 2d Sess. 65 (1994)) provide for the deduction of selling
expenses which are assumed by the seller on behalf of the buyer.
The FAG companies, INA, Koyo, NMB/Pelmec, NSK, NSK/RHP, NTN, the
SKF companies, and SNR all argue that the Department was correct in not
deducting the export selling expenses in question from CEP. A number of
respondents cite the SAA at 823 which indicates that the Department
will deduct only those expenses associated with economic activities
occurring in the United States. The FAG companies, INA, the SKF
companies, and SNR note that the assumed-expense language in the Senate
Report and the SAA that Torrington cites is limited to selling expenses
assumed by the seller on behalf of the buyer, not the selling expenses
in question which the foreign manufacturer incurred in selling to its
affiliated U.S. importer.
Department's Position: We agree with respondents. It is clear from
the SAA that under the new statute we should deduct only expenses
associated with economic activities in the United States from CEP. The
SAA also indicates that ``constructed export price is now calculated to
be, as closely as possible, a price corresponding to an export price
between non-affiliated exporters and importers.'' See SAA at 823.
Therefore, we have only deducted expenses associated with commercial
activities in the United States. Our proposed regulations reflect this
logic at 351.402(b) (``(t)he Secretary will make adjustments to
constructed export price under 772(d) for expenses associated with
commercial activities in the United States, no matter where incurred').
Torrington's citation of statements in the SAA to support the
proposition that the new law is not intended to change our practice in
this regard is misplaced. Torrington cites various provisions of the
SAA which state that our practice with respect to ``assumptions'' would
not change. The SAA explains that ``assumptions'' are selling expenses
of the purchaser for which the seller in the home market agrees to pay.
See SAA at 824. Thus, if the home market producer agrees to pay for the
affiliated importer's cost of advertising in the U.S. market, the
Department would deduct such an expense as an ``assumption.'' The issue
of assumptions is unrelated to the issue of selling expenses incurred
in the home market in selling to the affiliated importer. Such expenses
are not incurred ``on behalf of the buyer'' (i.e., the affiliated
importer); rather, the exporter incurs such expenses on its own behalf,
and for its own benefit, in order to complete the sale to the
affiliated importer.
Therefore, because the selling expenses Torrington cites were not
specifically related to commercial activity in the United States, we
did not deduct them from CEP.
Comment 2: NSK and Koyo argue that the Department deducted the cost
of carrying inventory in the HM from CEP incorrectly for the
preliminary results of these reviews. Both firms argue that HM
inventory carrying costs reflect costs associated with economic
activity occurring in the home market, not in the United States. NSK
also argues that the CEP calculation is intended to construct an export
price and that inventory carrying costs are not deducted in export
price calculations.
Torrington contends that the Department's deduction of HM inventory
carrying costs from CEP was proper. Torrington argues that carrying
inventory is a selling activity involved in selling to the affiliated
U.S. importer and is one of the expenses the Department must deduct in
arriving at an appropriate ex-factory price.
Department's Position: We agree with Koyo and NSK. We regard the
inventory carrying costs the respondents incurred in the home market,
which are incurred prior to the sale, transfer, or shipment of the
merchandise to the U.S. affiliate, as an expense incurred on behalf of
the sale to the U.S. affiliate. As described in response to Comment 1
above, we do not consider this to reflect a commercial activity in the
United States. Therefore, we have not deducted domestic inventory
carrying costs from CEP for the final results.
[[Page 2125]]
Comment 3: SKF France and SKF Germany claim that, because their
imputed inventory carrying costs, which they incurred in the country of
exportation or which were associated with the transit time between
Europe and the United States, relate to periods before the subject
merchandise arrived in the United States, the Department cannot
consider them to represent selling, distribution, and further-
manufacturing activities in the United States, as required by 772(d)(3)
of the Tariff Act. SKF France and Germany also cite the SAA at 824 to
support their position that the Department must derive the profit it
deducts in determining CEP from selling, distribution, and further-
manufacturing activities in the United States. In addition, SKF France
and SKF Germany claim that these imputed expenses are not deductible
under sections 772(d) (1) and (2) of the Tariff Act since these imputed
expenses are not incurred in the United States.
Torrington contends that SKF France's and SKF Germany's position is
in conflict with the statute (section 772(d)(3)) and the SAA at 154.
Torrington argues that the Tariff Act makes clear that all expenses are
properly part of the CEP-profit allocation and that the SAA provides
that 772(d)(3) of the Tariff Act requires the Department, in
determining CEP, to identify and deduct from the starting price in the
U.S. market an amount for profit allocable to selling, distribution,
and further-manufacturing activities in the United States. Torrington
claims that the SAA does not limit the CEP-profit adjustment to
expenses incurred in the United States.
Department's Position: We agree with SKF France and SKF Germany in
part. For the reasons indicated in our response to comment 1 above, we
have deducted from CEP only expenses associated with economic
activities in the United States. The inventory carrying costs at issue
are not associated with such activities. We disagree, however, that the
geographical location is necessarily determinative. Thus, as discussed
in our proposed regulations at 7331, we will deduct an expense
associated with economic activities in the United States no matter
where it is paid.
