[Federal Register Volume 61, Number 243 (Tuesday, December 17, 1996)]
[Notices]
[Pages 66471-66521]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31753]
[[Page 66471]]
_______________________________________________________________________
Part III
Department of Commerce
_______________________________________________________________________
International Trade Administration
_______________________________________________________________________
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; Notice
[[Page 66472]]
Federal Register / Vol. 61, No. 243 / Tuesday, December 17, 1996 /
Notices
DEPARTMENT OF COMMERCE
International Trade Administration
[A-427-801, A-428-801, A-475-801, A-588-804, A-559-801, A-401-801, A-
412-801]
Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, Germany, Italy, Japan, Singapore, Sweden,
and the United Kingdom; Final Results of Antidumping Duty
Administrative Reviews and Partial Termination of Administrative
Reviews
AGENCY: International Trade Administration, Import Administration,
Department of Commerce.
ACTION: Notice of Final Results of Antidumping Duty Administrative
Reviews and Partial Termination of Administrative Reviews.
-----------------------------------------------------------------------
SUMMARY: On December 7, 1995, the Department of Commerce (the
Department) published the preliminary results of its administrative
reviews of the antidumping duty orders on antifriction bearings (other
than tapered roller bearings) and parts thereof (AFBs) from France,
Germany, Italy, Japan, Singapore, Sweden, and the United Kingdom (the
Italian results were published in a separate notice). The classes or
kinds of merchandise covered by these reviews are ball bearings and
parts thereof, cylindrical roller bearings and parts thereof, and
spherical plain bearings and parts thereof, as described in more detail
below. The reviews cover 64 manufacturers/exporters. The review period
is May 1, 1993, through April 30, 1994.
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 for each class or kind of
merchandise are listed below in the section entitled ``Final Results of
the Reviews.''
EFFECTIVE DATE: December 17, 1996.
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, 14th
Street and Constitution Avenue, NW., Washington, DC. 20230; telephone:
(202) 482-4733.
France
Andrea Chu (AVIAC, SNFA, SNR), Davina Hashmi (INA), Hermes Pinilla
(Technofan), Matthew Rosenbaum (Franke & Heydrich, Hoesch Rothe Erde,
Rollix Defontaine, SKF), or Kris Campbell.
Germany
Kris Campbell (Cross-Trade, Delta, EXTA Aussenhandel), Chip Hayes
(NTN Kugellagerfabrik), Andrea Chu (SNR), Davina Hashmi (INA), Hermes
Pinilla (Hepa Walzlager, Schaumloffel), Matthew Rosenbaum (Fichtel &
Sachs, Franke & Heydrich, Hoesch Rothe Erde, Rollix Defontaine, SKF),
Thomas Schauer (FAG), Kris Campbell, or Richard Rimlinger.
Italy
Davina Hashmi (Meter), Mark Ross (FAG), Thomas Schauer (SKF), Kris
Campbell, or Richard Rimlinger.
Japan
J. David Dirstine (Koyo, NSK, ITOCHU, Godo Kogyo, Santest Co.),
Chip Hayes (Mitsubishi, Nachi, Nankai Seiko, NTN), Lyn Johnson (I&OC,
Kongo Colmet, Marubeni, Mihasi, Inc., Sanken Trading, Sanko Co.,
Taikoyo Sangyo, Takeshita, Tomen), Michael Panfeld (Izumoto Seiko,
Nissho-Iwai, NPBS, Origin Electric), Mark Ross (Asahi Seiko,
Minamiguchi, Mitsui, Naniwa Kogyo, Nichimen, Nichinan Sangyo, Nihon
K.J., Shima Trading, Sumitomo, Toei Buhin, TOK Bearing Co.), Thomas
Schauer (Matsuo Bearing Co., Nippon Thompson Co., Phoenix
International, THK Co., Tsubakimoto PP), or Richard Rimlinger.
Singapore
Lyn Johnson (NMB/Pelmec) or Richard Rimlinger.
