[Federal Register Volume 63, Number 117 (Thursday, June 18, 1998)]
[Notices]
[Pages 33320-33350]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-16100]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-427-801, A-428-801, A-475-801, A-588-804, A-485-801, A-559-801, A-
401-801, A-412-801]
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
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty administrative
reviews.
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SUMMARY: On February 9, 1998, the Department of Commerce published the
preliminary results of administrative reviews of the antidumping duty
orders on antifriction bearings (other than tapered roller bearings)
and parts thereof from France, Germany, Italy, Japan, Romania,
Singapore, Sweden, and the United Kingdom. The types of subject
merchandise covered by these orders are ball bearings and parts
thereof, cylindrical roller bearings and parts thereof, and spherical
plain bearings and parts thereof. The reviews cover 20 manufacturers
and/or exporters. The period of review is May 1, 1996, through April
30, 1997.
Based on our analysis of the comments received, we have made
changes, including corrections of certain inadvertent programming and
clerical errors, in the margin calculations. Therefore, the final
results differ from the preliminary results. The final weighted-average
dumping margins for the reviewed firms are listed below in the section
entitled ``Final Results of Reviews.''
EFFECTIVE DATE: June 18, 1998.
FOR FURTHER INFORMATION CONTACT: The appropriate case analyst, for the
various respondent firms listed below, of Import Administration,
International Trade Administration, U.S. Department of Commerce,
Washington, D.C. 20230; telephone: (202) 482-4733.
France--Chip Hayes (SKF), Lisa Tomlinson (SNFA), or Richard Rimlinger.
Germany--Davina Hashmi (SKF), Hermes Pinilla (Torrington Nadellager),
or Robin Gray.
Italy--Mark Ross (FAG), William Zapf (Meter), Chip Hayes (SKF), Minoo
Hatten (Somecat), Robin Gray, or Richard Rimlinger.
Japan--J. David Dirstine (Koyo Seiko), Hermes Pinilla (NPBS), Thomas
Schauer (NSK Ltd. and Nachi-Fujikoshi Corp.), Gregory Thompson (NTN),
Robin Gray, or Richard Rimlinger.
Romania--Suzanne Flood (Tehnoimportexport, S.A.) or Robin Gray.
Singapore--Lyn Johnson (NMB/Pelmec) or Richard Rimlinger.
Sweden--Mark Ross (SKF) or Richard Rimlinger.
United Kingdom--Suzanne Flood (Barden), Hermes Pinilla (FAG U.K. ),
Diane Krawczun (NSK-RHP), Lyn Johnson (SNFA U.K.), Robin Gray, or
Richard Rimlinger.
SUPPLEMENTARY INFORMATION:
The Applicable Statute
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (the Act), are references to the provisions effective
January 1, 1995, the effective date of the amendments made to the Act
by the Uruguay Round Agreements Act (URAA). In addition, unless
otherwise indicated, all citations to the Department's regulations are
to 19 CFR Part 353 (April 1997).
Background
On February 9, 1998, the Department of Commerce (the Department)
published the preliminary results of administrative reviews of the
antidumping duty orders on antifriction bearings (other than tapered
roller bearings) and parts thereof (AFBs) from France, Germany, Italy,
Japan, Romania, Singapore, Sweden, and the United Kingdom (63 FR 6512).
The reviews cover 20 manufacturers and/or exporters. The period of
review (POR) is May 1, 1996, through April 30, 1997. We invited parties
to comment on our preliminary results of reviews. At the request of
certain interested parties, we held public hearings for U.K.-specific
issues on March 24, 1998, and for Japan-specific issues on March 25,
1998. The Department has conducted these administrative reviews in
accordance with section 751 of the Act.
Scope of Reviews
The products covered by these reviews are AFBs and constitute the
following types of subject merchandise: ball bearings and parts thereof
(BBs), cylindrical roller bearings and parts
[[Page 33321]]
thereof (CRBs), and spherical plain bearings and parts thereof (SPBs).
For a detailed description of the products covered under these types of
subject merchandise, including a compilation of all pertinent scope
determinations, see the ``Scope Appendix,'' which is appended to this
notice of final results.
Use of Facts Available
In the preliminary results under the ``Use of Facts Available''
section, we inadvertently made two inaccurate statements with regard to
Torrington Nadellager (see Memorandum from Laurie Parkhill, Office
Director, to Richard W. Moreland, Deputy Assistant Secretary, dated
February 5, 1998). Neither of the statements was accurate for
Torrington Nadellager. We did not use facts available when calculating
Torrington Nadellager's margin.
Sales Below Cost in the Home Market
The Department disregarded home-market sales made at prices below
the cost of production for the following firms and classes or kinds of
merchandise for these final results of reviews:
----------------------------------------------------------------------------------------------------------------
Country Company Subject merchandise
----------------------------------------------------------------------------------------------------------------
France.................................. SKF............................ BBs.
Germany................................. SKF............................ BBs, CRBs, SPBs.
Italy................................... FAG............................ BBs.
SKF............................ BBs.
Japan................................... Koyo........................... BBs.
Nachi.......................... BBs, CRBs.
NSK............................ BBs, CRBs.
NTN............................ BBs, CRBs, SPBs.
NPBS........................... BBs.
Singapore............................... NMB/Pelmec..................... BBs.
Sweden.................................. SKF............................ BBs.
United Kingdom.......................... Barden......................... BBs.
NSK-RHP........................ BBs, CRBs.
----------------------------------------------------------------------------------------------------------------
Changes Since the Preliminary Results
Based on our analysis of comments received, we have made certain
revisions that changed our results. We have corrected certain
programming and clerical errors in our preliminary results, where
applicable. Any alleged programming or clerical errors with which we or
the parties do not agree are discussed in the relevant sections of the
Issues Appendix.
In addition, as a result of CEMEX, S.A. v. United States, 133 F.3d
897 (CAFC 1998) (CEMEX), we have changed our model-matching methodology
when we have disregarded sales of identical merchandise in the home
market because they were at prices below the cost of production.
Instead of relying on constructed value (CV) as the basis for normal
value for that U.S. model, as we did in the preliminary results, we
have attempted first to match models sold in the United States to
models sold in the comparison market that fall within the same family
of bearings (i.e., similar bearings). If we found no appropriate
matches within the same family, we then used CV as the basis of normal
value.
Analysis of Comments Received
All issues raised in the case and rebuttal briefs by parties to
these concurrent administrative reviews of AFBs are addressed in the
``Issues Appendix,'' which is appended to this notice of final results.
Final Results of Reviews
We determine that the following percentage weighted-average margins
exist for the period May 1, 1996, through April 30, 1997:
------------------------------------------------------------------------
Company BBs CRBs SPBs
------------------------------------------------------------------------
France
------------------------------------------------------------------------
SKF.......................................... 8.31 (3) 54.84
SNFA......................................... 0.45 1.78 (3)
------------------------------------------------------------------------
Germany
------------------------------------------------------------------------
SKF.......................................... 2.26 7.32 5.06
Torrington Nadellager........................ (2) 0.16 (3)
------------------------------------------------------------------------
Italy
------------------------------------------------------------------------
FAG.......................................... 1.18 (3) .......
Meter........................................ (3) 10.65 .......
SKF.......................................... 3.61 (3) .......
Somecat...................................... 0.00 (3) .......
------------------------------------------------------------------------
Japan
------------------------------------------------------------------------
Koyo Seiko................................... 6.17 (3) (3)
Nachi........................................ 3.37 1.67 (3)
NPBS......................................... 2.30 (2) (3)
NSK.......................................... 2.35 2.21 (3)
NTN.......................................... 7.10 11.55 14.18
------------------------------------------------------------------------
Romania
------------------------------------------------------------------------
TIE.......................................... 0.94 ....... .......
------------------------------------------------------------------------
Singapore
------------------------------------------------------------------------
NMB Singapore/Pelmec Ind..................... 5.33 ....... .......
------------------------------------------------------------------------
Sweden
------------------------------------------------------------------------
SKF.......................................... 11.61 (1) .......
------------------------------------------------------------------------
United Kingdom
------------------------------------------------------------------------
Barden....................................... 6.63 (1) .......
FAG.......................................... (1) (1) .......
NSK-RHP...................................... 17.14 22.16 .......
SNFA......................................... 58.20 (3) .......
------------------------------------------------------------------------
\1\ No shipments or sales subject to this review. Rate is from the last
relevant segment of the proceeding in which the firm had shipments/
sales.
\2\ No shipments or sales subject to this review. The firm has no
individual rate from any segment of this proceeding.
\3\ No review.
Assessment Rates
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. Because sampling
and other simplification methods prevent entry-by-entry assessments, we
have calculated, wherever possible, an exporter/importer-specific
assessment rate or value for each type of subject merchandise.
Export Price Sales
With respect to export price (EP) sales for these final results, we
divided the total dumping margins (calculated as the difference between
normal value and EP) for each importer/customer by the total number of
units sold to that importer/customer. We will direct Customs to assess
the resulting per-unit dollar amount against each unit of
[[Page 33322]]
merchandise in each of that importer's/customer's entries under the
relevant order during the review period. Although this will result in
assessing different percentage margins for individual entries, the
total antidumping duties collected for each importer/customer under
each order for the review period will be almost exactly equal to the
total dumping margins.
Constructed Export Price Sales
For constructed export price (CEP) sales (sampled and non-sampled),
we divided the total dumping margins for the reviewed sales by the
total entered value of those reviewed sales for each importer. Where an
affiliated party acts as an importer for EP sales we have included the
applicable EP sales in this assessment-rate calculation. We will direct
Customs to assess the resulting percentage margin against the entered
Customs values for the subject merchandise on each of that importer's
entries under the relevant order during the review period. While the
Department is aware that the entered value of sales during the POR is
not necessarily equal to the entered value of entries during the POR,
use of entered value of sales as the basis of the assessment rate
permits the Department to collect a reasonable approximation of the
antidumping duties which would have been determined if the Department
had reviewed those sales of merchandise actually entered during the
POR.
Cash-Deposit Requirements
To calculate the cash-deposit rate for each respondent (i.e., each
exporter and/or manufacturer included in these reviews) we divided the
total dumping margins for each company by the total net value for that
company's sales of merchandise during the review period subject to each
order.
In order to derive a single deposit rate for each order for each
respondent we weight-averaged the EP and CEP deposit rates (using the
EP and CEP, respectively, as the weighting factors). To accomplish this
where we sampled CEP sales, we first calculated the total dumping
margins for all CEP sales during the review period by multiplying the
sample CEP margins by the ratio of total days in the review period to
days in the sample weeks. We then calculated a total net value for all
CEP sales during the review period by multiplying the sample CEP total
net value by the same ratio. We then divided the combined total dumping
margins for both EP and CEP sales by the combined total value for both
EP and CEP sales to obtain the deposit rate.
We will direct Customs to collect the resulting percentage deposit
rate against the entered Customs value of each of the respondent's
entries of subject merchandise entered, or withdrawn from warehouse,
for consumption on or after the date of publication of this notice.
Entries of parts incorporated into finished bearings before sales
to an unaffiliated customer in the United States will receive the
respondent's deposit rate applicable to the order.
Furthermore, the following deposit requirements will be effective
upon publication of this notice of final results of administrative
reviews for all shipments of AFBs entered, or withdrawn from warehouse,
for consumption on or after the date of publication, as provided by
section 751(a)(1) of the Act: (1) the cash-deposit rates for the
reviewed companies will be the rates shown above except that, for firms
whose weighted-average margins are less than 0.5 percent, and therefore
de minimis, the Department shall require a zero deposit of estimated
antidumping duties; (2) for previously reviewed or investigated
companies not listed above, the cash-deposit rate will continue to be
the company-specific rate published for the most recent period; (3) if
the exporter is not a firm covered in this review, a prior review, or
the original less-than-fair-value (LTFV) investigation, but the
manufacturer is, the cash-deposit rate will be the rate established for
the most recent period for the manufacturer of the merchandise; and (4)
the cash-deposit rate for all other manufacturers or exporters will
continue to be the ``All Others'' rate for the relevant order made
effective by the final results of review published on July 26, 1993
(see Final Results of Antidumping Duty Administrative Reviews and
Revocation in Part of an Antidumping Duty Order, 58 FR 39729 (July 26,
1993), and, for BBs from Italy, see Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof From France, et al: Final
Results of Antidumping Duty Administrative Reviews, Partial Termination
of Administrative Reviews, and Revocation in Part of Antidumping Duty
Orders, 61 FR 66472 (December 17, 1996)). These rates are the ``All
Others'' rates from the relevant LTFV investigations.
These deposit requirements shall remain in effect until publication
of the final results of the next administrative reviews.
This notice also serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Department's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of doubled antidumping duties.
This notice also serves as the only reminder to parties subject to
administrative protective orders (APO) of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with 19 CFR 353.34(d) 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.
We are issuing and publishing this determination in accordance with
section 715(a)(1) and 777(i)(1) of the Act.
Dated: June 9, 1998.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
Scope Appendix Contents
A. Description of the Merchandise
B. Scope Determinations
Issues Appendix Contents
Abbreviations
Comments and Responses
1. Discounts, Rebates, and Price Adjustments
2. Circumstance-of-Sale Adjustments
A. Credit Expense
B. Other Direct Selling Expenses
C. Indirect Selling Expenses
3. Level of Trade
4. Cost of Production and Constructed Value
A. Cost-Test Methodology
B. Profit for Constructed Value
C. Affiliated-Party Inputs
D. General, Selling, and Administrative Expenses
E. Cost Variances
5. Further Manufacturing
6. Packing and Movement Expenses
A. Repacking Expenses
B. Inland Freight
C. Ocean and Air Freight
7. Affiliated Parties
8. Sample Sales/Prototypes and Zero-Priced Transactions
9. Export Price and Constructed Export Price
10. Miscellaneous Issues
A. Programming and Clerical Errors
B. Pre-Existing Inventory
C. Military Sales
11. Cash-Deposit Financing
12. Romania-Specific Issues
[[Page 33323]]
Scope Appendix
A. Description of the Merchandise
The products covered by these orders, antifriction bearings (other
than tapered roller bearings), mounted or unmounted, and parts thereof
(AFBs), constitute the following three types of subject merchandise:
1. Ball Bearings and Parts Thereof: These products include all AFBs
that employ balls as the roller element. Imports of these products are
classified under the following categories: antifriction balls, ball
bearings with integral shafts, ball bearings (including radial ball
bearings) and parts thereof, and housed or mounted ball bearing units
and parts thereof. Imports of these products are classified under the
following Harmonized Tariff Schedule (HTS) subheadings: 3926.90.45,
4016.93.00, 4016.93.10, 4016.93.50, 6909.19.5010, 8431.20.00,
8431.39.0010, 8482.10.10, 8482.10.50, 8482.80.00, 8482.91.00,
8482.99.05, 8482.99.35, 8482.99.2580, 8482.99.6595, 8483.20.40,
8483.20.80, 8483.50.8040, 8483.50.90, 8483.90.20, 8483.90.30,
8483.90.70, 8708.50.50, 8708.60.50, 8708.60.80, 8708.70.6060,
8708.70.8050, 8708.93.30, 8708.93.5000, 8708.93.6000, 8708.93.75,
8708.99.06, 8708.99.31, 8708.99.4960, 8708.99.50, 8708.99.5800,
8708.99.8080, 8803.10.00, 8803.20.00, 8803.30.00, 8803.90.30, and
8803.90.90.
2. Cylindrical Roller Bearings, Mounted or Unmounted, and Parts
Thereof: These products include all AFBs that employ cylindrical
rollers as the rolling element. Imports of these products are
classified under the following categories: antifriction rollers, all
cylindrical roller bearings (including split cylindrical roller
bearings) and parts thereof, housed or mounted cylindrical roller
bearing units and parts thereof.
Imports of these products are classified under the following HTS
subheadings: 3926.90.45, 4016.93.00, 4016.93.10, 4016.93.50,
6909.19.5010, 8431.20.00, 8431.39.0010, 8482.40.00, 8482.50.00,
8482.80.00, 8482.91.00, 8482.99.25, 8482.99.35, 8482.99.6530,
8482.99.6560, 8482.99.70, 8483.20.40, 8483.20.80, 8483.50.8040,
8483.90.20, 8483.90.30, 8483.90.70, 8708.50.50, 8708.60.50,
8708.93.5000, 8708.99.4000, 8708.99.4960, 8708.99.50, 8708.99.8080,
8803.10.00, 8803.20.00, 8803.30.00, 8803.90.30, and 8803.90.90.
3. Spherical Plain Bearings, Mounted or Unmounted, and Parts
Thereof: These products include all spherical plain bearings that
employ a spherically shaped sliding element and include spherical plain
rod ends.
Imports of these products are classified under the following HTS
subheadings: 3926.90.45, 4016.93.00, 4016.93.00, 4016.93.10,
4016.93.50, 6909.50.10, 8483.30.80, 8483.90.30, 8485.90.00,
8708.93.5000, 8708.99.50, 8803.10.00, 8803.10.00, 8803.20.00,
8803.30.00, and 8803.90.90.
The HTS subheadings are provided for convenience and customs
purposes. The written description of the scope of this proceeding is
dispositive.
Size or precision grade of a bearing does not influence whether the
bearing is covered by the orders. These orders cover all the subject
bearings and parts thereof (inner race, outer race, cage, rollers,
balls, seals, shields, etc.) outlined above with certain limitations.
With regard to finished parts, all such parts are included in the scope
of these orders. For unfinished parts, such parts are included if (1)
they have been heat-treated, or (2) heat treatment is not required to
be performed on the part. Thus, the only unfinished parts that are not
covered by these orders are those that will be subject to heat
treatment after importation.
The ultimate application of a bearing also does not influence
whether the bearing is covered by the orders. Bearings designed for
highly specialized applications are not excluded. Any of the subject
bearings, regardless of whether they may ultimately be utilized in
aircraft, automobiles, or other equipment, are within the scopes of
these orders.
B. Scope Determinations
The Department has issued numerous clarifications of the scope of
the orders. The following is a compilation of the scope rulings and
determinations the Department has made:
Scope determinations made in the Final Determinations of Sales at
Less than Fair Value; Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof from the Federal Republic of Germany, 54 FR
19006, 19019 (May 3, 1989):
Products Covered
Rod end bearings and parts thereof
AFBs used in aviation applications
Aerospace engine bearings
Split cylindrical roller bearings
Wheel hub units
Slewing rings and slewing bearings (slewing rings and slewing
bearings were subsequently excluded by the International Trade
Commission's negative injury determination) (see International Trade
Commission: Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof from the Federal Republic of Germany, France, Italy,
Japan, Romania, Singapore, Sweden, Thailand and the United Kingdom, 54
FR 21488 (May 18, 1989))
Wave generator bearings
Bearings (including mounted or housed units and flanged or
enhanced bearings) ultimately utilized in textile machinery
Products Excluded
Plain bearings other than spherical plain bearings
Airframe components unrelated to the reduction of friction
Linear motion devices
Split pillow block housings
Nuts, bolts, and sleeves that are not integral parts of a
bearing or attached to a bearing under review
Thermoplastic bearings
Stainless steel hollow balls
Textile machinery components that are substantially advanced
in function(s) or value
Wheel hub units imported as part of front and rear axle
assemblies; wheel hub units that include tapered roller bearings; and
clutch release bearings that are already assembled as parts of
transmissions
Scope rulings completed between April 1, 1990, and June 30, 1990
(see Scope Rulings, 55 FR 42750 (October 23, 1990)):
Products Excluded
Antifriction bearings, including integral shaft ball bearings,
used in textile machinery and imported with attachments and
augmentations sufficient to advance their function beyond load-bearing/
friction-reducing capability
Scope rulings completed between July 1, 1990, and September 30,
1990 (see Scope Rulings, 55 FR 43020 (October 25, 1990)):
Products Covered
Rod ends
Clutch release bearings
Ball bearings used in the manufacture of helicopters
Ball bearings used in the manufacture of disk drives
Scope rulings published in Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof; Final Results of
Antidumping Administrative Review (AFBs I), 56 FR 31692, 31696 (July
11, 1991):
Products Covered
Load rollers and thrust rollers, also called mast guide
bearings
Conveyor system trolley wheels and chain wheels
[[Page 33324]]
Scope rulings completed between April 1, 1991, and June 30, 1991
(see Notice of Scope Rulings, 56 FR 36774 (August 1, 1991)):
Products Excluded
Textile machinery components including false twist spindles,
belt guide rollers, separator rollers, damping units, rotor units, and
tension pulleys
Scope rulings completed between July 1, 1991, and September 30,
1991 (see Scope Rulings, 56 FR 57320 (November 8, 1991)):
Products Covered
Snap rings and wire races
Bearings imported as spare parts
Custom-made specialty bearings
Products Excluded
Certain rotor assembly textile machinery components
Linear motion bearings
Scope rulings completed between October 1, 1991, and December 31,
1991 (see Notice of Scope Rulings, 57 FR 4597 (February 6, 1992)):
Products Covered
Chain sheaves (forklift truck mast components)
Loose boss rollers used in textile drafting machinery, also
called top rollers
Certain engine main shaft pilot bearings and engine crank
shaft bearings
Scope rulings completed between January 1, 1992, and March 31, 1992
(see Scope Rulings, 57 FR 19602 (May 7, 1992)):
Products Covered
Ceramic bearings
Roller turn rollers
Clutch release systems that contain rolling elements
Products Excluded
Clutch release systems that do not contain rolling elements
Chrome steel balls for use as check valves in hydraulic valve
systems
Scope rulings completed between April 1, 1992, and June 30, 1992
(see Scope Rulings, 57 FR 32973 (July 24, 1992)):
Products Excluded
Finished, semiground stainless steel balls
Stainless steel balls for non-bearing use (in an optical
polishing process)
Scope rulings completed between July 1, 1992, and September 30,
1992 (see Scope Rulings, 57 FR 57420 (December 4, 1992)):
Products Covered
Certain flexible roller bearings whose component rollers have
a length-to-diameter ratio of less than 4:1
Model 15BM2110 bearings
Products Excluded
Certain textile machinery components
Scope rulings completed between October 1, 1992, and December 31,
1992 (see Scope Rulings, 58 FR 11209 (February 24, 1993)):
Products Covered
Certain cylindrical bearings with a length-to-diameter ratio
of less than 4:1
Products Excluded
Certain cartridge assemblies comprised of a machine shaft, a
machined housing and two standard bearings
Scope rulings completed between January 1, 1993, and March 31, 1993
(see Scope Rulings, 58 FR 27542 (May 10, 1993)):
Products Covered
Certain cylindrical bearings with a length-to-diameter ratio
of less than 4:1
Scope rulings completed between April 1, 1993, and June 30, 1993
(see Scope Rulings, 58 FR 47124 (September 7, 1993)):
Products Covered
Certain series of INA bearings
Products Excluded
SAR series of ball bearings
Certain eccentric locking collars that are part of housed
bearing units
Scope rulings completed between October 1, 1993, and December 31,
1993 (see Scope Rulings, 59 FR 8910 (February 24, 1994)):
Products Excluded
Certain textile machinery components
Scope rulings completed between January 1, 1994, and March 31,
1994:
Products Excluded
Certain textile machinery components
Scope rulings completed between October 1, 1994 and December 31,
1994 (see Scope Rulings, 60 FR 12196 (March 6, 1995)):
Products Excluded
Rotek and Kaydon--Rotek bearings, models M4 and L6, are
slewing rings outside the scope of the order
Scope rulings completed between April 1, 1995 and June 30, 1995
(see Scope Rulings, 60 FR 36782 (July 18, 1995)):
Products Covered
Consolidated Saw Mill International (CSMI) Inc.--Cambio
bearings contained in CSMI's sawmill debarker are within the scope of
the order
Nakanishi Manufacturing Corp.--Nakanishi's stamped steel
washer with a zinc phosphate and adhesive coating used in the
manufacture of a ball bearing is within the scope of the order
Scope rulings completed between January 1, 1996 and March 31, 1996
(see Scope Rulings, 61 FR 18381 (April 25, 1996)):
Products Covered
Marquardt Switches--Medium carbon steel balls imported by
Marquardt are outside the scope of the order
Scope rulings completed between April 1, 1996 and June 30, 1996
(see Scope Rulings, 61 FR 40194 (August 1, 1996)):
Products Excluded
Dana Corporation--Automotive component, known variously as a
center bracket assembly, center bearings assembly, support bracket, or
shaft support bearing, is outside the scope of the order
Rockwell International Corporation--Automotive component,
known variously as a cushion suspension unit, cushion assembly unit, or
center bearing assembly, is outside the scope of the order
Enkotec Company, Inc.--``Main bearings'' imported for
incorporation into Enkotec Rotary Nail Machines are slewing rings and,
therefore, are outside the scope of the order
Issues Appendix
Company Abbreviations
Barden--Barden Corporation (U.K.) Ltd. and the Barden Corporation
FAG Italy--FAG Italia S.p.A.; FAG Bearings Corp.
