[Federal Register Volume 63, Number 10 (Thursday, January 15, 1998)]
[Notices]
[Pages 2558-2585]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-944]
[[Page 2557]]
_______________________________________________________________________
Part III
Department of Commerce
_______________________________________________________________________
International Trade Administration
_______________________________________________________________________
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished From
Japan, etc.; Notice
Federal Register / Vol. 63, No. 10 / Thursday, January 15, 1998 /
Notices
[[Page 2558]]
DEPARTMENT OF COMMERCE
International Trade Administration
[A-588-054, A-588-604]
Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or
Less in Outside Diameter, and Components Thereof, From Japan; Final
Results of Antidumping Duty Administrative Reviews
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Final Results of Administrative Reviews.
-----------------------------------------------------------------------
SUMMARY: On September 9, 1997, the Department of Commerce (the
Department) published the preliminary results of the 1995-96
administrative reviews of the antidumping duty order on tapered roller
bearings (TRBs) and parts thereof, finished and unfinished, from Japan
(A-588-604), and the antidumping finding on TRBs, four inches or less
in outside diameter, and components thereof, from Japan (A-588-054)
(see Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, from Japan, and Tapered Roller Bearings, Four Inches or
Less in Outside Diameter, and Components Thereof, from Japan;
Preliminary Results of Antidumping Duty Administrative Reviews, 62 FR
47452 (September 9, 1997) (TRB Prelim)). The review of the A-588-054
finding covers two manufacturers/exporters and two resellers/exporters
of the subject merchandise to the United States during the period
October 1, 1995, through September 30, 1996. The review of the A-588-
604 order covers three manufacturers/exporters, two resellers/
exporters, and the period October 1, 1995, through September 30, 1996.
We gave interested parties an opportunity to comment on our preliminary
results. Based upon our analysis of the comments received we have
changed the results from those presented in our preliminary results of
review.
EFFECTIVE DATE: January 15, 1998.
FOR FURTHER INFORMATION CONTACT: Charles Ranado, Stephanie Arthur, or
Valerie Owenby, Office of AD/CVD Enforcement III, Office 8, Import
Administration, International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C.
20230, telephone: (202) 482-3518, 6312, or 0172, respectively.
SUPPLEMENTARY INFORMATION:
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are in
reference to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations are to the Department's regulations, 19 CFR
part 353 (1997).
Background
On August 18, 1976, the Treasury Department published in the
Federal Register (41 FR 34974) the antidumping finding on TRBs from
Japan, and on October 6, 1987, the Department published the antidumping
duty order on TRBs from Japan (52 FR 37352). On October 1, 1996 (61 FR
51529), the Department published the notice of ``Opportunity to Request
an Administrative Review'' for both TRB cases. The petitioner, the
Timken Company (Timken), and one respondent requested administrative
reviews. We initiated the A-588-054 and A-588-604 administrative
reviews for the period October 1, 1995, through September 30, 1996, on
November 15, 1996 (61 FR 58513). On September 9, 1997, we published in
the Federal Register the preliminary results of the 1995-96
administrative reviews of the antidumping duty order and finding on
TRBs from Japan (see TRB Prelim at 47542). We held a hearing for the
1995-96 administrative reviews of both the A-588-054 and A-588-604 TRBs
cases on October 30, 1997. The Department has now completed these
reviews in accordance with section 751 of the Act, as amended.
Scope of the Review
Imports covered by the A-588-054 finding are sales or entries of
TRBs, four inches or less in outside diameter when assembled, including
inner race or cone assemblies and outer races or cups, sold either as a
unit or separately. This merchandise is classified under the Harmonized
Tariff Schedule (HTS) item numbers 8482.20.00 and 8482.99.30. Imports
covered by the A-588-604 order include TRBs and parts thereof, finished
and unfinished, which are flange, take-up cartridge, and hanger units
incorporating TRBs, and tapered roller housings (except pillow blocks)
incorporating tapered rollers, with or without spindles, whether or not
for automotive use. Products subject to the A-588-054 finding are not
included within the scope of this order, except for those manufactured
by NTN Corporation (NTN). This merchandise is currently classifiable
under HTS item numbers 8482.99.30, 8483.20.40, 8482.20.20, 8483.20.80,
8482.91.00, 8484.30.80, 8483.90.20, 8483.90.30, and 8483.90.60. These
HTS item numbers and those for the A-588-054 finding are provided for
convenience and Customs purposes. The written description remains
dispositive.
The A-588-054 reviews cover TRB sales by two TRB manufacturers/
exporters (Koyo Seiko Ltd. (Koyo) and NSK Ltd. (NSK)), and two
resellers/exporters (Fuji Heavy Industries (Fuji) and MC International
(MC)). The reviews of the A-588-604 case cover TRB sales by three
manufacturers/exporters (Koyo, NSK and NTN Corporation (NTN)), and two
resellers/exporters (Fuji and MC). Because Fuji and MC had no shipments
in the A-588-604 review, for the reasons explained in our notice of
preliminary results, we have not assigned a rate to these firms for
these final results (see TRB Prelim at 47453). The period of review
(POR) for both cases is October 1, 1995, through September 30, 1996.
Duty Absorption
On December 11, 1996, Timken requested that the Department
determine, with respect to all respondents, whether antidumping duties
had been absorbed during the POR. Section 751(a)(4) of the Act provides
for the Department, if requested, to determine during an administrative
review initiated two or four years after the publication of the order,
whether antidumping duties have been absorbed by a foreign producer or
exporter if the subject merchandise is sold in the United States
through an affiliated importer. The Department's interim regulations do
not address this provision of the Act.
For transition orders as defined in section 751(c)(6)(C) of the Act
(i.e., orders in effect as of January 1, 1995), section 351.213(j)(2)
of the Department's new antidumping regulations provide that the
Department will make a duty-absorption determination, if requested, for
any administrative review initiated in 1996 or 1998. See 62 FR 27394
(May 19, 1997). Because the finding and order on TRBs have been in
effect since 1976 and 1987, respectively, they are transition orders in
accordance with section 751(c)(6)(C) of the Act. The preamble to the
new antidumping regulations explains that reviews initiated in 1996
will be considered initiated in the second year and reviews initiated
in 1998 will be considered initiated in the fourth year (62 FR 27317,
May 19, 1997). This approach
[[Page 2559]]
ensures that interested parties will have the opportunity to request a
duty-absorption determination prior to the time for sunset review of
the order under section 751(c) of the Act on entries for which the
second and fourth years following an order have already passed. Since
these reviews were initiated in 1996, and a request was made for a
determination, we are making duty-absorption determinations as part of
these administrative reviews.
As indicated above, the statute provides for a determination on
duty absorption if the subject merchandise is sold in the United States
through an affiliated importer. In these cases, NTN, Koyo, NSK, and
Fuji sold through importers that are affiliated within the meaning of
section 751(a)(4) of the Act. We have determined that duty absorption
has occurred with respect to the following firms and with respect to
the following percentages of sales made through their U.S. affiliates:
------------------------------------------------------------------------
Percentage
of U.S.
affiliates'
Manufacturer/exporter/reseller sales with
dumping
margins
------------------------------------------------------------------------
For the A-588-054 Case:
Koyo Seiko............................................... 12.99
Fuji..................................................... 4.54
NSK...................................................... 13.30
For the A-588-604 Case:
Koyo Seiko............................................... 98.10
Fuji \1\
NSK...................................................... 51.78
NTN...................................................... 66.36
------------------------------------------------------------------------
\1\ No shipments or sales subject to this review.
In the case of Koyo, the firm did not respond to our request for
further-manufacturing information and we determined the dumping margins
for these further-manufactured sales on the basis of adverse facts
available. Lacking other information, we find duty absorption on all
such sales of further-processed TRBs (see Antifriction Bearings (Other
Than Tapered Roller Bearings) and Parts Thereof from France, et. al.;
Preliminary Results of Antidumping Administrative Review, 62 FR 31568
(June 10, 1997) (where we found duty absorption with respect to all
sales for which respondent provided no data in response to the
Department's questionnaire)).
With respect to other respondents with affiliated importers (NSK,
NTN, and Fuji), for which we did not apply adverse facts available, we
must presume that the duties will be absorbed for those sales which
were dumped. Where Koyo's margins were not determined on the basis of
adverse facts available (i.e., for non-further-manufactured sales), we
must presume that duties will be absorbed for those sales which were
dumped. Our duty-absorption presumptions can be rebutted with evidence
that the unaffiliated purchasers in the United States will pay the
ultimately assessed duty. After publication of our preliminary results,
we gave interested parties the opportunity to submit evidence that the
unaffiliated purchasers in the United States will pay the ultimately
assessed duties. However, we received no such evidence. Under these
circumstances, we find that antidumping duties have been absorbed by
Koyo, NTN, NSK, and Fuji on the percentages of U.S. sales indicated.
Specific arguments relating to duty absorption are discussed in the
``Miscellaneous'' section below.
Analysis of Comments Received
We received case briefs from Koyo, NSK, NTN, and Timken on October
16, 1997. We received rebuttal briefs from the same four parties, as
well as from Fuji, on October 23, 1997. The comments which were
contained in all of the case and rebuttal briefs we received are
addressed below in the following order:
1. Facts Available/Further Manufacturing
2. Adjustments to Normal Value
3. Adjustments to United States Price
4. Cost of Production and Constructed Value
5. Miscellaneous Comments Related to Duty Absorption, Level of Trade,
the Arm's-Length Test, and Sample Sales
6. Clerical Errors
1. Facts Available/Further Manufacturing
Comment 1: Koyo argues that the Department's application of adverse
facts available with respect to its sales of A-588-604 further-
manufactured TRBs was inappropriate and contrary to law for the
following reasons. First, Koyo states, the Department apparently
decided to require further-manufacturing data because there was an
insufficient quantity of sales of imported finished A-588-604 TRBs to
serve as a surrogate in accordance with section 773(e) (1) and (e)(2)
of the Act, the special rule provision for further-processed
merchandise. Koyo asserts that the Department presumably reached its
conclusion by comparing the entered and sales values of imported
finished over 4'' TRBs to the entered and sales values of over 4'' TRB
components which were further manufactured. However, Koyo contends, the
Department's comparison of over 4'' finished TRBs to over 4'' further-
manufactured TRBs was flawed because the division of products subject
to the TRB orders does not reflect commercial reality, but rather arose
from the manner in which Timken defined merchandise covered by the
petitions in the A-588-054 and A-588-604 TRB cases. Koyo further
argues, in support of its assertions that the division between the
orders is asymmetrical, that the over 4'' A-588-604 order covers
components of TRBs which are typically further processed into under 4''
bearings.
Second, Koyo contends that the statute does not grant the
Department discretion to decide whether or not to invoke section
772(e)(1) and (e)(2) of the Act. Rather, Koyo argues, the Department is
required to apply the special rule provided the respondent has
demonstrated that the value added in the United States is likely to
substantially exceed the value of the imported merchandise. Koyo
contends that, given that the Department determined in its preliminary
results that Koyo satisfied the ``substantially exceeds'' requirement,
the Department was compelled by the statute to apply the special rule
provision and determine the constructed export price (CEP) for A-588-
604 further-manufactured TRB sales using the price of either identical
or other subject merchandise or, if it determined that there was not a
sufficient quantity of sales using these two proxies, any other
``reasonable'' basis. Koyo argues that the Department cannot, as it did
in its preliminary results, simply reject the special rule in its
entirety simply because it determines there is an insufficient quantity
of sales of identical or other subject merchandise. Rather, contends
Koyo, the Department must calculate CEP using ``any other reasonable
basis,'' as directed by the statute.
Koyo proposes that, in light of the similarities of merchandise
subject to the A-588-054 and A-588-604 orders, instead of evaluating
whether the margins of finished over 4'' A-588-604 bearings were an
appropriate proxy for further-manufactured merchandise, the Department
should have relied on the margins of finished under 4'' A-588-054 TRBs
as a surrogate for those over 4'' components which were further
processed into under 4'' TRBs, and the margins of imported finished
over 4'' A-588-604 TRBs as a surrogate for those over 4'' components
which were further manufactured into over 4'' TRBs. In fact, Koyo
argues, not only is such an approach another reasonable basis, but it
adheres to the statutory preference for relying on the price of
``other'' or
[[Page 2560]]
``identical'' subject merchandise. Koyo maintains that while the
Department may be hesitant to use a margin from a different order or
finding (A-588-054) and apply it to further-manufactured products
subject to a different order (A-588-604), its concerns are not legally
relevant for the special rule provision. Koyo contends that the statute
contains no language suggesting that ``crossing orders'' would
constitute an unreasonable basis for comparison, and that the
Department's refusal to look beyond the confines of the over 4'' order
is not consistent with the statue. Koyo also adds that the Department's
failure to acknowledge the existence of the under 4'' finding cedes too
much control to petitioners who might be encouraged to write petitions
that create anomalous outcomes, as is the case, Koyo asserts, with
respect to the division between the two TRB orders.
Furthermore, Koyo argues, using the calculated margins for under
4'' finished TRBs as a proxy for that merchandise subject to the A-588-
604 order which was further manufactured is appropriate because of the
physical similarities of the merchandise. It does not matter, argues
Koyo, that each of these categories of merchandise is not subject to
the same order because, as indicated above, the asymmetric division of
the orders arose from historical happenstance. Koyo also asserts that,
if the Department were to adopt such an approach, there would be a
sufficient quantity of U.S. sales of imported finished A-588-054 TRBs
to serve as a proxy for further-manufactured A-588-604 TRBs.
Koyo also suggests that, as an alternative, the Department can
compare the value of finished bearings subject to both the A-588-054
finding and A-588-604 order to the value of further-manufactured
bearings subject to the A-588-604 order. This method would guarantee,
Koyo argues, a sufficient quantity of sales to serve as a proxy and
would be reasonable and appropriate. Having then determined a
sufficient quantity test, Koyo suggests, the Department should weight-
average the margins calculated for A-588-054 and A-588-604 finished
bearings and apply the result to the A-588-604 further-processed
components.
Like Koyo, NSK argues that the Department must, in accordance with
section 772(e) of the Act, apply the special rule for further-processed
merchandise once it has determined that the value added in the United
States is likely to substantially exceed the value of the imported
product. NSK maintains that this is the only statutory requirement for
the application of the special rule provision, and once this
requirement has been met, the Department is mandated by the statue to
apply the special rule for further-manufactured merchandise. NSK
contends that the determination of whether such sales are appropriate
or whether there is a sufficient quantity to provide a reasonable basis
for comparison relates only to the two proxies for calculating CEP set
forth in section 772(e)(1) and (e)(2) of the statute. NSK further
argues that if the Department determines that neither of these two
proxies can be used, it may calculate CEP on ``any other reasonable
basis.'' However, NSK argues, once it finds that certain merchandise
qualifies for the special rule under the condition set forth above, the
Department cannot calculate CEP using the section 772(d)(2) standard
methodology. Specifically, NSK maintains that reverting to this
methodology is contrary to the language of the statute and that this
method does not constitute another ``reasonable basis'' by which to
calculate CEP because section 772(d)(2) of the Act provides that CEP be
reduced by ``the cost of any further manufacture or assembly * * *
except in circumstances described in subsection (e) of this section.''
Therefore, NSK asserts, the Department cannot reduce CEP by the cost of
any further manufacturing within the realm of section 772(e). NSK
argues that the Statement of Administrative Action (SAA) at 826
supports its assertions that the Department cannot apply the standard
772(d)(2) methodology once the condition for the special rule has been
satisfied because it purposefully omits the standard methodology as an
alternative to the two surrogates identified in section 772(e)(1) and
(e)(2). In addition, NSK claims, the SAA makes every attempt to keep
section 772(e) simple and a resort to the standard methodology is
contrary to the intent of the special rule to reduce the burden of a
further-manufacturing analysis for the Department. Finally, NSK argues
that the Department's interpretation of section 772(e) is contrary to
the objective of establishing a ``bright-line standard'' which allows
the Department to inform respondents early during a review proceeding
whether or not they must supply detailed further-manufacturing
information. Because the Department reversed its decision regarding
Koyo's further manufacturing months after it initially concluded this
data would not be required, the Department, NSK argues, has defeated
its stated objective of informing respondents if it will require
further-processing data early in the review.
Timken responds that the Department's application of adverse facts
available with respect to Koyo's further-manufactured merchandise was
supported by the record and in accordance with the law. Timken argues
that the statute grants the Department broad discretion in the
implementation of the special rule, and asserts that the Department's
actions were consistent with the statute when it determined that Koyo's
A-588-604 non-further-manufactured TRBs were an inappropriate proxy for
Koyo's A-588-604 further-manufactured merchandise. Timken argues that
the Department's use of the standard section 772(d)(2) methodology to
calculate CEP for Koyo's further-manufactured sales constituted another
``reasonable basis,'' and that the information on the record did not
provide any other ``reasonable basis'' for determining margins for
further-manufactured sales.
Department's Position: We disagree with respondents. The statute at
section 772(e) provides that:
Where the subject merchandise is imported by a person affiliated
with the exporter or producer, and the value added in the United
States by the affiliated person is likely to exceed substantially
the value of the subject merchandise, the administering authority
shall determine the constructed export price for such merchandise by
using one of the following prices if there is a sufficient quantity
of sales to provide a reasonable basis for comparison and the
administering authority determines that the use of such sales is
appropriate:
(1) The price of identical subject merchandise sold by the
exporter or producer to an unaffiliated person;
(2) The price of other subject merchandise sold by the exporter
or producer to an unaffiliated person.
If there is not a sufficient quantity of sales to provide a
reasonable basis for comparison under paragraph (1) or (2), or the
administering authority determines that neither of the prices
described in such paragraphs is appropriate, then the constructed
export price may be determined on any other reasonable basis.
Koyo asserts that the Department, having determined that the value
added in the United States is likely to substantially exceed the value
of the imported merchandise, is required to apply the special rule
provision of the statute, and argues that the use of the word ``shall''
in the provision clearly demonstrates that the Department does not have
discretion as to when to invoke the special rule.
Koyo and NSK incorrectly assume that we rejected the provision
entirely. In addition, Koyo incorrectly argues that we imposed an
additional qualification
[[Page 2561]]
for the application of the special rule; namely, that we required Koyo
not only to demonstrate that the value added to its further-
manufactured subject merchandise substantially exceeded the value of
the subject merchandise as entered but also to demonstrate that there
was a sufficient quantity of its non-further-manufactured sales to
serve as a proxy for the calculation of CEP for its further-
manufactured merchandise. To the contrary, our decision to request
further-processing data from Koyo was made within the confines of and
according to the language of the special rule. The SAA provides that
the special rule provision will come into play when it is estimated
that the value added in the United States is substantially more than
half of the price charged to the first unaffiliated purchaser of the
finished merchandise (see SAA at 825-826).
After a determination that the value added is likely to
substantially exceed the value of the imported components, the statute
specifies that the use of the options identified in section 772 (e)(1)
and (e)(2) is contingent upon the existence of a sufficient quantity of
sales to provide a reasonable basis for comparison and that the use of
such sales is appropriate. In other words, even if the quantity of the
proxy sales is sufficient, we will reject their use unless we determine
that using them is appropriate.
In determining whether the use of either of the two proxy methods
is appropriate, the Department looks to the underlying purpose of the
special rule, which is to avoid imposing an unnecessary burden on the
Department, while still ensuring reasonably accurate results (see SAA
at 825-826). As part of this determination, we consider such factors as
whether their use may lead to inaccurate results. We believe that the
greater the proportion of further-manufactured to non-further-
manufactured merchandise, the greater the possibility of inaccurate
results. If there is a concern about accuracy, we must consider whether
an alternative method, especially the standard methodology, would be
unduly burdensome. The burden of applying the standard methodology to
calculate the CEP for further-manufactured merchandise may vary from
case to case depending on factors such as the nature of the further-
manufacturing process and the finished products. The accuracy gained by
applying the standard methodology may also vary significantly from case
to case, depending upon such factors as the amount of value added in
the United States and the proportion of U.S. sales which undergo
further processing. Where the burden of performing a further-
manufacturing analysis is high, we may determine that the potential
gains in accuracy do not outweigh the burden of applying the standard
section 772(d)(2) methodology and that the use of one of the statutory
alternatives set forth in 772 (e)(1) and (e)(2) is appropriate.