Comment 4: Torrington contends that the Department should make a
deduction to CEP for certain selling expenses that FAG Italy incurred
in selling merchandise to the United States. Torrington identifies
costs which FAG OEM und Handel AG (FAG OH), a subsidiary of FAG Italy's
parent company, incurred in Germany to support the sale of bearings to
the United States. Torrington asserts that the deduction of these costs
is appropriate because these costs consist of expenses for maintaining
an electronic data interface with the U.S. affiliate, expediting and
handling functions in connection with the U.S. affiliate's orders, and
printing costs associated with the publication of catalogs and
technical data material in English.
FAG Italy contends that the Department properly excluded HM export
selling expenses and HM inventory carrying costs from the pool of CEP
deductions in accordance with Section 772(d) of the Tariff Act.
Department's Position: We disagree with Torrington in part. Based
on the record, we determined that the expenses in question are not
deductible from CEP under section 772(d) of the Tariff Act. However,
the record suggests that one of the three expenses Torrington
identifies, i.e., printing costs associated with the publication of
catalogs and technical materials in English, is a direct advertising
cost that FAG OH assumed on behalf of FAG Italy's U.S. affiliate for
sales to its unaffiliated customers in the United States. The SAA, at
828, requires that the Department make a COS adjustment (rather than a
CEP adjustment) for ``assumptions of expenses incurred in the foreign
country on sales to the affiliated importer.'' Thus, we have determined
that it is proper to add this expense to NV as a COS adjustment under
section 773(a)(6)(C)(iii) of the Tariff Act (see 7331 of our proposed
regulations).
Regarding the other two expenses Torrington identifies, we have
determined from the description on the record that they are not
associated with economic activity in the United States nor are they
direct selling expenses within the meaning of section 773(a)(6)(C)(iii)
of the Tariff Act. However, FAG Italy did not provide sufficient
information to permit us to isolate them from the sum of all three
expenses. Therefore, as facts available, we included the total amount
FAG Italy reported for these three expenses in our COS adjustment.
Comment 5: NTN disagrees with the Department's calculation of a
profit deduction from CEP based on each class or kind of merchandise
without regard to level of trade. NTN argues that, since selling
expenses differed by level of trade and had an effect on prices, this
difference does not entirely account for the different prices at the
different levels of trade. NTN asserts that the statute expresses a
preference for the profit calculation to be done as specifically as
possible with respect to sales in the appropriate markets of the
subject merchandise or the narrowest category of merchandise which
includes the subject merchandise. Therefore, NTN argues the Department
should calculate CEP profit on a level-of-trade basis which would
result in more accurate margins since it would better account for price
differences at the various levels of trade.
Torrington argues that the statute specifies that the Department is
to calculate CEP profit on all sales of subject merchandise without
regard to level of trade.
Department's Position: Neither the statute nor the SAA require us
to calculate CEP profit on bases more specific than the subject
merchandise as a whole. Indeed, while we cannot at this time rule out
the possibility that the facts of a particular case may require
division of CEP profit, the statute and SAA, by referring to ``the''
profit, ``total actual profit,'' and ``total expenses'' imply that we
should prefer calculating a single profit figure. NTN's suggested
approach would also add a layer of complexity to an already complicated
exercise with no guarantee that the result will provide any increase in
accuracy. We need not undertake such a calculation (see Daewoo
Electronics v. International Union, 6 F.3d 1511, 1518-19 (CAFC 1993)).
Finally, subdivision of the CEP-profit calculation would be more
susceptible to manipulation. Congress has specifically warned us to be
wary of such manipulation of the profit allocation (see S. Rep. 103-
412, 103d Cong., 2d Sess at 66-67).
Comment 6: Torrington argues that the Department should deduct from
CEP any credit provided by the foreign seller to its U.S. subsidiary.
Torrington asserts that credit is always a direct expense and that this
is an expense that the seller pays on behalf of the buyer in CEP
transactions.
NSK and NSK/RHP assert that imputed costs for home market
activities cannot lawfully be deducted from CEP. Koyo argues that
deducting expenses it incurred not in selling to the unaffiliated
customer in the United States, but rather in its transactions with its
U.S. affiliate, is contrary to the statute. Koyo argues further that to
accept Torrington's argument would be to double-count the inventory
carrying cost of the merchandise. The FAG companies argue that there is
no statutory authority to deduct export credit expenses incurred in the
home market from CEP. The SKF companies note that such a credit
expense, if calculated, could never constitute a direct selling
expense, as it is totally
[[Page 2126]]
unrelated to the sale to the first unrelated customer.
Department's Position: We do not consider credit expenses incurred
between a foreign producer and its U.S. affiliate to be expenses
associated with economic activities in the United States (see our
responses to Comments 1 and 2). Therefore, we have not deducted them
from CEP.