Sweden
Davina Hashmi (SKF) or Kris Campbell.
United Kingdom
Hermes Pinilla (FAG/Barden, NSK/RHP) or Kris Campbell.
SUPPLEMENTARY INFORMATION:
Background
On December 7, 1995, the Department published in the Federal
Register the preliminary results of its administrative reviews of the
antidumping duty orders on AFBs from France, Germany, Japan, Singapore,
Sweden, and the United Kingdom (60 FR 62817) and the preliminary
results of its administrative reviews of the antidumping duty orders on
AFBs from Italy (60 FR 62813). We gave interested parties an
opportunity to comment on our preliminary results.
At the request of certain interested parties, we held hearings on
case-specific issues for Germany on February 14, 1996 and for Japan on
February 15, 1996.
We are terminating the review with respect to Mitsubishi, Mitsui,
Phoenix International, Shima Trading, and Sumitomo. The suppliers to
these firms had knowledge at the time of sale that the merchandise was
destined for the United States. Consequently, these firms are not
resellers as defined in 19 CFR 353.2(s) because their sales cannot be
used to calculate the U.S. price (USP).
Scope of Reviews
The products covered by these reviews are AFBs and constitute the
following ``classes or kinds'' of merchandise: ball bearings and parts
thereof (BBs), cylindrical roller bearings and parts thereof (CRBs),
and spherical plain bearings and parts thereof (SPBs). For a detailed
description of the products covered under these classes or kinds of
merchandise, including a compilation of all pertinent scope
determinations, see the ``Scope Appendix,'' which is appended to this
notice of final results.
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute and to the
Department's regulations are references to the provisions as they
existed on December 31, 1994.
Best Information Available
In accordance with section 776(c) of the Tariff Act, we have
determined that the use of the best information available (BIA) is
appropriate for a number of firms. For certain firms, total BIA was
necessary while, for other firms, only partial BIA was applied. For a
discussion of our application of BIA, see the ``Best Information
Available'' section of the Issues Appendix.
Sales Below Cost in the Home Market
The Department disregarded sales below cost for the following firms
and classes or kinds of merchandise:
------------------------------------------------------------------------
Class or kind of
Country Company merchandise
------------------------------------------------------------------------
France.......................... SKF............... BBs
SNR............... BBs
Italy........................... FAG............... BBs
SKF............... BBs
Germany......................... FAG............... BBs, CRBs, SPBs
INA............... BBs, CRBs
SKF............... BBs, CRBs, SPBs
[[Page 66473]]
Japan........................... Asahi Seiko....... BBs
Koyo.............. BBs, CRBs
Nachi............. BBs, CRBs
NSK............... BBs, CRBs
NTN............... BBs, CRBs, SPBs
Singapore....................... NMB/Pelmec........ BBs
Sweden.......................... SKF............... BBs, CRBs
United Kingdom.................. Barden............ BBs
FAG............... BBs
NSK/RHP........... BBs, CRBs
------------------------------------------------------------------------
Changes Since the Preliminary Results
Based on our analysis of comments received, we have corrected
certain programming and clerical errors in our preliminary
calculations. Any alleged programming or clerical errors with which we
do not agree are discussed in the relevant sections of the Issues
Appendix.
Analysis of Comments Received
All issues raised in the case and rebuttal briefs by parties to
these concurrent administrative reviews of AFBs are addressed in the
``Issues Appendix'' which is appended to this notice of final results.