However, if the burden is relatively low and the proportion of further-
manufactured sales is sufficiently high to raise concerns about
accuracy, we may consider use of the statutory alternatives
inappropriate.
In the instant case, the record does not lead us to conclude that
the use of either of the two alternative methods described in section
772 (e)(1) and (e)(2) with respect to Koyo's further-manufactured
merchandise is appropriate. The record indicates that Koyo's U.S. sales
of further-manufactured subject merchandise represented a large portion
of its total U.S. sales of subject merchandise during the POR.
Therefore, the use of either of the proxy methods in this case--where
the proportion of further-manufactured sales is relatively high--would
have a relatively high potential for inaccuracy. In addition, as noted
in our preliminary results, the finished merchandise sold by Koyo to
the first unrelated U.S. customer was still in the same class or kind
as merchandise within the scope of the TRB order and finding (i.e.,
imported TRB components were processed into TRBs). As a result, the
calculation of the precise amount of cost of further manufacturing
would not be nearly as burdensome as it would be for Fuji, another
respondent who imported TRBs for incorporation in automobiles.
Furthermore, in prior reviews we have calculated margins for Koyo's
further-processed sales and have extensive experience with and
knowledge of Koyo's further-manufactured sales and the calculation of
the cost of further manufacturing in the United States with respect to
these sales. Therefore, in this case we have determined that for Koyo
the relatively small reduction of burden on the Department that would
result from resorting to either of the two statutory proxy methods
under the special rule is outweighed by the potential distortion and
losses in accuracy as a consequence of their use. Accordingly, we have
rejected the use of either of the two proxies as inappropriate and have
sought to calculate the CEP for Koyo's further manufactured sales using
another reasonable basis.
This determination, however, does not indicate that, because we
found the alternative methods in section 772 (e)(1) and (e)(2) to be
inappropriate, we have abandoned the special rule, as Koyo and NSK
suggest. For all respondents with further-manufactured merchandise, we
first evaluated whether the value added in the United States was likely
to substantially exceed the value of the imported components. We
determined that Fuji, NTN, and Koyo met the ``substantially exceeds''
qualification for implementation of the special rule. However, while we
have determined that the use of either of the two proxy methods is
appropriate for Fuji and NTN, we have found that for Koyo, resorting to
either of the alternatives set forth in the special rule provision is
not appropriate.
If we determine that the use of one of the two proxies set forth in
section 772 (e)(1) and (e)(2) is inappropriate, as explicitly directed
by the statute, we may use any other reasonable basis to calculate CEP
for further-manufactured sales. Here the statute again grants us
considerable latitude in determining precisely what constitutes ``any
other reasonable basis.'' The SAA at 825 indicates that one possible
method is basing the CEP of the further-processed merchandise on the
transfer price from the exporter or producer to the affiliated
importer. In general, however, if the two statutory alternatives cannot
be used, we should identify and use a method which not only satisfies
the overall purpose of the provision--the reduction of the burden on
the Department--but also furthers the goal of accuracy. A reasonable
alternative, then, may be our standard further-processing analysis if
its use is not unduly burdensome and if it sufficiently reduces the
potential for inaccuracy or distortion.
As explained in detail above, the record in this case indicates
that the use of the standard methodology for calculating CEP for Koyo's
further-manufactured sales is a reasonable method. Therefore, we
disagree with NSK that the standard methodology cannot serve as another
reasonable basis. Not only would its exclusion as another reasonable
basis effectively eliminate the Department's ability to use an accurate
and valid alternative in situations such as this, but the plain
language of the provision clearly does not preclude the standard
methodology as a viable alternative. In addition, we disagree with NSK
that, because the SAA does not specifically reference the standard
methodology as another reasonable basis, we are unable to use it as
such. In fact, the SAA does not specifically exclude the standard
methodology as an option. In addition, both the statute and the SAA
clearly grant the Department discretion with respect to the
determination of what
[[Page 2562]]
constitutes another reasonable basis. While NSK and Koyo correctly
point out that the intent underlying Congress' enactment of the special
rule was the reduction of the burden on the Department, both
respondents overlook the fact that the Department, nevertheless, has an
overriding mandate to calculate accurate dumping margins (see Bowe-
Passat v. United States, 17 CIT 335, 340 (1993) (Bowe-Passat)). While
the special rule provides us with a method to eliminate the burden of
calculating the cost of further processing, its intent was not to
elevate the goal of burden reduction over the goal of accuracy.
Finally, we note that while NSK argues against the use of the standard
methodology as another reasonable basis, it provides no alternative for
calculating CEP for Koyo's further-manufactured merchandise, nor does
it point to any record evidence establishing that the standard
methodology would be, in this instant case, inappropriate for
calculating CEP for Koyo's further-manufactured merchandise.
As discussed in the summary above, Koyo does propose, however, an
alternative for calculating the CEP of its further-manufactured A-588-
604 TRB merchandise, which it believes constitutes ``another reasonable
basis.'' Koyo proposes that the Department, instead of evaluating
whether the margins for finished over 4'' A-588-604 bearings were an
appropriate surrogate for A-588-604 further-manufactured merchandise,
could have used the margins it calculated for under 4'' A-588-054
bearings as a proxy for that A-588-604 merchandise which was further
processed into under 4'' bearings, and the margins calculated for over
4'' bearings as a proxy for that A-588-604 merchandise which was
further processed into over 4'' bearings.
While Koyo's proposal would be less burdensome than the use of the
standard methodology, we believe that the standard methodology is not
unduly burdensome and presents a higher probability of accurate results
than using margins calculated for non-further-manufactured sales. Among
other things, Koyo's proposal relies on information concerning a
different class or kind of merchandise and therefore in this case does
not sufficiently allay concerns about potential inaccuracy. The record
indicates that the use of these proxy methods would have a relatively
high potential for distortion; we believe that the gains in accuracy we
would achieve using the standard methodology would outweigh the
additional burden resulting from the use of the standard calculation.
The record supports our continued use of the standard methodology as a
reasonable basis for calculating the CEP for Koyo's further-
manufactured merchandise.
Based on its incorrect presumption that we found its sales of
identical or other A-588-604 subject merchandise to be in an
insufficient quantity to be used as a proxy for its further-
manufactured A-588-604 merchandise, Koyo argues that the Department
should have compared the value of all imported unfinished components to
the value of all finished bearings (whether subject to the A-588-604
order or A-588-054 finding) in order to make our sufficiency
determination. Since we rejected the use of Koyo's identical or other
A-588-604 subject merchandise based on our determination that these
alternatives were inappropriate, Koyo's argument is irrelevant.
However, we nonetheless note that section 772 (e)(1) and (e)(2) of the
Act refers to identical or other subject merchandise. As a result, when
determining if such sales occurred in a sufficient quantity, the
statute clearly limits our determination to the scope of the order and
does not permit the inclusion of non-subject sales as Koyo suggests.
In light of all of the above, we have determined that the facts in
this case support the selection of the standard methodology as a
reasonable basis. Furthermore, because Koyo failed to comply with the
Department's request for further-processing data, for these final
results we have applied as adverse facts available to Koyo's further-
manufactured merchandise the highest rate ever calculated for Koyo in
any segment of the A-588-604 proceeding (36.21 percent).
Comment 2: Timken argues that Department should adhere to its
normal practice and apply an adverse facts available rate of 36.21
percent to the total sales value of Koyo's further-manufactured sales
rather than to the total entered value of these sales. Citing the
United States Court of Appeals for the Federal Circuit's (CAFC)
decision in Olympic Adhesives v. United States, 899 F. 2d 1565, 1572
(Fed. Cir. 1990), Timken contends that the Department is required to
draw an inference that is ``reasonably adverse'' to the respondent.
However, Timken asserts, Koyo's selective submission of information has
seemingly worked to its advantage in that Koyo has apparently received
a lower margin despite the application of facts available. Timken
maintains that this is supported by the fact that while the preliminary
margin for Koyo in the A-588-604 case for this review is 23.26 percent,
in previous reviews in which the Department calculated margins for both
Koyo's A-588-604 further-manufactured and non-further manufactured
sales, preliminary margins for Koyo were 46.03 percent (1992-1993) and
41.21 percent (1993-1994).
Koyo responds that while the Department should not have applied
facts available at all, nonetheless it should reject Timken's argument.
Koyo argues that it would be difficult to imagine how applying the
highest rate ever calculated for Koyo is not ``reasonably adverse.''
Furthermore, Koyo asserts that just because Timken is able to devise a
more adverse approach in applying facts available does not mean that
the Department's application of facts available is not ``reasonably
adverse.'' Koyo also contends that the Department's choice of the
highest rate ever for Koyo as the adverse facts available rate was
reasonable considering the fact that Koyo cooperated with the
Department in every aspect of the review with the only exception being
its decision not to file a response to Section E of the Department's
questionnaire.
Department's Position: We disagree with Timken. In accordance with
section 776 (a) and (b) of the statute and our consistent practice,
because Koyo failed to cooperate to the best of its ability in
responding to our requests for information by declining to provide data
on its further-processed sales, we applied adverse facts available in
the absence of the further-manufacturing sales information. In
selecting from among the facts available, we chose as the adverse facts
available rate to apply to Koyo's further-manufactured sales the
highest rate we ever calculated for Koyo in any previous review of the
A-588-604 case. We then applied that rate to the total entered value of
Koyo's further-manufactured sales. In choosing among the facts
available, we are not required by the statute to select a method that
is ``the most'' or ``more'' reasonably adverse. In choosing the highest
margin ever calculated for Koyo in the A-588-604 case, we have adhered
to the statutory language and selected information that is adverse to
the interest of Koyo. Timken has failed to offer arguments or provide
record evidence demonstrating that the rate selected is not reasonably
adverse. Therefore, for these final results, we have not changed our
application of facts available with respect to Koyo's sales of further-
manufactured TRB components.
Comment 3: For the preliminary results of these reviews, we applied
facts available with respect to certain of MC's sales because it did
not provide
[[Page 2563]]
complete model-matching data. The absence of this information prevented
us from finding a suitable home market match for these U.S. sales.
Because the Department did not issue a supplemental questionnaire to MC
prior to the preliminary results, we provided the company with an
opportunity to correct its deficiencies for the final results. Timken
argues that if MC is unable to provide the information necessary for
matching certain of its U.S. sales to sales of the foreign like
product, the Department should apply as adverse facts available to
these unmatched U.S. sales the highest margin for any respondent in any
review of the A-588-054 finding.
Department's Position: As stated in our preliminary results, MC's
questionnaire response contained only limited model-match information
which prevented us from finding contemporaneous sales of the foreign
like product for comparison to a small number of U.S. sales of subject
merchandise (see TRB Prelim at 47455). As a result, in accordance with
section 776(a) of the Act, we resorted to facts available. Because MC
was not previously afforded the opportunity to remedy or explain its
deficiencies, on September 16, 1997, we issued a supplemental
questionnaire to MC requesting this information. On September 30, 1997,
MC responded by submitting the necessary data. The information provided
by MC has allowed us to find contemporaneous sales of the foreign like
product to compare to all of MC's U.S. sales. Therefore, we have
determined that it is not necessary to apply facts available to any of
MC's U.S. sales for these final results.
2. Adjustments to Normal Value
Comment 4: Timken asserts that because there is a discrepancy
between NTN's computer tape and the total billing adjustment figure in
a verification exhibit, NTN has incorrectly reported its home market
billing adjustments. Thus, Timken argues that NTN's reporting is
inconsistent with its narrative response and its verification exhibit
and, given these inconsistences, the Department should convert NTN's
negative billing adjustments to positive adjustments.
NTN claims that there is no merit to Timken's request because the
Department verified that its reported home market billing adjustments
were accurate. Therefore, NTN argues that the Department should retain
its billing adjustments as reported, and reject Timken's proposed
adjustment.
Department's Position: We agree with Timken in part. We examined
NTN's home market database and found a significant discrepancy between
the total billing adjustment for the POR located in exhibit three of
our home market verification report and the total billing adjustment we
derived from NTN's home market database. However, the difference
between the two totals was significantly different from the difference
Timken cited in its brief. Therefore, we reviewed the record to
ascertain the accurate total for NTN's billing adjustments.
During verification we thoroughly verified NTN's reported home
market volume and value for the POR. As our verification report
indicates, it was necessary for us to reconcile the volume and value
NTN reported in its response to its Ministry of Finance (MOF) reports.
As part of this reconciliation we examined an adjustment NTN made for
its total HM billing adjustments for the POR (see Department's Home
Market Verification Report for NTN, July 9, 1997, exhibit three) (NTN
HM Report). Not only did we successfully trace this total to the
computer program NTN used to calculate it, but we also traced NTN's
reported volume and value for the POR for its home market sales
directly to the MOF report with no discrepancies (see NTN HM Report at
6). We also verified NTN's reported, transaction-specific home market
billing adjustments by examining a variety of sales documentation in
the sales trace portion of our verification (see NTN HM Report at 17).
Again we found no discrepancies. As a result of both verification
exercises, one would assume that NTN's reported home market billing
adjustments were accurate and that the total of its transaction-
specific billing adjustments for the POR would equal the total reported
on exhibit three of our verification report. However, this is not the
case. In fact, when we calculated the overall POR total billing
adjustment for NTN's home market database, this total was significantly
different from that reported in the referenced exhibit three.
Therefore, we needed to determine which billing adjustment figure was
correct. For example, as we noted above, not only did we verify the
accuracy of the total from exhibit three, but we also verified the
accuracy of NTN's reported transaction-specific billing adjustments.
After additional review, we have concluded that the exhibit three
figure is the accurate total. We recognize that while our verification
of NTN's reported transaction-specific adjustment yielded no
discrepancies, this verification exercise constituted a ``spot check.''
In other words, we only examined selected billing adjustments. It is
therefore possible that, while the samples we selected were correct,
several of NTN's other reported transaction-specific billing
adjustments were inaccurate. In fact, we have determined that other
transaction-specific adjustments are inaccurate because the total of
all billing adjustments does not match the total from exhibit three.
Furthermore, because the total from exhibit three resulted in our
successful trace to NTN's MOF reports, we find this total to be far
more reliable than any other information on the record.
Therefore, having determined that the exhibit three total billing
adjustment amount is the accurate figure, we have adjusted NTN's
reported transaction-specific billing adjustments to reflect this
total. However, because our own analysis indicates an adjustment
different than that calculated by Timken, while we agree with Timken
that an adjustment is warranted, we have relied on our own calculated
adjustment amount. Furthermore, because the record provides no
information as to which transaction-specific billing adjustments are
accurate, and because NTN has neither explained this discrepancy nor
provided us with any information with respect to the correction of this
discrepancy in its reported data, we have relied on facts available to
correct NTN's reported home market billing adjustments. Because we are
unable to identify which billing adjustments are inaccurate, as facts
available, we systematically sorted through NTN's raw home market
database and totaled the reported per-sale billing adjustments until we
arrived at a total equal to our calculated adjustment. We then adjusted
these sales' billing adjustments such that they reflected the total in
exhibit three and disallowed the rest of NTN's reported billing
adjustments. For a detailed description of this methodology please
refer to the proprietary version of the Department's Final Analysis
Memorandum for NTN, dated January 7, 1998.
Comment 5: Timken contends that NTN used an incorrect denominator
when calculating the ratio it used to allocate home market inventory
carrying costs, resulting in inaccurate expense calculations. Timken
also argues that even if NTN had calculated an accurate ratio, it
nevertheless incorrectly applied this percentage to its home market
sales. Therefore, Timken asserts, for purposes of the final results the
Department should not only recalculate the inventory carrying cost
expense ratio for
[[Page 2564]]
NTN's home market sales using the appropriate sales value
(denominator), but it should also use the revised ratio to recalculate
NTN's claimed adjustment.
NTN argues that the Department thoroughly verified its calculation
methodology for inventory carrying costs and found no discrepancies.
NTN further asserts that not only is Timken's argument based on a
misunderstanding of information on the record, but the Department has
repeatedly accepted NTN's reporting methodology in prior TRB and
antifriction bearings (AFB) cases. Tapered Roller Bearings and Parts
Thereof, Finished and Unfinished, From Japan, and Tapered Roller
Bearings, Four Inches or Less in Outside Diameter, and Components
Thereof, From Japan, Preliminary Results of Antidumping Duty
Administrative Reviews and Termination in Part, 61 FR 25200, 25202 (May
20, 1996) and Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From France, Germany, Italy, Japan,
Singapore, Sweden, and the United Kingdom; Final Results of Antidumping
Duty Administrative Reviews and Partial Termination of Administrative
Reviews, 61 FR 66472, 66486 (December 17, 1996) (AFBs V). As a result,
NTN argues, there is no basis for Timken's argument.
Department's Position: We agree with NTN. Timken appears to have
misunderstood the verification exhibits. However, it is clear from the
information on the record that NTN accurately calculated and applied
the appropriate ratio when allocating its home market inventory
carrying costs. Not only did we verify NTN's inventory carrying cost
allocation, including the denominator, without discrepancy (see NTN HM
Report at 11), but NTN's response demonstrates that NTN applied an
accurate ratio to all of its home market sales. Therefore, we have not
recalculated NTN's reported home market inventory carrying costs for
these final results.
Comment 6: Timken argues that the Department should ensure that all
of NTN's reported home market adjustments are accurate and claims that
NTN's post-sale freight, pre-sale freight, packing labor, packing
material, and indirect selling expenses (to include technical services,
advertising, warehousing, and other indirect selling expenses) were
incorrectly allocated using an inaccurate total sales value. Timken
asserts that the Department should recalculate allocation ratios for
all of NTN's expenses (except technical services) using the correct
total sales value and apply these revised ratios to NTN's home market
sales to calculate revised expense adjustments.
NTN contends that these adjustments were successfully verified and
that its methodology has been accepted by the Department in the past.
NTN claims that for the reasons set forth in comments four and five,
the Department need not reexamine the data verified in Japan. Further,
NTN contends that, because Timken fails to put forth any rationale
regarding their proposed modification of the ratio used to determine
the amount of the adjustment, there is absolutely no grounds for the
Department to reverify and modify data already closely examined.
Department's Position: We agree with the respondent. In the instant
review we conducted a thorough verification of NTN's reported home
market adjustments to include post-sale freight, pre-sale freight,
packing labor, packing material, and indirect selling expenses. We
concluded that NTN's methodology yielded accurate results (see NTN HM
Report at 8). After reviewing the record again for these final results,
it is clear from the home market verification exhibits that all of
NTN's adjustments were calculated correctly. Therefore, for these final
results, we have accepted NTN's reported home market adjustments but
have recalculated them without regard to levels of trade, as discussed
in our response to comment 32 below.
Comment 7: Timken claims that NTN failed to provide an adequate
narrative response to the Department's supplemental questionnaire
regarding its calculation of technical service expenses. Instead,
Timken argues, NTN failed to demonstrate that its technical services
were selling expenses, and, as a result, the Department should not make
an adjustment to normal value (NV) for these expenses.
NTN claims that Timken's argument is based on a misunderstanding of
the NTN corporate brochure and that Timken misunderstands the
relationship, role, and function of those entities which incurred
technical service expenses during the POR. NTN argues that it has
clearly demonstrated that all of its technical service activities are
selling expenses and that, Timken's claims should be dismissed as
groundless.
Department's Position: We agree with NTN. In its brief Timken
argues that a specific entity which NTN reported as incurring technical
service expenses did not incur these expenses as selling expenses.
However, it is clear from information on the record that the unit in
question performed selling functions, including technical services, and
thus incurred selling expenses, including technical service expenses.
Furthermore, at verification we verified that the unit in question
clearly performed selling functions, and clearly incurred selling
expenses. Timken's claims are based on its failure to recognize the
distinction between two separate divisions of the same unit which
perform separate responsibilities. Therefore, for these final results,
we agree with NTN and have continued to accept its reported technical
service expenses.
Comment 8: Timken argues that Koyo's transaction-specific home
market billing adjustments (BILADJ1H) are already reflected in the
reported gross unit prices and that, consequently, the Department
should not adjust Koyo's unit prices for the BILADJ1H amounts. Timken
asserts that the Department's June 20, 1997 home market verification
report for Koyo (Koyo Home Market Report) supports its arguments that
home market prices have already been revised to account for billing
adjustments because the report notes that ``Koyo searched back through
its database, located the matching sales transaction(s), canceled them
out and re-entered the revised price'' (Koyo Home Market Report at 6).