Comment 7: Torrington asserts that CEP profit is understated where
the Department excused particular respondents from answering the
further-manufacturing section of the questionnaire, because the
Department did not deduct profits on U.S. value-added operations when
calculating CEP. While Torrington acknowledges that section 772(e) of
the Tariff Act allows the Department to consider non-U.S.-value-added
sales in determining CEPs for value-added sales, Torrington argues that
the statute merely provides that the Department may use other
transactions if it determines such use is appropriate. Torrington
asserts that this does not authorize the Department to disregard the
value-added profit. Torrington argues further that the specific
language of 772(d)(3) of the Tariff Act does not yield to the general
methodology allowed in section 772(e). When one reads the provisions,
in pari materia, Torrington claims that it is clear that sales used as
proxies must be adjusted for value-added profit in order to implement
the intention of the statute. Torrington concludes that the Department
must calculate appropriate profit amounts on the basis of ratios of
U.S. value added to total cost of production of the bearing in question
and deduct that amount in its final calculations. If the appropriate
data are not on the record, then Torrington concludes that the
Department must apply adverse facts available.
Koyo argues that the Department is not disregarding profit on
further-processed merchandise but is actually assuming that the profit
percentage earned (like the expenses incurred) on further-processed
merchandise was consistent with that earned (or incurred) on non-
further-processed merchandise. Moreover, Koyo asserts, there is no
evidence in the record to suggest that this is an unreasonable
assumption, and there is no question that the Department has ample
authority under section 772(e) to support its decision to apply the
margins calculated on non-further-processed sales to further-processed
sales.
The SKF companies argue that Torrington is attempting to have the
Department eviscerate 772(e) by suggesting a CEP-profit deduction that
would ``back-door'' the Department into requiring respondents to report
full cost data pertaining to all sales of further-manufactured
merchandise. The SKF companies also argue that Torrington's
interpretation of the law is incorrect and that nothing in section
772(d)(3) requires profit to be deducted for sales subject to the
simplified reporting provisions of 772(e). SKF asserts that the
opposite is true in that 772(d)(3), by referencing (d)(2), plainly
exempts sales eligible for simplified reporting from the CEP profit
deduction. The SKF companies explain that the statute requires that CEP
be reduced by, inter alia, ``the cost of any further manufacture or
assembly (including additional material and labor), except in
circumstances described in subsection (e) [(the special rule for
simplified reporting)] * * *'' (citing section 772(d)(2) of the Tariff
Act).
The FAG companies argue that to adopt Torrington's in pari materia
reading of the statute would render 772 (e) completely meaningless. The
FAG companies assert that waiving full further-processing reporting of
sales and costs while, at the same time, requiring full further-
processing reporting so that a value-added profit could be calculated
would render the waiver subsection entirely meaningless and re-encumber
the Department with burdens Congress explicitly intended to alleviate.
NSK and NSK/RHP argue that further-processing information is
irrelevant to CEP-profit calculations in that the Department is not
establishing NV and CEP for further-processed merchandise which has had
substantial value added in the United States.
Department's Position: Section 772(e) of the statute allows us to
determine the CEP of further-processed subject merchandise in a manner
that does not require the calculation and subtraction of U.S. value
added if the U.S. value added is likely to exceed substantially the
value of the imported merchandise (this procedure is also referred to
in the statute as the ``special rule''). In implementing this special
rule for certain respondents, we determined that it was appropriate to
use an alternative method to calculate CEP for the transactions
involving substantial value-added in the United States (in such
situations we determined dumping margins for the sales in question on
the basis of weighted-average dumping margins found on sales of
identical or other subject merchandise sold to unaffiliated customers).
Our waiving of the full reporting requirements of the further-
processing section of our questionnaire was, in effect, a decision not
to base CEP on any data relating to these transactions, including
expense and profit data. By using the sales of other subject
merchandise sold in the United States as a proxy or surrogate for the
further-processed transactions, we were making an assumption that the
expense and profit percentages incurred on the non-further-processed
transactions were representative of the expense and profit percentages
incurred on further-processed transactions. In other words, while a
greater absolute amount of expenses may be incurred in further
processing, and a commensurately greater profit earned, there is no
reason to believe that when the expenses and profits are deducted,
there is any difference between the value of further-processed and non-
further-processed merchandise. There is no evidence that the value of
imported merchandise varies depending on whether it will be further-
processed or not. Therefore, there is no record evidence suggesting
that our assumption was erroneous and that profits for the transactions
in question were understated.
Furthermore, we disagree with Torrington's interpretation of the
statute. The SAA in discussing the special rule at 826 indicates that
the purpose of the new rule is to save the Department the considerable
effort of measuring the U.S. value added precisely. Requiring the
Department to gather and analyze this data for the purpose of a profit
calculation for these transactions would defeat the purpose of this
provision.