FAG U.K.--FAG (U.K.) Ltd.
Koyo--Koyo Seiko Co. Ltd.
Meter--Meter, S.p.A.
Nachi--Nachi-Fujikoshi Corp., Nachi America Inc. and Nachi Technology,
Inc.
NMB/Pelmec--NMB Singapore Ltd.; Pelmec Industries (Pte.) Ltd.
NPBS--Nippon Pillow Block Manufacturing Co., Ltd.; Nippon Pillow Block
Sales Co., Ltd.; FYH Bearing Units USA, Inc.
NSK--Nippon Seiko K.K.; NSK Corporation
NSK-RHP--NSK Bearings Europe, Ltd.; RHP Bearings; RHP Bearings, Inc.
NTN--NTN Corporation; NTN Bearing Corporation of America; American
[[Page 33325]]
NTN Bearing Manufacturing Corporation
SKF France--SKF Compagnie d'Applications Mecaniques, S.A. (Clamart);
ADR; SARMA
SKF Germany--SKF GmbH; SKF Service GmbH; Steyr Walzlager
SKF Italy--SKF Industrie; RIV-SKF Officina de Villar Perosa; SKF
Cuscinetti Speciali; SKF Cuscinetti; RFT
SKF Group--SKF--France; SKF-Germany; SKF--Italy; SKF-Sweden; SKF USA,
Inc.
SKF Sweden--SKF Sverige AB
SNFA France--SNFA S.A.
SNFA U.K.-SNFA Bearings, Ltd.
TIE--Tehnoimportexport
Torrington--The Torrington Company
Torrington Nadellager--Torrington Nadellager, GmbH
Other Abbreviations
COP--Cost of Production
COM--Cost of Manufacturing
CV--Constructed Value
CEP--Constructed Export Price
NME--Non-Market Economy
OEM--Original Equipment Manufacturer
POR--Period of Review
PSPA--Post-Sale Price Adjustment
SAA--Statement of Administrative Action
SG&A--Selling, General, & Administrative Expenses
URAA--Uruguay Round Agreements Act
Regulations
19 CFR Part 353, et al., Antidumping Duties; Countervailing Duties;
Final rule (applicable regulations).
19 CFR Part 351, et al., Antidumping Duties; Countervailing Duties;
Final rule, 62 FR 27296--27424 (May 19, 1997) (new regulations).
AFB Administrative Determinations
LTFV Investigation--Final Determinations of Sales at Less than Fair
Value; Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof from the Federal Republic of Germany, 54 FR 19006 (May 3,
1989).
AFBs 1--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof from the Federal Republic of Germany; Final Results
of Antidumping Duty Administrative Review, 56 FR 31692 (July 11, 1991).
AFBs 2--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 3--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al.; Final Results of Antidumping
Duty Administrative Reviews and Revocation in Part of an Antidumping
Duty Order, 58 FR 39729 (July 26, 1993).
AFBs 4--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews, Partial Termination of Administrative Reviews,
and Revocation in Part of Antidumping Duty Orders, 60 FR 10900
(February 28, 1995).
AFBs 5--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews and Partial Termination of Administrative
Reviews, 61 FR 66472 (December 17, 1996).
AFBs 6--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews and Partial Termination of Administrative
Reviews, 62 FR 2081 (January 15, 1997).
AFBs 7--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews and Partial Termination of Administrative
Reviews, 62 FR 54043 (October 17, 1997).
1. Discounts, Rebates, and Price Adjustments
Comment 1: Torrington contends that the Department should disallow
certain discounts which NTN reported. Torrington states that, based on
its understanding of the record, NTN's reported discounts were
allocated across all sales to a particular customer, but the discounts
only applied to certain products sold to that customer. Torrington
states that this makes the allocation methodology distortive and open
to potential manipulation.
Citing to The Torrington Company v. United States, 82 F.3d 1039,
1047-1051 (Fed. Cir. 1996) (Torrington), Torrington states that the
Court made a distinction between direct and indirect expenses and
rejected a contention that the former could be allocated in a manner
suitable for the latter, i.e., allocated to sales not directly
affected. Torrington states that NTN's allocation is clearly
inconsistent with this decision.
NTN states the Department properly accepted these discounts in the
preliminary results, and in prior reviews, and that Torrington is
ignoring the Department's prior decisions on this issue. NTN states
further that the Department verified the discount methodology
thoroughly and that the Department should deny Torrington's request.
Department's Position: We agree with NTN. Contrary to petitioner's
understanding of the way this discount is granted and allocated, we
found that NTN granted the discount on a customer-and product-category
basis (i.e., by customer and on an antidumping (AD) order-specific
(i.e., BB, CRB, SPB) basis), as well as allocated it by customer on an
AD order-specific basis (BBs, CRBs, or SPBs). (See Verification Report
dated January 22, 1998, at 8 and at exhibit 13.) During verification,
we reviewed numerous documents which NTN uses to track this type of
discount (on an order-specific basis) and determined that NTN reported
this discount in the most feasible manner possible. The allocation was
AD order-specific (BBs, CRBs, or SPBs) and the bearings do not vary
significantly in terms of value, physical characteristics, or the
manner in which they are sold such that the results of the allocation
are not unreasonably inaccurate or distortive. Therefore, we find this
methodology to be acceptable.
In addition, we disagree with Torrington's characterization of the
Federal Circuit's decision in Torrington. Therein, the Court held that
the Department could not make an adjustment for post-sale price
adjustments (PSPAs) as indirect selling expenses (under the exporter's
sales price-offset regulation) when the PSPAs were related directly to
the transactions in question. While the Court held that the method of
allocating or reporting an expense does not alter the relationship
between the expense and the related sales (see Torrington, 82 F.3d at
1051), the Court did not indicate that allocations of direct expenses
were impermissible.
Comment 2: Torrington argues that the Department should reject two
types of Nachi's reported rebates because, it alleges, the allocation
methodology Nachi used is distortive. (In making its argument,
Torrington relies on business proprietary information which is not
susceptible to summary.)
Nachi contends that Torrington has not demonstrated that Nachi's
rebates are distortive and that the Department has accepted its rebate-
allocation methodologies in prior reviews. Nachi contends that, because
the Department verified that it is impossible for Nachi to report these
rebates on a transaction-specific basis and because the reporting
method that it has employed is the best alternative given its
particular method of keeping records, the Department should allow these
rebates in the final results of reviews.
[[Page 33326]]
Department's Position: We disagree with Torrington. We find that
Nachi acted to the best of its ability in reporting both types of
rebates with which Torrington takes issue and that Nachi's allocation
methodology was reasonable. In addition, there is no information on the
record which indicates that the bearings included in Nachi's
allocations vary significantly in terms of value, physical
characteristics, or the manner in which sold, such that Nachi's
allocations would result in unreasonably inaccurate or distortive
allocations.
With regard to rebate 3, the first of the two rebates in question,
we find that Nachi reported this rebate on the most specific basis
feasible, considering its particular method of recordkeeping. Nothing
on the record indicates that only certain types of bearings are subject
to the rebate. Nachi's response indicates that it calculated the rebate
on an invoice-specific basis (Nachi generates invoices on a monthly
basis in the home market). We determine that Nachi's statement that the
rebate is based on ``the bearings covered by the claim submitted by the
customer'' refers to the bearings covered by a specific invoice and not
a limited set of bearings. See Nachi's Section B response, dated
September 5, 1997, at page B-2 of Exhibit B/18.1. We found nothing at
verification to contradict this statement. See Verification Report,
dated January 26, 1998. Therefore, we conclude that, by allocating the
rebate over the sales of each invoice to which the rebate was
applicable, Nachi reported rebate 3 as accurately as possible.
With regard to rebate 5, we determine that Nachi reported this
rebate as specifically as is feasible, given the records Nachi keeps in
its normal course of business. Nachi reported that it ``pays (this
rebate) on a customer-specific basis for eligible products only and has
allocated and reported rebates to the Department on the same basis.''
See Nachi's Section B response dated September 9, 1998, at page B-1 of
Exhibit B/18.1. Nachi also noted in its Supplemental Response dated
November 10, 1998, at page 14 that, ``because it is not possible (for
Nachi) to tie the payment of a rebate paid several months after a sale,
Nachi allocated the payment each month on as specific a basis as
possible.'' Again, we found nothing at verification that contradicts
these statements. See the Verification Report for Nachi, dated January
26, 1998. Therefore, because we determine that Nachi acted to the best
of its ability and that its allocation methodology for these rebates is
reasonable, we have adjusted normal value for these rebates for these
final results.
Comment 3: Torrington contends that the Department should reject
SKF Germany's claim for adjustments in connection with its support
rebate because SKF Germany applied the rebate to all sales of any
distributor who qualified for this type of rebate. Torrington argues
that, in addition, SKF Germany has granted rebates to distributors for
non-subject merchandise. Torrington states that, because the rebate is
allocated over all sales to a given distributor and not on a
transaction-specific basis, the allocation is not reflective of how the
rebate was incurred and, thus, distorts the dumping margins. The
petitioner states that, because it does not have access to the
information that would enable it to demonstrate such distortions, the
respondent should bear the burden of proving that the reporting of its
support rebate is not distortive.
SKF Germany rebuts Torrington's argument that it has employed a
distortive methodology for reporting the support rebate. It states that
it reported this rebate for each customer which received the rebate.
SKF Germany explains that the rebate applied to the aggregate sales of
a particular customer and that it reported the rebate by customer
number. SKF Germany argues that, by allocating the support rebate to
all sales to each of the particular customers which actually received
the rebate, SKF Germany reported the rebate in the manner in which it
was incurred. SKF Germany refutes Torrington's argument that the
support rebate includes non-subject merchandise and points to the
Department's verification report which indicates that the rebate is
reasonable and allocated in a non-distortive manner. SKF Germany states
that the Department has accepted its reporting methodology for the
support rebate in the two previous AFB administrative reviews. SKF
Germany states that, moreover, the CIT has affirmed SKF Germany's
support rebate as a direct adjustment, citing INA Walzlager Schaeffler
KG et al. v. United States, 957 F. Supp. 251, 269 (CIT 1997).
Department's Position: We disagree with Torrington. As in AFBs 7,
we have not found SKF Germany's allocation methodologies to be
unreasonably distortive. Because SKF Germany grants the support rebates
to distributors/dealers on the basis of their overall sales to the
particular distributor/dealer, SKF Germany can not report this rebate
on a transaction-specific basis. We examined SKF Germany's home-market
support rebates in detail at verification and found that, although SKF
Germany calculates this rebate on a customer-specific basis, ``we found
no evidence of distortion in the data that we reviewed,'' a point which
Torrington has acknowledged. Furthermore, we verified the accuracy of
the claim of payments. There is no information on the record which
indicates that the bearings included in SKF Germany's allocation vary
significantly in terms of value, physical characteristics, or the
manner in which they are sold such that SKF Germany's allocations would
result in unreasonably inaccurate or distortive allocations. Moreover,
we find that SKF Germany reported these rebates on as specific a basis
as possible. For these reasons, we have adjusted for SKF Germany's
support rebates. See AFBs 7 at 54052-53 for a further discussion on the
Department's position regarding this issue.
Comment 4: Torrington argues that the Department should deny
certain home-market rebates claimed by Koyo. The petitioner contends
that, instead of identifying the sales to a certain distributor and
reporting the rebate for these sales only, Koyo allocated this
substantial rebate across all sales to the distributor.
In rebuttal, Koyo argues that it reported its rebate expenses in
these reviews in the same manner as it has in past reviews and that the
Department has verified and accepted the claimed expense repeatedly.
Koyo contends further that, during the POR, it did not have the
capability in its computerized recordkeeping system to distinguish
between sales of bearings to this distributor for a specific
application covered by the rebate and sales to the same distributor of
these bearing models that, although suitable for the specific
application for which the rebate was intended, were sold for different
applications that were not covered by the rebate. Koyo admits that its
rebate-allocation methodology adjusts sales prices for some sales to
this distributor for which rebates were not actually granted, but it
concludes that its methodology is, nonetheless, not distortive overall.
Koyo states that the determination of whether an allocation is
distortive is not dependent on whether the allocation pool included
merchandise for which the expense was not originally incurred, the
degree to which the allocated adjustment exceeded any arbitrary
benchmark, nor the difference between the allocated adjustment and the
actual adjustment associated with any individual transaction. Instead,
Koyo argues that the Department's test of whether an allocation is
distortive is whether the
[[Page 33327]]
merchandise for which the adjustment was actually granted is different
from the merchandise over which the adjustment was allocated in terms
of value, physical characteristics, and the manner in which it was
sold. Koyo contends that, in this case, it was not. Finally, Koyo
argues that, before accepting an allocated rebate adjustment, the
Department determines whether the respondent acted to the best of its
ability in reporting these adjustments.
Department's Position: We disagree with Torrington. For these final
results we have accepted claims for rebates as direct adjustments to
price if we determined that the respondent, in reporting these
adjustments, acted to the best of its ability and that its reporting
methodology was not unreasonably distortive. While we recognize that
there are differences in bearings, we have found no support for the
proposition that the bearings included in Koyo's allocation vary
significantly in terms of value, physical characteristics, or the
manner in which they are sold such that Koyo's allocation would result
in an unreasonably inaccurate or distortive allocation. Thus, since
Koyo has reported this rebate on as specific a basis as possible, we
have made a direct adjustment to home-market price for Koyo's rebates.
Comment 5: Torrington argues that the Department should disallow
NSK's reported negative post-sale billing adjustments because NSK has
not demonstrated that these price adjustments were contemplated at the
time of sale or that they are part of NSK's normal business practice.
NSK contends that Torrington is incorrect when it argues that, in
order for NSK to claim a negative billing adjustment, its customer must
have known at the time of sale that there would be a downward
adjustment to price. Citing the preamble to new regulations,
Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27295 (new
regulations) at 27344, NSK contends that the Department rejected the
request of certain parties that the Department adopt such a
requirement.
Department's Position: We disagree with Torrington. The new
regulations, at 19 CFR 351.401(c), state that the Department ``(i)n
calculating export price, constructed export price, and normal value
(where normal value is based on price) * * * will use a price that is
net of any price adjustment, as defined in section 351.102(b), that is
reasonably attributable to the subject merchandise or the foreign like
product (whichever is applicable).'' Price adjustments are defined in
the new regulations at section 351.102(b) as ``any change in the price
charged for subject merchandise or the foreign like product, such as
discounts, rebates and post-sale price adjustments, that are reflected
in the purchaser's net outlay.'' While the Department stated in the
preamble at 27344 that respondents should not be ``allowed to eliminate
dumping margins by providing price adjustments `after the fact,' ''
there is no evidence on the record in these reviews that demonstrates
or even suggests that this is happening. Finally, generally speaking,
there is nothing unusual about PSPAs in this industry and,
specifically, there is nothing on the record to suggest that NSK
manipulated these adjustments. Accordingly, we have granted NSK this
adjustment.
Comment 6: Torrington argues that the Department should disallow
NSK's reported negative lump-sum billing adjustments because NSK has
not demonstrated that these price adjustments were contemplated at the
time of sales or that they are part of NSK's normal business practice.
Torrington contends further, citing Torrington, that, because these
billing adjustments are allocated on a customer-specific basis and, as
a result, applied to sales on which they were not actually incurred,
the Department should deny the adjustment.
NSK contends that it documented its entitlement to this adjustment
fully. NSK also asserts that this issue has been raised by Torrington
in previous reviews and that the Department has rejected Torrington's
argument in those reviews.
Department's Position: We disagree with Torrington. With regard to
the contention that the lump-sum billing adjustments were not
contemplated at the time of sale, see our position in response to
Comment 5 of this section, above. With regard to the fact that NSK
allocated these adjustments, we note that our new regulations at 19 CFR
351.401(g)(1) direct that we ``may consider allocated expenses and
price adjustments when transaction-specific reporting is not feasible,
provided (we are) satisfied that the allocation method used does not
cause inaccuracies or distortions.'' Although NSK allocated lump-sum
price adjustments on a customer-specific basis, we determine that NSK
acted to the best of its ability in reporting this information when it
used customer-specific allocations.
Our review of the information which NSK submitted indicates that,
given the lump-sum nature of this adjustment, the fact that NSK's
records do not readily identify a discrete group of sales to which each
rebate pertains, and the extremely large number of sales NSK made
during the POR, it is not feasible for NSK to report this adjustment on
a more specific basis. Furthermore, there is no information on the
record which indicates that the bearings included in NSK's allocation
vary significantly in terms of value, physical characteristics, or the
manner in which they are sold such that NSK's allocations would result
in unreasonably inaccurate or distortive allocations. Therefore, we
have adjusted normal value for NSK's reported negative lump-sum billing
adjustments.
Comment 7: Torrington argues that the Department should reject SKF
Germany's home-market billing adjustment 2 and, accordingly, deny all
related downward adjustments. Torrington contends that SKF Germany
claimed downward adjustments for transactions for which none were
warranted because SKF Germany allocated the adjustment over all
transactions with a given SKF Germany customer. By not reporting this
adjustment on a transaction-specific basis, Torrington claims that SKF
Germany has distorted the home-market price of particular models.
Torrington also argues that the Department should deny billing
adjustment 2 because double-counting may have occurred for those
transactions for which SKF Germany reported both billing adjustment 1
and billing adjustment 2 and that SKF Germany has failed to demonstrate
that double-counting did not occur. Torrington acknowledges that the
Department accepted SKF Germany's reported home-market billing
adjustment 2 in AFBs 7, but states that the Department's decision to do
so was contrary to the Court of Appeals, for the Federal Circuit (CAFC)
decision in Fujitsu General Ltd. v. United States, 88 F.3d 1034, 1040
(Fed. Circ. 1996) (Fujitsu). Torrington posits that the Department
should deny only SKF Germany's reported downward adjustments associated
with billing adjustment 2 as it has done in previous AFB administrative
reviews.
SKF Germany rebuts Torrington's argument that its reporting
methodology for home-market billing adjustment 2 is distortive. SKF
Germany argues that the Department has verified and accepted both the
manner in which its billing adjustment 2 is recorded in its normal
course of business and the manner in which it was reported to the
Department in the 1994/95, 1995/96, and current AFB administrative
reviews. SKF Germany also refutes Torrington's claim that double-
counting may have occured because, for some sales transactions, both
billing adjustment 1 and billing
[[Page 33328]]
adjustment 2 were reported. SKF Germany contends that the underlying
purposes of these two adjustments are distinct from one another and, as
such, the adjustments are not mutually exclusive. SKF Germany also
refutes Torrington's assertion that the only adjustments that should be
disallowed are downward adjustments.