Additional evidence from the relevant verification exhibit, Timken
argues, also supports its conclusions. For example, Timken notes, there
is a particular TRB model which appears in Koyo's sales ledger at a
given price (apparently the ``original'' price), but the reported gross
unit price for a sales transaction involving that model is different
from the ledger price. Timken further argues that the fact that the
Department had to deduct post-sale price adjustments from the ledger
totals to reconcile total value and volume supports its position that
gross unit sales prices are already net of billing adjustments.
Koyo responds that Timken has overlooked an error in the BILADJ1H
computer reporting methodology that was corrected prior to
verification. Koyo argues that the revised tapes it submitted to the
Department after verification properly reflect gross unit prices prior
to any billing adjustments. The reported gross unit price of the TRB
model identified by Timken, Koyo argues, has been corrected on the
revised tapes and now matches the ``original'' price (before any
adjustments) appearing in its sales ledgers.
Department's Position: We disagree with petitioner. We have
reviewed the record, and have determined that the gross unit prices
Koyo reported in its revised home market tape submitted on
[[Page 2565]]
May 30, 1997 are not net of billing adjustments. As Koyo explained in
its rebuttal brief, it filed a revised home market sales file with the
Department as a result of the error it discovered in the reporting
methodology for this adjustment. The model identified by Timken was one
of those affected by this reporting error (see Koyo Home Market Report
at 6). Therefore, for these final results, we have not made any changes
with respect to our treatment of Koyo's transaction-specific billing
adjustments.
Comment 9: Timken argues that the Department should reject Koyo's
and NSK's claims for home market lump-sum post-sale price adjustments
(PSPAs). With respect to Koyo, Timken asserts that the Department
should deny an adjustment to NV for Koyo's customer-specific lump-sum
billing adjustments (BILADJ2H) for the following reasons: (1) NV may
not be modified by adjustments attributable to non-scope merchandise;
(2) sales prices modified by adjustments not attributable to those
particular sales cannot be used to calculate NV; (3) Koyo has not acted
to ``the best of its ability'' in reporting its lump-sum billing
adjustments; and (4) Koyo hasn't demonstrated that its allocation
methodology is not distortive. Timken notes that Koyo has calculated
its lump-sum billing adjustments by multiplying the total adjustment
amount paid to a customer by the ratio of its TRB sales to that
customer to the total sales to that customer. As a result, Timken
argues, this adjustment is attributable to subject and non-subject
merchandise and this allocation methodology attributes a portion of the
adjustment to sales for which no adjustment was made. Timken claims
that the Court of International Trade (CIT) in Torrington Co. v. United
States, 17 CIT 199, 218, 818 F. Supp 1563, 1578 (1993) (Torrington)
held that ``merchandise which is outside the scope of an antidumping
duty order cannot be used in the calculation of antidumping duties,''
and its decision in this case is reason alone to reject Koyo's claim
for lump-sum billing adjustments.
Regarding its next claim, Timken asserts that the statute provides
that ``normal value shall be the price'' at which the foreign like
product is sold. However, Timken argues, as a result of Koyo's
allocation methodology, there are some home market sales prices that
have been modified by a portion of the lump-sum billing adjustment
which is not properly attributable to those particular sales.
Therefore, Timken argues, the modified price of such sales is not ``the
price at which the foreign like product was first sold.''
Timken also argues that Koyo's claim for lump-sum billing
adjustments should be denied because Koyo has not acted to the best of
its ability in reporting them. Timken claims that there is information
on the record which demonstrates Koyo could have devised a computer
program to match lump-sum adjustments to the relevant sales. For
example, Timken argues that while in its questionnaire response Koyo
states that it does not maintain lump-sum adjustments in a customer-
specific manner, it also states in the response that it ``matched these
debit and credit notices to the relevant sales in order to report the
billing adjustments on a transaction-specific basis.'' Timken maintains
that this is exactly the type of computer programming that would allow
Koyo to attribute lump-sum billing adjustments to the sales upon which
they were granted. Timken also argues that additional evidence of
Koyo's ability to match lump-sum adjustments to relevant sales is
contained in the home market verification report, which describes how
Koyo was able to design a program that searched its database to reenter
revised unit prices.
Finally, Timken asserts that Koyo has not demonstrated that its
lump-sum billing adjustments are not distortive, and claims that Koyo's
May 30, 1997 home market sales printout demonstrates this. Timken
points to two examples of similar gross unit prices from the sales tape
that have been modified by lump-sum billing adjustments, and argues
that because each of the adjustments is a given percentage of the unit
price, all those sales which have had the adjustment allocated to them,
even though they were not in the group of sales to which the adjustment
is correctly attributed, have been modified by that percentage. Timken
further contends that such a difference is distortive given that the
statute recognizes any margin over .5 percent as significant, and
recommends that the Department subtract (rather than add) BILADJ2H from
the gross unit price to correct this distortion.
Petitioner also urges the Department to reject NSK's claims for
lump-sum rebates. Timken argues that NSK failed to accurately report
the amount of it customer-specific lump-sum PSPAs directly attributable
to specific sales of scope merchandise, and that, accordingly, the
Department should deny an adjustment to NV for these PSPAs. Timken
argues that the Department's acceptance of NSK's lump-sum adjustments
is contrary to Federal-Mogul Corp. v. United States, 834 F. Supp. 1391
(CIT 1993), in which the CIT, upon remand, ordered the Department to
attempt to devise a methodology that removed PSPAs and rebates paid on
sales of non-subject merchandise from FMV (NV), and to deny such an
adjustment if they could not be removed. In that decision, Timken
contends, the CIT held that PSPAs and rebates paid on both subject and
non-subject merchandise were acceptable provided the amount paid per
sale was the same throughout the POR. Timken further argues that
because the CIT determined that NSK did not meet the standard for
acceptance of its lump-sum PSPAs, and because NSK's allocation
methodology for the current reviews is apparently unchanged, its lump-
sum adjustments should not be allowed. Timken asserts that the CIT, in
other decisions, has upheld the rejection of NSK's lump-sum
adjustments. For example, in Torrington Co. v. United States, 881 F.
Supp 622 (CIT 1995), Timken argues, the CIT ordered the Department on
remand to develop a methodology for removing PSPAs paid on non-subject
merchandise from the calculation of FMV (NV). Timken also cites
Torrington Co. v. United States, 926 F. Supp. 1151 (CIT 1996), and
claims that the CIT, in that decision, held that PSPAs which could not
be tied specifically to the sales for which they were granted could not
be treated as direct expenses and affirmed the disallowance of NSK's
lumps-sum adjustments because they could not be tied to specific part
numbers.
Timken further contends that in Timken Co. v. United States, 930 F.
Supp. 621 (1996), the CIT held that Commerce should not have allowed an
adjustment to FMV (NV) for NSK's lump-sum PSPAs. Timken also cites to
the CIT's more recent decision in NSK vs. United States, 969 F. Supp.
34 (CIT 1997), asserting that the CIT affirmed the Department's
disallowance of NSK's lump-sum PSPAs.
In sum, Timken argues that NSK's allocation methodology is
distortive because, although every individual payment of a lump-sum
adjustment ties to a certain group of sales transactions (and not to
all sales), NSK nonetheless allocates the total of lump-sum payments to
all POR sales. In addition, Timken claims that NSK has not acted to the
best of its ability in reporting its lump-sum PSPAs.
Koyo responds that its lump-sum billing adjustments are not
distortive. Citing to the most recent AFB and TRB reviews, Koyo asserts
that the Department has evaluated Koyo's lump-sum billing adjustment
methodology and in each case has allowed the adjustment. The reporting
methodology
[[Page 2566]]
for the current reviews, Koyo asserts, is the same as that which the
Department has previously accepted.
Koyo argues that Timken's reliance on Torrington to support its
assertions that the adjustment should be denied because it was
allocated over a total sales value which included non-subject
merchandise is inappropriate because the case was decided before the
enactment of the URAA. Furthermore, Koyo argues, even prior to the
URAA, the CAFC rejected the distinction between scope and non-scope
merchandise used by the CIT. In addition, Koyo argues that the
Department determined that the Torrington case was of limited relevance
in evaluating Koyo's billing adjustment allocation methods for 1994/95
AFB review (see Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From France, et. al.; Final Results of
Antidumping Administrative Review, 62 FR 2091 (January 15, 1997) (AFBs
VI)).
With respect to Timken's claims that Koyo has not demonstrated that
its allocation methodology is not distortive, Koyo responds, citing the
1995/1996 AFB Final Results (Antifriction Bearings (Other Than Tapered
Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan,
Romania, Singapore, Sweden, and the United Kingdom; Final Results of
Antidumping Duty Administrative Reviews, 62 FR 54043 (October 17,
1997)(AFB's VII)), that the Department has established a test for
determining whether or not allocations are distortive. Koyo argues that
the Department's test does not depend on whether sales in the
allocation pool were of non-subject merchandise, nor does it depend
upon the difference between the allocated and actual adjustment. Koyo
contends that the purpose of the test is to determine if merchandise in
the allocation pool is significantly different in terms of value,
physical characteristics, and the manner in which it was sold. Koyo
further argues that evidence on the record in the instant reviews
demonstrates that it has met the Department's test regarding whether an
allocation is distortive. For example, Koyo claims that the merchandise
over which it allocated billing adjustments was similar in terms of
value and physical characteristics and that as a result, the sales
patterns of these products were similar to the merchandise to which the
adjustments were specifically attributable. Citing AFBs VI and AFBs
VII, Koyo notes that the Department concluded in the three most recent
AFB reviews that ``it is not feasible for Koyo to report this
adjustment on a more specific basis'' and that ``we are satisfied that
Koyo's allocation methodology across subject merchandise by sales value
was not distortive.''
Koyo adds that the Department followed the intent of the URAA to
liberalize reporting requirements in accepting billing adjustments and
asserts that the SAA at 823-824 makes clear this intent. Furthermore,
Koyo claims, the Department's new antidumping regulations allow the
Department to consider allocated expenses and adjustments where
transaction-specific reporting is not possible, and that Koyo's
allocation methodology is consistent with the expressed goals of the
new regulations.
Koyo claims that calculating BILADJ2H on a transaction-specific
basis is not possible. Because a portion of the adjustments are
attributable to more than one sale, Koyo asserts that data linking a
given sale to a particular adjustment does not exist within its
database. Finally, regarding Timken's assertion that any adjustment
which exceeds the de minimis threshold points to a distortive
allocation, Koyo responds that the concept of the de minimis threshold
is not related to whether or not an allocation is distortive.
NSK responds that the judicial precedent relied on by Timken to
support its assertions includes cases decided before the enactment of
the URAA which do not govern the Department in post-URAA reviews.
Furthermore, NSK argues that the SAA and the new antidumping
regulations support the Department's acceptance of NSK's methodology
for allocating lump-sum PSPAs. NSK adds that the Department, in recent
AFB reviews, has accepted NSK's lump-sum PSPAs.
Department's Position: We disagree with Timken. We have granted
claims for PSPAs as direct adjustments to NV if we determined that the
respondent, in reporting these adjustments, acted to the best of its
ability in providing information and meeting the requirements we have
established with respect to these adjustments, and that its reporting
methodology was not unreasonably distortive (see section 782(e) of the
Act). We did not treat such adjustments as direct or indirect selling
expenses, but as direct adjustments to identify the correct starting
price. While our preference is for transaction-specific reporting, we
recognize that this is not always possible. It is inappropriate to
reject allocations that are not unreasonably distortive where a fully
cooperating respondent is unable to report the information in a more
specific manner (see section 782(e) of the Act). Accordingly, we have
accepted these adjustments when it was not feasible for a respondent to
report these adjustments on a more specific basis, provided that the
allocation method 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
non-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 and physical characteristics, and the manner in which it is
sold. Significant differences in such terms may increase the likelihood
that respondents did not grant price adjustments in proportionate
amounts with respect to sales of subject and non-subject merchandise.
While we scrutinize any such differences carefully 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 be
unreasonable to require that respondents provide sale-specific
adjustment data on non-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 a respondent
that has cooperated to the best of its ability.
Based on our examination of the record in this and in past reviews,
we are satisfied that Koyo's records do not allow it to report these
billing adjustments on a transaction-specific basis and that Koyo acted
to the best of its ability in calculating the reported adjustment on as
narrow a basis as its records allowed. Therefore, for these final
results we have made a direct adjustment to NV for Koyo's lump-sum
billing adjustments.
With respect to NSK, as explained in our preliminary analysis
memorandum, we have accepted its claims for lump-sum rebates because we
are satisfied that NSK's methodology, while it includes non-subject
merchandise, does not shift rebates from non-scope to scope
merchandise. In its response, NSK submitted information demonstrating
that the ratio of scope to non-scope merchandise purchased by each
customer who received this rebate was relatively constant throughout
the POR. Furthermore, we have determined based
[[Page 2567]]
on our review of the record that NSK acted to the best of its ability
in reporting these price adjustments and that reporting on a more
specific basis was not possible given the manner in which NSK maintains
its records.
Comment 11: Timken argues that Koyo's home market rebates were not
allocated over the actual sales for which they were incurred. Timken
further asserts that Koyo did not act to the best of its ability in
reporting this adjustment because the record indicates that Koyo had
the capability to properly link rebates to specific sales. Finally,
Timken maintains that Koyo has provided no evidence demonstrating that
its allocation methodology is not distortive and asserts that the
Department should consequently deny Koyo's claim for home market
rebates.
Koyo responds that, as with its billing adjustments, the measure of
whether or not an allocation is distortive does not depend on the
difference between an allocated and actual adjustment or whether the
allocation pool includes merchandise for which the expense was not
originally incurred. Koyo argues that when attempting to determine
whether an allocation is distortive, the Department examines the extent
to which merchandise in the allocation pool is different from
merchandise for which the expense was incurred in terms of value,
physical characteristics, and the manner in which it is sold. In fact,
Koyo asserts, the Department, in the most recently completed TRB
review, found that the subject and non-subject bearings included in the
allocation pool for home market rebates did not differ significantly
with respect to value, physical characteristics, or sales patterns.
Koyo further argues, citing the home market verification report, that
the Department's finding that ``[there were] no discrepancies in either
the program or the calculation methodology'' demonstrates that Koyo's
rebate allocation methodology is not distortive.
Finally, Koyo argues that because the Department in the 1994/1995
TRB reviews determined that Koyo had acted to the best of its ability
in reporting rebates, and because the allocation methodology for these
reviews is unchanged, the Department should continue to make a direct
adjustment to home market price for rebates for these final results.
Department's Position: We disagree with Timken. During the POR Koyo
granted rebates to certain of its home market customers. Koyo
calculated rebate factors by dividing the total rebates paid to a given
customer by the total POR sales to that customer. In our supplemental
questionnaire, we asked Koyo to explain why it was unable to report
home market rebates on a more specific basis. In its supplemental
response Koyo stated that more specific reporting for a certain
customer who received rebates was not possible because its records did
not allow it to isolate sales of those bearings for which rebates were
granted. Based on information Koyo provided, we are satisfied that Koyo
acted to the best of its ability in reporting home market rebates.
However, because Koyo's allocation methodology includes non-scope
merchandise, we have nevertheless examined Koyo's allocation to
determine if it is distortive. Our review of the record indicates that
the non-scope merchandise included in Koyo's allocation are sales of
bearings other than TRBs. Not only has our review and analysis of the
record given us no reason to believe that Koyo is more likely to grant
rebates on sales of bearings other than TRBs than on sales of TRBs, but
we note that Koyo is primarily in the business of selling bearings,
some of which are within the scope of the TRB orders and others which
are not. While we recognize that there are differences among bearings,
we have not found that the scope and non-scope bearings included in
Koyo's allocation vary significantly in terms of value, physical
characteristics, nor the manner in which they were sold such that
Koyo's allocation would result in an unreasonably inaccurate or
distortive allocation. Therefore, for these final results we have made
no changes in our treatment of Koyo's home market rebates.
Comment 12: Timken argues that Koyo's domestic pre-sale freight
expenses should be allocated equally to sales in the home market and in
the United States. Timken contends that Koyo's practice of allocating
Japanese pre-sale freight expenses to U.S. sales on the basis of
transfer prices is potentially distortive because such prices are not
at arm's length. Koyo's allocation methodology, Timken argues, has the
effect of shifting expenses attributable to U.S. sales to sales in the
home market.
Timken also argues that Koyo's response demonstrates that there are
certain home market sales for which the company did not incur pre-sale
freight expenses. Timken suggests that, because the record indicates
that Koyo maintained warehouses at its plants during the POR, and
because pre-sale freight expenses are not incurred for sales shipped
directly from the plant warehouse to the customer, the Department
should follow its practice from the 94-95 TRB review in which it
removed the total sales value of Koyo's OEM home market sales from the
denominator of the expense ratio.
Koyo responds that Timken's argument regarding its allocation
methodology for pre-sale freight has been rejected by the Department in
past reviews and urges the Department to once again dismiss it. Koyo
argues that it has reported its pre-sale freight expense in the same
manner as in past reviews, and asserts that the Department has verified
and accepted its use of Koyo Seiko's total sales value as the
denominator for calculating pre-sale freight. Koyo further maintains
that its total bearing sales amounts were based on its ``Sales and Cost
of Goods Sold'' summary, and that the total bearing sales for its
distributors were based on figures the Department tied to the audited
financial statements. Furthermore, Koyo argues that these sales totals
included those to affiliated and unaffiliated customers in the home
market and export markets. Koyo argues that because its home market and
export sales were to a mix of both affiliated and unaffiliated
customers, its allocation methodology was fair and that the proper
basis for allocation is its prices for all relevant sales.
Department's Position: We agree with petitioner in part. While we
agree that Koyo's questionnaire response does indicate that it did not
incur pre-sale freight expenses for certain home market sales, we
disagree with Timken that Koyo's allocation of these expenses is
otherwise unreasonable. In its response Koyo reported home market pre-
sale freight expenses which reflected those expenses it incurred when
transporting TRBs destined for sale in both the U.S. and home markets
from the home market plant to home market warehouses. While Koyo
reported these pre-sale freight expenses for all of its home market and
U.S. sales, its questionnaire response indicates that there are certain
home market sales for which Koyo did not incur this expense because the
merchandise was not transported from the plant to a warehouse at a
location different from the plant. For example, on page 36 of its
section B response to our questionnaire, Koyo explains that, prior to
sale, not only did it store TRBs at its two home market central
warehouses, warehouses at its branch and sales offices, and at the
warehouses of its consolidated distributors, but it also stored certain
merchandise at its plant warehouse. In the proprietary explanation
following this description Koyo again indicates that there are certain
types of home market sales for which the merchandise was stored at its
plant warehouse. In
[[Page 2568]]
addition, on page 23 of its section B response, when explaining its
post-sale home market freight expenses, Koyo states that it incurred
post-sale freight expenses either in shipping merchandise from the
plant directly to a customer or when transporting merchandise from a
warehouse to a customer. Again, this indicates that there are certain
home market sales for which the merchandise is shipped directly from
the plant to a customer and, therefore, is not transported to a
warehouse at a location different from the plant. Therefore, we agree
with Timken that the record demonstrates that there are certain home
market sales for which Koyo did not incur home market pre-sale freight
expenses.
We have determined that for these final results it is necessary to
(1) reallocate Koyo's reported home market pre-sale freight expenses
such that the total sales value of those home market sales for which
the expense was not incurred is excluded from the allocation
denominator, and (2) apply the expense only to those home market sales
for which the expense was incurred. However, Koyo's response does not
enable us to specifically identify within Koyo's home market database
those sales for which the expense was not incurred. In light of this,
we have determined to rely on facts available to determine those sales
for which the expense was not incurred. Based on Koyo's proprietary
narrative explanation on page 36 of its response, we have concluded
that Koyo did not incur this expense on certain sales to home market
OEM customers. While we recognize that it is likely that not all of
Koyo's home market OEM sales were exempt from this expense, because we
are unable to identify exactly which OEM sales were exempt, we have
applied non-adverse facts available and recalculated the expense
adjustment by (1) removing from Koyo's reported allocation denominator
the total sales value of Koyo's home market OEM sales and (2) applying
the recalculated expense adjustment to U.S. sales and only non-OEM home
market sales.