Comment 8: FAG Italy and FAG Germany argue that the CEP selling
expense total to which the Department applied the CEP-profit ratio
improperly includes credit expense. Respondents maintain that the
Department's calculation excludes credit expenses from the numerator
and denominator of the CEP-profit ratio, but that the U.S. selling
expense to which the Department applied this ratio includes credit
expenses. Respondents contend that this improperly skews the
calculation of total CEP profit. FAG Germany suggests that the
Department correct this error by excluding credit from the U.S. selling
expenses or by including credit expenses in the denominator of the CEP-
profit ratio.
Torrington agrees in part with respondents. Torrington requests
that the Department include credit expenses in the denominator of the
CEP-profit ratio rather than exclude them from the U.S. selling
expense.
Department's Position: We disagree with respondents and Torrington.
Sections 772(f)(1) and 772(f)(2)(D) of the Tariff Act state that the
per-unit profit
[[Page 2127]]
amount shall be an amount determined by multiplying the total actual
profit by the applicable percentage (ratio of total U.S. expenses to
total expenses) and that the total actual profit means the total profit
earned by the foreign producer, exporter, and affiliated parties. In
accordance with the statute, we base the calculation of the total
actual profit used in calculating the per-unit profit amount for CEP
sales on actual revenues and expenses recognized by the company. In
calculating the per-unit cost of the U.S. sales, we have included net
interest expense. Therefore, we do not need to include imputed interest
expenses in the ``total actual profit'' calculation since we have
already accounted for actual interest in computing this amount under
section 772(f)(1).
When we allocated a portion of the actual profit to each CEP sale,
we have included imputed credit and inventory carrying costs as part of
the total U.S. expense allocation factor. This methodology is
consistent with section 772(f)(1) of the statute which defines ``total
United States Expense'' as the total expenses described under section
772(d)(1) and (2). Such expenses include both imputed credit and
inventory carrying costs. See Certain Stainless Wire Rods from France,
61 FR 47874, 47882 (September 11, 1996).
12. Programming
FAG Germany, FAG Italy, INA, Koyo, NSK, NSK/RHP, NTN Japan, NTN
Germany, SKF Italy, SKF Germany, SKF France, SNR France, and Torrington
commented on alleged errors in the Department's computer programs.
Where all parties and the Department agreed with a programming-error
allegation, we made the necessary changes to correct the error. Our
final results analysis memoranda describe the programming errors and
any changes we made to correct the problems. The following comments
address allegations of programming-errors that are in dispute.
Comment 1: FAG Italy and FAG Germany claim that, in calculating the
net unit price it used as NV, the Department neglected to deduct HM
credit expenses. FAG Italy requests that in the calculation of net unit
price for the final results the Department include credit expenses in
the pool of direct selling expenses that it deducts from the HM unit
price and, ultimately, from NV.
Torrington agrees that the Department should adjust FAG Germany's
and FAG Italy's NV for credit expenses. However, Torrington contends
that the Department should not treat FAG Italy's credit expenses as
direct because the credit periods the company used to calculate the
adjustment were not transaction-specific. Torrington maintains that, if
the Department makes the adjustments FAG Germany and FAG Italy request,
it must exclude credit expenses from the calculation of ISEs to avoid
double-counting.
Department's Position: We calculate net unit price in two sections
of our analysis. For the preliminary results, we neglected to deduct HM
credit expenses from the net unit prices we used to determine whether
respondents'' sales to related parties were at arm's-length prices.
This was a clerical error, and we have made this deduction for the
final results. However, when we calculated net unit price for NV
purposes in the preliminary results we did deduct credit expenses;
therefore, changing the NV as respondents request is not necessary.
We disagree with Torrington that we should not treat FAG Italy's HM
credit expenses as a direct expense. FAG Italy's calculation of a
customer-specific average credit period instead of a transaction-
specific credit period is reasonable given that, as confirmed by the
Department at verification, the latter information is not available in
FAG Italy's accounting records. Through verification we found that FAG
Italy's credit-period calculation methodology is not unreasonably
distortive. Regarding Torrington's suggestion that we exclude credit
expenses from FAG Germany's and FAG Italy's calculations of ISEs to
avoid double-counting, we checked our calculations to ensure that we
did not include credit expenses in the calculation of ISEs.
Comment 2: FAG Italy, FAG Germany, and NSK maintain that the
Department made a clerical error by not including manufacturer codes
when sorting and defining the U.S. and HM sales and cost databases.
Respondents contend that the Department must include the manufacturer
codes in order to calculate NV in accordance with the statutory
definition of foreign like product. In support, respondents cite
section 773(a)(1)(B)(i) of the Tariff Act, the reference for NV, and
section 771(16) of the Tariff Act, the statutory definition of foreign
like product.
Regarding FAG Italy, Torrington claims that the Department's
analysis is in accordance with the statute and, therefore, there is no
clerical error. In support of this argument, Torrington notes that FAG
Italy reported that it has a single manufacturing plant. Torrington
claims that FAG Italy has neither argued nor demonstrated that
unaffiliated manufacturers produced the subject merchandise, a
situation that would require the consideration of manufacturer codes in
the calculations. Torrington states that it cannot determine from FAG
Germany's response whether it reported products manufactured by other
producers.