Department's Position: We disagree with the petitioner. We examined
this expense closely at verification and found that the calculation of
this adjustment was not unreasonably distortive. In particular, there
is no information on the record which indicates that the bearings
included in SKF Germany's allocation vary significantly in terms of
value, physical characteristics, or the manner in which they are sold
such that SKF Germany's allocations would result in unreasonably
inaccurate or distortive allocations. We also found that SKF Germany
has used the most specific reporting methodology possible by
calculating an individual adjustment factor for each customer based on
SKF Germany's annual sales of bearings to that customer. SKF Germany
then used this factor to calculate each specific adjustment. See
Verification Report, December 12, 1997, p. 6-7. In addition, we
verified that billing adjustments 1 and 2 are separate billing
adjustments, with different underlying purposes. Accordingly, we have
determined that SKF Germany has allocated billing adjustment 2 in the
most specific manner possible and this allocation is not unreasonably
distortive. Therefore, we have granted this adjustment for these
reviews.
We also disagree with Torrington's statement that our acceptance of
SKF Germany's billing adjustment 2 is inconsistent with the CAFC's
decision in Fujitsu. In Fujitsu, the CAFC upheld the Department's
rejection of a respondent's claim regarding start-up costs because the
respondent had failed to meet its burden of proof. In this case, SKF
Germany has provided sufficient information such that the Department
was able to and has determined that SKF Germany is entitled to a price
adjustment for billing adjustment 2.
Comment 8: Torrington argues that the Department should deny all of
Koyo's downward billing adjustments because they were not truly billing
adjustments and, in some cases, were not reported correctly. The
petitioner argues that the Department should only accept billing
adjustments if they reflect agreements made prior to the sale or if
they reflect normal business practices. Specifically, Torrington
asserts that the Department should reject billing adjustments 1 and 2
because both include a ``substantial number'' of downward adjustments
and because both offer a potential for manipulation associated with
PSPAs. In addition, the petitioner contends that billing adjustment 2
is distortive because it includes adjustments which Koyo granted on a
model-specific basis but allocated over all sales to the customer
involved, as well as lump-sum adjustments granted on a customer-
specific basis, with the end result that adjustments are made to
transactions for which no adjustment actually applied. Torrington
argues that Koyo has the burden of justifying any downward adjustment
to normal value and that this requires the company to present concrete
evidence demonstrating distortion is not likely, given the nature of
each adjustment, each customer, and each sale.
In rebuttal, Koyo argues that the Department should reject
Torrington's arguments in these reviews as it has done in the past two
AFB reviews. Koyo contends that, given that there is a complete absence
of evidence that Koyo has been manipulating price adjustments, the
Department should accept them as reported. Koyo states that it reported
three general types of price adjustments in its questionnaire response:
(1) adjustments made to preliminary prices where a pricing agreement
did not previously exist; (2) adjustments made due to the renegotiation
of existing price agreements (e.g., to correct for Koyo's continued
shipment of merchandise to a customer under the terms of an expired
contract while price negotiations continued); and (3) lump-sum
adjustments negotiated between Koyo and its customers without reference
to the model-specific selling prices and other adjustments negotiated
on a case-by-case basis. Koyo contends that each of these types of
adjustments is a ``normal business practice'' for Koyo. Koyo argues
further that, although the Department, under the pre-URAA antidumping
law, rejected some of Koyo's PSPAs in some administrative reviews, it
did so because of objections to the allocation methodology Koyo used,
never because of any doubt as to the validity of the underlying post-
sale commercial activities. Koyo states that, for billing adjustment 1,
it matched debit and credit memos to the relevant sales and claimed the
adjustment on a transaction-specific basis. In refuting Torrington's
argument that Koyo's customer-specific billing adjustments reported
under billing adjustment 2 are distortive, Koyo argues that requiring
the precise assignment of adjustments to sales would in effect prohibit
the use of allocations. Koyo argues that this is contrary to
Congressional intent, as expressed in the URAA, and the express
provisions of the Department's recently enacted antidumping
regulations.
Department's Position: With respect to both billing adjustments,
our examination of the record leads us to conclude that both rebates
are part of Koyo's long-term business practices and there is no
information on the record that Koyo attempted to manipulate its
downward price adjustments for the purpose of lowering or eliminating
its dumping margin. Koyo incurs and reports the first billing
adjustment on a transaction-specific basis and therefore this
adjustment does not involve any type of allocation. Accordingly, each
adjustment to normal value reflects an actual billing adjustment. With
respect to the second billing adjustment, we have determined that Koyo
has reported it to the best of its ability. We have based our
determination on the fact that this PSPA is comprised of two types of
adjustments, including both lump-sum adjustments negotiated with
customers without reference to model-specific prices and also
adjustments granted on a model-specific basis, but which Koyo records
in its computer system on a customer-specific basis only. Given the
large number of sales involved, it is not feasible to report this on a
more specific basis. See AFBs 7 at 54050-51. Moreover, there is no
information on the record which indicates that the bearings included in
Koyo's allocation vary significantly in terms of value, physical
characteristics, or the manner in which they are sold such that Koyo's
allocations would result in unreasonably inaccurate or distortive
allocations. Therefore, we have allowed Koyo's lump-sum adjustments as
direct adjustments to normal value.
2. Circumstance-of-Sale Adjustments
2.A. Credit Expense. Comment: Torrington argues that the Department
should reject the credit expense adjustment NMB/Pelmec claimed on its
home-market sales. Although NMB/Pelmec alleges that it used the
borrowing experience of its affiliate, Minebea Technologies Pte., Ltd.
(MTL), Torrington asserts that the actual interest rates NMB/Pelmec
used to calculate home-market credit expenses are unsupported by
evidence on the record. Torrington notes first that NMB/Pelmec
miscalculated the short-term interest rate of MTL (the exact nature of
this alleged miscalculation can not be described here due to its
proprietary nature--see Analysis Memorandum
[[Page 33329]]
dated May 19, 1998). Torrington then points to NMB/Pelmec's financial
statements and the interest rates for NMB/Pelmec's parent company,
Minebea Group, as an example of the inconsistent reporting.
Furthermore, Torrington asserts that the rate NMB/Pelmec used for
calculating home-market credit expenses (i.e., MTL's short-term
interest rate) is also inconsistent with the rate it used to calculate
inventory carrying costs.
NMB/Pelmec responds that it calculated its average short-term
interest rate for the POR by dividing MTL's average monthly interest
expenses by its average outstanding end-of-month loan balances which,
NMB/Pelmec contends, is a routinely accepted formula to derive interest
rates in antidumping proceedings. NMB/Pelmec cites Steel Wire Rope from
the Republic of Korea, 61 FR 55965, 55969 (October 30, 1996), and Foam
Extruded PVC and Polystyrene Framing Stock from the United Kingdom, 61
FR 51411, 51420-21 (October 2, 1996), to support its statement. NMB/
Pelmec argues that Torrington has not provided any supporting evidence
demonstrating that the Department should disregard this methodology.
Moreover, NMB/Pelmec notes, the Department verified the home-market
credit calculations in prior reviews. NMB/Pelmec argues that
Torrington's reference to Minebea Group's rates is irrelevant since MTL
holds the receivables in the home market and other Minebea Group
companies do not. Furthermore, NMB/Pelmec argues that, during the time
that the merchandise remains in inventory at the factory (Stage 1), it
is being held by NMB/Pelmec and, therefore, it is appropriate to use
NMB/Pelmec's rate to calculate inventory carrying costs (as opposed to
MTL's rate).
Department's Position: Although we agree with NMB/Pelmec that its
use of MTL's interest rates is appropriate for calculating home-market
credit expenses, we also agree with Torrington that there was a
miscalculation in NMB/Pelmec's methodology for deriving its average
short-term interest rate. Therefore, we have corrected this error for
these final results (see Analysis Memo dated May 19, 1998).
Furthermore, we agree with the respondent that the use of NMB/Pelmec's
interest rate is appropriate for the calculation of inventory carrying
costs for Stage 1 because NMB/Pelmec incurs this cost. Where there are
differences in the circumstances, such as how NMB/Pelmec incurs
inventory carrying costs as opposed to its short-term interest
expenses, different applications are appropriate, supported by evidence
on the record. Therefore, with the correction noted above, we have
accepted NMB/Pelmec's credit expenses and inventory carrying costs.
2.B. Other Direct Selling Expenses. Comment: Torrington argues that
the Department should reject NSK-RHP's claim for a direct adjustment
for other direct selling expenses. Torrington maintains that NSK-RHP
has not shown that these expenses are direct expenses and that these
expenses include the cost of salaries. Torrington argues further that
the Department should reject an adjustment for direct expenses
allocated across all reported sales rather than to those sales where
the expense was actually incurred. In addition, Torrington argues, the
respondents must substantiate that more accurate reporting is not
feasible and that the allocation does not cause unreasonable
inaccuracies or distortions. Torrington concludes that NSK-RHP should
have reported its expenses on a sale-specific basis in accordance with
Torrington.
NSK-RHP responds that, since the Department's verification in these
reviews uncovered no evidence suggesting evasive reporting by NSK-RHP,
the Department should continue to deduct other direct selling expenses
from normal value as it did in AFBs 6 and AFBs 7. NSK-RHP also
maintains that it incurred the expense on a sale-by-sale basis. NSK-RHP
argues that it reported, in separate direct cost centers for its
channels of distribution, expenses associated with selling activities
related to particular customers. NSK-RHP contends that, since it was
not feasible to report these expenses on a more specific basis due to
its accounting system, it acted to the best of its ability and
allocated the costs in a manner that did not cause unreasonable
inaccuracies or distortions.
Department's Position: We agree with Torrington. The expenses which
NSK-RHP claims are ``other direct selling expenses'' are the type of
expenses which we normally do not categorize as sale-specific expenses
and, in the absence of the sale, such expenses would be incurred. NSK-
RHP includes salaries as an other direct selling expense; however, we
normally categorize the costs of salaries to employees as a fixed,
indirect expense. See Department's Questionnaire at I-5; Torrington at
1050. Moreover, the other expenses which NSK-RHP claims to be other
direct selling expenses, which can not be described here due to their
proprietary nature, also do not vary depending upon whether a
particular sale occurs. See Analysis Memorandum dated May 20, 1998.
Therefore, we have treated these costs as indirect selling expenses.
Because we find these selling costs to be indirect in nature, we
need not address whether NSK-RHP allocated its costs in an unreasonably
inaccurate or distortive manner. The fact that NSK-RHP allocated this
expense did not enter into our decision to treat it as an indirect
selling expense. We note further that Torrington addresses the
allocation of direct, rather than indirect expenses, and thus this
argument is inapplicable here.
Finally, neither our treatment in previous reviews of these
expenses as direct nor our verification of U.S. expenses precludes the
current finding. Furthermore, the issue is not whether evidence has
been uncovered suggesting evasive reporting. Rather, the burden is on
the respondent to demonstrate that the expenses are direct, as claimed.
In this case, the evidence indicates that the expenses are indirect in
nature.
2.C. Indirect Selling Expenses. Comment: NTN states that the
Department should use its indirect selling expenses as reported by
level of trade instead of allocating them on an aggregate basis. NTN
states further that the Department provides no explanation in its
preliminary results as to its rationale for recalculating this expense.
Finally, NTN states that the adjustment is particularly inappropriate
because it combines NTN's selling expenses with those of an affiliate.
Torrington contends that, since the Department refused to find the
relationship between home-market levels of trade and home-market
indirect selling expenses self evident in AFBs 7, the burden of proof
was on NTN to provide such evidence. Torrington states that, because
NTN showed no relationship between the home-market levels of trade and
indirect expenses incurred, the Department should affirm its
preliminary results.
Department Position: We agree with Torrington. The method that NTN
used to allocate its indirect selling expenses does not bear any
relationship to the manner in which NTN incurs the expenses in
question, thereby leading to distorted allocations (see AFBS 3 at
39750). Therefore, we have allocated NTN's home-market indirect selling
expenses over the total sales values, without regard to levels of
trade.
3. Level of Trade
In accordance with section 773(a)(1)(B) of the Act, to the extent
practicable, we determine normal value based on sales in the comparison
market at the same level of trade as the EP or CEP transaction. The
normal-value level
[[Page 33330]]
of trade is that of the starting-price sales in the comparison market
or, when normal value is based on CV, that of the sales from which we
derive selling, general, and administrative (SG&A) expenses and profit.
For EP, the U.S. level of trade is also the level of the starting-price
sale, which is usually from exporter to importer. For CEP, it is the
level of the constructed sale from the exporter to the importer.
To determine whether normal-value sales are at a different level of
trade than EP or CEP, we examine stages in the marketing process and
selling functions along the chain of distribution between the producer
and the unaffiliated customer. If the comparison-market sales are at a
different level of trade, and the difference affects price
comparability, as manifested in a pattern of consistent price
differences between the sales on which normal value is based and
comparison-market sales at the level of trade of the export
transaction, we make an level-of-trade adjustment under section
773(a)(7)(A) of the Act. Finally, for CEP sales, if the normal-value
level is more remote from the factory than the CEP-level and there is
no basis for determining whether the difference in the levels between
normal value and CEP affects price comparability, we adjust normal
value under section 773(a)(7)(B) of the Act (the CEP offset provision).
See Notice of Final Determination of Sales at Less Than Fair Value:
Certain Cut-to-Length Carbon Steel Plate from South Africa, 62 FR 61731
(November 19, 1997).
As in the preliminary results, where we established that the
comparison sales were made at a different level of trade than the sales
to the United States, we made a level-of-trade adjustment if we were
able to determine that the differences in levels of trade affected
price comparability. We determined the effect on price comparability by
examining sales at different levels of trade 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 level of trade 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 levels
of trade. We used the average difference in net prices to adjust normal
value when normal value is based on a level of trade different from
that of the export sale. If there was a pattern of no price
differences, the differences in levels of trade did not have a price
effect and, therefore, no adjustment was necessary.
We were able to quantify such price differences and make a level-
of-trade adjustment for certain comparisons involving EP sales, in
accordance with section 773(a)(7)(A). For such sales, the same level of
trade as that of the U.S. sales existed in the comparison market but we
could only match the U.S. sale to comparison-market sales at a
different level of trade because there were no usable sales of the
foreign like product at the same level of trade. Therefore, we
determined whether there was a pattern of consistent price differences
between these different levels of trade in the home market. We made
this determination by comparing, for each model sold at both levels,
the average net price of sales made in the ordinary course of trade at
the two levels of trade. If the average prices were higher at one of
the levels of trade for a preponderance of the models, we considered
this to demonstrate a pattern of consistent price differences. We also
considered whether the average prices were higher at one of the levels
of trade for a preponderance of sales, based on the quantities of each
model sold, in making this determination. We applied the average
percentage difference to the adjusted normal value as the level-of-
trade adjustment.
We were unable to quantify price differences in other instances
involving comparisons of sales made at different levels of trade.
First, with respect to CEP sales, the same level of trade as that of
the CEP for merchandise under review did not exist in the comparison
market for any respondent except NMB/Pelmec. We also did not find the
same level of trade in the comparison market for some EP sales of
merchandise under review. Therefore, for comparisons involving these
sales, we could not determine whether there was a pattern of consistent
price differences between the levels of trade based on respondents'
home market sales of merchandise under review.
In such cases, we looked to alternative sources of information in
accordance with the SAA. The SAA provides that ``if information on the
same product and company is not available, the level-of-trade
adjustment may also be based on sales of other products by the same
company. In the absence of any sales, including those in recent time
periods, to different levels of trade by the exporter or producer under
investigation, Commerce may further consider the selling experience of
other producers in the foreign market for the same product or other
products.'' See SAA at 830. Accordingly, where necessary, we attempted
to examine the alternative methods for calculating a level-of-trade
adjustment. In these reviews, however, we did not have information that
would allow us to apply these alternative methods for companies that,
unlike NMB/Pelmec, did not have a home-market level of trade equivalent
to the level of the CEP.
The only company for which we made a level-of-trade adjustment for
CEP sales in these final results was NMB/Pelmec. However, we concluded
that it would be inappropriate to apply the level-of-trade adjustment
we calculated for NMB/Pelmec to any of the other respondents. Because
no respondent reported sales in the same market as NMB/Pelmec (i.e.,
Singapore), we have not used NMB/Pelmec's data as the basis of a level-
of-trade adjustment for any other respondents.
In those situations where the U.S. sales were EP sales and we were
unable to quantify a level-of-trade adjustment based on a pattern of
consistent price differences, the statute requires no further
adjustments. However, with respect to CEP sales for which we were
unable to quantify a level-of-trade adjustment, we granted a CEP offset
where the home-market sales were at a more advanced level of trade than
the sales to the United States, in accordance with section 773(a)(7)(B)
of the Act.
Comment 1: NSK argues that the Department should make a level-of-
trade adjustment when CEP sales are matched to home-market aftermarket
sales. NSK contends that the Department can make a level-of-trade
adjustment on the basis of the difference between the OEM and
aftermarket levels of trade in the home market. NSK asserts that,
although the home-market OEM sales and the level of CEP sales are not
equivalent, the Department is not required to adjust for the entire
amount of the difference between levels of trade when making a level-
of-trade adjustment and could make a partial adjustment instead. NSK
contends that the level of home-market OEM sales is closer to the level
of CEP sales than is the level of home-market aftermarket sales because
the prices for home-market OEM sales are lower than the prices for
home-market aftermarket sales. NSK asserts that it would be
appropriate, therefore, to adjust normal value with a level-of-trade
adjustment based on the difference between the home-market levels of
trade whenever CEP sales are compared to home-market aftermarket sales.
Torrington states that the Department's approach to level-of-trade
adjustments and CEP offsets is extraordinarily complex. Torrington
contends that NSK's arguments are incomplete and fail to address the
[[Page 33331]]
complexities of the Department's approach. For example, Torrington
argues, NSK fails to describe how the statutory language at section
773(7)(A) ``partly due to'' is quantifiable when customer categories
define level of trade. Torrington states that the fact that the CEP
level of trade is ``closer to the factory'' than any other home-market
level of trade is not in itself a controlling factor for purposes of
quantifying an adjustment.
Department's Position: We disagree with NSK. We may make level-of-
trade adjustments when there is ``any difference... between the export
price or constructed export price and the normal value that is shown to
be wholly or partly due to a difference in the level of trade between
the export price or the constructed export price and normal value.''
See section 773(a)(7)(A) of the Act. We find no explicit authority to
make a level-of-trade adjustment between two home-market levels of
trade where neither level is equivalent to the level of the U.S. sale.
See AFBs 7.
Comment 2: The petitioner alleges that, based on the record, there
are considerable differences in the selling functions NSK and SKF Italy
perform for EP and home-market OEM customers and thus, home-market OEM
sales are not equivalent to EP OEM sales. Therefore, Torrington
concludes, because there is no home-market level of trade equivalent to
the level of EP sales, there is no basis for making a level-of-trade
adjustment to normal value for EP OEM sales when the comparison sales
were made to aftermarket customers.
NSK contends that, although there are some differences in selling
functions between the home-market OEM level of trade and the level of
the EP OEM sales, these two levels of trade are equivalent because many
of the selling functions are the same. More importantly, NSK asserts,
the purpose of defining levels of trade is to determine which customers
are at the same marketing stage. In this case, NSK asserts, both home-
market sales and EP OEM sales are sold directly to customers for OEM
consumption. NSK contends that the fact that there are some differences
does not alone demonstrate that the two levels of trade are not
equivalent.
SKF Italy counters that Torrington has misconstrued or incorrectly
analyzed and compared data regarding U.S. and home-market levels of
trade in its response. SKF Italy affirms that it provided thorough,
accurate, and accordant information on the levels of trade in the two
markets that supports their being considered comparable.
Department's Position: We disagree with Torrington. As we stated in
AFBs 7 at 54055, ``differences in selling functions, even substantial
ones, are not alone sufficient to establish a difference in the level
of trade.'' We have reviewed the records in these reviews and found
that the differences in selling functions between the home-market and
the EP OEM levels of trade are not great. Some of the differences
Torrington describes appear to be small differences in the level of
intensity of the selling function. For some other functions, the record
indicates that a minimal level of the function is performed at one
level and not at the other level. While there are a few individual
selling functions that vary substantially, we determine that these
functions, by themselves, do not offset many similarities of the
selling functions both respondents performed at the two levels of
trade. See Level-of-Trade Memorandum from Robin Gray and Richard
Rimlinger to Laurie Parkhill dated January 26, 1998.
Furthermore, while customer categories alone are also insufficient
in themselves to establish that there is a difference in the levels of
trade, they provide useful information in the identification of such
differences. In this case, given the fact that the customer categories
of the home-market and EP OEM levels of trade are identical, the fact
that there is a qualitatively minimal difference in selling functions
between the levels of trade does not persuade us that they are
distinct. For these reasons, we conclude that the home-market and EP
OEM levels of trade are equivalent.
Therefore, because we determined that there were two levels of
trade in both home markets (see Level-of-Trade Memorandum from Robin
Gray and Richard Rimlinger to Laurie Parkhill dated January 26, 1998),
we have made our comparisons and a level-of-trade adjustment, as
appropriate.
Comment 3: Koyo contends that the Department's practice with regard
to level of trade effectively precludes a level-of-trade adjustment to
normal value for CEP sales and is thus contrary to law and the intent
of Congress.
Koyo asserts that it and other respondents have proposed
alternative methods by which the Department could construct an
appropriate home-market level of trade by deducting from normal value
those expenses which correspond to the expenses the Department deducts
from CEP, but that the Department has failed to provide a reasonable
explanation for rejecting the proposals.
Torrington agrees with the Department's rejection of Koyo's
proposal to use a ``constructed normal value'' to calculate a level-of-
trade adjustment. Torrington maintains that the Department has
responded to Koyo's argument in detail in AFBs 6 and AFBs 7.
Department's Position: We disagree with Koyo that we should adopt
alternative methods by which to construct home-market levels of trade.
We base home-market levels of trade on the respondent's actual
experience in the home market. The statute is clear that ``...the
amount of the adjustment shall be based on the price differences
between the two levels of trade in the country in which normal value is
determined.'' (See 773(a)(7)(A)). Therefore, we have not used Koyo's
claimed constructed home-market levels of trade in order to calculate a
level-of-trade adjustment for Koyo's CEP-sales comparisons. See AFBs 6
at 2081 and AFBs 7 at 54043.