However, despite the fact that we have determined for these final
results that Koyo's pre-sale freight allocation denominator is
overstated and the expense was reported for home market sales for which
it was not incurred, we disagree with Timken that Koyo's allocation
otherwise fails to reflect the manner in which the expense was actually
incurred. In general, when a respondent relies on an expense allocation
to calculate its per-unit adjustment amounts, we require that
allocation to reflect the manner in which the expense was actually
incurred (see, e.g., 92-93 TRB Final at 57635 and Certain Fresh Cut
Flowers From Columbia; Final Results of Antidumping Duty Administrative
Reviews, 61 FR 42848 (August 19, 1996)). In addition, we examine the
respondent's allocation methodology to determine if there is internal
consistency between the numerator and denominator and in the
methodology as a whole. For example, if an expense is allocated on the
basis of total sales value, as is the expense at issue here, the
expense amount (the numerator) and the total sales value (the
denominator) should reflect the same pool of sales such that the total
expense amount reported by the respondent is divided by the total value
of the sales for which the expense was actually incurred. Likewise, the
allocation ratio should be applied to the same sales price reflected in
the denominator. For example, we would not accept the application of an
allocation ratio to home market gross sales price if the denominator
was calculated by totaling the value of all sales on the basis of a net
price. In the instant case, Koyo Seiko, the Japanese parent, incurred
the pre-sale freight expenses at issue for all merchandise, whether
destined for sale to the U.S., third-country, or home market (with the
exception of the home market OEM sales described above). Because Koyo
does not maintain its records such that it is able to calculate the
total expense amount incurred for each market, it was unable to
separately calculate the specific pre-sale freight expense attributable
to each market. Therefore, Koyo used as its allocation numerator the
total expense amount incurred by Koyo Seiko for all merchandise, as
derived from Koyo Seiko's sales records. The sales for which this
expense was incurred were Koyo Seiko's sales to all its customers,
which encompassed a mix of affiliated and unaffiliated entities in both
the export and home markets. Thus, Koyo calculated its pre-sale freight
allocation denominator by totaling the value for all of Koyo Seiko's
sales to all its customers, as derived from Koyo Seiko's records. While
for these final results we have adjusted this denominator to exclude
the total sales value of home market OEM sales, we have nevertheless
preserved Koyo's basic allocation methodology. Because Koyo Seiko's
customers encompassed a mix of affiliated and unaffiliated parties in
both the home and export markets, Koyo's denominator includes sales
values which reflect both transfer and resale prices. Since Koyo
Seiko's customer in the United States is Koyo Corporation of U.S.A.
(KCU), its wholly-owned U.S. affiliate, the U.S. sales transactions
relevant to Koyo's allocation are those between Koyo Seiko and KCU.
Thus, Koyo correctly included within its denominator the total value of
its sales to KCU, which were made at transfer prices. Similarly, in the
home and third-country markets Koyo Seiko sold to both affiliated and
unaffiliated customers. Therefore, Koyo properly included within its
allocation denominator the total value of Koyo Seiko's sales to its
home and third-country market customers, some of which were made at
resale prices while others were at transfer prices. Koyo's methodology,
therefore, not only relies on a numerator and denominator which reflect
the same pool of sales, but its denominator is calculated on the basis
of the value of those sales for which the reported total expense amount
was actually incurred. When calculating the per-unit expense adjustment
amount for each U.S. and home market transaction, Koyo applied its
allocation ratio (which was the same for all sales) to the appropriate
unit price. For U.S. sales it applied the ratio to the transfer prices
Koyo reported between Koyo Seiko and KCU, which were the U.S. prices
upon which the expense was incurred and the U.S. sales values reflected
in Koyo's allocation denominator. For home market sales, Koyo applied
the ratio to either a resale price (for unaffiliated customers) or
transfer price (for affiliated customers) because these were the home
market prices upon which the expense was incurred and the home market
sales values reflected in the allocation denominator.
Timken argues that, in order to properly reflect commercial reality
and avoid distortion, Koyo should instead apply its expense ratio to
U.S. resale prices, the price between KCU and the first unaffiliated
U.S. customer. However, Timken overlooks the fact that this transaction
is not the sale for which the expense was actually incurred. As a
result, Timken's proposed methodology would neither reflect the manner
in which, nor the sales upon which, Koyo actually incurred the expense.
Timken's argument also ignores the fact that Koyo's allocation
denominator includes not only U.S. transfer values but home market and
third-country transfer values as well. Thus, Timken's assertion that
Koyo always calculates the home market expense adjustment on the basis
of resale prices is incorrect. Rather, the record demonstrates that,
for sales to affiliated home market parties, Koyo calculated the
adjustment on the basis of the transfer price between Koyo Seiko
[[Page 2569]]
and the affiliated home market customer. In addition, rather than argue
that all transfer values included in Koyo's denominator should be
excluded from the allocation methodology, Timken limits its argument to
only U.S. transfer prices and fails to demonstrate why U.S. transfer
values are an improper factor in the denominator's calculation while
home market and third-country transfer values are not.
Finally, the record does not contain, and Timken has not provided,
any evidence demonstrating that the transfer prices Koyo reported
between Koyo Seiko and KCU are unreliable. Rather, the record indicates
that these transfer prices were maintained by KCU, for purposes other
than antidumping proceedings, within the ordinary course of business.
Furthermore, we note that antidumping proceedings are only one of the
factors a respondent must account for in setting its transfer prices;
transfer prices are also subject to possible Internal Revenue Service
audits for U.S. tax purposes and to U.S. Customs' review. Therefore,
based on the above reasons, we do not agree with the petitioner that
Koyo's basic allocation methodology is unreasonable. Therefore, for
these final results, while we have recalculated Koyo's originally
reported allocation ratio to exclude home market OEM sales, we have
made no other changes to Koyo's overall allocation methodology.
Comment 13: Timken argues that the Department should recalculate
Koyo's home market average short-term borrowing rate to exclude
interest amounts which it maintains are aberrational and unsupported by
the record. Timken asserts that home market verification documents
detailing loans taken by Koyo during the POR contain two loan entries
which do not list certain relevant information regarding the terms and
details of these loans for which the reported interest was incurred.
Koyo argues that Timken's assertions are misplaced because they are
based on a misunderstanding of the credit verification exhibit. Koyo
argues that the interest amounts Timken identified as aberrational do
not constitute payments on specific loans, but rather reflected
interest paid by Koyo Seiko under some other arrangement. Citing the
Department's home market verification report, Koyo asserts that the
Department has already verified the accuracy of Koyo's reported credit
expense ratio and found no discrepancies.
Department's Position: We disagree with Timken. During verification
we carefully reviewed the manner in which Koyo calculated its short-
term interest rate and its credit expense ratios. After reviewing
supporting documentation for each of several loans we selected from
Koyo's credit calculation worksheets, we were satisfied that Koyo had
accurately reported its credit expense. While those entries identified
by Timken were not among those chosen, we emphasize that the purpose of
verification is not to conduct an exhaustive review of a response.
Rather, verification is intended to serve as a spot check to verify the
overall integrity of a response (see, e.g., Bomont Industries v. United
States, 14 CIT 208, 209, 733 F. Supp. 1507 (1990)). Absent any
unreconciling information regarding Koyo's calculation of its short-
term borrowing rate, we were satisfied that this expense was accurately
reported. Furthermore, we are generally satisfied with Koyo's
explanation of and the reliability of those interest amounts which
Timken claims should be removed from the interest rate calculation and
can find no evidence on the record that indicates these interest
amounts should be excluded from the calculation of credit; accordingly,
we have not done so for these final results.
Comment 14: In its case brief Timken argued that Koyo allocated its
home market inventory carrying costs (ICC) over a sales value which
improperly excluded sales to its distributors. However, Timken
subsequently withdrew that argument. In addition, Timken also suggested
that the Department should recalculate Koyo's ICC ratio using the
following methodology: (1) calculate separate ICC ratios for Koyo Seiko
sales and sales by its wholly-owned distributors; (2) apply the Koyo
Seiko ICC ratio to all of its sales; and (3) apply both Koyo Seiko's
and the distributors' ICC rates to the affiliated distributors' sales.
Timken contends that this methodology would produce a more accurate
result because merchandise stored by Koyo Seiko and by its distributors
remains in inventory for different average periods of time.
Koyo did not specifically comment on Timken's proposed method for
allocating ICC.
Department's Position: We agree with Timken. Exhibit B-9 of Koyo's
questionnaire response indicates that, to calculate its reported home
market ICC, Koyo derived an overall average number of days using
inventory balance and total sales figures for both Koyo Seiko and its
consolidated distributors. However, because there were significant
differences between the inventory balances and total sales values for
Koyo Seiko as compared to those for its consolidated distributors,
Koyo's calculation of a single average number of days in inventory has
the effect of overstating the ICC incurred for those sales made by the
consolidated distributors and understating the ICC incurred for sales
made by Koyo Seiko. Therefore, because information exists on the record
which would allow us to calculate home market ICC which more closely
reflect the actual experience of Koyo Seiko and its consolidated
distributors, we have recalculated Koyo's reported home market ICC for
these final results. Please see our Final Results Analysis Memorandum
for Koyo, dated January 7, 1998 for a detailed explanation of our
recalculation.
Comment 15: Timken argues that Koyo improperly excluded a certain
category of expenses from its reported total export selling expenses.
Koyo responds that its methodology properly excludes these expenses
and contends that Timken's argument is based on a misunderstanding of
the home market verification report and of Koyo's August 26, 1997
letter in response to Timken's pre-preliminary comments.
Department's Position: We disagree with Timken. We have reviewed
the home market verification report and the relevant exhibit and have
determined that Koyo correctly excluded this expense category from its
total export selling expenses. The proprietary nature of this argument
prevents us from discussing it in further detail here. For more
information, refer to the proprietary version of our final results
analysis memorandum for Koyo, dated January 7, 1998.
3. Adjustments to United States Price
Comment 16: Timken argues that the Department should apply facts
available with respect to Koyo's pre-sale U.S. inland freight because
Koyo failed to demonstrate that the expenses attributed to subject
merchandise are reasonably accurate. Timken is concerned that Koyo's
allocation methodology is distortive because (1) the total reported
expenses include those associated with shipping merchandise from Japan,
Europe, and from Koyo Corporation of U.S.A. Manufacturing Division
(KCUM) to KCU, and (2) Koyo allocated freight costs based on the weight
of all sales, including those sales for which KCU apparently did not
incur a freight expense.
Koyo maintains that Timken incorrectly assumes that this expense is
allocated on the basis of sales value when it was actually allocated on
the basis of the weight of the merchandise shipped. Koyo further
maintains that
[[Page 2570]]
allocating this expense based on weight is not distortive because the
cost to ship a given weight of non-scope and scope merchandise is
identical. Koyo also argues that its allocation methodology is well-
established, has been repeatedly verified, and was again verified
without discrepancy at the Department's U.S. verification for these
reviews.
Department's Position: We disagree with Timken. Koyo calculated its
U.S. inland pre-sale freight expense ratio by dividing KCU's total POR
freight-in expenses (associated with shipping merchandise from
railheads to KCU's warehouses) as reported in its financial statements
by the total gross weight shipped to U.S. customers of all products.
Koyo then multiplied the resulting freight-in factor by the unit gross
weight to arrive at its reported pre-sale freight amounts. During
verification, not only did we carefully examine Koyo's methodology for
allocating its U.S. pre-sale inland freight expenses, but we tied KCU's
reported total pre-sale freight expenses directly to its financial
statements and found no discrepancy. In addition, we verified that the
gross weight reported by Koyo was accurate (see Koyo Seiko U.S.
Verification Report, August 7, 1997, at 13).
As noted above, the expense total appearing in Koyo's numerator
encompasses POR freight-in expenses incurred when shipping merchandise
(whether scope or non-scope) from Europe and Japan to KCU's sales
warehouses, and from KCUM to KCU. Similarly, the denominator includes
the POR gross weight of all such sales for which these expenses were
incurred. We have examined the record and are satisfied that Koyo's
records do not allow it to report these expenses on a more specific
basis. Additionally, while Timken asserts that KCU apparently allocates
U.S. inland pre-sale freight expense totals to certain sales for which
KCU did not pay for freight transfers from KCUM to KCU, we can find no
evidence on the record indicating that KCU did not incur all expenses
associated with shipping merchandise from KCUM to KCU's sales
warehouse.
Because we are satisfied that Koyo's allocation is as specific as
possible, and because the numerator and denominator properly reflect
all shipments and all expenses, we have not resorted to the use of
facts available for these final results.
Comment 17: NTN argues that the Department should have calculated
CEP profit on a level-of-trade (LOT)-specific basis. NTN claims that
the Department noted that prices differed significantly based on the
LOT at which merchandise was sold. NTN claims that selling expenses
also differed by LOT and had an effect on prices but that this
difference does not account entirely for the different price levels.
NTN further emphasizes that section 772 (a) and (f) of the Act
expresses a preference for the profit calculations to be performed as
specifically as possible and on the narrowest basis as possible.
Finally, NTN asserts that because the Department calculated constructed
value (CV) profit on a LOT-specific basis and matched U.S. and home
market sales by LOT, the calculation of CEP profit should also take LOT
into account.
Timken argues that the Department rejected the identical argument
by NTN in its final results of the sixth review of the AFBs case,
stating that ``neither the statute nor the SAA require us to calculate
CEP profit on a basis more specific than the subject merchandise as a
whole. * * * [t]he statute and SAA, by referring to ``the'' profit,
``total actual profit,'' and ``total expenses'', imply that we should
prefer calculating a single profit figure'' (see AFBs VI at 2081 and
2125). For these same reasons, Timken contends that the Department
should again reject NTN's assertion in this TRB review.
Department's Position: We agree with Timken. Neither the statute
nor the SAA requires us to calculate CEP profit on a basis more
specific than the subject merchandise as a whole. See AFBs VI at 2125.
Respondent's suggestion would not only add a layer of complexity to an
already complicated exercise with no increase in accuracy, but a
portion of the CEP-profit calculation would be more susceptible to
manipulation. Therefore, for these final results we have not changed
our CEP profit calculation.
Comment 18: NTN asserts that the Department had no basis for
including EP sales in the calculation of the CEP profit adjustment and
argues that section 772 (a) and (f) of the Act clearly state that the
adjustment for profit to CEP sales is to be based on the expenses
incurred in the United States as a percentage of total expenses. NTN
contends that section 772(d) of the Act contains no provision for the
inclusion of export price expenses and that the canon of statutory
construction, expressio unius est exclusio alterius, indicates that the
absence of such a provision precludes its inclusion. NTN further
asserts that the SAA similarly states that ``the total expenses are all
expenses incurred by or on behalf of the foreign producer and exporter
and the affiliated seller in the United States with respect to the
production and sale of. . . the subject merchandise sold in the United
States and the foreign like product sold in the exporting country (if
Commerce requested this information in order to determine the normal
value and the constructed export price)''. Therefore, NTN claims that
the Department has calculated CEP profit in a manner contrary to that
specified in the statute.
Department's Position: We disagree with NTN. The Department's
September 4, 1997 policy bulletin regarding the calculation of CEP
profit indicates that section 772(f)(2)(D) of the Act clearly states
that the calculation of total actual profit is to include all revenues
and expenses resulting from the respondent's EP sales as well as from
its CEP and home market sales. The basis for total actual profit is the
same as the basis for total expenses under section 772(f)(2)(C) of the
Act. The first alternative under this section states that, for purposes
of determining profit, the term ``total expenses'' refers to all
expenses incurred with respect to the subject merchandise sold in the
United States (as well as home market expenses). Thus, where the
respondent makes both EP and CEP sales to the United States, sales of
the subject merchandise would encompass all such transactions.
Therefore, because NTN had EP sales, we have included these sales in
the calculation of CEP profit.
Comment 19: NTN argues that the Department's decision to ignore
adjustments to its U.S. indirect selling expenses for expenses incurred
when financing cash deposits for antidumping duties is contrary to both
the Department's position in past reviews and judicial precedent, and
that it inappropriately denies an adjustment for expenses incurred
solely as a result of the existence of an antidumping order.
NTN asserts that the CIT has previously held that these imputed
interest expenses do not constitute selling expenses, and cites PQ
Corp. v. United States, 11 CIT 53, 67 (1987) (PQ Corp), in which the
CIT stated, ``if deposits of estimated antidumping duties entered into
the calculation of present dumping margins, those deposits would work
to open up a margin where none otherwise exists.'' NTN claims that the
rationale in PQ Corp applies similarly to interest incurred when
financing cash deposits, and asserts that if the Department were to
allow interest expenses from previous reviews to affect the calculation
of margins for current reviews, it would precipitate an unending cycle
which would prevent the Department from revoking an order.
[[Page 2571]]
NTN maintains that the CIT, in Timken v. United States, Slip Op.
97-87 (July 3, 1997)(Timken), upheld NTN's adjustments to U.S. indirect
selling expenses for interest incurred when financing cash deposits,
and notes that the Department itself argued in support of such an
adjustment. NTN argues that, as set forth in Timken, interest expenses
attributable to cash deposit financing are not incurred in the course
of selling merchandise in the United States.
NTN also references the CIT's decision in Federal Mogul Corp. v.
United States, Slip Op. 96-163 (December 12, 1996), claiming that the
CIT explicitly rejected the petitioner's argument that interest
expenses constituted selling expenses because they were incurred as a
result of NTN's ``decision'' to engage in dumping. Additionally, argues
NTN, the Court rejected the petitioner's argument that allowing such an
adjustment was duplicative of interest paid on the refund of excess
cash deposits.
Timken responds that the Department correctly rejected NTN's claim
for a downward adjustment to U.S. indirect selling expenses for
interest incurred when financing cash deposits. Timken argues that
allowing such an adjustment serves as an incentive to respondents to
prolong litigation to avoid actual payment of duties, which is contrary
to the purpose of the interest provision set forth in the Trade
Agreements Act of 1979, which is to reduce incentives to delay payment
of duties owed.
Department's Position: We agree with Timken that we should deny an
adjustment to NTN's U.S. indirect selling expenses for expenses which
NTN claims are related to financing of cash deposits.
The statute does not contain a precise definition of what
constitutes a selling expense. Instead, Congress gave the administering
authority discretion in this area. It is a matter of policy whether we
consider there to be any financing expenses associated with cash
deposits. We recognize that we have, to a limited extent, removed such
expenses from indirect selling expenses for such financing expenses in
past reviews of this finding, this order, and other orders. However, we
have reconsidered our position on this matter and have now concluded
that this practice is inappropriate. Further, we note that the Court's
affirmance of our prior policy does not preclude us from following this
new, reasonable policy.
We have long maintained, and continue to maintain, that antidumping
duties, and cash deposits of antidumping duties, are not expenses that
we should deduct from U.S. price. To do so would involve a circular
logic that could result in an unending spiral of deductions for an
amount that is intended to represent the actual offset for the dumping
(see, e.g., 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 II); see
also, e.g., Certain Cut-to-Length Carbon Steel Plate from Germany;
Final Results of Antidumping Duty Administrative Review, 62 FR 18390,
18395 (April 17, 1995)). We have also declined to deduct legal fees
associated with participation in an antidumping case, reasoning that
such expenses are incurred solely as a result of the existence of the
antidumping duty order (see AFBs II). Underlying our logic in both
these instances is an attempt to distinguish between business expenses
that arise from economic activities in the United States and business
expenses that are direct, inevitable consequences of an antidumping
duty order.
Financial expenses allegedly associated with cash deposits are not
a direct, inevitable consequence of an antidumping duty order. As we
stated in the preliminary results at 47455: ``[m]oney is fungible. If
an importer acquires a loan to cover one operating cost, that may
simply mean that it will not be necessary to borrow money to cover a
different operating cost.'' Companies may choose to meet obligations
for cash deposits in a variety of ways that rely on existing capital
resources or that require raising new resources through debt or equity.
For example, companies may choose to pay deposits by using cash on
hand, obtaining loans, increasing sales revenues, or raising capital
through the sale of equity shares. In fact, companies face these
choices every day regarding all their expenses and financial
obligations. There is nothing inevitable about a company having to
finance cash deposits and there is no way for the Department to trace
the motivation or use of such funds even if it were.