Department's Position: We agree with respondents and have
considered manufacturer codes when establishing U.S. and HM sales and
cost databases for use in our analysis. Not using manufacturer codes in
the preliminary analysis was an inadvertent error. Thus, for the final
results we have calculated NV in accordance with section
773(a)(1)(B)(i) of the Tariff Act and the statutory definition of
foreign like product (see section 771(16) of the Tariff Act).
We disagree with Torrington's contention that we should not change
the analysis for FAG Italy because the company reported having a single
manufacturing plant. While FAG Italy reported having a single
manufacturing plant, the company also reported that it purchased some
bearings from unaffiliated manufacturers which it sold to the United
States. Therefore, we included the manufacturer codes in our analysis.
Comment 3: FAG Germany argues that the Department's decision to
rely on CV when the model the Department selected as most comparable
fails the cost test leads to inaccurate and distorted results. FAG
Germany argues that the Department should correct this clerical error
for the final results so that NV is based on a family match when sales
of an identical match are disregarded as below cost rather than CV.
Torrington supports FAG Germany's suggested revision.
Department's Position: We disagree with the revision FAG Germany
and Torrington suggest. For the reasons described in response to
comment 2 of section 6.A. above, our reliance on CV when the model we
selected as most comparable fails the cost test is a methodological
decision and not a clerical error. Still, the parties are correct in
suggesting that the mechanics of our concordance did not function
properly. This was the result of an error in how we defined the U.S.
and HM periods, and we have corrected it for the final results.
Comment 4: Koyo argues that the Department incorrectly used the COM
of bearings produced in-house instead of the weighted-average COM based
on both the quantities produced in-house and purchased in calculating
COP and CV. Koyo explains that this results in no COM or CV values for
purchased bearings in the COM calculations.
[[Page 2128]]
Torrington agrees with Koyo that the Department should not use the
COM of bearings produced in-house for those particular models that Koyo
only purchased and did not produce. However, Torrington argues that the
use of a weighted-average COM, as Koyo suggests, is only appropriate
where Koyo has purchased the bearing from an unaffiliated party.
Torrington contends that, for purchases from affiliated suppliers, the
Department should use the highest of either the reported transfer price
or the COP of the affiliated supplier.
Department's Position: We agree with Koyo and have corrected this
clerical error for these final results. Koyo explained in its cost
questionnaire response that it has taken into consideration the
difference between transfer price and COP of the affiliated-party
inputs in the calculation of the weighted-average variable COM for COP
purposes and weighted-average total COM for CV.
Comment 5: NTN Germany contends that the Department made a clerical
error in the model-match portion of its preliminary analysis. NTN
Germany asserts that this error resulted in the Department not matching
sales at the same or closest level of trade.
Department's Position: We disagree with NTN Germany. The model-
match portion of our analysis does not use level of trade as part of
the criteria for selecting the best foreign like product because level
of trade is not a criterion under section 771(16) of the Tariff Act.
After selecting the most comparable product match according to the
statute, we attempt to find contemporaneous sales of that product at
the same level of trade, if possible. For a detailed explanation of our
level-of-trade analysis, see the introduction to Section 5 above.
Comment 6: SNR contends that the Department's analysis double-
counts HM quantity adjustments. Torrington concurs with SNR regarding
this error.
Department Position: We disagree with SNR and Torrington. While we
make an adjustment to HM quantities in two parts of our analysis, i.e.,
once in connection with the arm's-length test and a second time in
calculating NV, this does not result in double-counting because these
portions of our analysis are independent of one another.
13. Duty Absorption and Reimbursement of Dumping Duties
Comment 1: Torrington argues that the Department should deduct
dumping duties from CEP as part of ``all charges and expenses incident
to bringing subject merchandise from the place of shipment in the
exporting country to the place of delivery in the U.S.,'' citing
section 772(c)(2)(A) of the Tariff Act. Petitioner asserts that, if the
Department does not deduct these duties, the law does not have its
remedial effect. Torrington maintains that dumping duties are ``special
duties'' that are included in the definition of ``import duties'' in
the contemplation of U.S. Customs law. Torrington believes that
deducting dumping duties from CEP double-counts those duties only in
situations where the importer does not absorb the duties on behalf of
the unaffiliated buyer. Petitioner cites to regulations for adjustment
to price in European Community law, which permit the deduction of
dumping duties paid to an importer by any party associated with that
importer. Petitioner also contends that deducting dumping duties is not
prohibited by the CIT's decision in Federal Mogul I (at 856), since
that decision dealt with the deduction of cash deposits, which are a
reflection of past behavior rather than current behavior. Petitioner
suggests that calculating a margin without regard to dumping duties
and, if there is a positive margin, then making an additional deduction
for the duties is consistent with the CIT's decision and section 772(c)
of the Tariff Act.