Comment 4: NTN states that the Department should use the
transaction to the first unaffiliated customer in the United States to
determine the level-of-trade adjustment. NTN suggests that, based on
this transaction, NTN satisfies the statutory requirements for an
adjustment. Finally, NTN states that the methodology the Department
used in the preliminary results would effectively bar an entire class
of sales, CEP transactions, from ever being granted a price-based
level-of-trade adjustment.
While Torrington acknowledges that it once espoused this same
position, it acquiesces to the Department's past decisions on this
issue and believes the current approach is now well established and
should not be changed. Finally, Torrington states that, since the
statute is unclear on this matter, the Department needs only to
construct a reasonable methodology, which it has done.
Department's Position: We disagree with NTN. The statutory
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 adjusted for selling expenses and profit. As such, the CEP
reflects a price exclusive of all selling expenses and profit
associated with economic activities occurring in the United States. See
SAA at 823. These adjustments are necessary in order to arrive at, as
the term CEP makes clear, a ``constructed'' export price. The
adjustments we make to the starting price, specifically those made
pursuant to section 772(d) of the Act (``Additional Adjustments for
Constructed Export Price''), normally change the level of trade.
Accordingly, we must determine the level of trade of CEP sales
exclusive
[[Page 33332]]
of the expenses (and concomitant selling functions) that we deduct
pursuant to this sub-section. Therefore, because no home-market levels
of trade NTN reported were equivalent to the level of trade of its CEP
sales, we were unable to make a level-of-trade adjustment for such
sales. See Level-of-Trade Memorandum from Robin Gray and Richard
Rimlinger to Laurie Parkhill dated January 26, 1998.
4. Cost of Production and Constructed Value
4.A. Cost-Test Methodology. On January 8, 1998, the Court of
Appeals for the Federal Circuit issued a decision in CEMEX v. United
States, 133 F.3d 897 (CAFC 1998) (CEMEX). In that case, based on the
pre-URAA version of the Act, the Court discussed the appropriateness of
using CV as the basis for foreign market value when the Department
finds home-market sales to be outside the ``ordinary course of trade.''
The URAA amended the definition of sales outside the ``ordinary course
of trade'' to include sales below cost. See section 771(15) of the Act.
In our preliminary results, we invited parties to comment on this issue
and various parties have provided comments.
Comment 1: Torrington argues that the Department should attempt to
match U.S. sales to comparison-market sales of similar models before
resorting to CV when comparison-market sales of identical models are
excluded from the home-market sales database because they failed the
cost test. Torrington asserts that the CAFC's decision in CEMEX
requires the Department to do this whenever comparison-market sales of
identical models are outside the ordinary course of trade or otherwise
do not exist. Koyo does not disagree with the position stated by
Torrington regarding the impact of the CEMEX decision.
NSK argues that the CEMEX decision does not provide a basis for the
Department to change its practice of resorting to CV when comparison-
market sales of identical models are excluded from the home-market
sales database because they failed the cost test. NSK contends that
Federal-Mogul Corp. v. United States, 918 F. Supp. 386, 396-397 (CIT
1996) (Federal-Mogul 1), supports this methodology. NSK asserts that,
in CEMEX, the CAFC was faced with sales that were outside the ordinary
course of trade under the statute as it existed prior to its amendment
pursuant to the URAA. NSK explains that, under the pre-URAA law, below-
cost sales were not considered outside the ordinary course of trade.
NSK argues that it is incumbent upon the Department to demonstrate how
the URAA amendments require a change in the practice endorsed by
Federal-Mogul 1. NSK contends that the statute, at section 773(b),
provides that the Department shall base normal value upon CV when all
sales of the foreign like product are excluded because they have failed
the below-cost test. NSK also asserts that the SAA supports this
interpretation by indicating that the only change from the Department's
practice prior to the URAA was to eliminate the ten-percent floor for
using above-cost sales of a particular model and that, to the extent
that the Department perceives any conflict between sections 773(b)(1)
and 771(15), the express language of the former must control the
general language of the latter. NSK contends further that the SAA
confirms that sales below cost are a special, separate category of non-
ordinary-course-of-trade sales to which CEMEX can not be applied.
NTN states that the CEMEX decision should have no impact on the
current reviews because it did not address the issue of below-cost
sales. NTN asserts further that the CAFC made no mention of section
773(b)(1) of the Act which requires the Department to use CV when it
has disregarded below-cost sales from the calculation of normal value.
In conclusion, NTN contends that, based on the aforementioned section
of the law, if all sales of identical merchandise are found to have
been sold below cost, as is the case in the current reviews, no sales
of like product remain in the ordinary course of trade and the
Department should base normal value on CV.
SKF France, SKF Germany, and SKF Italy contend that the Department
should adhere to the policy set forth in the CEMEX decision and, as
such, should resort to finding similar merchandise as a basis for
determining normal value rather than CV in instances where normal value
can not be based on identical merchandise in the home market.
Department's Position: The Department has reconsidered its practice
as a result of the CEMEX decision and has determined that it would be
inappropriate to resort directly to CV as the basis for normal value if
the Department finds sales of the most similar merchandise to be
outside the ``ordinary course of trade.'' Instead, the Department will
use sales of other similar merchandise, if such sales exist. The
Department will use CV as the basis for normal value only when there
are no above-cost sales of a foreign like product that are otherwise
suitable for comparison.
In response to NSK's comments, the Court stated in CEMEX that
``[t]he language of the statute requires Commerce to base foreign
market value on nonidentical but similar merchandise * * *, rather than
constructed value when sales of identical merchandise have been found
to be outside the ordinary course of trade.'' See CEMEX at 904. There
was no cost test in CEMEX and CEMEX was under the pre-URAA statute.
However, under the URAA, below-cost sales in substantial quantities and
within an extended period of time are outside the ordinary course of
trade and we disregard them from consideration. Therefore, in order to
be consistent with CEMEX for these final results, when making
comparisons in accordance with section 771(16) of the Act, we
considered all products sold in the home market that were comparable to
merchandise within the scope of each order and which were sold in the
ordinary course of trade for purposes of determining appropriate
product comparisons to U.S. sales. Where there were no sales of
identical merchandise in the home market made in the ordinary course of
trade to compare to U.S. sales, we compared U.S. sales to sales of the
most similar foreign like product made in the ordinary course of trade.
Only where there where no sales of foreign like product in the ordinary
course of trade did we resort to CV.
Comment 2: Barden argues that the Department does not have the
authority to conduct a sales-below-cost test with respect to Barden
because the Department can not use the results of a prior below-cost
investigation which the Department has acknowledged was unlawful to
conclude that it has ``reasonable grounds to believe or suspect'' that
sales in the home market have been made below COP in these reviews. As
such, Barden requests that the Department restore all disregarded home-
market sales and recalculate the margin accordingly.
Torrington disagrees with Barden and asserts that the Department
acted correctly by using COP data Barden submitted both to test whether
home-market sales were above COP and to calculate profit for CV on the
basis of above-cost sales. Torrington claims further that the
Department is entitled to use COP data voluntarily placed on the record
and, therefore, a respondent may not submit data voluntarily and then
insist that the Department can not use it. Torrington claims that
Barden does not argue that its COP data can not be used because it is
in error, unreliable, or
[[Page 33333]]
incomplete. As such, the petitioner believes that section 773(b) of the
Act authorizes the Department to consider and use the COP data
submitted, both to test home-market prices and to calculate CV profit.
Department's Position: We have reconsidered the original decision
to initiate a below-cost investigation for Barden in this review. In
FAG (U.K.) Ltd. v. United States, Consol. Court No. 97-01-00063-SI
(FAG-U.K.), reviewing the results of AFBs 5, the Department has
acknowledged that, ``prior to conducting the test, Commerce had no
reasonable belief that Barden's ball bearings were sold at below
cost.'' Therefore, we conceded that we had applied the below-cost test
to Barden in the 1993-1994 administrative review unlawfully, and,
accordingly, we have requested a partial remand to rescind the COP
investigation for that POR. Since our initiation of cost investigations
in subsequent reviews were based on the results of our below-cost test
in the 1993-1994 administrative reviews, we have concluded that our
initiation of cost investigations in the current administrative reviews
was unjustified. However, since the petitioner was precluded from
filing cost allegations prior to the 120-day deadline due to our
earlier decision to initiate these cost investigations, we allowed the
petitioner to file cost allegations after our normal deadline. See the
Department's letter dated April 2, 1998. We have now accepted
Torrington's April 13, 1998 cost allegation and have performed a below-
cost test of Barden's home-market sales for these final results. See
Cost-Allegation Memorandum, dated May 1, 1998.
Comment 3: SKF France argues that the Department conducted a below-
cost test of home-market sales for its SPB transactions improperly. SKF
France notes that the Department has never initiated a test of sales
below cost for SPBs. SKF France also contends that the Department
should not use its reported costs in the calculation of profit for CV.
SKF France contends that the data should only be used to test its
reported variable costs of manufacture.
Torrington counters that the Department should continue to use SKF
France's reported cost data. The petitioner states that the CIT has
affirmed the Department's authority under the statute to consider and
use submitted cost data both to test home-market prices and to
calculate CV profit, citing NSK Ltd. v. United States, 969 F. Supp. 34
(1997).
Department's Position: We agree with SKF France that we were
incorrect in conducting a test to determine whether it made home-market
sales of SPBs below COP. We stated in FAG U.K. (see our response to
Comment 2 above) that it is improper to examine whether sales are being
made below COP unless we have received an allegation to substantiate
such an examination or have disregarded below-cost sales in the most
recent segment of the proceeding. Since we did not receive such an
allegation in this review and have not disregarded below-cost sales in
prior reviews, we have not conducted a below-cost test of SKF France's
sales of home-market SPBs for these final results. We disagree with SKF
France, however, that we should not use reported costs to determine
profit for CV. Although we have flexibility to use alternate methods to
determine profit for CV, our stated preference is to calculate profit
on the sales of the foreign like product. Therefore, since SKF France
submitted such data voluntarily, we have continued to use SKF France's
reported costs for the calculation of CV profit of SPBs for these final
results.
4.B. Profit for Constructed Value. Subparagraph (A) of section
773(e)(2) of the Act sets forth the preferred method for determining
the amount of profit to be included in CV, and subparagraph (B) of the
same section sets forth three alternative CV-profit calculation methods
for use when the actual data are not available with respect to the
amounts described in subparagraph (A). For all respondents, except
Torrington Nadellager, in the preliminary results of these
administrative reviews we calculated CV profit in accordance with the
preferred method set forth under section 773(e)(2)(A) of the Act. For
Torrington Nadellager, we calculated CV profit using the alternative
methodology set forth under section 773(e)(2)(B)(iii).
Comment 1: FAG Italy and Barden argue that the Department has not
calculated CV profit as required by section 773(e)(2)(A) of the Act
since the actual calculations encompass multiple foreign like products,
i.e., all AFB models within the order-specific subject merchandise that
were reported in the foreign-market sales databases as potential
matches to U.S. sales. The respondents assert that, if the Department
is going to calculate CV profit based on multiple foreign like
products, it must perform the calculation in accordance with one of the
three alternative methodologies set forth in section 773(e)(2)(B) of
the Act.
The respondents assert that section 773(e)(2)(B)(i) of the Act
provides for a CV-profit calculation methodology that is, for the most
part, similar to the one the Department used. However, the respondents
claim that, unlike the Department's methodology, section
773(e)(2)(B)(i) does not specifically limit the calculation of CV
profit to sales in the ordinary course of trade. The respondents
suggest that, since sections 773(e)(2)(A) and (2)(B)(ii) of the Act
contain specific language to limit the CV-profit calculation to sales
in the ordinary course of trade, the Department should interpret the
lack of specificity under section (2)(b)(i) as not requiring such a
limitation. As support for this position, the respondents cite to The
Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland Cement v.
United States, 12 F.3d 398, 401 (CAFC 1994) (Portland Cement), in which
the Court stated that ``(w)here Congress has included specific language
in one section of the statute but has omitted it from another, related
section of the same Act, it is generally assumed that Congress intended
the omission.''
Torrington asserts that the Department has calculated CV profit in
accordance with section 773(e)(2)(A) of the Act. Torrington contends
that it is not necessary therefore to use one of the alternative CV-
profit calculation methodologies as suggested by the respondents.
Department's Position: We agree with Torrington. As we stated in
AFBs 7 at 54062, we believe that an aggregate calculation that
encompasses all foreign like products under consideration for normal
value represents a reasonable interpretation of section 773(e)(2)(A) of
the Act. Moreover, we believe that, in applying the preferred method
for computing CV profit under section 773(e)(2)(A) of the Act, the use
of aggregate data results in a reasonable and practical measure of
profit that we can apply consistently in each case. By contrast, a
method based on varied groupings of foreign like products, each defined
by a minimum set of matching criteria shared with a particular model of
the subject merchandise, would add an additional layer of complexity
and uncertainty to antidumping duty proceedings without necessarily
generating more accurate results. It would also make the statutorily
preferred CV-profit method inapplicable to most cases involving CV. See
the preamble to our new regulations at section 351.405.
As noted above, we believe that our calculation of CV profit is in
accordance with section 773(e)(2)(A) of the Act and, therefore, we
disagree with respondents' assertion that our methodology for
calculating CV profit is most similar to the first alternative
methodology
[[Page 33334]]
described under section 773(e)(2)(B)(i) of the Act. However, we agree
with the respondents' assertion that we should interpret the lack of a
specific reference to sales in the ordinary course of trade under
section 773(e)(2)(B)(i) of the Act as requiring that we not limit the
CV-profit calculation under this method to sales in the ordinary course
of trade. We addressed this issue in the preamble of our new
regulations (see section 351.405), stating that, ``(w)ith respect to
the other alternative profit methods authorized by section
773(e)(2)(B), the Department believes that the absence of any ordinary
course of trade restrictions under the first alternative (subsection
(i)) is a clear indication that the Department normally should
calculate profit under this method on the basis of all home-market
sales, without regard to whether such sales were made at below-cost
prices.'' Therefore, for these final results we have used all sales
under consideration for normal value and in the ordinary course of
trade as the basis for calculating CV profit.
Comment 2: NSK argues that the Department must calculate CV profit
on a model-specific or family-specific basis. Acknowledging that in
prior segments of these proceedings the Department rejected arguments
in support of such a methodology, NSK suggests that the issue be
revisited in light of the recent CAFC decision in CEMEX. NSK suggests
that the Department's calculation of CV profit based on the aggregation
of data that encompasses all foreign like products under consideration
for normal value is unlawful in light of the statutory requirement that
the calculation of CV profit be limited to actual amounts for a
``foreign like product'' (NSK claims that a foreign like product as
defined by section 771(16) of the Act is a category of merchandise that
is narrower than the pre-URAA class-or-kind definition). In conclusion,
NSK suggests that its proposed methodology for the calculation of CV
profit would improve the accuracy of the margin calculations by more
closely approximating price-to-price comparisons.
Torrington disagrees with NSK and asserts that the justification
the Department provided for using this methodology in the last segment
of these proceedings is still valid. Torrington suggests that the
Department's interpretation of section 773(e)(2)(A) is reasonable on
the basis that the law did not specify how the term ``foreign like
product'' is to be applied in the context of calculating CV profit.
Torrington contends that there is no reason that the term ``foreign
like product'' can not have different applications for different
purposes in the same statute. Noting that section 773(e)(2)(A) of the
Act is the preferred method for calculating profit, Torrington asserts
that NSK's narrow reading of the statute would render the ``preferred''
method useless in most situations involving CV. Furthermore, Torrington
asserts that the Department could never apply the alternative CV-profit
calculation methodology in section 773(e)(2)(B)(ii) of the Act if it
were to adopt NSK's reading of the statute. Finally, Torrington argues
that NSK's reliance on the Court's decision in CEMEX is misplaced
because the decision dealt with a different issue.
Department's Position: We disagree with NSK for the reasons we
stated in AFBs 7 at 54062 and our response above to Comment 1 of this
section. Therefore, we have not changed our CV-profit calculation
methodology for the final results of these reviews. Regarding NSK's
assertion that we should re-examine the issue in light of the CAFC's
recent decision in CEMEX, we agree with Torrington that NSK's reliance
on that decision is misplaced. The Court's decision in CEMEX dealt with
how to determine foreign market value when there were home-market sales
which were outside the ordinary course of trade. See our response to
Comment 1 of section 4.A. above.
Comment 3: SNFA U.K. argues that, using its ten-transaction home-
market sales listing to calculate CV profit is improper (the ten
transactions comprise sales of models that are potential identical or
similar matches to those models of subject merchandise sold to the
United States during the POR). SNFA U.K. claims that the ten
transactions account for a small percentage of its total home-market
sales of BBs during the POR. The respondent asserts that relying on
this limited reporting to calculate profit for CV does not yield a fair
and representative result and ignores the economic reality of SNFA
U.K.'s actual overall profit experience. The respondent asserts further
that the average profit for one bearing model drives the profit rate
for the entire limited database. SNFA U.K. argues that such a result is
contrary to the Department's policy, noting that the Department stated
in the preamble to its new regulations at section 351.405 that ``the
sales used as the basis for CV profit should not lead to irrational and
unrepresentative results.''
SNFA U.K. asserts that, in recent cases, the Department has
resorted to more accurate data submitted on the record. SNFA U.K. cites
Certain Stainless Steel Wire Rods From France: Final Results of
Administrative Review, 62 FR 7206 (February 18, 1997) (Certain
Stainless Steel Wire Rods), and Certain Hot-Rolled Lead and Bismuth
Carbon Steel Products from the United Kingdom: Final Results of
Antidumping Administrative Review, 61 FR 56514 at 56514 (November 1,
1996) (Lead and Bismuth Carbon Steel Products) to support its argument.
SNFA U.K. contends that the CIT and CAFC have rejected the use of
data that leads to clearly anomalous and unrepresentative results. To
support this, SNFA U.K. cites CEMEX, at 901, stating that the Court
upheld the Department's exclusion of certain sales in the calculation
of CV profit because the (much lower) profit level of these sales
indicated that they were distortive and outside the ordinary course of
trade. SNFA U.K. asserts that what is most important is that the Court
stated that ``these sales represent a minuscule percentage of CEMEX's
total sales of cement, a fact that indicates that they were not in the
ordinary course of trade'' (id). SNFA U.K. also cites Fabrique de fer
de Charleroi S.A. v. United States, et al., 1998 CIT Lexis 53, Slip Op.
98-4 (CIT 1998) (Fabrique), in which the Court directed that unusually
high-priced sales be excluded from the calculation of CV profit where
the sales were ``but a fraction of sales'' made in the home market and
led to unrepresentative results. (Id. at * 13.)
Finally, SNFA U.K. argues that section 771(16)(A) of the Act
defines ``foreign like product'' as ``subject merchandise and other
merchandise which is identical in physical characteristics with * * *
that [subject] merchandise'' (emphasis added). Citing section 771(25)
of the Act, SNFA U.K. continues that subject merchandise is in turn
defined as ``the class or kind of merchandise that is within the scope
of an investigation.'' SNFA U.K. asserts that the Department's June 20,
1997, AFBs questionnaire (at Appendix I-7) supports this definition and
contends that the Department itself has held in other cases that
``(f)or purposes of calculating CV and CEP profit, we interpret the
term ``foreign like product'' to be inclusive of all merchandise sold
in the home market which is in the same general class or kind or
merchandise as that under consideration,'' citing Final Determination
of Sales at Less than Fair Value: Large Newspaper Printing Presses and
Components Thereof, Whether Assembled or Unassembled, from Japan, 61 FR
38139, 38145-38147 (July 23, 1996).
SNFA U.K. requests that the Department use the profit rate that it
calculated and submitted in its
[[Page 33335]]
questionnaire response which is based on audited financial data for
home-market sales of subject merchandise. SNFA U.K. contends that its
profit calculation is supported under section 773(e)(2)(A) of the Act.
Torrington argues that the fact that the home-market transactions
used to calculate CV profit involve sales of high-tech merchandise does
not render the profit unrepresentative but, rather, duly reflects the
nature of SNFA U.K. as a producer of high-tech bearings. Torrington
points out that, in AFBs 6 at 2114, the Department rejected a similar
argument by FAG Germany and FAG Italy on the basis that nothing in the
statute or SAA required the Department either to identify bearings with
equivalent commercial values or to limit the profit levels observed on
home-market sales. Therefore, Torrington concludes, the Department
should not modify its calculation of CV profit in this case.
Department's Position: We agree with Torrington and, consistent
with our practice in these proceedings, have continued to calculate CV
profit using all foreign-like products under consideration for normal
value, which is in accordance with the preferred methodology set forth
under section 773(e)(2)(A) of the Act. See our response to Comment 1 of
this section.
First, we do not find the respondent's submitted profit information
to be an appropriate basis for determining CV profit. Although the
respondent calculated and reported an alternative profit rate in its
questionnaire response, it did not explain why it was providing this
information at the time of submission or at any time during which
additional factual information could reasonably be sought. It was not
until the submission of its case brief that SNFA U.K. took issue with
our usual practice for calculating CV profit and proposed using its
alternative profit rate. By waiting until this late date in these
reviews to claim that we should use SNFA U.K.'s alternative data, SNFA
U.K. precluded our ability to seek additional information about its
claimed profit rate. In particular, we did not have an opportunity to
obtain necessary record evidence to establish the accuracy of the
alternative profit rate (e.g., a reconciliation of the alternative
profit rate with SNFA U.K.''s audited financial statements). Because we
did not have an opportunity to obtain necessary record evidence
regarding SNFA U.K.'s alternative profit rate, we can not consider
using this information.