Final Results of Reviews
We determine that the following percentage weighted-average margins
exist for the period May 1, 1993, through April 30, 1994:
----------------------------------------------------------------------------------------------------------------
Company BBs CRBs SPBs
----------------------------------------------------------------------------------------------------------------
France
----------------------------------------------------------------------------------------------------------------
AVIAC........................................................... 0.47 (\2\) (\2\)
Franke & Heydrich............................................... \1\ 66.42 (\3\) (\3\)
Hoesch Rothe Erde............................................... (\2\) (\3\) (\3\)
INA............................................................. 66.42 18.37 42.79
Rollix Defontaine............................................... (\2\) (\3\) (\3\)
SKF............................................................. 3.75 (\2\) 18.80
SNFA............................................................ 66.42 18.37 (\3\)
SNR............................................................. 70.73 2.08 (\3\)
Technofan....................................................... 14.59 (\2\) (\2\)
----------------------------------------------------------------------------------------------------------------
Germany
----------------------------------------------------------------------------------------------------------------
Cross-Trade GmbH................................................ 132.25 76.27 118.98
Delta Export GmbH............................................... (\2\) (\2\) (\2\)
EXTA Aussenhandel GmbH.......................................... 68.89 55.65 114.52
FAG............................................................. 13.06 13.58 2.00
Fichtel & Sachs................................................. 19.60 (\3\) (\3\)
Franke & Heydrich............................................... \1\ 132.25 (\3\) (\3\)
Hepa Walzlager GmbH............................................. (\2\) (\2\) (\2\)
Hoesch Rothe Erde............................................... (\2\) (\3\) (\3\)
INA............................................................. 31.29 52.43 (\2\)
NTN............................................................. 12.50 (\3\) (\3\)
Rollix & Defontaine............................................. (\2\) (\3\) (\3\)
Schaumloffel Technik GmbH....................................... (\2\) (\2\) (\2\)
SKF............................................................. 2.67 9.46 14.30
SNR............................................................. 3.69 0.99 (\3\)
----------------------------------------------------------------------------------------------------------------
Italy
----------------------------------------------------------------------------------------------------------------
FAG............................................................. 1.79 0.00 (\3\)
Meter........................................................... 3.75 (\3\) (\3\)
SKF............................................................. 3.26 (\3\) (\3\)
----------------------------------------------------------------------------------------------------------------
Japan
----------------------------------------------------------------------------------------------------------------
Asahi Seiko..................................................... 1.61 (\2\) 92.00
Godo Kogyo...................................................... (\2\) (\2\) (\2\)
I & OC.......................................................... (\2\) (\2\) (\2\)
ITOCHU.......................................................... (\2\) (\2\) (\2\)
Izumoto Seiko................................................... 2.28 (\2\) (\2\)
Kongo Colmet.................................................... (\2\) (\2\) (\2\)
Koyo Seiko...................................................... 14.90 6.53 \1\ 0.00
Marubeni........................................................ (\2\) (\2\) (\2\)
Matsuo Bearing.................................................. (\2\) (\2\) (\2\)
Mihasi.......................................................... (\2\) (\2\) (\2\)
Minamiguchi Bearing............................................. 106.61 51.82 92.00
Nachi-Fujikoshi................................................. 13.79 9.72 (\3\)
Naniwa Kogyo.................................................... 106.61 51.82 92.00
Nankai Seiko.................................................... 0.55 (\2\) (\2\)
Nichinan Sangyo................................................. (\2\) (\2\) (\2\)
Nichimen........................................................ 106.61 51.82 92.00
Nihon K.J....................................................... (\2\) (\2\) (\2\)
NPBS............................................................ 45.83 (\3\) (\3\)
[[Page 66474]]
NSK Ltd......................................................... 19.39 15.37 (\2\)
Nippon Thompson................................................. 10.16 51.82 59.63
Nissho-Iwai..................................................... 106.61 51.82 92.00
NTN............................................................. 14.34 11.05 32.33
Origin Electric................................................. 106.61 51.82 92.00
Sanken Trading.................................................. 106.61 51.82 92.00
Sanko........................................................... (\2\) (\2\) (\2\)
Santest......................................................... (\2\) (\2\) (\2\)
Taikoyo Sangyo.................................................. 106.61 51.82 92.00
Takeshita Seiko................................................. 0.89 (\3\) (\3\)
THK............................................................. 106.61 51.82 92.00
Toei Buhin...................................................... (\2\) (\2\) (\2\)
TOK Bearing..................................................... 106.61 51.82 92.00
Tomen........................................................... 106.61 51.82 92.00
Tsubakimoto..................................................... 7.77 (\3\) (\3\)
----------------------------------------------------------------------------------------------------------------
Singapore
----------------------------------------------------------------------------------------------------------------
NMB/Pelmec...................................................... 4.32 (\3\) (\3\)
----------------------------------------------------------------------------------------------------------------
Sweden
----------------------------------------------------------------------------------------------------------------
SKF............................................................. 2.22 0.00 (\3\)
----------------------------------------------------------------------------------------------------------------
United Kingdom
----------------------------------------------------------------------------------------------------------------
Barden.......................................................... 1.49 \1\ 8.22 (\3\)
FAG............................................................. 3.32 \1\ 8.22 (\3\)
NSK/RHP......................................................... 10.21 10.35 (\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\ Not subject to review.