In a different context, we have made similar observations. For
example, we stated that ``debt is fungible and corporations can shift
debt and its related expenses toward or away from subsidiaries in order
to manage profit'' (see Ferrosilicon from Brazil, 61 FR at 59412
(regarding whether the Department should allocate debt to specific
divisions of a corporation)).
So, while under the statute we may allow a limited exemption from
deductions from U.S. price for cash deposits themselves and legal fees
associated with participation in dumping cases, we do not see a sound
basis for extending this exemption to financing expenses allegedly
associated with financing cash deposits. By the same token, for the
reasons stated above, we would not allow an offset for financing the
payment of legal fees associated with participation in a dumping case.
We see no merit to the argument that, since we do not deduct cash
deposits from U.S. price, we should also not deduct financing expenses
that are arbitrarily associated with cash deposits. To draw an analogy
which shows why this logic is flawed, we also do not deduct corporate
taxes from U.S. price; however, we would not consider a reduction in
selling expenses to reflect financing alleged to be associated with
payment of such taxes.
Finally, we also determine that we should not use an imputed amount
that would theoretically be associated with financing of cash deposits.
There is no real opportunity cost associated with cash deposits when
the paying of such deposits is a precondition for doing business in the
United States. Like taxes, rent, and salaries, cash deposits are simply
a financial obligation of doing business. Companies cannot choose not
to pay cash deposits if they want to import nor can they dictate the
terms, conditions, or timing of such payments. By contrast, we impute
credit and inventory carrying costs when companies do not show an
actual expense in their records because companies have it within their
discretion to provide different payment terms to different customers
and to hold different inventory balances for different markets. We
impute costs in these circumstances as a means of comparing different
conditions of sale in different markets. Thus, our policy on imputed
expenses is consistent; under this policy, the imputation of financing
costs to actual expenses is inappropriate.
Comment 20: Timken contends that the Department should recalculate
NTN's U.S. credit expense because NTN reported a customer-specific
average credit expense rather than a transaction-specific credit
expense. Timken argues that NTN has provided the necessary information
on the record to recalculate a transaction-specific credit expense.
Further, Timken claims that, based on a comparison of the credit
amounts reported by NTN to those credit amounts which are derived when
using NTN's reported transaction-specific sales payment dates, it is
apparent that NTN's customer-specific methodology produces distortive
results.
[[Page 2572]]
NTN argues that the Department has upheld its methodology in
several past proceedings and has verified the accuracy of NTN's data,
not only in this review, but in previous reviews as well.
Department's Position: We agree with Timken with regard to NTN's
CEP sales. We have data on the record which allows us to calculate a
transaction-specific credit expense for CEP sales. Therefore, we have
recalculated NTN's credit expense using the dates of payment which NTN
reported.
Comment 21: Timken contends that NTN improperly excluded certain
expenses from its reported U.S. indirect selling expenses and states
that, for the purpose of final results, the Department should deduct
these expenses from CEP.
NTN argues that not only has the Department rejected Timken's claim
in past reviews, determining that NTN's reporting methodology was
accurate, but in this current review the Department thoroughly verified
this methodology and again found no discrepancies.
Department's Position: We agree with the respondent. As NTN has
explained and as we have repeatedly accepted, because certain of its
U.S. expenses were incurred solely for non-scope merchandise, in order
to ensure an accurate allocation of its U.S. expenses, NTN first
removed all such expenses from its pool of U.S. expenses. The remaining
expenses which were incurred for either scope or non-scope merchandise,
but cannot be specifically linked to either scope or non-scope
merchandise by NTN, were then allocated to scope and non-scope
merchandise. We have consistently determined this methodology to be
reasonable not only in past reviews of these TRB cases but in past
reviews of AFB cases as well (see 92/93 TRB Final and AFBs VII). In
addition, for this review, we verified NTN's U.S. expenses and found no
discrepancies (see Department's U.S. Verification Report for NTN, June
3, 1997, at 10) (NTN U.S. Report). Because NTN has not altered its
methodology for this current review and because the record in this
review indicates no reason for a different methodology to be used, we
have again accepted this methodology for these final results.
Comment 22: Timken alleges that certain of NTN's claimed EP
transactions are actually CEP transactions when examined in light of
the criteria for defining EP transactions as outlined in the
Department's Antidumping Manual. Petitioner states that EP sales must
meet the following criteria; (1) the sales transaction occurs prior to
importation; (2) the merchandise in question was shipped directly from
the manufacturer to the unrelated buyer, without being introduced into
the inventory of the related selling agent; (3) this was a customary
commercial channel for sales of this merchandise between the parties
involved; and (4) the related agent in the United States acted only as
a processor of the sales-related documentation and a communication link
with the unrelated U.S. buyer. Timken argues that, when the activities
of the related selling agent exceed the functions normally associated
with a related agent involved with EP sales, the sale cannot be
classified as an EP sale. For example, petitioner asserts that the
Department's Antidumping Manual (1994) states that ``the extent of the
related selling agent's normal functions, such as the administration of
warranties, advertising, extensive in-house technical assistance, and
the supervision of further manufacturing, may indicate that the agent
is more than the ``paper-pusher'' envisioned for purchase price sales''
(see Antidumping Manual, Chapter 7 at 4-5). Timken claims that evidence
on the record indicates that NTN's U.S. subsidiary, NBCA, performed
numerous functions which exceeded those normally associated with a
related agent involved in EP sales transactions. As a result, Timken
concludes, the Department should reclassify all of NTN's reported EP
sales as CEP sales.
NTN argues that, as the Department has verified in this current and
in previous TRB reviews, (1) there were no sales negotiations between
its unaffiliated EP customer and NBCA, (2) NBCA did not receive any
purchase orders from the unaffiliated customer, (3) NBCA did not
generate any invoices for unaffiliated customers, (4) NBCA never took
title to the merchandise in question, (5) NBCA never carried the
merchandise in its inventory, and (6) NBCA never acted as the importer
of record. In summary NTN states, these sales were clearly made in
Japan and clearly met the Department's definition of EP sales
transactions. Furthermore, NTN adds, the record demonstrates that NBCA
acted solely as a communications link and a processor of documents with
respect to U.S. EP sales.
Department's Position: We agree with NTN. Timken lists the criteria
the Department considers when deciding whether sales should be
classified as EP or CEP. Of the criteria outlined, however, the only
area that Timken questions is the activities of NBCA's liaison office.
As NTN notes, there is no information on the record suggesting that
NBCA is the seller for the sales in question or that NTN performed
activities that exceeded those normally associated with the role of a
related agent in EP transactions. Moreover, we verified NTN's response
for this review and found that NBCA's functions with respect to EP
sales were limited to being a communications link and a processor of
documents. Therefore, we have not reclassified NTN's EP sales for these
final results.
Comment 23: Due to the proprietary nature of the comments we
received regarding NTN USA's expenses, we are unable to state the
concerns expressed by both NTN and Timken and our position with
response to this issue. Therefore, for a detailed explanation of this
issue and our position, please see the proprietary analysis memorandum
for NTN dated January 7, 1998.
4. Cost of Production (COP) and Constructed Value (CV)
Comment 24: NTN claims that the Department's preliminary results
adjustment to COP and CV for affiliated-party inputs is distortive and
should be eliminated. NTN argues that the Department's adjustment,
which was calculated based on sampled transactions, does not accurately
reflect the experience of all sales and, by applying the results of the
sample to the total population of affiliated-party purchases, the
Department, in essence, used facts available when sufficient
information was clearly available on the record. NTN further argues
that the Department misinterpreted section 773(f)(2) and (3) of the Act
by determining that an adjustment was necessary. NTN claims that
section 773(f)(2) of the Act addresses the circumstances under which
the Department should disregard some transactions, but it does not
mention the Department's practice of choosing the highest of either the
cost of production, transfer prices, or market prices when calculating
COP or CV. NTN additionally claims that Section 773(f)(3) of the Act
requires the Department to have reasonable grounds to believe that
inputs are being sold at less than the COP before it may use COP
information. NTN contends that, because the record demonstrates that
affiliates sold many inputs to NTN above COP, it is incorrect for the
Department to adjust the costs for all TRBs which contained affiliated-
party inputs.
NTN also asserts that, assuming the Department was correct in
making an adjustment for affiliated-party inputs, it should use a more
reasonable recalculation methodology such as the weighted-average
difference between
[[Page 2573]]
COP and transfer price for all inputs sold to NTN. According to NTN, by
adjusting all sales which had an affiliated-party input, the Department
added additional profit to those inputs which already included profit.
Therefore, NTN concludes that the Department should use NTN's
affiliated-party input data as reported.
The petitioner contends that the Department acted in accordance
with section 773(f)(2) and (3) of the Act and that NTN failed to
demonstrate that the Department's adjustments produced distorted
results. According to the petitioner, section 773(f)(2) and (3) of the
Act states that the Department may use information available in
circumstances such as those which exist with respect to NTN in this
review and that the Department has the right to use discretion in
selecting the highest of (1) the transfer price from an affiliated
party, (2) the COP for the input, or (3) the price from the
unaffiliated party. Timken disputes NTN's interpretation of section
773(f)(3) of the Act, stating that the statute does not require the
Department to act only if it is able to determine that all inputs have
been priced below COP. Rather, Timken argues, the Department may act
when it has reasonable grounds to believe or suspect that an amount
represented as the value of an affiliated-party input is less than the
COP of the input. Moreover, the petitioner asserts, the Department
acted reasonably in making its preliminary adjustment because it had
limited data regarding NTN's affiliated-party inputs. Thus, the
Department reasonably determined that the problem it had identified was
likely to affect all models with affiliated-party inputs. Finally,
Timken claims, for each TRB part number where the COP of the
affiliated-party input was greater than the transfer price, the
Department should increase COP and CV by an amount equal to the
difference between transfer price and the COP.
Department's Position: We disagree with NTN that our adjustment to
increase certain transfer prices to equal a market price is flawed. The
Department tested affiliated-party inputs on a sample basis, and
applied the results of the sample to the total population of
affiliated-party transactions. Our adjustment relied on affiliated-
party factors provided by NTN in its COP and CV database and it
accounted for the fact that only certain inputs obtained from certain
affiliates did not reflect a market value. The preamble of section
351.407 of the Final Rule at 27296 and 27413 leaves conducting an
arm's-length test of the transfer price to the Department's discretion
depending on the facts and circumstances of the case. In this instance,
NTN provided the transfer prices and cost information for its major
inputs. We examined this information on a sample basis and determined
that the company's reported amounts were not less than its respective
COP, as required by section 773(f)(3) of the Act. NTN also provided a
market value for identical or similar inputs obtained from or sold to
non-affiliated parties to establish that the transfer price was
comparable to the market price. We then examined this information on a
sample basis and determined that in certain instances the company's
reported transfer prices did not reflect a market price, as required by
section 773(f)(2) of the Act. As noted on page 24 of the June 13, 1997
cost verification report, NTN could not explain the difference between
the transfer price and the market price. Thus, for the preliminary
results we used the results of our samples to increase the
manufacturing costs of the control numbers NTN identified as including
related-party inputs.
We also disagree with NTN's contention that it is not appropriate
for the Department to rely on section 773(f)(2) and (3) of the Act in
this instance. We note that section 351.407 (a) and (b) of the Final
Rule, at 27296 and 27413, sets forth certain rules that are common to
the calculation of CV and COP. This section states that for the purpose
of section 773(f)(3) of the Act the Department will determine the value
of a major input purchased from an affiliated person based on the
higher of: (1) the price paid by the exporter or producer to the
affiliated person for the major input; (2) the amount usually reflected
in sales of the major input in the market under consideration; or (3)
the cost to the affiliated person of producing the major input.
Furthermore, we have relied on this methodology in Final Results of
Antidumping Duty Administrative Review; Certain Corrosion-Resistant
Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate
From Canada, 62 FR 18449, 18457 (April 15, 1997), AFBs VI at 2115, and
the 92/93 TRB Final. In each of these review's final results, the
Department determined that 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 party, the market price
between unaffiliated persons involving the major input, or the
affiliated supplier's cost of producing this input.
Accordingly, for the final results we adjusted NTN's reported costs
to account for the difference between the transfer price and market
value for inputs purchased from affiliated parties based on the
adjustment factor used in the preliminary results.
Comment 25: Petitioner states that the Department should ensure
that the calculation of COP and CV includes certain non-operating
expenses (e.g., certain write-offs, depreciation of idle equipment,
foreign currency gains and losses, etc.) NSK, on the other hand,
contends that the exclusion of these non-operating expenses is
permissible and is based on past Department practice.
Department's Position: For the final results we have relied on
NSK's reported general expense factor that excludes certain non-
operating income and expenses. We reviewed the information on the
record and noted that NSK included depreciation of idle equipment in
its COP. As for the other non-operating expenses identified by the
petitioner, we note that NSK excluded them from the calculation of COP.
However, these non-operating expenses are minor expenses. Thus,
including them in the calculation of the dumping margin has a de
minimis effect on the calculation of NSK's margin.
Comment 26: NSK argues that, in accordance with section 773(f) of
the Act, the Department may only substitute affiliated-party costs for
a respondent's reported transfer prices for affiliated-party inputs for
purposes of sections 773(b) and 773(e) of the statute. However, NSK
asserts, in the preliminary results the Department also substituted
affiliated-party cost data when it determined whether the foreign like
product was commercially comparable to each U.S. model, when it
calculated a difference-in merchandise (difmer) adjustment for non-
identical U.S. and home market matches, and when it recalculated NSK's
reported U.S. inventory carrying costs prior to deducting this expense
from CEP. Citing Ad Hoc Comm, of AZ-NM-TX-FL Producers of Grey Portland
Cement v. United States, 13 F.3d 398, 401 (Fed. Cir. 1994), NSK
contends that where Congress has included specific language in one
section of the statute but has omitted it from another, related section
of the same statute, it is generally presumed that Congress intended
the omission. Therefore, NSK argues, because the statutory authority to
determine whether the foreign like product is commercially comparable
to the U.S. merchandise, to adjust NV for difmer, and to adjust CEP for
U.S. inventory carrying costs is found in sections 771(16), 773(a)(6),
and 772(d) of the Act, respectively, and not in
[[Page 2574]]
section 773(f), and because section 773(f) specifically limits the
substitution of related-party costs to sections 773(b) and 773(e) of
the statute, the antidumping law clearly does not permit the Department
to use affiliated-party cost data to determine commercial
comparability, to calculate the difmer adjustment, or to calculate an
adjustment to CEP for inventory carrying costs. Therefore, NSK
concludes, the Department should rely on NSK's reported cost data
without regard to affiliated-supplier cost data in all instances except
where specifically authorized by the statute.
NSK also asserts that the substitution of affiliated-party costs
when determining commercial comparability constitutes an alteration of
the Department's model-match methodology and prevents respondents from
taking advantage of the Department's TRB Option II reporting
methodology. NSK argues that it is not only difficult for a respondent
to obtain affiliated-party cost data in time to integrate it into the
model match, but it is often the case that an affiliated supplier
refuses to provide the respondent with its cost data. As a result, NSK
contends, through no fault of its own, a respondent's inability to
obtain affiliated-party cost data may result in the inability to
compare appropriate models and in the Department's use of total facts
available.
Timken argues that, contrary to NSK's assertions, there is nothing
in the statutory provisions cited by NSK which restricts the
Department's discretion to use adjusted cost data for purposes other
than sections 773(b) and 773(e) of the statute. For example, Timken
maintains, section 771(16) of the Act, the ``model-match'' provision,
only instructs the Department to select comparison merchandise that is
``like'' the U.S. subject merchandise in component material and uses
and is ``approximately equal in commercial value,'' and does not
specify the methodology by which the Department is to select the
similar comparison merchandise or determine commercial comparability.
Rather, citing the CAFC's decision in Koyo Seiko v. United States, 66
F.3d 1204 (Fed. Cir. 1995), Timken contends that, because Congress has
implicitly delegated authority to the Department to determine and apply
a model-match methodology, it was not inappropriate or unlawful for the
Department to rely on affiliated-party cost data in making its
commercial comparability determination for NSK.
Likewise, Timken argues that the provision which underlies the
Department's difmer adjustment, section 773(a)(6) of the Act, does not
detail the precise methodology that the Department must use to make
such an adjustment. Hence, Timken states, Congress has again implicitly
delegated authority to the Department to formulate an appropriate
methodology and the Department reasonably determined that it was
appropriate to use NSK's affiliated-party cost data when calculating
this adjustment.
Timken also asserts that section 772(d) of the Act does not detail
the methodology the Department is to use to calculate ICC adjustments
to CEP but only lists the kinds of expenses that may be deducted from
CEP. Therefore, Timken argues, Congress has once again implicitly
delegated authority to the Department to select an appropriate
methodology to calculate ICC and other expenses.
Finally, Timken argues, the Department's substitution of
affiliated-party cost data when determining the commercial
comparability of NSK's home market comparison merchandise is not likely
to have a significant impact on the Department's model matches.
Moreover, Timken concludes, not only are respondents required to supply
data on multiple models for matching under the TRB Option II reporting
methodology, but any respondent concerned about the potential effect on
the model-match may revise its submission accordingly.
Department's Position: We agree with Timken. In our preliminary
results for NSK, in accordance with section 773(f) of the Act, we
recalculated NSK's reported TRB-specific COP and CV to include the COP
of an affiliated-party input if the transfer price NSK reported for
that input was less than the COP for that input. We note that COP and
CV are composed of several components. The adjustment we made for NSK's
affiliated-party inputs is actually an adjustment to its reported
material costs. Because material costs are a component of the variable
cost of manufacture (VCOM) and the total cost of manufacture (TCOM),
and these in turn are components of COP and CV, when we adjusted NSK's
reported material costs we not only recalculated its COP and CV, but we
effectively recalculated VCOM and TCOM components of COP and CV as
well.
NSK's assertions overlook the fact that the Department does not
rely on a respondent's reported costs solely for the calculation of COP
and CV. We also use cost information in a variety of other aspects of
our margin calculations. For example, when determining the commercial
comparability of the foreign like product in accordance with section
771(16) of the Act, it has been our long-standing practice to rely on
the product-specific VCOMs and TCOMs for U.S. and home market
merchandise. Likewise, when calculating a difmer adjustment to NV in
accordance with section 773(b) of the Act, it has been our consistent
policy to calculate the adjustment as the difference between the
product-specific VCOMs for the U.S. and home market merchandise
compared (see, e.g., 92-93 TRB Prelim at 57631). Furthermore, we have
permitted respondents to calculate their reported ICC on the basis of
TCOM.
As a result, if we determine a component of a respondent's COP and
CV is distortive for one aspect of our analysis, it is reasonable to
make the same determination with respect to those other aspects of our
margin calculations where we relied on the identical cost data. To do
otherwise would not only produce distortive results but would be
contrary to our mandate to administer the dumping laws as accurately as
possible.
NSK incorrectly asserts that section 773(f) of the Act specifically
limits substitution of affiliated-party cost data to our analysis under
sections 773(b) and 773(e). In fact, section 773(f) indicates that for
purposes of subsections (b) and (e) we may substitute certain cost data
but 773(f) does not prohibit this kind of substitution for other
purposes. None of the sections of the statute (771(16), 772(d), and
773(a)(6)), for which NSK argues that we may not substitute affiliated-
party costs, explicitly precludes the incorporation of corrected cost
data. For example, the only guidance provided by section 771(16) of the
Act is that the comparison merchandise be ``like'' the U.S. subject
merchandise in terms of component material and uses and ``approximately
equal in commercial value.'' Therefore, as Timken points out, section
771(16) of the Act does not specify a particular methodology for
determining appropriate matches. Rather, the statute implicitly
delegates the selection of an appropriate methodology to the
Department.
Likewise, section 773(a)(6) of the Act grants us the same
discretion to determine a suitable method to calculate a difmer
adjustment and does not restrict our selection of an appropriate
methodology to any particular approach. In addition, with respect to
our recalculation of NSK's U.S. ICC, section 772(d) of the Act only
specifies what adjustments are to be made to determine CEP and does not
provide details regarding the precise
[[Page 2575]]
calculations for each particular adjustment.
Accordingly, we have not altered our model-match, difmer, or
calculation of NSK's ICC for these final results.