Furthermore, we disagree with SNFA U.K. that our CV-profit
calculation is improper. In support of its argument, SNFA U.K. cites to
the preamble of our new regulations where we stated that ``the sales
used as the basis for CV profit should not lead to irrational and
unrepresentative results.'' See preamble at section 351.405. This is an
accurate statement of our policy, even before the adoption of these
regulations. However, in deciding whether certain sales used as the
basis for CV profit lead to irrational and unrepresentative results, we
must consider the specific facts and circumstances surrounding the
transactions. Furthermore, this is an issue that must be examined on a
case-by-case basis, and the burden of showing that certain profits
earned are ``abnormal,'' or otherwise unusable as the basis for CV
profit, rests with the party making the claim. See preamble at section
351.405. Proof that the profits a respondent earned on specific sales
are abnormal will depend on a number of factors. These factors include
the type of merchandise under investigation or review and the normal
business practices of the respondent and of the industry in which the
merchandise is sold. In this respect, SNFA U.K. argues that it reported
a few home-market sales which consist of some specialty, high-priced
bearings that are rarely sold in the home market, but SNFA U.K. has not
claimed that certain transactions in the home-market sales listing are
outside the ordinary course of trade. Based on our analysis of the
home-market sales listing and other information on the record, it
appears that all of the reported models have a relatively high profit
margin and that these high-profit home-market sales (reported by SNFA
U.K. as potential identical or similar matches to those models of
subject merchandise sold to the United States during the POR) meet the
requirements for calculating CV profit in accordance with the preferred
methodology set forth under section 773(e)(2)(A) of the Act.
In the respective final determinations for Certain Stainless Steel
Wire Rods and Lead and Bismuth Carbon Steel Products, we acknowledged
that, in the respective preliminary results, we had erred in each case
by calculating the profit ratio multiplied by COP to derive CV profit.
Initially, we calculated the profit ratio by computing a profit
percentage for each home-market sales transaction and then weight-
averaged the percentages by quantity. We later revised our calculation
to derive the profit ratio by dividing total home-market profit by
total home-market costs which is consistent with our normal
methodology. However, this recalculation was not a result of too few
home-market sales transactions or, as suggested by respondents, a
``micro-calculation'' which caused serious distortion in the profit
rate. In fact, we derived the profit ratio for SNFA U.K. in the same
way we derived the corrected profit ratio in the cases cited above by
dividing the total home-market profit by total home-market costs.
In CEMEX, the CAFC supported the Department's decision to exclude
certain types of cement sold in the home market from the margin
calculations because there was substantial evidence on the record to
support that the sales were outside the ordinary course of trade. The
substantial evidence upon which we relied was that (1) the sales
represented a minuscule percentage of total home-market sales, (2)
shipping arrangements departed significantly from the standard industry
practice in the home market which resulted in a significantly low
profit margin, and (3) the sales were of a promotional quality which
differentiated them from other products. See CEMEX at 133 F.3d at 901.
With respect to SNFA U.K., again, the respondent did not provide
substantial evidence on the record for the Department to determine
whether sales of any of the models that SNFA U.K. claims were designed
for special use were outside the ordinary course of trade. Furthermore,
sales of these specially designed bearings do not represent a minuscule
percentage of the total home-market sales reported in SNFA U.K.'s sales
listing. In fact, these so-called specialty bearings account for most
of SNFA U.K.'s reported home-market sales. At any rate, the simple fact
that these products represent a small portion of total home-market
sales alone does not render the sales outside the ordinary course of
trade. In CEMEX, the Court cited Murata Mfg. Co. v. United States, 820
F. Supp. 603, 607 (CIT 1993), and stated that the Department must
evaluate not just ``one factor taken in isolation but rather * * * all
the circumstances particular to the sales in question.'' Here, after
evaluating all the circumstances particular to the sales in question,
we do not find that the transactions are outside the ordinary course of
trade.
Finally, we do not find SNFA U.K's reliance on Fabrique persuasive.
While in Fabrique the CIT found that the inclusion of profit on certain
home-market sales for the calculation of CV profit extrapolated the
average profit ``out of realistic and rational proportion'' (Fabrique
at *16), we believe the facts of that case differ significantly from
the present case. In Fabrique, the CV-profit calculation was affected
by home-market sales of ``Z-
[[Page 33336]]
type product,'' a type of merchandise that the respondent did not sell
in the United States. Id. at * 3-4. In the present case, SNFA U.K. is
objecting to the inclusion in the CV-profit calculation of the home-
market sales of merchandise it reported as potential identical or
similar to matches to merchandise it sold in the United States. For
this reason, we do not find Fabrique to be persuasive.
We note that the cases SNFA U.K. cites are pre-URRA cases in which
profit was required to be calculated on the general class or kind of
merchandise sold in the country of exportation. Under the new law, we
are directed to calculate, where possible, profit in connection with
the production and sale of the foreign like product made in the
ordinary course of trade. In other new-law cases, we have interpreted
this to mean the specific products reported for use as normal value for
purposes of the CV-profit calculation. We discussed this in AFBs 7 at
54062 and in our response to Comment 1 of this section. Therefore, our
calculation of SNFA U.K.'s profit based on its reported sales is
consistent with our past practice. Since SNFA U.K. has not demonstrated
that its high-profit sales were outside the ordinary course of trade,
we have continued to use them in our profit calculation for CV.
Comment 4: Barden argues that, in the absence of a valid sales-
below-cost investigation (see Comment 2 of Section 4.A. above), the
Department should deem all of its home-market sales as sold in the
ordinary course of trade and, therefore, use all of the transactions to
calculate CV profit.
Torrington disagrees with the Barden. Torrington contends that the
Department was correct to eliminate sales below cost from the home-
market sales database before calculating CV profit.
Department's Position: As we noted in our response to Comment 2 of
Section 4.A. above, for the current segment of the proceedings we
believe that we are justified in performing a sales-below-cost
examination of Barden's reported home-market sales. Therefore, for the
final results of reviews, in calculating the Barden's CV profit, we
have continued to eliminate home-market sales that we disregarded
because they were sold at below-cost prices and thus, not in the
ordinary course of trade. This CV-profit calculation methodology is in
accordance with the preferred method set forth under section
773(e)(2)(A) of the Act.
Comment 5: Citing to the CAFC's ruling in CEMEX, Barden argues that
sales with abnormally high profits, or sales in small quantities, must
be excluded from the calculation of CV profit on the basis that such
transactions are outside the ordinary course of trade. Barden notes
that the CAFC upheld the Department's decision to exclude from the
calculation of CV profit two types of cement products on the basis that
the ``profit margin on these types was significantly lower than * * *
profits on other cement types,'' citing CEMEX at 901. Regarding sales
in small quantities, Barden asserts that in CEMEX and in the CIT's
ruling in Mantex v. United States, 841 F. Supp. 1290, 1307-08 (CIT
1993) (Mantex), the courts observed that a low volume of sales of
certain products being examined demonstrates that such transactions are
outside the ordinary course of trade.
In light of the above court rulings, Barden suggests that for the
final results the Department perform a special analysis of profit and
sales volume of transactions in the home-market database to determine
whether certain sales fall outside a mean profit/quantity amount and
thus outside the ordinary course of trade.
Torrington does not agree with Barden's argument that high-profit
sales should be excluded from the calculation of CV profit. Torrington
notes that, in AFBs 7 at 54065, the Department rejected similar
arguments in which the respondents claimed that section 773(a)(1)(B) of
the Act and the Department's new regulations at 351.102(b) require that
sales with abnormally high profits be treated as outside the ordinary
course of trade. Torrington asserts that the ruling in CEMEX is
different from the issue at hand here because the Department found
``unique or unusual characteristics,'' apart from differences in profit
margins, which rendered the sales outside the ordinary course of trade.
Torrington contends that, since there is no such evidence in this case,
no modification should be made for the final results.
Department's Position: We disagree with Barden. First, we believe
that the circumstances surrounding the CAFC's ruling in CEMEX are
different from the circumstances here. As Torrington notes, in CEMEX we
found ``unique or unusual characteristics,'' apart from differences in
profit margins, that rendered the sales outside the ordinary course of
trade. These characteristics include sales in a niche market and
shipping arrangements that differ significantly from standard industry
practice. Here, we find that there is not substantial evidence on the
record to justify such a determination.
Rather than supporting its argument by citing to record evidence or
presenting an analysis based on its reported home-market sales, Barden
merely claims that sales with abnormally high profits or sales in small
quantities should be found to be outside the ordinary course of trade.
Barden attempts to place the burden of substantiating its arguments
upon the Department, suggesting that the Department must develop
special tests regarding profit and sales volume on the reported home-
market sales transactions in order to determine whether such sales are
outside the ordinary course of trade. Implementing such a suggestion
would cause unnecessary delays in these reviews and impose an
inappropriate burden upon the Department. As we stated in the preamble
of the new regulations at section 351.405 (page 27358), the burden of
showing that profits earned on above-cost sales are abnormal (or
otherwise unusable as the basis for CV profit) rests with the party
making the claim. If Barden wanted particular sales to be disregarded
in the calculation of CV profit, it bore the burden of providing
substantial record evidence and analysis to justify excluding those
sales. Barden has not met that burden.
We also disagree with Barden's assertion that the courts' rulings
in CEMEX and Mantex support a determination, here, that certain sales
in small quantities should be excluded from the calculation of CV
profit on the basis that such transactions are outside the ordinary
course of trade. As noted above, the burden of establishing that a
particular sale (or grouping of sales) is outside the ordinary course
of trade rests on the party making the claim. Barden has not provided
evidence to substantiate its claim that the sales in question are
outside the ordinary course of trade.
Accordingly, we have not altered our calculation of Barden's CV
profit for the final results of these administrative reviews.
4. C. Affiliated-Party Inputs. Comment: The petitioner argues that
the Department should use the higher of transfer price or actual costs
for all NTN affiliated-party inputs. Specifically, the petitioner
states that, pursuant to section 773(f)(2) of the Act, the Department
should reject NTN's transfer values not meeting the arm's-length test,
just as the Department did in AFBs 7 (at 54065). Torrington makes the
additional argument that, due to the circumstances involved (see
proprietary case brief dated March 16, 1998), the Department should
apply facts available in
[[Page 33337]]
accordance with the same methodology used in seventh review.
NTN contends that the Department should accept NTN's reported
transfer prices for affiliated-party inputs because they reflect market
values accurately and that use of facts available is not appropriate.
NTN states that it realizes that sections 773(f)(2) and (3) of the Act
instruct the Department to disregard certain affiliated-party
transactions. However, the respondent emphasizes that these provisions
do not apply to the factual situation at hand. NTN claims that there is
no record evidence that its affiliated-party input transactions did not
reflect arm's-length prices. Moreover, NTN argues that, even if a
company sells an input at less than its cost of production, it does not
follow that the transfer price is not reflective of a fair market
price. NTN then argues that section 773(f)(3) of the Act applies only
to ``major inputs.'' Thus, the company believes that the Department's
decision in the preliminary results is incorrect because it applied the
major-input rule to minor inputs NTN obtained from affiliates. NTN also
states that the Department made a ministerial error in its preliminary
results by applying section 773(f)(3) of the Act to services provided
by affiliates. NTN believes that the Department did not intend to apply
the major-input rule to these transactions.
Department's Position: We disagree with NTN that we should accept
in all instances its reported transfer prices for transactions between
affiliates. Pursuant to section 773(f)(3) of the Act, in the case of a
transaction between affiliated persons involving the production of a
major input, the Department may consider whether the amount represented
as the value of the major input is less than its cost of production. In
addition, section 351.407 of the Department's new regulations states
that, for purposes of section 773(f)(3) of the Act, the value of a
major input purchased from an affiliated person will be 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. We have
relied upon this methodology in past AFB reviews as well as in other
cases. See, e.g., AFBs 7 at 54065, AFBs 6 at 2117; 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).
In this case, in our COP questionnaire we asked NTN to provide a
list of the major inputs it received from affiliated parties which it
used to produce the merchandise under review. NTN responded to the
question by directing us to several exhibits. These exhibits listed the
inputs NTN considered to be major inputs and provided the respective
transfer prices and cost information for the inputs. We examined this
information and determined that in some instances the company's
reported transfer prices were less than their respective COP. As there
were no other market prices available in most instances, we restated
NTN's COP and CV in the instances where the affiliated supplier's COP
for inputs used to manufacture the merchandise under review was higher
than the transfer price.
In this regard, we disagree with NTN's contention that we
misapplied section 773(f)(3) of the Act. This section governs the
valuation of major inputs. NTN provided information regarding the cost
of major inputs it used in manufacturing the subject merchandise; it
was reasonable to rely upon the costs of producing these inputs which
NTN provided. Therefore, the Department applied section 773(f)(3)
correctly for purposes of determining COP and CV for these final
results.
Furthermore, we disagree with NTN's allegation that we applied the
major-input rule incorrectly, as described above, to processes
performed by affiliates in the preliminary results. We intended to
apply the the major-input rule to processes performed by affiliates
because section 773(f)(3) of the Act directs us to examine the costs
incurred for transactions between affiliated persons. These
transactions may involve either the purchase of materials,
subcontracted labor, or other services.
Finally, we did not find it necessary to use facts available in
applying the major-input rule as we did in our previous review of NTN
(see AFBs 7 at 54065) and as suggested by the petitioner for these
reviews. NTN provided the necessary information to restate costs
appropriately.
4.D. General, Selling, and Administrative Expenses. Comment: The
petitioner contends that NTN did not include in its calculation of COP
and CV the bonus payments it made to its board of directors and
auditors. Torrington notes that, in the normal course of business, NTN
treats these payments as direct reductions to the company's retained
earnings. However, the petitioner believes NTN should include these
bonus payments in COP and CV in the same manner as any other current
personnel expense. To adjust for this omission, the petitioner first
suggests that the Department allocate the omitted cost exclusively to
the merchandise under review. Second, Torrington suggests that the
Department re-characterize all other reductions to ``retained
earnings'' as current expenses because NTN apparently uses ``retained
earnings'' to pay current expenses.
NTN counters that it excluded the bonuses distributed from retained
earnings from its COP and CV calculations appropriately. NTN argues
that the Department has determined on numerous occasions that these
type of bonuses are similar to dividend payments and, accordingly, are
not production costs, citing Final Results of Antidumping Duty Review
of Tapered Roller Bearings, Finished and Unfinished, and Parts Thereof,
from Japan, 57 FR 4951, 4957 (February 11, 1992), and Final Results of
Antidumping Administrative Review of Tapered Roller Bearings, Finished
and Unfinished, and Parts Thereof, from Japan, 56 FR 41508 (August 21,
1991). Furthermore, NTN argues that these bonuses should not be
considered as a personnel expense because the payments are not for
contractual remuneration, the disbursement is a distribution from
retained earnings, and the company makes this distribution when it
deems it appropriate.
Department's Position: We agree with the petitioner that these
bonus payments which NTN distributed through its retained earnings
represent compensation for services provided to the company. Therefore,
in accordance with section 773(f)(1)(A) of the Act, we believe that it
is appropriate to include these amounts in the calculation of COP and
CV. Moreover, including this type of bonus payment in COP and CV is
consistent with our treatment of this type of retained-earnings bonus
distributions in the Final Determination of Sales at Less Than Fair
Value; Static Random Access Memory Semiconductors From Taiwan, 63 FR
8909, 8921 (February 23, 1998). In that proceeding, we determined that
the amounts distributed by the respondents represented compensation for
services which the individual had provided the companies. In the Final
Determination of Sales at Less Than Fair Value: Oil Country Tubular
Goods from Austria, 60 FR 33551, 33557 (June 28, 1995), and the Final
Results of Antidumping Duty Administrative Review of Porcelain-on-Steel
Cookware from Mexico, 62 FR 25908, 25914 (May 12, 1997), we also made
similar determinations. In both instances, we determined that the
respondents' bonuses and profit-sharing
[[Page 33338]]
distributions were forms of compensation and not dividends. Hence, we
disagree with NTN's classification of these payments as dividends and
its claim that the inclusion of these amounts in COP and CV contradicts
our normal practice. We have revisited this issue in more recent cases
and, based on a more thorough analysis, revised the position that we
took in the TRBs decisions NTN cited.
As to the petitioner's suggestion that this bonus distribution only
relates to the production of subject merchandise, we disagree. We found
that this distribution relates to the administrative activities of the
company as a whole and should be treated as such because it is not
specific to the manufacture, design or sale of the product under
review. We also disagree with petitioner's suggestion that it is
necessary to include all other reductions made to ``retained earnings''
in the calculation of COP and CV. We reviewed the information on the
record and found no evidence to suggest that NTN's other retained-
earning distributions related to current expenses of the company. As
for revising NTN's reported costs, we reviewed the information on the
record and noted that the excluded amount is insignificant in this
instance; inclusion of this bonus in the calculation of the dumping
margins would have a minuscule effect on the final margin calculations.
Therefore, while our policy is to include such amounts in our
calculations because it has no effect on the final margins, for these
final results, we have not included the bonus payments that NTN
distributed from its retained earnings to its board of directors and
auditors.
4.E. Cost Variances. Comment: The petitioner argues that the
Department should restate NTN's reported cost variance to conform with
variances reported in the company's normal books and records. The
petitioner alleges that NTN is manipulating its reported COP and CV
because it calculated its reported variances inconsistently. According
to the petitioner, NTN calculated some of its models' variances based
on product-specific costs while others were based on general plant-wide
costs. Torrington asserts that the Department's acceptance of
respondent's different calculation methods allows respondent too much
potential for cost manipulation. Thus, petitioner suggests that the
Department rely on the variances NTN calculated in the normal course of
business.
NTN does not object to the Department's use of the company's
variances calculated in the normal course of business. However, NTN
points out that it only recalculated its submitted variances to conform
voluntarily with previous Departmental decisions on this issue.
Consequently, NTN does not believe that a revision of its reported COP
and CV is necessary.
Department's Position: We disagree with the petitioner that the
variances NTN used in the calculation of COP and CV distort model-
specific costs. In AFBs 4 at 10928, the Department determined that
NTN's application of a plant-wide variance shifted costs unreasonably
between products. Moreover, the Department found that the cost-
accounting system the company used in the ordinary course of business
maintained the necessary data to calculate more specific variances.
Since completion of that administrative review, we have required NTN to
compute its reported variances on the more specific basis when
calculating COP and CV. For the instant reviews, we found NTN's more-
specific variance computations reasonable because they allocate costs
to products under review accurately. We also found that NTN only
applied plant-wide variances to those models that it manufactured in
facilities dedicated to producing only a single product type. If a
facility produced more than one product type, NTN calculated and
applied product-specific variances. At verification, we reviewed and
tested NTN's method of calculating its product-specific variances (see
Memorandum from Stan Bowen to Chris Marsh, pages 14, 15, 16, and
related cost-verification exhibits (January 30, 1998)). The following
is a summary of the verification steps we performed: (1) we reconciled
NTN's submitted variances to source accounting records; (2) we
confirmed that NTN calculated the submitted variances in the same
manner as the variance calculated in the normal course of business; (3)
we reconciled NTN's product-specific variances to respective plant-wide
variances used in the normal course of business; (4) we confirmed that
NTN grouped physically similar models when calculating its product-
specific variances; and (5) we confirmed that NTN used the same method
of calculating its various product-specific variances consistently. Our
testing and review noted no exceptions. Therefore, for these final
results, we have accepted NTN's product-specific variances and used
them to calculate NTN's COP and CV.
5. Further Manufacturing
Comment: NSK-RHP argues that the Department erred when it did not
apply the ``special rule'' for NSK-RHP's further-manufactured
merchandise. NSK-RHP asserts that the Department erred when it used its
traditional value-added methodology based on respondent's Section E
data. NSK-RHP maintains that the weighted-average entered value of
merchandise subject to further manufacturing is less than 35 percent of
the net selling price to its unaffiliated U.S. customer; thus, it
contends, these sales qualify for the special rule. NSK-RHP asserts
further that there is a sufficient quantity of U.S. sales of finished
bearings to provide a reasonable basis for comparison.
Torrington responds that the Department's rejection of the special
rule was a proper exercise of its discretion. Torrington argues that
the Department retains the authority to both employ and excuse Section
E data as the basis of its further-manufacturing analysis. The
Department need not modify the preliminary results with regard to the
further-manufactured products, Torrington maintains, since calculating
the value added clearly did not impose an added burden upon the
Department.
Department's Position: We agree with the petitioner. As we stated
in our new regulations, the special rule for further manufacturing
exists in order to reduce the Department's administrative burden. 62 FR
at 27353. See, also, section 772(e) of the Act, which provides that the
Department need only apply the special rule where it determines that
the use of such alternative calculation methodologies is appropriate.
We retain the authority to refrain from applying the special rule in
those situations where the value added, while large, is simple to
calculate. Id. Respondent submitted Section E data in its questionnaire
and supplemental responses. We acted within our discretion by employing
this data to calculate the U.S. value added, as the calculation
involves little more than the subtraction of the value-added figures
which NSK-RHP provided. Thus, this case does not present the complex
data-gathering and calculation burdens contemplated by the special
rule.
6. Packing and Movement Expenses
6.A. Repacking Expenses. Comment: NSK and NSK-RHP argue that the
Department should deduct U.S. repacking expenses as a movement expense.
Both respondents state that U.S. repacking is an element of warehousing
and as such should be classified like a warehousing expense under
section 772(c)(2)(A) of the Act of 1930. NSK and NSK-RHP also contend
that the Department's reasoning as expounded in AFBs 7 at 54067 is
flawed: the fact that respondents would
[[Page 33339]]
not repack merchandise if they did not have to in order to make a sale
does not make repacking expense a selling expense. NSK and NSK-RHP
assert that for the final results the Department should deduct U.S.
repacking as a movement charge from CEP and exclude U.S. repacking from
the calculation of CEP profit.
Torrington argues that the Department should not treat U.S.
repacking expense as a movement expense. It asserts that the
Department's existing position is valid. Furthermore, Torrington
asserts that repackaging is a function of selling. Moreover, Torrington
believes that the expense is incurred by reason of the sale, which is
the test for a direct selling expense, and cites Torrington at 1050. In
Torrington's view, the mere fact that the above-named companies do not
retain sale-by-sale records does not change this basic character of the
repacking. Accordingly, Torrington concludes that the Department's AFBs
7 determination remains valid.