Cash Deposit Requirements
To calculate the cash deposit rate for each exporter, we divided
the total dumping margins for each exporter by the total net USP value
for that exporter's sales for each relevant class or kind during the
review period under each order.
In order to derive a single deposit rate for each class or kind of
merchandise for each respondent (i.e., each exporter or manufacturer
included in these reviews), we weight-averaged the purchase price and
exporter's sales price (ESP) deposit rates (using the United States
price (USP) of purchase price sales and ESP sales, respectively, as the
weighting factors). To accomplish this where we sampled ESP sales, we
first calculated the total dumping margins for all ESP sales during the
review period by multiplying the sample ESP margins by the ratio of
total weeks in the review period to sample weeks. We then calculated a
total net USP value for all ESP sales during the review period by
multiplying the sample ESP total net value by the same ratio. We then
divided the combined total dumping margins for both purchase price and
ESP sales by the combined total USP value for both purchase price and
ESP sales to obtain the deposit rate.
We will direct Customs to collect the resulting percentage deposit
rate against the entered Customs value of each of the exporter's
entries of subject merchandise entered, or withdrawn from warehouse,
for consumption on or after the date of publication of this notice.
Entries of parts incorporated into finished bearings before sales
to an unrelated customer in the United States will receive the
exporter's deposit rate for the appropriate class or kind of
merchandise.
Furthermore, the following deposit requirements will be effective
upon publication of this notice of final results of administrative
reviews for all shipments of AFBs entered, or withdrawn from warehouse,
for consumption on or after the date of publication, as provided by
section 751(a)(1) of the Tariff Act: (1) The cash deposit rates for the
reviewed companies will be the rates shown above, except that for firms
whose weighted-average margins are less than 0.50 percent, and
therefore de minimis, the Department shall require a zero deposit of
estimated antidumping duties; (2) for previously reviewed or
investigated companies not listed above, the cash deposit rate will
continue to be the company-specific rate published for the most recent
period; (3) if the exporter is not a firm covered in this review, a
prior review, or the original less-than-fair-value (LTFV)
investigation, but the manufacturer is, the cash deposit rate will be
the rate established for the most recent period for the manufacturer of
the merchandise; and (4) the cash deposit rate for all other
manufacturers or exporters will continue to be the ``All Others'' rate
for the relevant class or kind and country made effective by the final
results of review published on July 26, 1993 (see Final Results of
Antidumping Duty Administrative Reviews and Revocation in Part of an
Antidumping Duty Order, 58 FR 39729 (July 26, 1993)). These rates are
the ``All Others'' rates from the relevant LTFV investigations.
These deposit requirements shall remain in effect until publication
of the final results of the next administrative reviews.
Assessment Rates
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. Because sampling
and other simplification methods prevent entry-
[[Page 66475]]
by-entry assessments, we will calculate wherever possible an exporter/
importer-specific assessment rate for each class or kind of
antifriction bearings.
1. Purchase Price Sales
With respect to purchase price sales for these final results, we
divided the total dumping margins (calculated as the difference between
foreign market value (FMV) and USP) for each importer by the total
number of units sold to that importer. We will direct Customs to assess
the resulting unit dollar amount against each unit of merchandise in
each of that importer's entries under the relevant order during the
review period. Although this will result in assessing different
percentage margins for individual entries, the total antidumping duties
collected for each importer under each order for the review period will
be almost exactly equal to the total dumping margins.