Koyo and SNR argue that the Department lacks statutory authority to
treat antidumping duties as a cost. Koyo refers to the SAA to
underscore that the law regarding duty absorption ``is not intended to
provide for the treatment of duties as a cost,'' citing the SAA at 885.
Respondent contends that Torrington's method for treating duties as an
expense would incumber respondents with an expense that bears no
relation to their pricing policies during the POR as respondents would
be unable to anticipate the rate at which entries would finally be
liquidated. In addition, Koyo states that Torrington's suggestion is
contrary to the remedial purpose of the law.
NTN and SKF point out that nothing in the URAA indicates a
statutory change in the treatment of antidumping duties. SKF notes that
section 772(c)(2)(A) refers to duties ``incident to bringing subject
merchandise * * * to the place of delivery in the U.S.'' and opines
that dumping duties do not fall under this definition since liability
for the dumping duties arises from sales of the merchandise in the
United States. INA counters that U.S. Customs practice is not germane
to interpretation of the antidumping duty statute, citing American NTN
Bearing Mfg. Corp. v. United States, 739 F. Supp. 1555, 1565 (CIT
1990). All five respondents refer to the Department's consistent
practice in AFBs I, AFBs II, and AFBS III of not treating antidumping
duties as a cost and note that the CIT has upheld the Department's
policy, citing Federal Mogul.
Department's Position: We disagree with Torrington. The wording of
section 772(c)(2)(A) did not change under the URAA. The Department has
consistently interpreted the provision to mean that antidumping duties
are not eligible for deduction from the price of the imported product
in that they would result in double-counting (AFBs IV at 10900, 10907;
Certain Corrosion-Resistant Carbon Steel Flat Products from Korea, 61
FR 18547; Certain Hot-Rolled Lead and Bismuth Carbon Steel Products
from the United Kingdom, 60 FR 44009, 44010). Likewise, section
751(a)(4) does not require that duties ``absorbed'' by an importer be
deducted from CEP, only that they be considered in a review of the
likelihood of continuation of dumping. We maintain our position stated
in AFBs V, at 66519, that we do not consider antidumping duties to be
themselves a selling expense, similar to ordinary customs duties,
movement expenses, or credit terms, which we should deduct from CEP as
a selling cost.
Comment 2: Torrington believes that, if the Department declines to
deduct dumping duties from CEP, it should apply the reimbursement
regulation to merchandise with transfer prices below the COP whenever
it finds dumping margins on that merchandise. Petitioner contends that
below-cost transfer prices constitute an indirect transfer of funds
relieving importers from having to raise resale prices to finance
assessment of antidumping duties. Petitioner believes that the
Department's decision in Color Television Receivers for Korea, 61 FR
4408, 4411 (February 6, 1996), that the reimbursement regulation
applies in exporter's-sales price situations, sanctions the adoption of
such a policy for CEP transactions under the new law. Petitioner also
argues that, when Congress enacted the URAA, it approved the
reimbursement regulation and expressed its wish that the concept be
extended to reimbursements of countervailing duties.
Koyo counters that the Department's authority to deduct reimbursed
duties is the same as the authority to deduct rebates or discounts, in
that it applies to a sale to the first unaffiliated purchaser in the
United States, not to the transfer from the exporter to the affiliated
importer. Thus, Koyo interprets the reimbursement regulation as
applying only to sales described in section 772 of the Tariff Act.
[[Page 2129]]
INA, SKF, and SNR contend that URAA did not change the substance or
intent of the reimbursement regulation. Respondents believe that the
Department's reliance on explicit and specific factual evidence that an
affiliated importer has been directly reimbursed for dumping duties
should be maintained. SNR states that Torrington's allegations of
below-cost transfer prices do not establish a specific and direct link
between transfer pricing and reimbursement.
Department's Position: We disagree with Torrington. Although we
agree that reimbursement may be applicable in CEP situations, we also
hold that there must be evidence that the parent has reimbursed its
subsidiary for estimated deposits or assessed duties. See Color
Television Receivers from the Republic of Korea, 61 FR 4408, 4410-11
(February 6, 1996), Brass Sheet and Strip from the Netherlands, 57 FR
9534, 9537 (March 19, 1992), Brass Sheet and Strip from Sweden, 57 FR
2706, 2708 (January 23, 1992), and Brass Sheet and Strip from Korea, 54
FR 33257, 33258 (August 14, 1989). In this case, Torrington has
presented no evidence of reimbursement. The presence of both below-cost
transfer prices and actual dumping margins do not, in and of
themselves, constitute evidence that reimbursement is taking place. See
AFBs III (39736), AFBs IV (10906-07), and AFBs V (66519).