Department's Position: We disagree with NSK and NSK-RHP. As NSK and
NSK-RHP note, section 772(c)(2)(A) of the Act covers ``transportation
and other expenses, including warehousing expenses, incurred in
bringing the subject merchandise from the original place of shipment in
the exporting country to the place of delivery in the United States.''
See SAA at 153. We do not view repacking expenses as movement expenses.
The repacking of subject merchandise in the United States bears no
relationship to moving the merchandise from one point to another. The
fact that repacking is not necessary to move merchandise is borne out
by the fact that the merchandise was moved from the exporting country
to the United States prior to repacking. Rather, we view repacking
expenses as direct selling expenses respondents incur on behalf of
certain sales which we deduct pursuant to section 772(d)(1)(B) of the
statute, which directs us to reduce CEP by ``expenses that result from,
and bear a direct relationship to, the sale, such as credit expenses,
guarantees, and warranties.''
We also disagree with NSK and NSK-RHP's characterization of
repacking expense as a warehousing expense. We regard repacking expense
as a direct selling expense because it was performed on individual
products in order to sell the merchandise to the unaffiliated customer
in the United States. Warehousing expense, on the other hand, is merely
an expense associated with storing the merchandise in a location before
or during the movement process. As noted above, repacking does not have
to be performed in order for merchandise to be moved while warehousing
may be required in the movement process. Thus, we conclude that U.S.
repacking expense is an expense associated with selling the
merchandise.
6.B. Inland Freight. Comment 1: Torrington contends that the
Department should reject the home-market inland-freight expenses which
SKF Italy, SKF France, SKF Sweden, Barden, Koyo, FAG Italy, and NSK-RHP
reported because those expenses are distortive since respondents failed
to account for modes of transportation or distances shipped. Torrington
asserts that freight charges are likely to be affected by the latter
factors, noting that respondents' customers are located in different
parts of the domestic markets and that in some situations sea transport
might have been necessary. Due to the potential for distortion,
Torrington asserts that the respondents should have employed a more
specific per-unit freight-cost calculation methodology. Torrington
states that, since the Department's dumping analysis is transaction-
specific and given that variances in freight expenses may, in part, be
a function of distance, the derivation of an average freight expense
using a factor based on total transport expense and total transport
weights or total sales values provides over-stated freight expenses in
certain instances. Torrington states further that transaction-specific
reporting is feasible, as Torrington's affiliate exporting from
Germany, Torrington Nadellager, demonstrated.
SKF Italy, SKF France, and SKF Sweden respond that the Department
has verified the accuracy of the expense and weight components of their
inland-freight factors in these and earlier reviews and found those
factors to be a reasonable reflection of SKF's freight expenses. The
respondents assert that the Department has broad discretion under the
post-URAA statute to employ the allocation of expenses when
transaction-specific reporting is not feasible, provided such
allocation does not cause inaccuracies or distortions. SKF Italy, SKF
France, and SKF Sweden contend that the fact that transaction-specific
reporting may be feasible for Torrington Nadellager is irrelevant to a
determination of whether such reporting is feasible for other
respondents. Therefore, SKF Italy, SKF France, and SKF Sweden state,
the Department should continue to accept their reported home-market
inland-freight expenses.
Barden argues that Torrington has not demonstrated sufficiently
that Barden's methodology is in fact distortive. Barden claims that it
is unable to report freight amounts on a shipment-specific basis from
its records and that the Department has verified this on three separate
occasions, most recently in these reviews. Barden argues further that
the record demonstrates that it ships a significant amount of bearings
in the home market using the regular postal service. Barden asserts
that all postal rates are dependent upon weight, not distance, in
England.
In rebuttal, Koyo states that, as it reported in its response, its
home-market freight expenses are not incurred on a distance (or weight
or volume) basis. Koyo argues that the methodology which it has used in
prior reviews reflects Koyo's experience of shipping to hundreds of
customer locations from various Koyo warehouses and plants throughout
its home market. In summary, Koyo argues that Torrington's argument
regarding its home-market freight expenses should be rejected and that
Koyo's freight adjustment should be accepted as in all prior reviews.
FAG Italy contends that the Department should accept its reporting
methodology unless Torrington can provide evidence of distortion. FAG
Italy asserts that, in accordance with the questionnaire, it allocated
freight expenses on the basis incurred, i.e., by weight, and contends
that there is nothing on the record to suggest that freight charges are
dependent upon distance. Furthermore, FAG Italy notes that in its
supplemental questionnaire response it stated that freight rates are
based upon weight of the merchandise and do not vary significantly
based upon the customer's destination.
NSK-RHP responds that it is unable, and should not be required, to
submit freight charges on a transaction-specific basis. NSK-RHP argues
that it used largely its own fleet of vehicles to ship merchandise to
home-market customers and that it should not be forced to maintain
freight accounts in the manner of Torrington's foreign affiliate. NSK-
RHP asserts that the Department has verified and accepted previously
its allocation of freight expense on the basis of weight and,
therefore, has recognized that freight expenses are often not incurred
on a transaction-specific basis.
Department's Position: We disagree with Torrington that
respondents' reported home-market inland-freight expenses should be
disallowed as distortive. In the first instance, Torrington's argument
about the Department's uses of a transaction-specific analysis is not
thoroughly accurate. While we do initially examine transaction-specific
information on home-market sales, ultimately we
[[Page 33340]]
calculate a weighted-average home-market price for comparison to U.S.
sales. The averaging of net home-market prices has the effect of
averaging the components used to calculate those net prices, including
inland freight. Therefore, the use of an allocated expense would not
necessarily result in a distortion of home-market prices. Respondents
in different markets incur freight charges on different bases and
frequently on more than one basis. These factors generally make the
calculation of a transaction-specific expense infeasible and no more
reasonable than the allocation techniques respondents employed for
these reviews. We are satisfied that the components of respondents'
reported inland-freight expenses were reported accurately and allocated
reasonably for the calculation of normal value. Therefore, we have
continued to use these reported expenses in our final results.
Comment 2: Torrington contends that, because NTN calculated home-
market pre-sale inland-freight expenses based upon sales values, the
Department should disallow this expense or, at the minimum, apply the
lowest per-unit amount reported by any other Japanese respondent as a
facts-available solution. Torrington states that determining this
expense based upon sales value is unnecessary and yields distortive
results. Torrington states further that Torrington Nadellager was able
to make allocations for this expense by invoice and that other
respondents should be able to do the same.
NTN states that the Department verified the reported movement
expenses and found them to be accurate and, as such, it should use them
for the final results. In addition, NTN states that Torrington's
argument regarding Torrington Nadellager's experience is illogical. NTN
states that the argument completely ignores the fact that the
Department's determination must be based on the facts unique to NTN,
citing Ipsco. Inc. v. U.S., 899 F.2d 1192, 1197 (Fed. Cir. 1990).
Finally, NTN argues that the Department's decision in AFBs 7 must
apply here since there have been no changes in law or fact which would
compel a different result in these reviews.
Department's Position: In these reviews, we have accepted the
methodology NTN used in past reviews. We did not find it to be
distortive in those reviews and do not find it distortive here. See
AFBs 7 at 54084. Furthermore, we verified NTN's methodology for these
reviews and found it to be reasonable because NTN explained that it can
not calculate these expenses on a transaction-specific basis (see
verification report dated January 22, 1998, at 8). Finally, one
respondent's experience or recordkeeping system can not be imposed on
another respondent. Therefore, we have accepted NTN's methodology for
allocating freight expenses in the present reviews.
Comment 3: Torrington asserts that SKF Sweden might have overstated
the reported per-unit cost of inland freight from warehouse to customer
by including freight revenue in the numerator of the factor
calculation.
SKF Sweden contends that it did not overstate the reported per-unit
cost of inland freight from warehouse to customer. SKF Sweden asserts
that, in order to calculate the total freight expense to use as the
numerator in the freight-expense factor calculation, it must sum
freight expenses from two separate freight accounts, freight revenue
(freight which SKF Sweden initially incurred but later charged to
customers) and freight expenses. SKF Sweden notes that it reported the
actual per-unit freight revenue it received from its customers
separately.
Department's Position: We agree with SKF Sweden that it did not
overstate the per-unit cost of inland freight from warehouse to
customer. The respondent calculated the reported per-unit cost of
inland freight from warehouse to customer by applying a freight factor
to the weight of each bearing shipped. SKF Sweden's invoice price
includes an amount for freight paid by its customers. Therefore, to
calculate the freight factor, SKF Sweden added the amount of freight it
ultimately incurred on its own account to the amount of freight it
initially incurred but later charged to customers, and it divided the
sum by the corresponding weight of all bearings shipped. Since SKF
Sweden reported the amount of freight revenue it received separately in
its response and we added this revenue to the unit price, we must take
into account freight costs SKF billed to its customers in calculating
the numerator of the freight-factor calculation. This avoids
understating SKF Sweden's total freight costs. The AFBs 7 verification
report for SKF Sweden's home-market sales contains a detailed
explanation of how the respondent calculated this per-unit adjustment.
We have included a public version of the report as an attachment to our
May 29, 1998, analysis memorandum for the final results of this
administrative review for SKF Sweden.
6.C. Ocean and Air Freight. Comment 1: Torrington argues that the
Department should not have allowed Koyo to aggregate and then allocate
ocean-and air-freight costs. Moreover, the petitioner notes that Koyo
made no attempt to demonstrate that the failure to report separate
amounts for ocean-and air-freight expenses did not distort the reported
freight costs. As such, Torrington believes that the Department should
not accept Koyo's position that it does not maintain a database that
permits it to trace individual transactions. In addition, Torrington
asserts that the Department should reject Koyo's reporting and
recalculate a separate air-freight factor.
Koyo states that nothing in its recordkeeping or data-reporting
methodologies has changed from previous reviews and that the Department
has verified and accepted Koyo's treatment of these expenses. Koyo
contends further that nothing in its response to the Department's
requests for additional information demonstrates an ability to identify
air-freight shipments with specific U.S. sales.
Department's Position: We disagree with Torrington. We have found
that it is generally not feasible for respondents to report air and
ocean freight on a transaction-specific basis in these proceedings.
See, e.g., AFBs 7 at 54081. Where respondents were unable to report
ocean and air freight separately, we have accepted aggregated
international freight data. See AFBs 6 at 2121; see also The Torrington
Company v. United States, Slip Op. 97-57 at 11-14 (CIT May 14, 1997)
(affirming the Department's methodology for accepting co-mingled ocean
and air freight where a respondent could not report the two expenses
separately). Furthermore, we note that section 351.401(g) of our new
regulations provides that we may consider allocated expenses and price
adjustments when transaction-specific reporting is not feasible,
provided we are satisfied that the allocation method used does not
cause inaccuracies or distortions. While the new regulations are not
binding in the instant reviews, they are a codification of our practice
in this area. See also AFBs 7 at 54081. While we have considered
Torrington's claim that aggregating and then allocating air and ocean
freight is potentially distortive, we find that this allocation is not
unreasonably distortive.
Because we determined that the respondent acted to the best of its
ability, it would be improper to make adverse inferences about its
reported data by applying facts available simply because its
recordkeeping system does not record the data on a transaction-specific
basis. Therefore, we have
[[Page 33341]]
accepted Koyo's reported air-and ocean-freight expenses.
Comment 2: Torrington argues that the Department should disallow
SKF Italy's attribution of air-freight expenses to all EP sales, but it
should distinguish such shipments on a transaction-specific basis. The
petitioner contends that the Department should not assume that more
accurate delineation of transportation expenses for EP sales is not
feasible. Torrington states that the diluted attribution of the expense
distorts the calculation of net prices for EP transactions. Torrington
suggests that the Department increase international-freight expenses
for SKF Italy's EP transactions with a factor representing the
additional cost of air freight.
SKF Italy counters that it would be inappropriate for the
Department to segregate and identify the expense on a transaction-
specific basis, since transportation of the shipments in question is
dictated by SKF's determination to maintain inventory balances rather
than customer orders. SKF states that it has calculated a separate
international-freight factor for EP transactions and that the
Department has verified and accepted this methodology in verifications
of previous responses.
Department's Position: We disagree with Torrington that SKF Italy's
reporting of air-freight expenses for EP transactions distorts the
calculation of net prices for those transactions. In verifications of
the expense in past reviews we have found that SKF has reported it in
the best manner that its records will allow. It was not feasible to tie
the air shipments to specific transactions. Thus, we determined its
methodology of allocating the expense to the specific customer to be a
reasonable attribution of the expense to EP sales. There is no
information in the record of these reviews that would indicate that the
attribution of the expense is no longer reasonable. Because SKF has
acted to the best of its ability, we have continued to accept SKF's
reporting methodology for the final results.
7. Affiliated Parties
Comment 1: Torrington claims that the Department should apply facts
available to Nachi because Nachi reported sales it made to its
affiliated resellers instead of sales which the affiliated resellers
made to unaffiliated customers. Citing the preamble of the Department's
regulation at section 351.402, Torrington argues that the volume of
sales to unaffiliated resellers is greater than the regulatory
threshold that the Department considers significant. Torrington also
claims that the letters Nachi's affiliated resellers provided claiming
an inability to report resales are unconvincing. Citing Fresh Cut
Flowers from Colombia, 62 FR 53287 (October 14, 1997) (Colombian
Flowers), Torrington argues that the Department has previously required
small companies to adhere to similar standards in other proceedings
regardless of the computer capacity of the company involved. In
addition, Torrington notes that the Department's verification report
does not address whether sales to affiliated resellers were at arm's-
length prices. As facts available, Torrington suggests that the
Department increase dumping duties by an amount equal to the value of
the sales to resellers multiplied by the applicable facts-available
margin for cooperative respondents for both BBs and CRBs.
Nachi contends that it has reported its sales to the best of its
ability and that the Department tested its sales to affiliated
resellers to ascertain whether they were made at arm's length. Nachi
argues that the verification report's silence on the issue of sales to
affiliated parties indicates the Department's acceptance of the
evidence Nachi submitted. In addition, Nachi contends that Torrington's
citation to Colombian Flowers is inapposite, since the case does not
establish a rule as to how much information is required to determine
that a respondent with limited computer capabilities has reported
information to the best of its ability. Accordingly, Nachi argues that
the record of these reviews demonstrates that Nachi has reported its
sales to the best of its ability and that it would be contrary to law
to apply adverse facts available.
Department's Position: We disagree with Torrington that the use of
facts available is warranted. The record shows that Nachi attempted to
obtain downstream-sales information from its affiliates, but it was
unable to do so because ``these affiliates are small companies with
unsophisticated computer systems that do not permit them to retain the
sales data required by the Department.'' See Nachi's Supplemental
Questionnaire response dated November 10, 1997, at page 11 and the
letters from the affiliates contained in Exhibit A/1.f of Nachi's
Section A Response dated September 5, 1997. No evidence on the record
contradicts this claim.
Furthermore, Torrington's citation to the preamble to the new
regulations does not compel the use of facts available in this case.
Although the regulation to which Torrington cites does not govern these
administrative reviews, they do reflect current practice. Section
351.403(d) of the new regulations states that ``the Secretary normally
will not calculate normal value based on the sale by an affiliated
party if sales of the foreign like product by an exporter or producer
to affiliated parties account for less than five percent of the total
value (or quantity) of the exporter's or producer's sales of the
foreign like product in the market in question.'' The preamble to the
regulations at section 351.403 also states that ``we have decided to
codify the Department's current practice regarding the reporting of
downstream sales when the volume of sales to affiliates is small. Under
our current practice, we normally do not require the reporting of
downstream sales if total sales of the foreign like product by a firm
to all affiliated customers account for five percent or less of the
firm's total sales.'' 62 FR at 27356. Those provisions do not indicate
that we will necessarily base normal value on sales by affiliates in
every circumstance. Rather, the preamble states that ``(t)he Department
does not believe it necessary or appropriate to require the reporting
of downstream sales in all instances. Questions concerning the
reporting of downstream sales are complicated, and the resolution of
such questions depends on a number of considerations, including the
nature of the merchandise sold to and by the affiliate, the volume of
sales to the affiliate, the levels of trade involved, and whether sales
to affiliates were made at arm's length.'' Id. Thus, while we normally
require respondents to report sales by affiliates rather than sales to
affiliates, we can and do make exceptions on a case-by-case basis. In
this case, we have accepted Nachi's sales to affiliates in lieu of
sales by Nachi's affiliates for the following reasons: (1) the large
overall number of sales to unaffiliated customers Nachi reported; (2)
the fact that the majority of sales Nachi made to affiliated customers
were made at arm's-length prices (see the margin calculation program
attached to Nachi's Final Results Analysis Memorandum dated May 12,
1998); and (3) Nachi's inability to obtain those prices from its
affiliates.
Finally, we agree with Nachi that Colombian Flowers is inapposite.
In Colombian Flowers we did not establish a rule that must be applied
in other cases but, rather, we stated our practice of determining
whether to accept a respondent's sales to its affiliates instead of
sales by its affiliates on a case-by-case basis. Therefore, for these
final results we have based normal value on Nachi's sales to its
affiliates
[[Page 33342]]
where we determine that those sales were made at arm's-length prices.
Comment 2: Torrington argues that the Department should increase
Nachi's dumping margin to account for certain sales Nachi made to
affiliated parties but did not report to the Department. Torrington
states that Nachi excluded sales to affiliates of the foreign like
product in the comparison market which Nachi sold for consumption.
Torrington claims that, had they been reported, a portion of these
unreported sales would have been matched to U.S. sales and thus
resulted in margins. Torrington suggests as facts available that the
Department increase dumping duties by an amount equal to the unreported
sales multiplied by the facts-available margin for cooperative
respondents.
Nachi claims that the Department should accept the exclusion of
these sales from its home market database because these sales were
outside the ordinary course of trade. According to Nachi, the total
volume of sales was extremely small and its affiliated customers
purchased the bearings for the purpose of repairing machinery and not
resale. Nachi also states that it made these sales at aberrant prices.
Department's Position: We agree with Torrington that Nachi should
have reported certain sales made to affiliated parties. In the
questionnaire, we asked all respondents to ``report (their) sales to
affiliated customers that consume the foreign like product.'' See
questionnaire dated June 20, 1997, at B-7. Nachi failed to report these
sales and did not explain why it did not report these sales either in
its original response or its supplemental response. The company did not
claim that these sales were outside of the ordinary course of trade
until its March 23, 1998, rebuttal brief, and there is no evidence on
the record to demonstrate that these sales actually are outside the
ordinary course of trade. In addition, Nachi was obligated to report
all sales, irrespective of the number of sales being excluded, and we
do not consider the ultimate use of a bearing to be a relevant factor
in our dumping analysis. Because there is no information on the record
concerning the kinds, quantities, or values of bearings Nachi failed to
report, we are adopting Torrington's suggestion for adverse facts
available.
Comment 3: Torrington contends that Koyo did not report resales by
all its resellers as the Department requested in its questionnaire and
urges the Department to apply facts available to all models for which
Koyo did not report home-market reseller sales. Torrington states that
Koyo admitted it would have been possible, but that compliance efforts
would be ``out of proportion'' to the fraction of home-market sales
involved.
In rebuttal, Koyo states that it consulted with the Department on
this issue prior to responding to the questionnaire. Specifically, Koyo
reasons that it conferred with the Department as to whether it was
acceptable to report (1) its sales to certain affiliated resellers
rather than the sales by those affiliates to their customers, and (2)
the percentage of sales made to the affiliated resellers rather than
those affiliates' resales. Koyo argues that, although the volume of
merchandise involved is small, the number of transactions is enormous.
Furthermore, Koyo explains that the subject affiliates do not maintain
either their sales information in a computerized format consistent with
Koyo's records or their sales records according to the product
descriptions Koyo uses. Thus, Koyo contends that the amount of work
required to collect this data would involve an amount of time that
ultimately would be disproportional to the volume of sales. Koyo also
states that it used the same methodology in these reviews as in the
1994/95 and 1995/96 reviews. Finally, Koyo argues that the amount of
sales involved accounts for less than five percent of the firm's total
sales of the foreign like product.
Department's Position: We disagree with the petitioner. Koyo
notified us of its intention to report sales to affiliated customers in
the home market prior to answering our questionnaire (Koyo reported its
direct sales to unaffiliated customers as well). Given that the sales
to certain affiliated customers, for which collecting the data
regarding the resales would be a major undertaking, constituted less
than five percent of Koyo's home-market sales, we agreed that Koyo
could report the sales to these affiliates and that it would not be
necessary to report those affiliates' resales. Furthermore, since the
quantity of these sales is below the five-percent threshold as stated
in the new regulations at 351.403, we determined that facts available
is not warranted in this case.
8. Sample Sales/Prototypes and Zero-Priced Transactions
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. Id. Moreover, the CAFC found that, since free samples
did not constitute ``sales,'' the Department should not have included
them in calculating U.S. price.
In light of the CAFC's opinion, we have re-evaluated and revised
our policy with respect to sales of sample products. Therefore,
pursuant to the CAFC's opinion, the Department now excludes from the
margin calculation sample transactions for which a respondent has
established that there is no transfer of ownership and no
consideration.
This new policy does not mean that the Department automatically
excludes from analysis any transaction to which a respondent applies
the label ``sample.'' In fact, in these reviews, we determined that
there were instances where we should not exclude such alleged samples
from our dumping analysis. It is well-established that the burden of
proof rests with the party in possession of the needed information.
See, e.g., NTN Bearing Corporation of America v. United States, 997
F.2d 1453, 1458-59 (Fed. Cir. 1993) (citing Zenith Elecs. Corp. v.
United States, 988 F.2d 1573, 1583 (Fed. Cir. 1993), and Tianjin Mach.