5. Miscellaneous Comments Related to Duty Absorption, Sample Sales,
Level of Trade, and the Arm's-Length Test
Comment 27: Timken contends that the Department's decision not to
make an adjustment to CEP to account for indirect selling expenses and
ICC incurred in Japan because expenses were not related specifically to
commercial activity in the United States was incorrect. Timken argues
that under pre-URAA law the Department deducted all selling expenses
incurred in exporting to the United States and that the new law was not
intended to change the Department's practice. Timken contends that the
SAA clearly indicates that Congress did not intend to change the old
law insofar as the Department's prior treatment of selling expenses was
concerned. Further, Timken asserts that under the Department's new
regulations (19 CFR 351.402(b), 62 FR at 27411), CEP should be adjusted
if the expenses in question are related to the sale to the unaffiliated
customer in the United States but not if they are only associated with
the sale to the U.S. affiliate. Therefore, Timken argues that the
Department should implement the SAA and the understanding Congress
intended by deducting export selling expenses incurred in Japan from
the calculation of CEP.
NTN, NSK, Koyo, and Fuji assert that the SAA fully supports the
Department's decision not to adjust CEP to account for indirect selling
expenses and ICC incurred in Japan and cite to section 772(d) of the
Act which states that ``constructed export price will be calculated by
reducing the price of the first sale to an unaffiliated customer in the
United States by the amount of the following expenses (and profit)
associated with economic activities occurring in the United States.''
SAA at 823. Further, respondents argue that the Department has used the
same methodology in Tapered Roller Bearings and Parts Thereof, Finished
and Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or
Less in Outside Diameter, and Components Thereof, From Japan; Final
Results of Antidumping Duty Administrative Reviews and Termination in
Part, 62 FR 11825, 11834 (March 13, 1997) (94-95 TRB Final) and AFBs
VII at 54043 and 54055, in which the Department concluded that export
selling expenses are not specifically associated directly with
commercial activity in the United States.
Department's Position: As we stated in the 94-95 TRB Final at
11825, 11834 and AFBs VI at 2124, we will deduct from CEP only those
expenses associated with economic activities in the United States which
occurred with respect to sales to the unaffiliated U.S. customer. We
found no information on the record for this review period to indicate
that the indirect selling expenses and ICC for the respondents that
were incurred in their respective home markets were incurred on sales
to the unaffiliated customer in the United States.
In addition, it is clear from the SAA that under the new statute we
should deduct from CEP only those expenses associated with economic
activities in the United States. 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 deducted from CEP only those expenses associated with commercial
activities in the United States. Timken's reference to the SAA to
support the proposition that the new law is not intended to change our
practice in this regard is misplaced. Timken 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 foreign seller
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.'' It should be noted that assumptions are different than
selling expenses incurred in the home market in selling to the
affiliated importer, which 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 (see AFBs VI at 2124). In
this case respondent's reported selling expenses at issue were not
associated with commercial activity in the United States. Rather, the
expenses at issue were incurred prior to the commercial activity in the
United States. Therefore, because the respondents' reported export
selling expenses and ICC did not represent commercial activities
performed in the United States, we did not deduct these expenses from
CEP for these final results.
Duty Absorption
As indicated in the introduction to this notice, section 751(a)(4)
of the Act provides for the Department, if requested, to determine
whether antidumping duties have been absorbed by a foreign producer or
exporter subject to the order if the subject merchandise is sold in the
United States through an importer who is affiliated with such foreign
producer or exporter, and authorizes this type of investigation during
an administrative review initiated two years or four years after
publication of an order.
For transition orders as defined in section 751(c)(6)(C) of the Act
(i.e., orders in effect as of January 1, 1995), section 351.213(j)(2)
of the Department's regulations provides that the Department will make
a duty-absorption determination, if requested, for any administrative
review initiated in 1996 or 1998. See 62 FR 27296, 27394 (May 19,
1997). Although these antidumping regulations are not binding upon the
Department for these TRB reviews, they do constitute a public statement
of how the Department expects to proceed in construing section
751(a)(4) of the Act. This approach ensures that interested parties
will have the opportunity to request a duty-absorption determination
prior to the time of the sunset review of the order under section
751(c) of the Act on entries for which the second and fourth years
following an order have already passed. Because this finding and order
on TRBs have been in effect since 1976 and 1987, these are transition
orders in accordance with section 751(c)(6)(C) of the Act; therefore,
based on the policy stated above, the Department will consider a
request for a duty-absorption determination during a review initiated
in 1996 or 1998. On December 11, 1996, Timken requested that the
Department determine, with respect to various respondents, whether
antidumping duties had been absorbed during the POR. Since these
reviews were initiated in 1996 and such a request was made, we have
made a duty-absorption determination as part of these administrative
reviews.
In our preliminary results of review we calculated the percentage
of sales by a U.S. affiliate with dumping margins for each exporter. We
stated that, with respect to those companies (with affiliated
importer(s)) that had dumping margins, we would rebuttably presume that
the duties will be absorbed for those sales which were dumped.
Subsequent to the preliminary results, we received comments regarding
our duty-absorption determination but have
[[Page 2576]]
not changed our presumption for these final results.
Comment 28: NSK, NTN, and Koyo claim that the Department has
interpreted section 351.213(j) of its regulations incorrectly as
providing for duty-absorption inquiries in the second and fourth years
following a sunset review after which an order is continued and in
periods such as the seventh and ninth reviews for transition orders.
Citing the principle of statutory construction ``expressio unius est
exclusio alterius,'' wherein there is an inference that all omissions
should be understood as exclusions, respondents conclude that the lack
of explicit Congressional approval for duty-absorption inquiries for
the latter transition orders shows that Congress did not intend for
duty-absorption inquiries to be initiated more than four years after
publication of an antidumping order. Finally, respondents contend that
the Department is incorrect in justifying the duty-absorption inquiry
by considering the TRB order and finding as transitional in accordance
with section 751(c)(6)(C) of the Act. According to respondents, section
751(c)(6)(C) of the Act only applies to ``sunset'' reviews.
Timken claims that not only does narrowing the applicability of the
duty-absorption inquiries to only the second and fourth years of sunset
reviews unduly limit the effectiveness of the statute, but there is no
indication that sections 751(a)(4) or 751(c)(6)(D) of the Act intended
such a narrow application. Timken's response to the legal principle of
``all omissions should be understood as exclusions'' is that it has
little force in the administrative setting because deference is granted
to an agency's interpretation of a statute, unless Congress has
directly spoken to the question at issue (citing Mobile Communications
Corp. Of America v. F.C.C., 77 F.3d 1399, 1404-1045). Timken further
argues that ``whether the specification of one matter means the
exclusion of another is a matter of legislative intent for which one
must look at the statute as a whole'' (citing Massachusetts Trustees of
Eastern Gas & Fuel Associates v. United States, 312 F.2d 214, 220 (1st
Cir. 1963) (citing authority), aff'd, 377 U.S. 235 (1964)).
Department's Position: As for the time frame in which we are
conducting these reviews, section 351.213(j)(1) of our regulations, in
accordance with section 751(a)(4) of the Act, provides for the conduct,
upon request, of duty-absorption inquiries in reviews initiated two and
four years after the publication of an antidumping duty order (see
e.g., AFBs VII at 54043 and 54044). The preamble to the proposed
antidumping regulations explains that reviews initiated in 1996 will be
considered initiated in the second year and reviews initiated in 1998
will be considered initiated in the fourth year (see Final Rule at
7317). Because the TRB order and finding have been in effect since 1987
and 1976, respectively, these are transitional in accordance with
section 751(c)(6)(C) of the Act (see e.g., AFBs VII at 54044 and
54075). This being a review initiated in 1996 and a request having been
made, we have made duty-absorption determinations as part of these
administrative reviews.
Comment 29: Respondents argue that measuring duty absorption based
on information not known until the completion of an administrative
review is unfair. More specifically, they claim that the nature of the
review process prevents them from determining the U.S. price increase
necessary to pass dumping duties on to customers because the ultimate
liability is not determined until the end of a review. Respondents
argue further that, other than dumping duties paid at the time of
entry, they have no means of estimating the price increases necessary
to pass dumping duties on to the customers.
Finally, respondents argue that the Department cannot presume
``rebuttably'' that duty absorption on sales to a U.S. affiliate exists
if the record does not contain evidence of the U.S. purchaser's
assumption of liability for ultimate assessment. Respondents claim that
the Department's rebuttable presumption ignores commercial reality in
that no U.S. buyer would agree to assume liability for an
unascertainable amount of duties. Respondents claim that the Department
has not provided any reason for adopting the presumption of duty
absorption and that the presumption is not allowable by law.
Timken agrees with the Department's approach in using the
rebuttable presumption that the duties for sales that were dumped will
be absorbed. Timken argues that the Department's examination of whether
duty absorption occurred by reviewing data on the volume of dumped
imports and dumping margins follows the guidelines of the SAA. Timken
argues that the Department's decision was reasonable, given the lack of
record evidence that the first unrelated customer will be responsible
for paying the duty that is ultimately assessed, the consistency of the
Department's dumping determinations, and the fact that the Department
gives the respondents the opportunity to provide evidence that the
unaffiliated purchasers will pay the assessed duty.
Department's Position: We agree with Timken. An investigation as to
whether there is duty absorption does not simply involve publishing the
margin in the final results of review. As the Department noted in the
preliminary results of these reviews, the determination that duty
absorption exists is also based on the lack of any information on the
record that the first unaffiliated customer will be responsible for
paying the duty that is ultimately assessed. Absent such an irrevocable
agreement between the affiliated U.S. importer(s) and the first
unaffiliated customer, there is no basis for the Department to conclude
that the duty attributable to the margin is not being absorbed (see,
e.g., AFBs VII at 54043 and 54044).
As was the case with the most recently completed review of AFBs,
this is an instance where the existence of a margin raises an initial
presumption that the respondent and its affiliated importer(s) are
absorbing the duty. As such, the burden of producing evidence to the
contrary shifts to the respondent (see Creswell Trading Co., Inc. v.
United States, 15 F.3d 1054 (CAFC 1994)). Here, the respondents have
failed to place evidence on the record, despite being given ample time
to do so, in support of their position that they and their affiliated
importer(s) are not absorbing the duties (see, e.g., AFBs VII at 54043
and 54044).
Comment 30: Koyo and NSK argue that, even if a duty-absorption
inquiry is lawful, the Department's duty-absorption methodology fails
to measure duty absorption on respondents' U.S. sales database as a
whole. Respondents claim that by not considering sales made at non-
dumped prices the Department fails to get an accurate measure of
whether duty absorption has occurred.
Timken responds that taking into consideration negative margins in
a duty-absorption inquiry may indirectly lead to increased levels of
dumping. Timken asserts that while sales priced above ``dumping
levels'' may in fact allow an importer to engage in duty absorption,
this does not change the likelihood that dumping will increase upon
revocation of an order.
Department's Position: We disagree with respondents that we should
aggregate negative and positive margins in our duty-absorption
determination. The Department treats so-called ``negative'' margins as
being equal to zero in calculating a weighted-average margin because
otherwise exporters would be able to mask their dumped
[[Page 2577]]
sales with non-dumped sales (see Final Determination of Sales at Less
Than Fair Value; Professional Electric Cutting Tools and Professional
Electric Sanding/Grinding Tools from Japan, 58 FR 30149 (May 26,
1993)). It would be inconsistent on one hand to calculate margins using
only positive-margin sales, which is the Department's practice, and
then argue, in effect, that there are no margins for duty-absorption
purposes because a deduction from the total duties determined should be
made for sales without margins (see AFB VII at 54043 and 54076, citing
Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From the
United Kingdom; Final Results of Antidumping Duty Administrative
Review, 62 FR 18744, 18745 (April 17, 1997)). However, non-dumped sales
affect the percentage of sales through affiliated importers which are
dumped and therefore affect the results of the absorption inquiry.
Level of Trade (LOT)
As set forth in section 773(a)(7) of the Act and in the SAA at 829-
831, to the extent practicable we have determined NV based on sales at
the same LOT as the LOT of the EP and CEP sales. When we were unable to
find comparison sales at the same LOT as the EP or CEP sales, we
compared the U.S. sales to sales at a different LOT in the comparison
market. We determined the LOT of EP sales on the basis of the starting
prices of sales to the United States. We based the LOT of CEP sales on
the price in the United States after making the CEP deductions under
section 772(d) of the Act but before making the deductions under
section 772(c) of the Act. Where home market prices served as the basis
of NV, we determined the NV LOT based on starting prices in the NV
market. Where NV was based on CV, we determined the NV LOT based on the
LOT of the sales from which we derived SG&A and profit for CV. In order
to determine the LOT of U.S. sales and comparison sales, we reviewed
and compared distribution systems, including selling functions, classes
of customer, and the extent and level of selling expenses for each
claimed LOT. Customer categories such as distributor, original
equipment manufacturer (OEM), or wholesaler are commonly used by
respondents to describe LOTs but are insufficient to establish a LOT.
Different LOTs necessarily involve differences in selling functions,
but differences in selling functions, even substantial ones, are not
alone sufficient to establish a difference in the LOTs. Different LOTs
are characterized by purchasers at different stages in the chain of
distribution and sellers performing qualitatively or quantitatively
different functions in selling to them. See AFBs VI at 2105.
As in the preliminary results, where we established that the
comparison sales were made at a different LOT than the sales to the
United States, we made a LOT adjustment if we were able to determine
that the differences in LOTs affected price comparability. We
determined the effect on price comparability by examining sales at
different LOTs in the comparison market. Any price effect must be
manifested in a pattern of consistent price differences between foreign
market sales used for comparison and foreign market sales at the LOT of
the export transaction. To quantify the price differences, we
calculated the difference in the average of the net prices of the same
models sold at different LOTs. We used the average difference in net
prices to adjust NV when NV was based on a LOT different from that of
the export sale. If there was a pattern of no price differences, the
differences in LOTs did not have a price effect and, therefore, no
adjustment was necessary.
Section 773 of the Act provides for an adjustment to NV when NV is
based on a LOT different from that of the CEP if the NV level is more
remote from the factory than the CEP and if we are unable to determine
whether the difference in LOTs between the CEP and NV affects the
comparability of their prices (see, e.g., AFBs VII at 31566 and 31572).
This latter situation can occur when there is no home market LOT
equivalent to the U.S. LOT or where there is an equivalent home market
level but the data are insufficient to support a conclusion on price
effect. This adjustment, the CEP offset, is identified in section
773(a)(7)(B) of the Act and is the lower of the following:
The indirect selling expenses on the home market sale, or
The indirect selling expenses deducted from the starting
price used to calculate CEP.
The CEP offset is not automatically granted each time we use CEP
(see, e.g., Notice of Final Determination of Sales at Less Than Fair
Value; Certain Cut-to-Length Carbon Steel Plate from South Africa, 62
FR 61731, 61732 (November 19, 1997)). The CEP offset is made only when
the LOT of the home market sale is more advanced than the LOT of the
CEP sale and there is not an appropriate basis for determining whether
there is an effect on price comparability.
We determined that for respondents Koyo and NSK there were two home
market LOTs and one U.S. LOT (i.e., the CEP LOT). For Fuji we
determined that one LOT existed in the home market and three distinct
LOTs existed in the U.S. market (the CEP LOT and two EP LOTs). Because
there was no home market LOT equivalent to any of the U.S. LOTs for
Fuji, NSK, and Koyo, and because NV for these firms represented a price
more remote from the factory than the CEP, for these firms we made a
CEP offset adjustment to NV in our CEP comparisons (see Certain
Internal-Combustion Industrial Fork Lift Trucks from Japan; Final
Results of Antidumping Duty Administrative Reviews, 62 FR 5592, 5608
(February 6, 1997)).
We determined that for MC a single LOT existed in the third-country
market and that a single EP LOT existed in the U.S. market. Based on
our comparison of the U.S. EP LOT to the third-country LOT, we
determined that the third-country LOT was the same as the EP LOT. As a
result, we made no LOT adjustment.
For NTN we found that there were three home market LOTs and two (EP
and CEP) LOTs in the United States. Because there were no home market
LOTs equivalent to NTN's CEP LOT, and because NV for NTN represented a
price more remote from the factory than the CEP, we made a CEP offset
adjustment to NV in our CEP comparisons. We also determined that NTN's
EP LOT was equivalent to one of its LOTs in the home market. Because we
determined that there was a pattern of consistent price differences, we
made a LOT adjustment to NV for NTN in our EP comparisons where the
U.S. EP sale matched to a home market sale at a different level of
trade.
Comment 31: Koyo, NTN, and NSK contend that the Department's
practice with regard to LOTs effectively precludes a LOT adjustment to
NV for CEP comparisons and is thus contrary to law and Congressional
intent.
NSK contends that there is no statutory requirement that a LOT
adjustment be based on the full difference in prices between the home
market comparison LOT and the HM LOT equivalent to the CEP LOT and
suggests that a partial LOT adjustment is contemplated by the statute.
NSK contends that the plain reading of the statute requires that the
Department must adjust NV for CEP sales for the difference between
price levels at the LOTs which do exist in the home market. Therefore,
NSK argues the Department should at least make a partial LOT adjustment
when comparing NSK's CEP sales to home market aftermarket (AM) sales
which, it contends, are more advanced than HM OEM sales because prices
are higher at
[[Page 2578]]
the HM AM LOT. Finally, NSK contends that the Department should grant
NSK a partial LOT adjustment equal to the price difference between home
market AM sales and OEM sales.
Koyo asserts that it and other respondents have proposed to the
Department alternative methods by which the Department could construct
an appropriate home market LOT by deducting from NV those home market
expenses that correspond to the expenses that are deducted from CEP,
but that the Department has failed to provide a reasonable explanation
for rejecting the proposals.
NTN states that the Department should make a price-based LOT
adjustment when the LOT of the CEP sale is different from the LOT of
the comparison foreign like product, and that the LOT of the CEP sale
should be based on the sale to the first unaffiliated U.S. customer
prior to the deduction of expenses pursuant to section 772(d) of the
Act. NTN asserts that such an approach is not only consistent with the
Department's model-match methodology, but evidence on the record
demonstrates that NTN's performance of different selling activities at
each LOT affected price comparability. NTN argues that it is
unreasonable for the Department to refuse to make a price-based
adjustment when there are significant differences in prices between
home market LOTs and U.S. sales are matched to home market sales at
LOTs different than the U.S. sale.
Timken contends that under section 773(a)(7)(A)(ii) of the Act,
Congress intended for a LOT adjustment to be made only if it was
``demonstrated to affect price comparability, based on a pattern of
consistent price differences between sales at different LOT's in the
country in which normal value is determined.'' Timken contends that the
adjustment cannot be made unless a LOT equivalent to the U.S. LOT
exists in the home market. Therefore, Timken claims, if the data
available to the Department does not allow the demonstration required
by section 773(a)(7)(A)(ii) of the Act, the statute does not permit a
LOT adjustment and allows only a CEP offset.
Further, Timken argues that NSK's assertion that the Department
could have calculated a ``partial LOT adjustment'' for the difference
between the CEP LOT and the home market AM LOT on the basis of a
consistent pattern of price differences between the home market OEM and
AM LOTs is unfounded. Timken contends that where there is no home
market LOT comparable to the U.S. LOT, the statute does not authorize
the use of price differences between different home market LOTs to
substitute for calculated LOT adjustments. As a result, Timken
concludes, the Department should reject NSK's claim for the same
reasons it rejected the identical argument in AFBs VII at 54043 and
54056-57.
Department's Position: We disagree with respondents. Our
methodology does not preclude LOT adjustments to NV for CEP sales.
Rather, we do not make a LOT adjustment where the facts of the case do
not support such an adjustment. Based upon our examination of the
information on the record, for this review we found that no respondent
had a home market LOT equivalent to its CEP LOT. As a result, because
we lacked the information necessary to determine whether there is a
pattern of consistent price differences between the relevant LOTs, we
did not make a LOT adjustment for any of the respondents when we
matched a CEP sale to a sale of the foreign like product at a different
LOT. We disagree with NSK that we should make a ``partial LOT
adjustment'' because there is no provision in the statute for making
such a partial adjustment. We make a LOT adjustment when there is ``any
difference between the export price or constructed export price and the
[NV] that is shown to be wholly or partly due to a difference in LOT
between the export price or constructed export price and the normal
value.'' See section 773(a)(7)(A) of the Act. While NSK has interpreted
the phrase ``wholly or partly'' to justify a partial LOT adjustment, we
interpret this phrase to mean that we may make a LOT adjustment only if
part of the differences in prices between LOTs is attributable to the
difference in LOT. In other words, we need not demonstrate that no
factor other than LOT influenced a pattern of price differences. Thus,
we do not read into this language of the statute the authority to make
a LOT adjustment between two home market LOTs where neither level is
equivalent to the LOT of the U.S. sale.