14. Miscellaneous Issues
A. U.S. Sales Completeness. Comment: Torrington asserts that the
Department should include all repair merchandise bearings SNR imported
into the United States in the U.S. database. Torrington cites sections
751 and 753 of the Tariff Act, which state that all merchandise covered
by an antidumping duty order must be appraised for antidumping duties,
and asserts that there is no exception for repair merchandise. As
support, Torrington cites to a scope ruling the Department issued in
response to a request by Wafios Machinery Corporation, July 22, 1991.
Torrington suggests that, if SNR cannot assign a price to those
bearings, the Department should treat them as zero-priced sales and
assess duties accordingly.
SNR states that the Department calculated margins for imported
parts used in repair jobs properly. SNR asserts that it reported all
U.S. sales of scope product as requested by the questionnaire. SNR does
not disagree with the scope ruling Torrington cites, but contends that
the ruling relates to the issue of whether bearings imported for use as
spare-parts replacement bearings are subject to the antidumping order.
SNR comments further that it did not sell the parts which were used to
repair bearings sold by other manufacturers. Instead, SNR explains, it
charged an inspection-and-repair fee. SNR states the Department could
apply antidumping duties to these parts using SNR's weighted-average
margin. However, SNR contends that it is not possible to calculate
individual margins for these parts. SNR cites section 772(e) of the
Tariff Act, which allows the Department to calculate margins using the
weighted-average dumping margin on sales of complete bearings to assess
dumping duties on importations such as repair parts.
Department's Position: We agree that, although these bearings are
subject to the antidumping orders on AFBs, it is not possible to
calculate export price or CEP because SNR does not sell the bearings
themselves. Rather, SNR uses the bearings in the context of performing
a service for which SNR charges a fee. It is not possible to discern,
from this fee, an amount which would be appropriate to attribute to the
sale of the bearings. Therefore, we will liquidate the entries of this
merchandise at the weighted-average rate we have calculated for SNR's
other sales.
B. Pre-Final Reviews. Comment: Asahi requests that, if the
Department makes any methodological changes from the preliminary
results other than those commented on in respondent's brief, the
Department provide the company with an opportunity to comment on any
such changes before issuance of the final results of review. In
addition, Asahi requests disclosure of the Department's calculations
before issuance of the final results so that it can review the
Department's calculations for changes and comment on any clerical or
ministerial errors.
Department's Position: As noted in previous reviews (see AFBs III
(at 39786), AFBs IV (at 10957) and AFBs V at 66520), in the interest of
issuing the final results in a timely manner, the Department cannot
implement the steps Asahi requests. Since the current reviews are
governed by statutory deadlines, Asahi's requests are now even less
feasible than previously. Moreover, the regulations provide a procedure
for correcting ministerial errors in the final results of review. See
19 CFR 353.28.
C. Certification of Conformance To Past Practice. Comment:
Torrington argues that the Department should require respondents to
affirm that their responses conform to prior Departmental
determinations for reviews of these orders. Torrington states that the
Department or domestic interests should not be responsible for
detecting a respondent's unilateral departure from the Department's
rulings in prior reviews. Torrington suggests, at a minimum, that
respondents identify where they have continued to use any methodology
that the Department rejected in a prior review, accompanied by a
statement justifying the departure from established practice.
Torrington proposes that, in such cases, the Department require
respondents to supply data both in the format established by past
practice and the manner that respondents hope will be acceptable to the
Department despite the prior practice. Torrington suggests that,
without such identification, the emergence of a consistent Departmental
practice is dependent on the continued vigilance of the Department in
analyzing responses and in the availability of funding for repeated
verification. Torrington cites examples of respondents' unidentified
use of reporting methodologies that do not conform to Department
practice and which the Department has previously rejected.
INA argues that the Department should reject Torrington's proposal
that respondents be required to state that their questionnaire
responses conform to prior rulings. INA asserts that Torrington's
proposal merely imposes an additional make-work burden upon
respondents. INA states that respondents respond to the Department's
questionnaire in accordance with the antidumping law, the Department's
regulations, and the questionnaire instructions. INA also states that
the statute and regulations do not contemplate anything else.
NSK says that it reports the information requested by the
Department, and it is the Department, as the administering authority,
which determines what to do with the reported information. NSK contends
that Torrington's request that respondents certify compliance with past
Department rulings must be rejected as needless information and an
unwarranted intrusion by the petitioner into the administration of the
antidumping law.
FAG Germany and FAG Italy contend that they have completely
conformed to all prior applicable Departmental rulings and have never
been accused or found to be deviating from applicable Departmental
policy or precedent. FAG Germany and FAG Italy also assert that
Torrington has not cited any examples underlying Torrington's
allegations. FAG Germany and FAG Italy argue further that the
Department has long
[[Page 2130]]
adhered to the proposition that each administrative review is a
separate and distinct proceeding and that, while Department practice is
helpful and instructive in succeeding reviews, it is not binding.
Finally, FAG Germany and FAG Italy contend that Torrington's request
would place a burden on respondents by making them recite the history
of each adjustment permitted or rejected over all previous reviews. FAG
Italy and FAG Germany state that such a burden would be overwhelming
and unnecessary.