Import & Export Corp. v. United States, 806 F. Supp. 1008, 1015 (CIT
1992)). In several cases, as discussed below, respondents failed to
demonstrate or to submit documentation to show that their claimed
sample sales lacked consideration. When respondents failed to support
their sample claim, we did not exclude the alleged samples from our
margin analysis. Because the inclusion of zero-priced transactions in
the home-market database would benefit respondents by lowering average
normal value, however, we excluded zero-priced items from the home-
market database when such unsupported transactions occurred in the home
market.
With regard to home-market sales, in addition to excluding home-
market sample transactions which do not meet the definition of
``sales,'' we may exclude sales designated as samples or prototypes
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 we set the dumping duties due for
[[Page 33343]]
such transactions to zero. We have done this because U.S. Customs will
collect the ad valorem (or per-unit, where applicable) duty-assessment
rate on all entries of subject merchandise regardless of whether the
merchandise was a sample transaction. However, to ensure that sample
transactions do not dilute the cash-deposit margin, we excluded both
the calculated U.S. prices and quantities for sample transactions from
our calculation of the cash-deposit rates.
Comment 1: Torrington contends that the Department should include
SKF Germany's reported home-market sample and prototype sales in the
final margin calculation. Torrington argues that SKF Germany did not
reply to many of the Department's requests for information to support
such an exclusion (i.e., comparison of prices and quantities of samples
and non-samples). Torrington also submits that, in its supplemental
questionnaire response, SKF Germany admitted that it did not respond to
the Department's inquiries purposely because the effort to do so would
be disproportionate to any potential benefit. Citing Fujitsu,
Torrington argues that the respondents have the burden of proof to
establish that the sales in question were made outside the ordinary
course of trade.
SKF Germany argues that the Department should exclude its home-
market sample and prototype sales. SKF Germany submits that, given the
few sample and prototype sales it made, it did not find it necessary to
provide detailed information to the Department's exhaustive request for
information. SKF Germany posits that the Department should rely on the
same information provided in these reviews as it provided in AFBs 7.
SKF Germany also states that its three-page narrative is responsive and
the identification of these sales in its sales listing should be
sufficient to warrant the exclusion of such sales from the margin
calculation.
Department's Position: We agree with Torrington. Our practice is to
exclude home-market sales transactions that are outside the ordinary
course of trade based on the circumstances particular to the sales in
question. However, despite our additional request for information in
our supplemental questionnaire, SKF Germany has not demonstrated that
the circumstances relating to these home-market sales are outside the
ordinary course of trade and, therefore, we have included them in our
analysis.
Comment 2: Torrington argues that the Department should include SKF
Germany's reported zero-value and non-zero-value U.S. sample and
prototype sales in the final margin calculation. Torrington contends
that SKF Germany did not provide all of the data, including price and
quantity comparisons, necessary for the Department to determine whether
such sales lacked consideration to support their exclusion from the
dumping analysis.
SKF Germany rebuts that it did provide enough data to establish
that its zero-priced transactions lacked consideration to support their
exclusion from the dumping analysis. SKF Germany argues that, pursuant
to the Department's supplemental questionnaire, it answered in detail
each of the five questions in the Department's questionnaire and it
provided sales, cost, price, and quantity data for all sales
transactions in question. SKF Germany contends that it has provided all
necessary data to support the exclusion of its zero-priced U.S. sample
and prototype sales from the final margin calculation.
Department's Position: We disagree with Torrington. Based on the
information provided in SKF Germany's responses, we determined that no
consideration was provided for SKF Germany's reported U.S. zero-priced
transactions and prototype sales. Therefore, we did not calculate a
margin on U.S. sales which SKF Germany designated as zero-priced
samples or prototypes.
Comment 3: Torrington argues that, since Koyo is not requesting the
exclusion of any U.S. sample sales or prototype sales from the margin
calculation, the Department should assume that any zero-priced U.S.
sales are nevertheless for consideration and not exclude them from the
database.
Koyo does not oppose Torrington's suggestion.
Department's Position: We agree with Torrington. As we noted in the
introduction to this issue, the party in possession of the information
has the burden of producing that information. Koyo did not answer our
questions regarding the purchase history of parties receiving samples.
Koyo also did not answer our questions regarding comparisons of the
prices and quantities involved in sample and non-sample transactions.
Lacking knowledge of the details of these transactions, we can not
conclude that Koyo received no consideration for these alleged samples.
Therefore, for these final results, we have included Koyo's samples
sales in its U.S. sales database in calculating the margins.
Comment 4: NTN requests that the Department exclude its sample
sales from its U.S. sales databases in accordance with the CAFC's
ruling in NSK. NTN also states that, 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, 63 FR 2558, 2581 (January 15, 1998), the Department stated
that it had reconsidered its policy with respect to samples and would
now exclude from its dumping calculations sample transactions for which
a respondent has established that there is either no transfer of
ownership and no consideration. Finally, NTN states that zero-priced
sales, by their very nature, lack consideration.
Torrington argues that NTN has the burden of proving entitlement to
any favorable claim. Torrington asserts that NTN does not represent,
much less demonstrate with facts, that no consideration is involved in
its U.S. sample transactions. Rather, Torrington maintains, NTN merely
asserts that zero-priced sales, by their very nature, lack
consideration. Torrington states that NTN has failed to provide facts
showing the absence of consideration, other than the zero price, and
that the Department should reject the claim.
Department's Position: We agree with Torrington. As we noted in the
introduction to this issue, the party in possession of the information
has the burden of producing that information, particularly when seeking
a favorable adjustment or exclusion. NTN did not answer our questions
regarding the purchase history of parties receiving samples or our
questions regarding comparisons of the prices and quantities involved
in U.S. sample and non-sample sales adequately. The answers to these
questions would have aided us in determining whether the alleged sample
sales were, in fact, zero-priced samples with no consideration or,
instead, provided essentially as a discount in conjunction with other
sales. Because NTN did not provide the details we requested, we can not
conclude that NTN received no consideration for these alleged samples.
NTN withheld information within the meaning of section 776(a)(2)(A) of
the Act and, in so doing, failed to cooperate by acting to the best of
its ability to comply with our information request within the meaning
of section 776(b) of the Act. Thus, we have determined that an adverse
inference is appropriate. Therefore, for these final results, we have
included NTN's claimed sample sales in its U.S. sales database.
Comment 5: NTN states that sample sales with abnormally high
profits
[[Page 33344]]
should be excluded from the calculation of normal value. NTN asserts
that normal value must be based on sales made in the home market that
are in the ``ordinary course of trade.'' NTN states that the ordinary-
course-of-trade provision serves an important purpose: ``to prevent
dumping margins from being based on sales which are not
representative'' of the home market, citing Monsanto Co. v. United
States, 698 F. Supp. 275, 278 (CIT 1988). NTN states further that, to
guarantee that sales the Department uses to calculate normal value are
representative, the Department examines ``the circumstances particular
to the sales in question,'' citing CEMEX at 6. Finally, NTN states that
a profit-level comparison is probative of the economic reality of the
sales and therefore the disparity in profit margins is indicative of
sales that were not in the ordinary course of trade, citing Mantex v.
United States, 841 F. Supp. 1290, 1308 (CIT 1993).
Torrington states the Department should include all alleged samples
in NTN's home-market database. Torrington states that providing samples
is ordinary practice in the market for bearings and the fact that NTN
records transactions as ``samples'' in its books is not a basis for
allowing the company to exclude arguably higher-price transactions from
its antidumping database, as that would be a self-serving practice.
Furthermore, Torrington states that NTN failed to show that profits it
earned on particular transactions were aberrational or abnormal, and,
thus, outside the ordinary course of trade. Finally, Torrington states
that no one factor can determine whether particular transactions are
within or outside the ordinary course of trade, citing CEMEX.
Department's Position: We agree with Torrington. With regard to
home-market ``sample'' sales which NTN claimed were outside the
ordinary course of trade, our practice is to exclude home-market sales
transactions from the margin calculation as outside the ordinary course
of trade based on all the circumstances particular to the sales in
question. See Murata Mfg. Co. v. United States, 820 F. Supp. 603, 607
(CIT 1993). With regard to NTN's abnormally high-profit sales, the
presence of profits higher than those of numerous other sales does not
necessarily place the sales outside the ordinary course of trade. In
order to determine that a sale is outside the ordinary course of trade
due to abnormally high profits, there must be unique and unusual
characteristics related to the sale in question which make it
unrepresentative of the home market. See CEMEX, 133 F.3d at 900
(citation omitted). However, NTN has provided no information other than
the numerical profit amounts to support its contention that these home-
market sales had abnormally high profits. The simple fact of high
profits, standing alone, is not sufficient to find sales to be outside
the ordinary course of trade. Accordingly, we have not excluded NTN's
``sample'' sales with allegedly high profits in calculating normal
value.
Comment 6: Nachi argues that the Department should have excluded
its claimed home-market prototype sales. Nachi contends that it
demonstrated that these sales were outside the ordinary course of trade
and the Department verified the accuracy of the claim.
Torrington disagrees, asserting that Nachi did not provide the
information the Department requested with regard to its home-market
prototype sales. Torrington contends further that whether the
Department verified the fact that these sales were outside the ordinary
course of trade can not remedy Nachi's failure to respond to the
Department's questionnaire.
Department's Position: We agree with Nachi. Nachi demonstrated at
verification that its home-market prototype sales are outside of the
ordinary course of trade. See the Department's home-market verification
for Nachi report dated January 26, 1998, at page 11. Therefore, we have
excluded such sales from our analysis for these final results.
9. Export Price and Constructed Export Price
Comment 1: SKF Sweden asserts that the Department erroneously
deducted the inventory carrying costs incurred for the time merchandise
was in transit between Europe and the United States from the price used
to establish the CEP. SKF Sweden argues that the Department should not
deduct these expenses because they are not associated with commercial
activity occurring in the United States.
Torrington requests that the Department continue to deduct these
expenses from CEP. Citing to the SAA at 823 and the Department's new
regulations at 351.402(b), Torrington asserts that the Department will
generally make a deduction from CEP for expenses associated with
commercial activities in the United States. Torrington contends that,
since SKF Sweden's U.S. affiliate bore the expenses at issue, the costs
are associated with U.S. commercial activity.
In addition, Torrington suggests that because the expenses relate
to the transit of goods from Europe to the United States, the expenses
should be deducted as a movement expense under section 772(c)(2)(A) of
the Act.
Department's Position: We agree with SKF Sweden that the inventory
carrying costs incurred for the time merchandise was in transit between
Europe and the United States should not be deducted from the price used
to calculate CEP. It is evident from both the SAA at 823 and our new
regulations that, under section 772(d) of the Act, we only deduct from
CEP the expenses associated with commercial activity in the United
States which relate to the resale to an unaffiliated purchaser. We find
that the expenses at issue are not associated with commercial activity
in the United States and do not relate to the resale to the
unaffiliated customer. Rather, these inventory carrying costs reflect
part of the interest expense SKF Sweden incurred when it extended
credit on the sale to its U.S. affiliate. Our new regulations direct us
clearly not to deduct from the starting price any expense that is
``related solely to the sale to an affiliated importer in the United
States,'' i.e., those expenses that support the sale from the exporter
to its U.S. affiliate (see 351.402). Thus, for the final results, we
did not deduct these expenses from CEP.
We also disagree with Torrington's suggestion for treating the
inventory carrying costs as a movement expense. Section 772(c)(2)(A) of
the Act instructs us to reduce CEP by ``* * *. the amount, if any,
included in such price, attributable to any additional costs, charges,
or expenses, and United States import duties, which are incident to
bringing the subject merchandise from the original place of shipment in
the exporting country to the place of delivery in the United States * *
*'' (emphasis added). The expenses at issue do not relate to
``bringing'' the subject merchandise from Sweden to the United States.
As noted above, the expenses reflect the financing cost of holding
inventory. Thus, we have not treated the inventory carrying costs as a
movement expense.
Comment 2: Torrington argues that, with respect to certain sales
made through one of FAG Italy's U.S. affiliates, to calculate CEP in
accordance with section 772(d)(1)(A) of the Act the Department should
have deducted the warehousing commissions and sales commissions paid to
affiliated warehousing companies rather than deducting pre-sale
warehousing expenses and indirect selling expenses for these sales.
Torrington argues that
[[Page 33345]]
under no circumstance should the Department resort to the amounts
reported for pre-sale warehousing expenses and indirect selling
expenses over the actual commission amounts FAG Italy's U.S. affiliate
paid to an affiliated warehousing company. Torrington argues further
that the statute prefers the use of the commissions over adjustments
like pre-sale warehousing expenses and indirect selling expenses on the
basis that commissions are direct and reflect the actual amount paid
while pre-sale warehousing expenses and indirect selling expenses are
costs. In support of this argument, Torrington cites Smith Corona Group
v. United States, 713 F.2d 1568, 1575 (Fed. Cir 1983), cert. denied,
465 U.S. 1022, 79 L.Ed.2d 679 (1984).
FAG Italy supports the Department's methodology of deducting pre-
sale warehousing expenses and indirect selling expenses rather than
deducting the commissions paid to affiliated warehousing companies. FAG
Italy argues that commission payments between affiliated parties are
not actual expenses within the meaning of the antidumping law. On the
basis that commission payments between affiliated parties are not
actual expenses, FAG Italy suggests that Torrington's argument for
deducting actual amounts supports rather than disputes the Department's
methodology.
Department Position: We disagree with Torrington's contention that
in calculating the CEP of FAG Italy's U.S. sales we should have
deducted certain warehousing commissions and sales commissions rather
than pre-sale warehousing expenses and indirect selling expenses.
The sales that Torrington addresses in its comment were made by one
of FAG Italy's U.S. affiliates to unaffiliated customers through
affiliated warehousing companies. For these CEP sales, FAG Italy's U.S.
affiliate paid both a sales commission and a warehousing commission to
the affiliated warehousing companies. FAG Italy asserted on page 24 of
its December 3, 1997, supplemental questionnaire response that the
Department should deduct pre-sale warehousing expenses incurred on
these transactions and not the warehousing commissions it paid to the
affiliated warehousing companies because the deduction of both would
result in double-counting. To avoid further double-counting, FAG Italy
requested, if the Department deducted the sales commissions on these
transactions, that it not deduct the indirect selling expenses reported
for the U.S. affiliate because the sales agent assumed the selling
functions and expenses for these sales.
To address FAG Italy's concern about double-counting, for the
preliminary results we did not deduct from the price used to establish
the CEP the warehousing commissions and sales commissions that FAG
Italy's U.S. affiliate paid to its affiliated warehousing companies.
Rather, we deducted the actual expenses, i.e., indirect selling
expenses and pre-sale warehousing expenses, that FAG Italy's U.S.
affiliates incurred on the sales. We followed this methodology because
we generally rely on actual expenses rather than intra-company
transfers. See, for example, Certain Fresh Cut Flowers from Colombia;
Final Results of Antidumping Duty Administrative Reviews, 62 FR 53287,
53294 (October 14, 1997), and AFBs 5 at 66489. Affiliated-party
commissions are an intra-company transfer of funds to compensate an
affiliate for actual expenses incurred in completing the sale to
unaffiliated customers. We do not believe that such intra-company
transfers of funds are a proper adjustment to price and, therefore,
have not altered our methodology for the final results.
Comment 3: Torrington argues that the Department should reject
Koyo's exclusion from the sum of its U.S. indirect selling expenses its
excluded antidumping-related expenses because Koyo did not explain how
they were calculated or what they involve.
In rebuttal, Koyo argues that it is evident from its questionnaire
response that the only antidumping-related expense it reported was the
antidumping-related legal expense that Koyo incurred during the POR.
Koyo argues further that the Department has a well-established policy
by which it does not consider legal expenses incurred in defending
against an allegation of dumping to be expenses incurred in selling the
merchandise in the United States, citing AFBs 7 at 54079.
Department's Position: We agree with Koyo that the response makes
clear that the expenses in question are antidumping-related legal
expenses. We also agree with Koyo that we should not consider the legal
fees associated with participation in an antidumping case to be U.S.
indirect selling expenses. As we stated in AFBs 7 at 54079, such
expenses are incurred solely as a result of the existence of the
antidumping duty order and to deduct such expenses from U.S. price
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.
Comment 4: NTN states that the Department had no basis for
including in the preliminary results the profit on EP sales in the
calculation of CEP profit. NTN contends that the statute states clearly
that the adjustment of profit to the CEP is to be based on expenses
incurred in the United States as a percentage of total expenses, citing
section 772(d) of the Act. NTN states that there is no provision in the
statute for the inclusion of EP expenses or CV profit in this
calculation and requests that the Department exclude these sales from
the calculation of CEP profit in the final results.
Torrington states that the Department addressed this issue in
Tapered Roller Bearings, Four Inches or Less from Japan (63 FR 2558,
2570 (January 15, 1998)) recently and in a policy bulletin dated
September 4, 1997, and should stand by its determination in the
preliminary results.
Department Position: We disagree with NTN. 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. See also
September 4, 1997, policy bulletin.
Comment 5: NTN argues that the Department should calculate CEP
profit on a level-of-trade-specific basis. Citing section 772(f) of the
Act, NTN maintains that the statute expresses a preference for CEP
profit to be calculated on the narrowest possible basis which, NTN
states, ensures more accurate results.
Torrington contends that the Department should follow its prior
determinations. Torrington notes that NTN is mischaracterizing the
statute and states that the statute refers to the ``narrowest'' group
of products only when the groups are broader than the subject
merchandise involved.
Department's Position: We agree with Torrington that NTN's reliance
on the ``narrowest'' language is misplaced (section 773 (f)(2)(c)(ii)).
That language addresses only the second alternative basis for the
profit calculation, whereas here we rely on the first alternative.
Moreover, neither the statute nor the
[[Page 33346]]
SAA requires us to calculate CEP profit using any of the alternatives
on a basis more specific than subject merchandise and foreign like
product (see AFBs 7 at 54072). Thus, we have not adopted NTN's
suggestion.
10. Miscellaneous Issues
10.A. Programming and Clerical Errors. Barden, FAG Italy, Koyo,
Nachi, NMB/Pelmec, NSK, NSK-RHP, NTN, SNFA France, SKF France, SKF
Germany, SKF Italy, SKF Sweden, Torrington Nadellager, and the
petitioner have alleged that we made programming and/or clerical errors
in the preliminary result calculations. Where we and all parties agree
that a programming or clerical error had occurred, we made the
necessary correction and addressed the comment only in the final-
results analysis memoranda. (See Final Results Analysis Memoranda of
various dates.) The comments included in this notice address situations
where parties alleged that we made a programming or clerical error but
either we or a party to the proceedings disagrees with the allegation.
Comment 1: SKF Italy, SKF France, and SKF Germany address
inconsistencies between the methodology the Department specified for
assigning level of trade in its preliminary results analysis memoranda
dated January 26, January 27, and February 2, 1998, respectively, and
the actual methodology the Department used in its margin calculations.
Specifically, the respondents note that, while the Department's
preliminary-results analysis memoranda indicate that the variable for
customer category, e.g., OEM or distributor, was used to designate a
level of trade for sales to unaffiliated customers, the Department
actually used the channel-of-distribution variable in its calculations.
The respondents assert that, in a situation where there is an
inconsistency between the calculations and the analysis memoranda, the
calculations reflect the Department's intent. For the final results,
the respondents request that the Department note a correction in the
analysis memoranda.
Torrington asserts that the Department's preliminary-results
analysis memoranda are statements of intent. Therefore, Torrington
contends, the Department should modify its calculations for SKF France,
SKF Germany, and SKF Italy so that the variable for customer category
is used to designate the level of trade.
Department's Position: We agree with these respondents that, for
these reviews, we should use the variable for channel of distribution
to designate the level of trade on their sales to unaffiliated
customers for this period of review. Our reference in the analysis
memoranda to assigning the level of trade of the respondents' sales to
unaffiliated customers based on the variable for customer category was
an error.
In our view, customer categories alone are insufficient to
establish the level of trade. For the CEP transactions at issue, in
performing the analysis necessary for determining normal value at the
same level of trade as the starting price for the CEP, which was the
price to the unaffiliated customer, we examined the selling activities
performed in each channel of distribution, as well as the point in the
chain of distribution where the selling activities occurred. See
January 26, 1998, Level-of-Trade memorandum that is on the General
Issues record. Based on our analysis of all the SKF companies in these
reviews, we determined that the variable for channel of distribution
was the most appropriate item to use for designating the level of trade
of their sales to unaffiliated customers. This variable identifies
groupings of transactions that are most similar in terms of the selling
activities the respondents and their affiliates performed in selling to
unaffiliated customers in the home market and the United States. For
the final results, we did not need to alter the level-of-trade
designations in the margin calculations for SKF Italy, SKF France, and
SKF Germany because we used the variable for channel of distribution to
assign a level-of-trade for the preliminary results.
Comment 2: SKF Sweden asserts that in its preliminary-results
margin calculation the Department assigned the level of trade for sales
to unaffiliated customers incorrectly based on customer categories
rather than channels of distribution.
Torrington asserts that no changes need to be made to SKF Sweden's
calculations since the Department implemented the methodology described
in the preliminary-results analysis memorandum.
Department's Position: We agree with SKF Sweden that we should use
the variable for channel of distribution to designate the level of
trade of sales to unaffiliated customers. In our preliminary-results
margin calculations, we erred by assigning the level of trade to SKF
Sweden's sales to unaffiliated customers based on the variable for
customer category. Based on our analysis of SKF Sweden, the variable
for channel of distribution is the most appropriate item to use for
designating the level of trade on its sales to unaffiliated customers.
See our response to Comment 1 of this section for additional
information regarding our level-of-trade analysis. Thus, for these
final results, we altered our calculations for SKF Sweden such that we
used the channel-of-distribution variable to assign the level of trade
of sales to unaffiliated customers.
Comment 3: Torrington refers to language in the Department's
computer program for FAG Italy and asserts that the language excludes
zero-priced U.S. sales from the margin calculation. Torrington contends
that the Department should remove this programming language since FAG
Italy reported that there were no sample transactions of Italian-made
bearings in the U.S. sales database.