We also disagree with Koyo that we should adopt one of the proposed
alternative methods by which we would ``construct'' home market LOTs.
We base home market LOTs on a respondent's actual experience in selling
in the home market. Therefore, because there is no statutory basis for
us to ``construct'' levels in the home market or elsewhere, we have not
used Koyo's claimed constructed NV LOT in order to calculate a LOT
adjustment for Koyo's CEP sales (see AFBs VII at 54040, 54047).
Furthermore, we disagree with NSK that its CEP sales should be
matched to its home market OEM sales before they are matched to home
market AM sales. Based upon our examination of the information on the
record, we found that no home market LOT for NSK had more selling
functions than another home market level. Rather, the home market LOTs
each involved different degrees of various selling functions. We
conclude that, for NSK and for respondents generally, while the
reported home market LOTs are different from one another, no home
market LOT is more advanced than any other based upon the evidence on
the record. We also disagree with NSK's assertion that, because its OEM
prices are generally lower than its AM prices, its OEM LOT is less
advanced than the distributor/aftermarket LOT. We determine whether one
LOT is more advanced than another on the basis of the selling functions
performed by a respondent with respect to the two LOTs. NSK's home
market OEM and AM sales are more advanced than the LOT of the CEP sales
because comparatively fewer selling functions are associated with the
CEP sales than are associated with sales to either of the other LOTs.
Therefore, we have not altered our LOT methodology.
Finally, we disagree with NTN. The definition of ``constructed
export price'' contained at section 772(d) of the 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'' EP. The adjustments we make to the starting
price, specifically those made pursuant to section 772(d) of the Act
(``Additional Adjustments for Constructed Export Price''), normally
change the LOT. Accordingly, we must determine the LOT of CEP sales
exclusive of the expenses (and associated selling functions) that we
deduct pursuant to this section (see, Certain Cold-Rolled Carbon Steel
Flat Products from the Netherlands; Final Results of Antidumping
Administrative Review, 62 FR 18475, 18480 (April 15, 1997)). As stated
earlier, because none of NTN's home market LOTs were equivalent to the
LOT of its CEP sales, we were unable to make a LOT adjustment for such
sales.
Comment 32: NTN contends that the Department should have relied on
its U.S. and home market selling expenses,
[[Page 2579]]
which were based on LOT, as reported, instead of reallocating these
selling expenses without regard to LOT. NTN argues that the Department
incorrectly relied on the CIT's decision in The Timken Company v.
United States, Slip Op. 96-86 (May 31, 1996)(Timken 1) as the basis for
its reallocation because the standards set forth in the Timken 1
decision are not only met by NTN's allocated expenses, but its original
reporting methodology is less distortive than the Department's
reallocation without regard to LOT. NTN further asserts that the
Department's reliance on Timken 1 is misplaced due to the fact that the
Department has previously indicated that NTN's reporting methodology is
within the parameters of the Timken 1 determination. For example, NTN
asserts, in 92/93 TRB Final at 57629 and 57636, the Department
determined that NTN's LOT-based reporting was not acceptable based
``solely on our discovery of a discrepancy in NTN's reported total U.S.
sales value for scope merchandise during the POR.'' NTN maintains that
it is clear from the language of the determination that the only reason
the Department rejected NTN's reported expenses was an alleged
discrepancy in reported numbers. NTN claims that not only is the
reporting methodology in this review identical to that in the above-
cited final results, but the Department found no discrepancies in this
methodology during its U.S. sales verification.
In addition, NTN contends that the Department determined that
different LOTs existed in the U.S. and Japanese markets for its sales
(see TRB Prelim at 47458-9), and that the decision to allocate certain
U.S. and home market expenses without regard to LOT voids the LOT
determination made in the preliminary results, insofar as the effect of
the different LOTs on price is lessened by this reallocation.
Furthermore, NTN argues that the Department's mandate is to administer
the antidumping laws as accurately as possible (see Bowe-Passat at 335
and 340). Because the Department's reallocation of these expenses
without regard to LOT eliminates the affect of LOT on price, NTN
asserts, the Department's decision to reallocate these expenses is a
direct violation of this mandate. Therefore, NTN concludes, the
Department should rely on the LOT-specific expense allocation ratios
and its LOT-specific expenses as originally reported in its
questionnaire response.
Timken contends that in Timken 1 the CIT stated that the issue
raised by NTN's LOT-specific expense allocation methodology was
``whether the reported expenses demonstrably vary according to levels
of trade.'' Timken argues that while NTN asserts that its LOT-specific
allocation methodology meets this standard, NTN provides no explanation
on the record of how its methodology met this standard nor is there any
other evidence on the record supporting NTN's methodology.
Timken further argues that in Timken 1, after identifying the issue
in question, the CIT remanded the case to the Department to determine
whether NTN had demonstrated that its expenses varied according to LOT.
However, Timken states, while the Department was working on its
response to that remand, it issued its 1992-93 final results, the final
results cited by NTN, in which it rejected NTN's allocation of U.S.
expenses due to a discrepancy in sales value. Timken states that it was
only after publication of the 1992-93 final results for NTN that the
Department completed its remand results pursuant to Timken 1 and
determined that the record lacked the evidence necessary to demonstrate
that NTN's expenses varied by LOT. See The Department's Final Results
of Redetermination Pursuant to Court Remand (December 17, 1996), at 9.
Timken contends that, given that these remand results have been
affirmed by the CIT (see Timken v. United States, Slip Op. 97-87 (July
3, 1997), and that the Department has requested a remand in the
litigation arising from the 1992-93 final results to consider this
issue in light of its remand redetermination pursuant to Timken 1 and
the CIT's affirmation thereof, the Department correctly rejected NTN's
LOT-specific expense allocations in this instant review.
Department's Position: We agree with Timken in part. We have
determined that, for a majority of the expenses in question, NTN's LOT-
specific selling expense allocation methodology bears no relationship
to the manner in which NTN actually incurred these selling expenses. In
Timken 1 the CIT ordered the Department to accept NTN's LOT-specific
allocations and per-unit LOT expense adjustment amounts only if NTN's
expenses demonstrably varied according to LOT. By ordering us to
ascertain whether these expenses actually varied according to LOT, the
CIT, in essence, indicated that NTN's use of its calculation of LOT-
specific per-unit expense adjustments did not necessarily mean that NTN
incurred the expenses differently due to differences in LOTs. Rather,
additional evidence must also exist which demonstrates that NTN
actually sold differently to each LOT by performing different
activities/functions or by performing the same activities/functions to
a different degree when selling to each LOT. In accordance with this
order, in our remand results pursuant to Timken 1 we did not allow
NTN's allocation of its expenses by LOT due to the lack of quantitative
and narrative evidence on the record demonstrating that the expenses in
question demonstrably varied according to LOT. In the instant review,
we applied the same standards articulated by the CIT in Timken 1. In
other words, we have examined the record to determine if evidence
exists demonstrating that those home market and U.S. expenses NTN
allocated by LOT did demonstrably vary according to LOT.
For this review NTN provided two exhibits which outlined its
derivation of LOT-specific per-unit expense adjustments for certain of
its U.S. and home market expenses. Exhibit C-7 detailed NTN's
calculations of LOT-specific per-unit expense adjustment ratios for its
U.S. inland freight (warehouse to customer) expenses, other U.S.
transportation expenses, U.S. Customs duty, U.S. packing material,
overhead, and labor expenses, U.S. advertising expenses, U.S. inventory
carrying costs, and other U.S. indirect selling expenses. Exhibit B-4
detailed NTN's LOT-specific per-unit adjustment ratios for its home
market pre-sale and post-sale freight expenses, home market advertising
expenses, home market packing labor and material expenses, home market
technical service expenses, and other home market indirect selling
expenses. Both exhibits indicate that, except for certain U.S. and home
market packing material and packing labor expenses, none of the
expenses were unique to a single LOT in that NTN incurred each of the
above expenses when selling to each LOT. However, rather than calculate
a single allocation ratio to be applied to all sales, NTN instead
allocated a portion of each total expense amount to each LOT such that
it was able to derive LOT-specific allocation ratios. When applied to
the reported unit prices, NTN's LOT-specific allocation ratios resulted
in the calculation of significantly different per-unit expense
adjustment amounts such that NTN actually reported an expense
adjustment amount for a TRB sale to one LOT which was significantly
different than the amount of the same expense it reported for a sale of
the identical TRB to another LOT.
NTN determined the portion of each of the above expenses (except
for certain U.S. and home market packing material and labor expenses)
to be allocated to
[[Page 2580]]
each LOT by means of allocation methodologies which were based on (1)
the differences in total sales value for each LOT, (2) the differences
in the total number of invoices generated for each LOT, (3) the
differences in the total number of employees involved in sales at each
LOT, or (4) a combination of the above. As a result, these differences
caused the differences in the expense amounts NTN reported for each LOT
and in its LOT-specific ratios.
While the record for these reviews contains detailed worksheets
demonstrating NTN's allocation methodologies, it does not contain any
narrative or quantitative evidence demonstrating why or to what degree
a TRB sale to one LOT would generate a greater or lesser amount of the
above expenses than a sale of the same TRB to another LOT. Rather,
NTN's sole support for its allocations are the allocations themselves.
While we recognize that total sales values, the total number of
invoices, and even the total number of employees may vary according to
LOT, these aggregate differences do not demonstrate whether NTN sold
differently to its LOTs and fail to indicate what activities or
functions NTN may have performed differently when selling to each LOT
such that it actually incurred per-unit expense amounts differently due
to differences in LOTs. The record, therefore, lacks the evidence
necessary to demonstrate that all of NTN's expenses varied according to
LOT. Therefore, for these final results, we have not accepted NTN's
LOT-specific allocations and its use of LOT-specific adjustment ratios
for its U.S. inland freight (warehouse to customer) expenses, other
U.S. transportation expenses, U.S. Customs duty, U.S. advertising
expenses, U.S. inventory carrying costs, and other U.S. indirect
selling expenses, or for its home market pre-sale and post-sale freight
expenses, home market advertising expenses, home market technical
service expenses, and other home market indirect selling expenses.
Rather, we have recalculated NTN's allocation ratios such that we
derived a single ratio applicable to all sales regardless of LOT. We
then applied these recalculated allocation ratios to NTN's reported
U.S. and home market unit prices to calculate per-unit expense
adjustment amounts which did not vary by the LOT to which the U.S. or
home market sale was made.
We disagree with Timken that all of NTN's U.S. and home market
expenses should be recalculated without regard to LOT. In our
preliminary analysis memorandum (see Preliminary Analysis Memorandum
for NTN, September 2, 1997, attachments I and II), we did, in fact,
recalculate NTN's U.S. selling expenses without regard to LOT. However,
in contrast to the above, for certain of NTN's U.S. packing material
and packing labor expenses, exhibit C-7 of NTN's response indicated
that NTN incurred these expenses only when selling to one specific U.S.
LOT. In addition, NTN's narrative explanation clearly indicated that
certain of NTN's packing expenses individually differed by LOT. Because
these expenses were unique to a single LOT, NTN (1) allocated each
total expense amount solely to this LOT, (2) calculated a single
allocation ratio for this LOT, and (3) applied this ratio only to those
U.S. sales at this LOT. NTN's response clearly indicates that these
expenses demonstrably varied according to LOT (see NTN questionnaire
response, January 27, 1997, at exhibit C-7) (NTN Response).
Furthermore, in the instant review, we verified these expenses in
detail and concluded that NTN's allocation methodology regarding U.S.
packing material and U.S. packing labor was accurate (see NTN U.S.
Report, at 13). Therefore, for our preliminary results we applied our
recalculated ratios for certain of NTN's U.S. packing and U.S. labor
expenses only for sales to the one LOT for which these expenses were
incurred.
In addition, after further review of the record, we have also
determined that NTN's home market packing labor and packing material
expenses demonstrably varied according to LOT. Section A and exhibit B-
4 of NTN's response clearly demonstrate that different methods of
packing are required depending upon LOT. As indicated above, NTN has
allocated all of its home market expenses by LOT, but has not provided
record evidence (except for home market packing) demonstrating that
they were incurred differently by LOT. Therefore, for these final
results we have only accepted NTN's allocation for home market packing
expenses according to LOT.
Therefore, with the exception of NTN's home market and U.S. packing
expenses, due to the lack of quantitative and narrative evidence on the
record demonstrating that certain of NTN's expenses demonstrably varied
according to LOT, for these final results we have reallocated these
expenses without regard to LOT.
Arm's Length Test
Comment 33: NTN asserts that the Department's 99.5 percent arm's-
length test is not a reasonable basis for determining whether
affiliated-party sales were at prices comparable to those to
unaffiliated parties. NTN argues that in applying the arm's-length test
the Department only considers the average percentage difference in
pricing between affiliated and unaffiliated-party sales and ignores
other factors which greatly influence price such as the terms and
quantities of each affiliated-party sale. NTN further contends that the
Department's 99.5 percent threshold is not really a ``test'', since it
fails to provide an objective standard to determine whether affiliated
sales are at arm's-length. Instead, NTN claims, the test weighs sales
against an average which does not reflect the full range of prices paid
in the transactions examined. Therefore, NTN asserts, the use of the
99.5 percent figure as a baseline to decide if sales are at arm's
length does not address the fact that some arm's-length sales fall
outside this narrow range. As a result, NTN claims, the percentage used
would better reflect the range of arm's-length prices if it were
lowered to a 95 percent threshold.
Timken claims that in accordance with section 773(a)(1)(B) of the
Act, the Department properly excluded those home market sales to
affiliated parties which were not at arm's length. Timken argues that
not only is it wholly within the Department's discretion to derive a
methodology to determine whether home market sales to affiliates are at
arm's length, but NTN has provided no evidence supporting its claim
that the Department's 99.5 test was contrary to law.
In addition, Timken points out, the record indicates that one of
the factors suggested by NTN for inclusion in the 99.5 percent test,
terms of sale, was reported the same for all of NTN's home market
sales. Thus, Timken concludes, even if the Department agreed with NTN,
the adoption of NTN's suggestion would have no effect.
Department's Position: We disagree with NTN. Our 99.5 percent
arm's-length test is a reasonable method for establishing a fair basis
of comparison between affiliated and unaffiliated-party sales. NTN
asserts that additional factors, such as quantity and payment terms,
should be taken into consideration when comparing affiliated and
unaffiliated-party sales, but fails to establish that the Department
must abandon its existing test. NTN also argues that our use of the
99.5 percent threshold is distortive but provides no quantitative
evidence demonstrating that a lowering of the threshold would yield
more accurate results. Furthermore, the CIT has upheld the validity of
our arm's-length test on numerous occasions. For example, in Usinor
Sacilor v. United States, 872 F.
[[Page 2581]]
Supp 1000 (1994), the CIT clearly stated that ``[g]iven the lack of
evidence showing any distortion of price comparability, the court finds
application of Commerce's arm's-length test reasonable.'' Likewise, in
Micron Technology, Inc. v. United States, 893 F. Supp 21, 38 (CIT
1995), because the CIT found that the plaintiff/respondent failed to
``demonstrate that Commerce's customer-based arm's-length is
unreasonable'' and failed to ``point to record evidence which tends to
undermine Commerce's conclusion,'' the CIT sustained the 99.5 percent
arm's-length test, given a lack of evidence showing a distortion of
price comparability. Further, in NTN Bearing Corp. of America, American
NTN Bearing Manufacturing Corp., and NTN Corp. v. United States, 905 F.
Supp. 1083 (CIT 1995), NTN argued, as here, that there were numerous
factors influencing the price of a related-party transaction and the
Department cannot make a meaningful price comparison without examining
them. The CIT disagreed with NTN and stated that, in accordance with
section 19 CFR 353.45(a) of our regulations, the Department has broad
discretion in devising an appropriate methodology to determine whether
particular related-party prices are, in fact, comparable to unrelated-
party prices.
Therefore, because NTN has failed to demonstrate that the 99.5
percent threshold produces distortive results and that the Department's
methodology is unreasonable, in accordance with the CIT decisions cited
above, we have not altered our 99.5 percent arm's-length test for these
final results.
Sample Sales
On June 10, 1997, the CAFC held that the term ``sold'' requires
both a transfer of ownership to an unrelated party and consideration.
NSK Ltd. v. United States, 115 F.3d 965, 975 (Fed. Cir. 1997) (NSK).
The CAFC determined that samples which NSK had given to potential
customers at no charge and with no other obligation lacked
consideration. Moreover, the CAFC found that, since free samples did
not constitute ``sales,'' they should not have been included in
calculating U.S. price.
In light of the CAFC's opinion, we have revised our policy with
respect to samples. The Department will now exclude from its dumping
calculations sample transactions for which a respondent has established
that there is either no transfer of ownership or no consideration.
This new policy does not mean that the Department automatically
will exclude from analysis any transaction to which a respondent
applies the label ``sample.'' In fact, for these reviews we determined
that there were instances where it is appropriate not to exclude such
alleged samples from our dumping analysis. It is well-established that
the burden of proof rests with the party making a claim and in
possession of the needed information (see, e.g., NTN Bearing
Corporation of America v. United States, 997 F.2d 1453, 1458-59 (CAFC
1993), (citing Zenith Elecs. Corp. v. United States, 988 F.2d 1573,
1583 (CAFC 1993), and Tianjin Mach. Import & Export Corp. v. United
States, 806 F. Supp. 1008, 1015 (CIT 1992)). As discussed below, one
respondent failed to demonstrate that its claimed sample sales lacked
consideration. When respondents failed to support their sample claim,
we did not exclude the alleged samples from our margin analysis.
With respect to HM sales, in addition to excluding sample
transactions which do not meet the definition of ``sales,'' we may
exclude sales designated as samples from our analysis, pursuant to
section 773(a)(1) of the Act, when a respondent has provided evidence
demonstrating that the sales were not made in the ordinary course of
trade, as defined in section 771(15) of the Act.
With regard to assessment rates, in order to ensure that we collect
duties only on sales of subject merchandise, we included the entered
values and quantities of the sample transactions in our calculation of
the assessment rates and set the dumping duties due for such
transactions to zero. We have done this because U.S. Customs will
collect the ad valorem (or per-unit, where applicable) duties on all
entries of subject merchandise whether or not the merchandise was a
sample transaction. However, to ensure that sample transactions do not
dilute the cash deposit rates, we excluded both the calculated U.S.
prices and quantities for sample transactions from our calculation of
the cash deposit rates.
Comment 34: Timken argues that for these final results the
Department should include in NSK's U.S. database its zero-priced sample
sales. Timken contends that although the CAFC's decision in NSK held
that zero-priced sample sales which lacked consideration did not
constitute ``sales'' for purposes of the antidumping law, the decision
did not establish a per se exclusion for all zero-priced sample sales.
Timken argues that such sales do not qualify for automatic exclusion
from the U.S. database because the burden is on the respondent to
demonstrate that sample sales did not involve the transfer of ownership
or that they lacked consideration. Timken maintains that NSK did not
provide information for the record affirmatively demonstrating that its
U.S. sample sales were transferred without consideration or ownership.
Timken further argues that the CIT in J.C. Hallman Mfg. Co. v. United
States, 13 CIT 1073, 1076, 728 F. Supp. 751, 753 (1989) (J.C. Hallman)
stated that samples must be reported under a ``temporary importation
bond.'' Timken asserts that the CIT in that case also held that in the
absence of such a bond, the Department has no way of knowing that the
merchandise is not imported for sale. Timken contends that because NSK
has provided no information demonstrating whether its zero-priced
sample sales were imported under a temporary importation bond, the
Department should reverse its preliminary determination and include
NSK's zero-priced sample sales in its margin calculations for these
final results.