Department's Position: We disagree with Torrington that we should
require that all respondents conform their submissions, their
allocations, and their methodology to our most recent prior
determinations and rulings. We also disagree with Torrington that
respondents should identify where they have continued to use any
methodology that we rejected in a prior review and justify the
departure from established practice. Each administrative review is a
separate reviewable segment of the proceeding involving different
sales, adjustments, and underlying facts. What transpired in previous
reviews is not binding precedent in later reviews, and parties are
entitled, at the risk of the Department's determining otherwise, to
argue against a prior Department determination. As a practical matter,
methodologies the Department accepts in one review are generally used
by respondents in subsequent reviews and methodologies the Department
rejects are not perpetuated in later reviews. The Department, however,
may reconsider its position on an issue during the course of the
proceeding in light of facts and arguments presented by the parties.
D. Country of Origin. Comment 1: Torrington claims that SKF
Germany did not disclose its methodology for determining country of
origin after the Department asked it in its supplemental questionnaire
to do so. Torrington claims that SKF Germany asserted in its
supplemental questionnaire response that its methodology had not
changed over the past reviews, but that it did not indicate the
product's essential characteristics for purposes of determining country
of origin. In addition, Torrington contends that SKF Germany did not
indicate what manufacturing steps convey origin, and SKF Germany did
not indicate the methodology which it has consistently applied.
Torrington argues further that SKF Germany does not describe how it
arrived at its origin determination. Torrington asserts that if the
company cannot clear up these questions the Department should conclude
that it is unable to determine whether SKF Germany has reported all
sales of German bearings in its HM and U.S. sales listings and apply
facts available. Torrington suggests that an appropriate facts
available solution would be to apply the highest margin found for any
SKF company in this review.
SKF Germany contends that, as it stated in its questionnaire and
supplemental questionnaire responses, it considers the complexity and
extent of the manufacturing processes involved and the origin of each
bearing's major components when identifying country of origin for its
bearings. SKF Germany claims that the accurate determination of origin
is important to the proper reporting of its sales in an administrative
review and in order to comply with European and United States marking
and other requirements. SKF Germany contends further that in multiple
prior verifications the Department has confirmed the accuracy and
completeness of SKF Germany's sales reporting. In addition, SKF Germany
claims that, in this review, the Department also affirmed the accuracy
of its sales reporting, including a description of the specific steps
taken at verification to confirm SKF's origin determinations. SKF
Germany contends that, as the Department verified, it reported sales of
all German origin bearings.
Department's Position: We agree with SKF Germany. We are satisfied
that SKF Germany reported all of its German-origin bearings and did not
report sales of non-German origin bearings in this review. We verified,
in this review, SKF Germany's methodology and were able to trace the
procedure that SKF Germany uses in determining the country of origin
for its bearings. We did not find any discrepancies in SKF Germany's
reporting methodology in our examination of invoices, inventory
records, and sales registers.
Comment 2: Torrington argues that the Department should confirm
that NSK-RHP has determined the country of origin properly for all
reported bearings. Torrington asserts that NSK-RHP did not answer fully
a question that the Department asked in its supplemental questionnaire
on the country of origin of bearings NSK-RHP sold in or to the U.S.
market. Torrington contends that NSK-RHP did not clarify how it
determines whether a bearing is a U.K.-produced (versus a Japanese-
produced) bearing in its supplemental response. For these reasons,
Torrington requests that Department consider applying facts available
for these final results. Torrington also suggests that an appropriate
facts-available solution would be to apply the highest margin found for
any NSK-related company for this review period.
NSK-RHP argues that it only sold RHP-brand bearings in, or to, the
United States during the POR. Further, NSK-RHP asserts that almost all
of these bearings were produced at factories owned and controlled by
RHP Bearings, Ltd. NSK-RHP maintains that the few remaining RHP-brand
bearings manufactured by NSK Bearings Europe were sold in the United
States during the sample weeks. NSK-RHP argues that NSK-brand bearings
manufactured by NSK Bearings Europe were not sold in, or to, the United
States during the review period. Moreover, NSK-RHP argues that it has
already reported the degree to which affiliated companies provided raw
materials or components either to RHP Bearings, NSK Bearings Europe, or
both, during the POR. Therefore, NSK-RHP asserts, an examination of
this material demonstrates that bearings manufactured in Japan were not
reported as U.K. merchandise.
Department's Position: We disagree with Torrington. We addressed
the question in our supplemental questionnaire in relation to NSK-RHP's
further-manufactured sales. NSK-RHP reported these sales as being of
U.K. origin. There is nothing on the record that suggests these sales
are not of U.K. origin and Torrington has not provided any evidence to
suggest otherwise. Furthermore, we have examined NSK-RHP's methodology
for reporting its bearings and are satisfied that NSK-RHP properly
determined the country of origin of all reported bearings.
[FR Doc. 97-923 Filed 1-14-97; 8:45 am]
BILLING CODE 3510-DS-P