FAG Italy asserts that, since it did not report any zero-priced
U.S. sales, there is no reason for the Department to delete the
programming language. FAG Italy also suggests that the programming
language should remain since it represents a correct statement of law.
Department's Position: We agree with FAG Italy that there is no
reason to delete the programming language to which Torrington refers.
However, we disagree with the respondent that this particular
programming language should remain because it represents a correct
statement of law. Rather, the purpose of this programming language is
to avoid the creation of an error message when the numerator of the
transaction-specific percentage margin calculation is zero or negative
and the denominator is positive.
Moreover, with respect to FAG Italy, the issue of whether to
exclude zero-priced U.S. sales is moot because we examined the
respondent's U.S. sales database and determined that there are no such
transactions. We also examined the output of the margin-calculation
program and confirmed that no U.S. sales are being removed.
Comment 4: NTN contends that the Department's application of a
sampling factor to its CEP sales of SPBs is an error, asserting that it
did not report these sales on a sampled basis.
Torrington states that, if NTN reported 2000 or more SPB
transactions, the Department should apply the sampling factor but, if
the company had fewer transactions, it should not.
Department Position: We agree with NTN. However, because of the
proprietary nature of our position on this issue, we are not able to
respond adequately here. See memorandum from Greg Thompson to the file
dated May 20, 1998.
[[Page 33347]]
Comment 5: NTN asserts that the Department miscalculated CEP
profit.
Torrington contends that NTN's comment on this issue is too vague.
Torrington contends that it is not able to provide a meaningful
response without the respondent clarifying its point of contention and
requests that the Department reject NTN's argument.
Department Position: We agree with Torrington. Inasmuch as NTN does
not state what it believes is in error, what caused the error, or how
the calculations should be changed to fix the alleged problem, we can
not address the issue.
Comment 6: NTN states that, consistent with the Department's
position in the Final Results of the Administrative Review of Tapered
Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan,
61 FR 57629, 57636 (November 7, 1996), the Department should use the
U.S. selling expenses based on level of trade as NTN reported.
Torrington asserts that the Department should not use NTN's U.S.
selling expenses based on level of trade because the reporting
rationale is not supported by the record. Furthermore, Torrington
contends that the Department's use of NTN's reported methodology
appears to be a ministerial error, noting that the analysis memorandum
does not provide an explanation of the Department's substantive
departure from prior determinations.
Department Position: We agree with Torrington on both points.
Moreover, due to a ministerial error, we did not revise NTN's reporting
of U.S. indirect selling expenses for the preliminary results of
review. We have corrected the problem for the final results. See
memorandum from Greg Thompson to the file, dated May 20, 1998. Also,
see our response to comment B.2. of the ``Circumstance of Sale''
section of this document.
10.B. Pre-Existing Inventory. Comment: SKF Italy, SKF France, and
SKF Germany note that the Department's preliminary-results analysis
memoranda dated January 26, January 27, and February 2, 1998, do not
address the issue of whether U.S. sales of merchandise that entered
into inventory prior to the suspension of liquidation in the original
LTFV investigation were excluded from the margin calculations. The
respondents suggest that the Department's failure to include
instructions in the margin-calculation program to exclude sales of this
merchandise is a programming error. Respondents request that the
Department address this oversight for the final results and modify its
calculations to exclude sales of pre-suspension inventory.
Torrington contends that no programming error occurred and,
therefore, no changes need to be made. Moreover, Torrington asserts
that it is the Department's policy to base its antidumping analysis of
CEP sales on all transactions that have a sale date during the POR.
Since the merchandise at issue was sold during the POR, Torrington
argues, the Department should continue to include the sales in the
margin analysis.
Department's Position: We agree with Torrington that no programming
error occurred.
In Stainless Steel Wire Rod from France, 61 FR 47874, 47875 (Sept.
11, 1996), we discussed the treatment of U.S. sales of merchandise that
entered into inventory prior to the suspension of liquidation. In that
case, we indicated that sales of merchandise that can be demonstrably
linked with entries prior to the suspension of liquidation are not
subject merchandise within the meaning of section 771(25) of the Act
and, therefore, are not subject to our review. However, in these
reviews, the respondents did not submit record evidence to establish
that the sales at issue are of merchandise that entered the United
States prior to the original suspension of liquidation. Therefore,
consistent with our practice in the prior segment of these proceedings
(see AFBs 7 at 54084), for the final results we have continued to
consider the transactions to be sales of subject merchandise and
included them in our margin calculation.
10.C. Military Sales. Comment: Barden argues that the Department
included military sales improperly in the preliminary calculations.
Barden observes that, in its preliminary-analysis memo, the Department
stated that, ``because the United Kingdom government does not have a
Memorandum of Understanding (MOU) with the United States, we have
included these sales in our analysis.'' Barden argues that this
statement is incorrect and that there is a current MOU between the
United States and the United Kingdom. Therefore, Barden contends that
the Department must exclude all U.S. military sales in the calculation
of Barden's final margins as it has in all prior reviews to date.
Torrington disagrees with Barden's argument and opines that the
Department is not required to modify its preliminary results because
Barden did not supply the Department with the information requested in
the initial and supplemental questionnaires necessary to permit an
exclusion of military sales. The petitioner asserts that the Department
should reject Barden's argument and that the Department is justified in
ignoring Barden's claims, citing Murata Mfg. Co. Ltd. v. United States,
17 CIT 259, 264, 820 F. Supp. 603, 607 (1993).
Department's Position: We agree with the respondent because our
preliminary-analysis memorandum was in error. There is a current MOU
between the U.S. and the U.K. governments effective until January 1,
2005. This memorandum is an agreement in the public domain. Therefore,
we have excluded Barden's military sales from the final results in
these reviews, as we have in all prior reviews to date. See section
771(20)(B) of the Act.
11. Cash-Deposit Financing
Comment: NTN argues that the Department's decision to ignore
adjustments to NTN's U.S. indirect selling expenses for interest on
cash deposits of antidumping duties is contrary to the Department's
position in past reviews of these orders and in recent litigation.
NTN contends, the Department noted in AFBs 6 at 2104 that such
expenses were not selling expenses since they ``were incurred only
because of the existence of the antidumping duty orders'' and the
Department concluded that ``the expenses can not correctly be
characterized as selling expenses.'' NTN also points to the
Department's acceptance of this adjustment in AFBs 5 and 6, and in the
position the Department took in comments it filed with the CIT in the
litigation arising from AFBs 4. According to NTN, the CIT adopted these
comments in large part, holding that ``interest NTN paid for
antidumping duty deposits is not a selling expense and, thus, should be
excluded from NTN's U.S. indirect selling expenses'' (Federal-Mogul v.
United States, 20 CIT __, __, Slip Op. 96-193 (December 12, 1996)
(Federal-Mogul 2)).
NTN argues that, in addition to disregarding Departmental and
judicial precedent on this issue, the Department's decisions in the
instant reviews are flawed. First, NTN contends, the Department's
decision to disallow the adjustment in the preliminary results
contradicts the well-reasoned analysis the Department set forth 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
[[Page 33348]]
Reviews and Termination in Part (TRBs Final Results), 62 FR 11,825,
11828-830 (March 13, 1997), in which the Department explained that it
``recognize(s) that opportunity costs * * * have a real financial
impact on the firm.''
Second, NTN asserts, the Department's statements that opportunity
costs are not associated with making cash deposits is a
misunderstanding of the definition of ``opportunity costs.'' NTN argues
that opportunity costs are ``the real economic loss which an entity
experiences when it must forgo some other, more profitable use of its
resources,'' citing Cartersville Elevator, Inc. v. ICC, 724 F.2d 668,
670 (8th Cir. 1984), and Mira v. Nuclear Measurements Corp., 107 F.3d
466, 472 (7th Cir. 1997) (describing the diversion of funds from more
profitable activity as ``the classic definition of opportunity
costs''). NTN argues that the expense associated with making cash
deposits fits these definitions. In NTN's view, the source of the funds
does not determine whether this is an opportunity cost because, in
either case, these funds can not be put to a more profitable use.
Finally, NTN argues that, at some point, the Department's prior
decisions must become case law, citing Shikou Chemicals v. United
States, 16 CIT 383, 388 (1992) (Shikou Chemicals).
Torrington argues that the Department rejected an adjustment to
NTN's U.S. selling expenses for cash-deposit financing expenses
properly. Torrington contends that there are both policy and legal
reasons that support the Department's decision.
Torrington states that posting the estimated antidumping duties is
a direct consequence of respondent's conscious decision to dump and, as
such, is a selling (or other import) expense. Torrington contends that,
if deposits were not made, then there would be no merchandise to
resell. Thus, Torrington concludes, deposits are a cost of doing
business for those who choose to trade unfairly.
Torrington acknowledges that the CIT, in Federal-Mogul 2, reached a
contrary conclusion but contends that this is irrelevant, stating that,
when the statute is unclear on its face, the court only reviews the
Department's determinations for reasonableness, citing The Timken
Company v. United States, 37 F.3d 1470, 1474 (Fed Cir. 1994).
Torrington states that, since the statute provides no definition of
``indirect selling expense,'' the Court only affirmed the
reasonableness of the Department's old position and, therefore, it
remained open for the Department to reconsider and reach another
reasonable position. Torrington states further that administrative
agencies may change their positions, as the Department did in AFBs 7,
if they provide reasoned explanations, citing Busse Broadcasting Corp.
v. F.C.C., 87F.3d 1456 (CAFC 1996), and Household Goods Forwarders
Tariff Bureau v. I.C.C., 968 F.2d 81 (CAFC 1992).
Torrington contends that the ``law of the case'' doctrine does not
apply in this situation. Torrington states that the Department made
this very clear in AFBs 5 when it stated that each administrative
review is a separate reviewable segment of the proceeding involving
different sales, adjustments, and underlying facts.
Finally, Torrington states that Shikou Chemicals is not relevant in
the instant case because the Department has determined that its old
methodology was conceptually incorrect and required change, whereas in
Shikou Chemicals the Department simply changed a methodology to improve
a prior method. Moreover, Torrington argues that, in Shikou Chemicals,
the respondent relied on the old methodology. In the instant reviews,
NTN was fully aware of the determination made in AFBs 7.
Department's Position: We agree with Torrington that we should deny
an adjustment to NTN's U.S. indirect selling expenses for expenses
which NTN claims are related to financing cash deposits. However, we do
not agree with the reasons Torrington has presented.
We should not remove such financial expenses from reported indirect
selling expenses under any circumstances because they do not bear
directly on an expense that parties incur solely as a result of the
antidumping duty order; this holds regardless of whether the party
claims any link to antidumping duty deposits or other expenses, such as
legal fees. As we have stated previously: ``money 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.'' See AFBs 7 at 54079.
Even if a respondent has a loan amount that equals its cash
deposits or can demonstrate a ``paper trail'' connecting the loan
amount to cash deposits, we do not consider the loan amount to be
related to the cash deposits and will not remove it from the indirect
selling expenses. Moreover, the result should not be different where an
actual expense can not be associated in any way with the cash deposits.
We reject imputation of an adjustment both for this reason and the
reason Torrington stated: 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. As a result, we have not
accepted NTN's reduction in indirect selling expenses based on actual
borrowings to finance cash deposits nor will we accept such a reduction
based on imputed borrowings. We consider all financial expenses the
affiliated importer incurred with respect to sales of subject
merchandise in the United States to be indirect selling expenses under
section 772(d)(1)(D) of the Act.
Although we have allowed removal of expenses for financing cash
deposits in a post-URAA case (see TRBs Final Results), we reexamined
this issue in a previous segment of these proceedings and concluded
that the new policy best reflects commercial reality with respect to
affiliated-importer situations (see AFBs 7).
12. Romania-Specific Issues
Comment 1: Torrington argues that the Indonesian import data used
to value the steel to manufacture inner and outer rings (Indonesian
tariff classification HTS 7228.30) appear to be erroneous. Torrington
claims that these data only appear in the trade statistics for January-
February 1996 and therefore do not include full-year data for 1996.
Torrington also argues that the Indonesian import statistics for the
entire year 1996 demonstrate no imports of that category of steel.
Torrington claims that the only reliable Indonesian import data on the
record for HTS 7228.30 are those for the full-year 1995, which
Torrington submitted on December 12, 1997. Thus, Torrington contends
that the Department should determine that the January-February 1996
data for this certain Indonesian tariff classification are unreliable
and rely on data for the full-year 1995 instead.
TIE disagrees with Torrington's argument and claims that the
January-February 1996 data the Department used to value steel used to
manufacture inner and outer rings (Indonesian tariff classification HTS
7228.30) are reliable. TIE states that it is logical to assume that the
end-of-year data for that tariff classification was simply not
available for publication at the time the year-end Indonesian
statistics were issued. TIE claims that Torrington provided no factual
evidence showing that end-of-year steel data are available. TIE notes
that there is only a slight difference between the average import price
as derived from the January-February 1996
[[Page 33349]]
data and the full-year 1995 data and thus claims that the similarity in
prices supports the reliability of January-February 1996 data.
Department's Position: We agree with the petitioner. We find that
using full-year 1995 data is more appropriate than using only two
months of data from 1996, especially given that the 1995 data, unlike
the 1996 data, allow us to remove imports from NME countries and
countries with small volumes of exports to Indonesia. See our response
to comment 2 below.
Comment 2: Torrington argues that surrogate values for bearing-
quality steel should have been adjusted in conformity with Department
practice to exclude imports from NMEs, imports of small quantities, and
imports from non-producers of bearing-quality steel when the Department
calculated surrogate values from import statistics. Torrington suggests
that the Department use the 1995 Indonesian import-statistics report
that lists the source countries of the import data and develop ratios
to apply to Indonesian imports in other periods for which the source
countries are not listed, citing Tapered Roller Bearings and Parts
Thereof, Finished or Unfinished, from Romania; Final Results of
Antidumping Duty Administrative Review, 62 FR 37194, 37195 (July 11,
1997) (TRBs from Romania).
The respondent argues that, under the circumstances, the Department
should not exclude imports from NMEs, imports of small quantities, and
imports from non-producers of the relevant product in calculating
surrogate values from import statistics. TIE states that the most
current and accurate data are not available to make the appropriate
adjustments in the final results.
Department's Position: We agree with the petitioner. It is our
practice to exclude imports from countries we have previously
determined to be NMEs, small import quantities, and imports from non-
producers of bearing-quality steel in calculating surrogate values for
material inputs, where such exclusions are possible based on record
information. See TRBs from Romania at 37195. Therefore, using the data
available in the record and consistent with our practice in TRBs from
Romania at 37195, we have excluded imports from countries that export
less than seven metric tons per annum to Indonesia for the final
results. We also have excluded imports from NMEs and imports from non-
producers of bearing-quality steel.
Comment 3: Torrington argues that the Department should not use
factory overhead, SG&A, and profit rates from the financial statements
of an Indonesian steel company, P.T. Jaya Pari Steel, and asserts that
it is not in the same industry category as the bearing industry.
Torrington asserts that data from another Indonesian manufacturer, P.T.
Lion Metal Works, is on the record and this company produces
merchandise which more closely approximates the bearing industry.
Torrington asserts that in the final results the Department should use
the financial statements of P.T. Lion to calculate SG&A and profit
rates, adjusting the calculation to avoid double-counting of movement
expenses by using public data available on the record.
TIE disagrees with Torrington's argument that the Department should
use the financial statements of P.T. Lion Metal works to calculate
factory overhead, SG&A, and profit rates instead of using the financial
statement of P.T. Jaya Pari Steel. TIE recognizes that P.T. Jaya Pari
Steel is not a bearings producer. However, TIE argues that P.T. Jaya
Pari Steel is a steel company and, therefore, is more closely related
to a bearings producer than is P.T. Lion, which is involved in
activities such as hospital and high-security equipment.
TIE asserts that, in AFBs 7 at 54080, the Department used the
factory overhead, SG&A, and profit values of P.T. Jaya Pari and should
conform to past practice. TIE also asserts that, in this review, P.T.
Jaya Pari's information contains, in a single, public source, factory
overhead, SG&A, and profit data. TIE claims that it would be inaccurate
to use P.T. Lion's data since it could not be ensured that costs are
included correctly within administrative or distribution expenses and
that the Department would be forced to go to another source to get the
overhead information for its analysis.
Department's Position: As we stated in AFBs 7 at 54080, in our
hierarchy for selecting data for possible surrogate values, we prefer
to use current, publicly available information. P.T. Jaya Pari's
information is contemporaneous with the POR, P.T. Jaya Pari is a steel
producer and therefore more similar to a bearings producer than P.T.
Lion, a manufacturer of hospital and high-security equipment, and,
finally, the P.T. Jaya Pari statements, unlike the P.T. Lion
statements, allow us to calculate overhead, SG&A, and profit from one
source as well as to analyze the components of each element. See
Preliminary Analysis Memorandum for AFBs from Romania for the 1996-1997
POR dated January 26, 1998. Therefore, we have used P.T. Jaya Pari's
financial statement because it represents a closer approximation of the
costs incurred by TIE than would use of P.T. Lion's financial
statement.
Comment 4: Torrington argues that, to value the steel used in the
manufacture of TIE's bearings, the Department should use the
appropriate tariff classification for steel used to manufacture balls,
i.e., other wire of alloy steel (HTS 7229.90). Torrington argues that
TIE stated that wire is used to produce balls but it appears that the
Department used the value of steel ``rod'' in coils (HTS 7227.90), not
``wire'' (HTS 7229.90), to value the steel for balls. Torrington
suggests that the Department correct this error in the final results,
replacing the value for ``rod,'' wherever it is used to value the steel
for balls, with the appropriate value for ``wire.''
Department's Position: We have reviewed the record and found that
we used the appropriate values for steel used to manufacture balls,
i.e., HTS 7229.90 (other alloy wire of alloy steel). Our materials for
the final results contain the correct HTS numbers.
Comment 5: Torrington contends that the International Labor Office
(ILO) costs the Department used in the preliminary results of review
are flawed because the wage rates the Department used to calculate
labor costs reflect only minimum wages in Indonesia and thus do not
represent actual labor costs accurately.
Torrington also disagrees with the Department's use of the ILO's
``average daily wage and hours worked per week for the iron and steel
basic industries'' to value direct labor. Torrington claims that the
iron and steel basic industries are not within the same industry
category as the industry producing bearings. Torrington argues that the
Department decided the proper classification of the AFB industry in
TRBs from Romania at 37194. The petitioner claims that, even if the
minimum wage rates the Department used reflected rates actually paid in
Indonesia, the rates would not be applicable to the industry in this
review under any reasonable interpretation of the comparable-
merchandise standard set forth in section 773(c)(4)(B) of the Act.
Torrington proposes that, in the interest of the Department's
desire to obtain actual or as accurate as possible information, the
Department should use, for the final results, either the Department's
Expected Wages of Selected Nonmarket Economy Countries, the 1997 issue
of Investing, Licensing and Trading Conditions Abroad (IL&T), or Doing
Business in Indonesia (1996).
[[Page 33350]]
TIE claims that it was reasonable and in accordance with law for
the Department to use the ILO labor costs. TIE argues that there is
nothing on the record which indicates that the ILO wages do not reflect
actual costs to employers. TIE explains that in TRBs from Romania at
37197 the Department found no indication that the ``minimum'' rate for
the industry excludes any employee-benefit costs which the Department
normally considers. TIE notes that the Department also addressed this
issue in its January 26, 1998, Preliminary Analysis Memorandum, where
it added amounts to labor rates to account for benefits. TIE states
that the Department adjusted the ILO data correctly by using
information from the Foreign Labor Trends, as in Lighters from the PRC,
which showed supplementary benefits to be 33 percent of manufacturing
earnings.
TIE also opposes Torrington's contention that the Department should
not use data from Indonesian iron and steel basic industries to value
direct and indirect labor. TIE claims that the Department responded to
this same argument in TRBs from Romania at 37197, where it acknowledged
that wage rates for laborers in the iron and steel basic industries are
not in the same industry as the bearings industry. TIE notes that
section 773(c)(4) of the statute states that the Department will
attempt to find producers of comparable products in selecting surrogate
countries when the Department can not locate information from the same
industry. TIE argues that the facts of the current case are the same as
those in TRBs from Romania and, therefore, that there is no information
on the record which pertains specifically to the bearing industry.
In addition, TIE argues that the Department rejected in TRBs from
Romania at 37197 two of the alternate sources for surrogate data, IL&T
and Doing Business in Indonesia (1996), proposed by Torrington. Also,
TIE contests Torrington's suggestion that the Department use its own
calculation of wage rates for NME countries, Expected Wages of Selected
Nonmarket Economy Countries, which is referenced by the Department's
new regulations. TIE argues that the new regulations are not relevant
in this review and, therefore, it would be unreasonable for the
Department to apply those wage rates in an old-regulations case without
prior notice to TIE.
Department's Position: We disagree with the petitioner. The wage
rates we used in the preliminary results represent actual costs.
Although the ILO data is a minimum wage, it includes such costs as
``cost-of-living allowances, and other guaranteed and regularly paid
allowances,'' according to the ILO's Special Supplement to the Bulletin
of Labor Statistics (1994). Furthermore, this follows our practice in
AFBs 7, TRBs from Romania, and in Tapered Roller Bearings and Parts
Thereof, Finished or Unfinished, from Romania; Preliminary Results of
Antidumping Duty Administrative Review, 63 FR 11217 (March 6, 1998).
Thus, we have continued to use, in these final results, the ILO labor
data that we used in the preliminary results.
We have not used our own calculation of wage rates for NME
countries, Expected Wages of Selected Nonmarket Economy Countries,
because this administrative review is not governed by the new
regulations. We do, however, intend to use this data source in any
subsequently requested administrative reviews which will be governed by
the new regulations.
[FR Doc. 98-16100 Filed 6-17-98; 8:45 am]
BILLING CODE 3510-DS-P