NSK responds that the Department correctly excluded zero-priced
U.S. sample sales from its analysis. NSK contends that Timken's
reliance on J.C. Hallman is misplaced because this case predated the
court's NSK decision and because the CIT, in its omission of any
reference to J.C. Hallman in its decision, effectively determined that
the case was irrelevant for its decision. Furthermore, NSK argues, the
only standard set forth by the CAFC in NSK is whether a sale occurred
(i.e., involved consideration). NSK contends that as long as sample
sales lacked consideration, then all other issues, such as whether the
recipient took title to the merchandise, are irrelevant. NSK further
argues that it reported its free samples as outside the ordinary course
of trade and indicated that zero-priced samples were not sales because
they lacked consideration. Because the Department did not ask any
questions regarding the company's sample sales in its supplemental
questionnaire, NSK argues, the Department concluded that it had all
necessary information to determine whether or not zero-priced sample
sales should be considered ``sales'' for purposes of its analysis.
Department's Position: We disagree with petitioner. The record
indicates that NSK's reported sample transactions did not involve
consideration (see, e.g., NSK Section C Questionnaire Response, January
27, 1997, at 4). Accordingly, pursuant to the CAFC's decision in NSK,
we have excluded NSK's reported U.S. sample sales from the U.S. sales
database.
Comment 35: NTN argues that the Department should exclude from its
margin calculations those sample sales
[[Page 2582]]
it made in both the U.S. and home markets. With respect to its home
market database, NTN asserts that its home market sample sales which it
claims are outside the ordinary course of trade should be excluded from
margin calculations in accordance with section 773(b) of the Act and in
accordance with the CIT's decision in NSK v. United States, Slip Op.
97-74 (June 17, 1997), in which the CIT held that the Department
improperly included NTN's sample sales.
NTN also asserts that its U.S. sample sales should be excluded from
the Department's analysis in accordance with the CAFC's ruling in NSK,
in which the CAFC ordered that zero-priced sample sales be excluded for
purposes of calculating margins.
Timken responds that the CAFC in NSK did not establish a per se
exclusion for so-called sample sales. Rather, Timken claims, the CAFC
held that sales which lacked consideration did not constitute sales for
purposes of the antidumping law. Timken notes that the Department's
preliminary margin program at lines 92 and 704 already excludes zero-
priced sales, and claims that the NSK decision does not support the
exclusion of sales NTN alleges are samples. Finally, Timken argues that
NTN has not adequately demonstrated that its home market sample sales
are outside the ordinary course of trade, and that such sales therefore
do not warrant exclusion from the home market database.
Department's Position: We disagree with NTN. We examined the record
to determine whether NTN's U.S. sample sales lacked consideration, and
were unable to find any information whatsoever in either NTN's
narrative or sales database regarding sample transactions. As noted
above, the party in possession of the information has the burden of
producing that information, particularly when seeking a favorable
adjustment or exclusion. Because NTN did not provide any information in
its response or elsewhere that would have aided us in determining
whether NTN received a bargained-for exchange from its U.S. customers,
we cannot conclude that NTN received no consideration for these alleged
samples. While NTN's database does include sales which are zero-priced,
we are unable to determine from the record if these transactions
represent those sales which NTN apparently argues should be excluded
from the U.S. database in accordance with NSK. Furthermore, the mere
fact that a sale has a reported unit price of zero does not indicate
that a transaction lacked exchange of consideration. Our preliminary
margin program incorporated language to exclude all zero-priced sales
in the home and U.S. markets. However, for the reasons stated above, we
have altered our treatment of NTN's zero-priced U.S. sales and have
included them in NTN's U.S. database for these final results.
NTN also argues that we should exclude its alleged home market
sample sales from its home market sales database. As noted previously,
one of the circumstances under which we may exclude sample sales from
the home market database is when a respondent has demonstrated that
such sales were made outside the ordinary course of trade. Accordingly,
we have examined the record with respect to NTN's alleged home market
sample sales to determine if these sales qualify for such an exclusion.
In its original questionnaire response NTN only states that ``samples
are provided to customers for the purpose of allowing the customer to
determine whether a particular product is suited to the customer's
needs'' and that ``the purpose * * * would not be the same as those
purchased in the normal course of trade'' (see, NTN Response at B-15).
NTN has provided no other information demonstrating that its alleged
home market sample sales were outside the ordinary course of trade. The
fact that a respondent identified sales as samples does not necessarily
render such sales outside the ordinary course of trade (see AFBs VI at
2124). For these reasons, we disagree with NTN that its home market
``sample'' sales should be excluded from our margin calculations.
We have also evaluated whether NTN's alleged home market sample
sales qualify for exclusion from the home market database in light of
the NSK decision. As noted above, we exclude sample transactions from
the dumping calculation only if a respondent has demonstrated that
there is either no transfer of ownership or no consideration. Evidence
on the record clearly indicates that NTN received consideration for all
home market sales it claims are samples. As such, none of its home
market sample sales meet the criterion for exclusion established by
NSK.
Therefore, because NTN's alleged U.S. and home market sample sales
do not qualify for exclusion under NSK, and because NTN has failed to
demonstrate that its home market sample sales are outside the ordinary
course of trade, we have included these sales in our U.S. and home
market databases for these final results.
Comment 36: NSK argues that Timken's general issues should be
stricken from the record because the petitioner failed to include these
arguments in the case briefs it served to respondents. NSK contends
that because the general issues section is free of proprietary
material, it should have been served with the proprietary portion of
Timken's brief rather than one day later. NSK claims that the
Department should not allow Timken to abuse the ``one-day lag'', for
the purpose of the rule is to permit counsel the opportunity to review
proprietary portions of submissions and to confirm that (a) all
proprietary information has been properly bracketed, and (b) that the
public version correctly removes, ranges or indexes the proprietary
information. 19 CFR 353.32(a)(2). Therefore, NSK asserts, because
neither of these purposes is served by Timken's decision to withhold an
entire portion of its case brief, the Department should reject the
general issues portion of Timken's case brief.
Department's Position: During our October 30, 1997 TRB hearing NSK
raised these concerns. After adjourning to review the details of
Timken's brief and the issues raised by NSK, we determined that Timken
improperly served the general issues portion of its case brief to the
other parties to this proceeding but nevertheless properly filed its
brief with the Department. After further discussion with the parties in
attendance we found that NSK, NTN, and Fuji all responded to Timken's
general comments section in their rebuttal briefs, but that Koyo had
not. Therefore, with the agreement of the parties in attendance,
because Koyo did not have the opportunity to rebut this section of
Timken's brief due to the service of the brief, we granted Koyo an
additional week to respond to the general issues section of Timken's
case brief and allowed Timken's general comments to remain part of the
administrative record.
Clerical Errors
Comment 37: NSK argues that, when calculating home market net
prices, rather than deducting NSK's reported REBATE1H, the Department
incorrectly added these rebates to home market gross unit price. Timken
states that, to the extent that the Department intended to deduct NSK's
rebates when calculating NV, it agrees that the rebates were improperly
added to gross price.
Department's Position: We agree with NSK and have amended our
computer program for these final results such that NSK's reported home
market rebates are subtracted from, rather than added to, home market
gross unit prices.
Comment 38: NSK and Koyo assert that, when calculating CEP profit,
the
[[Page 2583]]
Department incorrectly based its derivation of total home market
revenue on gross home market prices rather than on home market prices
net of discounts and rebates. Timken agrees that the calculation of
home market revenues should be based on net price.
Department's Position: We agree. The Department's September 4, 1997
policy bulletin regarding the calculation of CEP profit clearly
indicates that total home market sales revenue should be calculated net
of home market discounts and rebates. Therefore, for these final
results we have adjusted our calculation of NSK's and Koyo's home
market revenue such that our computer programs calculate home market
revenues net of rebates and discounts. In addition, while NTN did not
comment on this issue, we note that we made the identical error in our
preliminary results computer program for NTN. Therefore, to ensure the
calculation of the most accurate final results margin for NTN, we have
corrected this error in our computer program for NTN as well.
We also note that, while reviewing our preliminary results
calculation of CEP profit for each of the respondents, we discovered
that we inadvertently made an additional error. After calculating total
actual profit and deriving a profit ratio, we multiply this ratio by
the respondent's total U.S. selling expenses. Our September 4, 1997
policy bulletin clearly states that ``when allocating a portion of the
actual profit to each U.S. CEP sale, we will include imputed (U.S.)
credit and inventory carrying costs as part of the total U.S. expenses
allocation.'' However, in our preliminary results computer programs we
inadvertently excluded U.S. credit and inventory carrying costs from
our calculation of the U.S. selling expenses upon which profit was
allocated. Therefore, although no party to this proceeding commented on
this issue, to ensure the calculation of accurate margins we have
nevertheless corrected this error, where appropriate, for these final
results.
Comment 39: NSK argues that, although it is the Department's long-
standing policy when calculating CV to deduct credit from CV as a home
market circumstance-of-sale (COS) adjustment and to deduct ICC as part
of the CEP offset, the Department's preliminary results computer
program for NSK did not make these adjustments. NSK contends that not
only should the Department make these adjustments for these final
results, but when deriving the expense ratios for credit and ICC, the
Department should ensure that these ratios are calculated on the same
basis as the value to which the ratios are applied.
Timken asserts that these imputed credit and inventory expenses are
already included in the Department's calculation of CV as part of SG&A
and that to add them again would result in double counting.
Department's Position: We agree with NSK. When calculating CV in
our preliminary results computer program for NSK we inadvertently
failed to make a COS adjustment to CV for NSK's reported home market
credit expenses and failed to deduct ICC from CV as part of the CEP
offset. Therefore, for these final results we have modified certain
language within our computer program to ensure that these deductions
are made when we calculated NV using CV. In addition, in order to
derive the actual credit and ICC amounts used in our CV calculation, we
calculated our home market credit and ICC ratios on the same basis as
the value to which we applied these ratios. Furthermore, while only NSK
commented on this issue, we have determined that we made the identical
error in our preliminary results computer programs for NTN and Koyo.
Therefore, to ensure the calculation of accurate final results margins
for these two respondents, we have corrected this error in our computer
programs for NTN and Koyo as well.
Comment 40: NSK contends that the Department improperly downloaded
NSK's U.S. computer data by failing to define the Y2FACTU variable as
having two decimal places. As a result, NSK asserts, the U.S. Y2
factors used by the Department in its preliminary results model-match
for NSK erroneously relies on a U.S. Y2 factor which is overstated by
100. Timken agrees that NSK's U.S. Y2 factor variable appears to lack
decimal places.
Department's Position: We agree with NSK. However, rather than re-
downloading NSK's U.S. data to correct this error, for these final
results we have corrected this error by dividing all of NSK's U.S. Y2
factors within our database by 100 prior to conducting our model
matches.
Comment 41: Timken and NSK assert that an error exists in the
Department's preliminary results computer programs which causes certain
U.S. sales to be matched with the second or third most similar foreign
like product in those instances where the identical or most similar
foreign like product was determined to be below COP. Timken and NSK
argue that, because it is the Department's long-standing practice to
base its calculation of NV on CV whenever the identical or most similar
foreign like product is below cost, for the final results the
Department should correct this error such that whenever contemporaneous
sales of an identical or most similar foreign like product is
determined to be below COP, the computer program calculates NV on the
basis of CV rather than continuing the search for a contemporaneous
match of the next most similar foreign like product.
Department's Position: We agree with Timken and NSK. Therefore, for
these final results we have modified our multi-level array model-match
computer programming language to correct this error and to ensure that
all sales of a U.S. model for which the identical or most similar
foreign like product is below COP are compared to CV.
Comment 42: NTN argues that the Department's preliminary results
computer program contains two errors which should be corrected for the
final results. First, NTN claims, when creating the data sets NEGDATA1,
HMREL, and HMUNREL from the data set HMOVER, the Department's computer
program for NTN drops several observations which should have not been
excluded from the margin calculations. Likewise, NTN argues, when the
Department created the data sets HMSETS, HMCUPS, and HMCONES from the
data set HMMM, the computer program again dropped several observations
which should not have been excluded from the margin calculations.
While Timken does not specifically agree or disagree with NTN's
clerical error allegations, with respect to NTN's first alleged error
it notes that the Department's computer programming language causes
sales observations with a customer relationship code other than 1 or 2
to be excluded from the Department's calculations. Similarly, Timken
notes that, with respect to NTN's second alleged error, the
Department's computer programming language results in observations for
which the home market part type was reported as other than 1, 2, or 3
also to be excluded from the margin calculations.
Department's Position: With respect to NTN's first alleged error,
we agree. In preparation for our arm's-length test we divided NTN's
home market sales (data set HMOVER) into two groups on the basis of
whether the sale was made to an affiliated or unaffiliated customer
(data sets HMREL and HMUNREL). In our questionnaire we asked
respondents to identify for each home market sale whether it was to an
affiliated or unaffiliated customer, using a code of ``1'' for
unaffiliated customers and a code of ``2'' for affiliated customers.
[[Page 2584]]
While our questionnaire does not instruct respondents to use any
additional codes, NTN nevertheless separately identified its sales to
home market affiliated customers which were consumed rather than resold
using a code of ``3.'' In our preliminary results computer program we
inadvertently excluded the code of ``3'' from the programming language
we used to separate home market sales into the affiliated and
unaffiliated sales groups. Therefore, for these final results we have
corrected this error by identifying all home market sales to affiliated
customers by means of both codes ``2'' and ``3.''
With respect to NTN's second alleged error, we disagree that the
discrepancy NTN notes is an error. In our TRB questionnaire we ask
respondents to identify TRB sets, cups, cones, and parts using
numerical codes (``1'' for sets, ``2'' for cups'', ``3'' for cones, and
``4'' for parts), and we used these numerical codes when we created the
data sets HMSETS, HMCUPS, and HMCONES in our computer program. The
sales NTN identifies as being incorrectly excluded from the margin
calculations were sales of home market parts (code ``4''). We did not
create a separate HMPARTS data set and did not retain these sales in
our margin calculation because we had already determined that NTN did
not make any sales of TRB parts in the United States. Because our TRB
model-match methodology does not permit the comparison of U.S. TRB
sets, cups and cones to home market parts (we only match U.S. TRB sets
to home market sets, U.S. cups to home market cups, U.S. cones to home
market cones, and U.S. parts to home market parts), and because there
were no U.S. sales of TRB parts, it was unnecessary for us to retain
NTN's reported sales of home market TRB parts (code ``4'') in our data
base. Therefore, because NTN's sales of home market TRB parts were not
needed for comparison purposes, our exclusion of these sales from the
margin calculations was appropriate and does not constitute an error as
NTN alleges.
Comment 43: Timken argues that, while the Department's computer
program for Koyo properly sets the inside diameter (ID) for home market
TRB cups and the outside diameter (OD) for home market TRB cones to
zero, the program fails to do the same for Koyo's reported U.S. sales
of TRB cups and cones. Timken asserts that, because the inside and
outside diameters are two of the five physical criteria relied upon in
the Department's model-match methodology, this error will cause
distortions when the Department matches U.S. sales to sales of the
foreign like product.
Koyo contends that it is unnecessary for the Department to
purposely set the ID for its reported U.S. TRB cups and the OD for its
reported U.S. TRB cones to zero. Koyo argues that, regardless of
whether there is an erroneous ID or OD reported for a U.S. TRB cup or
cone, the Department's computer program nevertheless ranks the home
market foreign like products for each U.S. model accurately.
Department's Position: We disagree with Timken that distortions
will result because the computer program does not set the OD for U.S.
cones and the ID for U.S. cups to zero. Two of the physical criteria
for TRB sets are the ID and OD. The ID reflects the measure of the TRB
cone while the OD reflects the measure of the TRB cup. While a TRB set,
which contains both a cup and cone, has both an ID and OD measurement,
individually sold TRB cups do not have an ID and individually sold TRB
cones do not have an OD. As a result of our home market set-splitting
methodology, in which we derive separate cup and cones sales from the
respondents' reported home market TRB set sales, it is necessary for us
to purposely set the ID for split cups to zero and the OD for split
cones to zero. In the past, we have found it unnecessary to include
similar programming language with respect to a respondent's U.S. sales
because we do not split U.S. sets into individual cup and cone sales.
Timken's comments reflect its concern that, if a respondent incorrectly
reports an ID value greater than zero for any U.S. cups and an OD value
greater than zero for any U.S. cones, the Department's programming
language would result in inaccurate model matching. Therefore, for
these final results we have examined whether Koyo reported any ID
values for its U.S. cups or OD values for its U.S. cones which were
greater than zero. We found that Koyo had indeed reported values
greater than zero for both the OD of its U.S. cones and the IDs of its
U.S. cups. As a result, we have set the value of any positive inside
cup diameters or positive outside cone diameters to zero in Koyo's U.S.
summary sales databases.
Final Results of Reviews
Based on our review of the arguments presented above, for these
final results we have made changes in our preliminary margin
calculation programs. We determine that the following percentage
weighted-average margins exist for the period October 1, 1995 through
September 30, 1996:
------------------------------------------------------------------------
Margin
Manufacturer/exporter/reseller (percent)
------------------------------------------------------------------------
For the A-588-054 Case:.....................................
Koyo Seiko................................................ 9.60
Fuji...................................................... .34
NSK....................................................... 1.45
MC International.......................................... 1.92
For the A-588-604 Case:.....................................
Fuji...................................................... (\1\)
MC International.......................................... (\1\)
Koyo Seiko................................................ 29.02
NTN....................................................... 27.80
NSK....................................................... 9.60
------------------------------------------------------------------------
\1\ No shipments or sales subject to this review. These firms have no
rate from any prior segment of this proceeding.
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. We will
calculate importer-specific ad valorem duty assessment rates for the
merchandise based on the ratio of the total amount of antidumping
duties calculated for the examined sales made during the POR to the
total customs value of the sales used to calculate those duties. This
rate will be assessed uniformly on all entries that a particular
importer made during the POR. (This is equivalent to dividing the total
amount of antidumping duties, which are calculated by taking the
difference between NV and U.S. price, by the total U.S. price of the
sales compared and adjusting the result by the average difference
between U.S. price and customs value for all merchandise examined
during the POR.) 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 a basis of
the assessment rate permits the Department to collect a reasonable
approximation of antidumping duties which would have been determined if
the Department had reviewed those sales of merchandise during the POR.
The Department will issue appropriate appraisement instructions
directly to the Customs Service.
Furthermore, the following deposit requirements will be effective
after the publication date of these final results for all shipments of
TRBs from Japan entered, or withdrawn from warehouse, for consumption
on or after the publication date of the final results of these
administrative reviews, as provided by section 751(a)(1) of the Act:
(1) The cash deposit rates for the reviewed companies will be those
rates established in the final results of these reviews;
(2) For previously reviewed or investigated companies not listed
above, the cash deposit rate will continue to be
[[Page 2585]]
the company-specific rate published for the most recent period;
(3) If the exporter is not a firm covered in these reviews, a prior
review, or the less-than-fair-value (LTFV) investigations, but the
manufacturer is, the cash deposit rate will be the rate established for
the most recent period for the manufacturer of the merchandise; and
(4) If neither the exporter nor the manufacturer is a firm covered
in these or any previous reviews conducted by the Department, the cash
deposit rate for the A-588-054 case will be 18.07 percent, and 36.52
percent for the A-588-604 case (see Preliminary Results of Antidumping
Duty Administrative Reviews; Tapered Roller Bearings, Finished and
Unfinished, and Parts Thereof, from Japan and Tapered Roller Bearings,
Four Inches or less in Outside Diameter, and Components Thereof, From
Japan, 58 FR 51061 (September 30, 1993)).
The cash deposit rate has been determined on the basis of the
selling price to the first unaffiliated U.S. customer. For appraisement
purposes, where information is available, the Department will use the
entered value of the merchandise to determine the assessment rate.
This notice serves as a final reminder to importers of their
responsibility 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. These administrative reviews and this notice are in accordance
with section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR
353.22.
This notice also serves as a 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) or conversion
to judicial protective order is hereby requested. Failure to comply
with the regulations and terms of an APO is a violation which is
subject to sanction.
These administrative reviews and this notice are in accordance with
section 751 (a)(1) of the Act (19 U.S.C. 1675(a)(1) and 19 CFR 353.22.
Dated: January 7, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-944 Filed 1-14-98; 8:45 am]
BILLING CODE 3510-DS-P