2. Exporter's Sales Price Sales
For ESP sales (sampled and non-sampled), we divided the total
dumping margins for the reviewed sales by the total entered value of
those reviewed sales for each importer. We will direct Customs to
assess the resulting percentage margin against the entered Customs
values for the subject merchandise on each of that importer's entries
under the relevant order during the review period. While the Department
is aware that the entered value of sales during the POR is not
necessarily equal to the entered value of entries during the POR, use
of entered value of sales as the basis of the assessment rate permits
the Department to collect a reasonable approximation of the antidumping
duties which would have been determined if the Department had reviewed
those sales of merchandise actually entered during the POR.
For calculation of the ESP assessment rate, entries for which
liquidation was suspended, but for which ultimately we do not collect
antidumping duties under the ``Roller Chain'' principle, are included
in the assessment rate denominator to avoid over-collecting. (The
``Roller Chain'' principle excludes from the collection of antidumping
duties bearings which were imported by a related party and further
processed, and which comprise less than one percent of the finished
product sold to the first unrelated customer in the United States. See
the section on ``Further Manufacturing and Roller Chain'' in the Issues
Appendix.)
This notice also serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as the only reminder to parties subject to
administrative protective orders (APO) of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with 19 CFR 353.34(d). Failure to
comply is a violation of the APO.
These administrative reviews and this notice are in accordance with
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR
353.22.
Dated: December 5, 1996.
Jeffrey P. Bialos,
Acting Assistant Secretary for Import Administration.
Scope Appendix Contents
A. Description of the Merchandise
B. Scope Determinations
Issues Appendix Contents
Abbreviations
Comments and Responses
1. Assessment and Duty Deposits
2. Best Information Available
3. Circumstance-of-Sale Adjustments
A. Technical Services and Warranty Expenses
B. Inventory Carrying Costs
C. Commissions
D. Credit
E. Indirect Selling Expenses
F. Differences in Merchandise
4. Cost of Production and Constructed Value
A. Cost Test Methodology
B. Research and Development
C. Profit for Constructed Value
D. Related Party Inputs
E. Inventory Write-off
F. Interest Expense Offset
G. Other Issues
5. Discounts, Rebates and Price Adjustments
6. Further Manufacturing and Roller Chain
7. Level of Trade
8. Packing and Movement Expenses
9. Related Parties
10. Samples, Prototypes and Ordinary Courses of Trade
11. Taxes, Duties and Drawback
12. U.S. Price Methodology
13. Accuracy of Home Market Database
14. Programming
15. Duty Absorption and Reimbursement
16. Miscellaneous Issues
A. Verification
B. Pre-Final Reviews
C. Certification of Conformance to Past Practice
D. All Others Rate
E. Resellers
Scope Appendix
A. Description of the Merchandise
The products covered by these orders, antifriction bearings (other
than tapered roller bearings), mounted or unmounted, and parts thereof
(AFBs), constitute the following classes or kinds of merchandise:
1. Ball Bearings and Parts Thereof: These products include all AFBs
that employ balls as the roller element. Imports of these products are
classified under the following categories: Antifriction balls, ball
bearings with integral shafts, ball bearings (including radial ball
bearings) and parts thereof, and housed or mounted ball bearing units
and parts thereof. Imports of these products are classified under the
following Harmonized Tariff Schedule (HTS) subheadings: 4016.93.10,
4016.93.50, 6909.19.5010, 8482.10.10, 8482.10.50, 8482.80.00,
8482.91.00, 8482.99.05, 8482.99.10, 8482.99.35, 8482.99.70, 8483.20.40,
8483.20.80, 8483.30.40, 8483.30.80, 8483.90.20, 8483.90.30, 8483.90.70,
8708.50.50, 8708.60.50, 8708.70.6060, 8708.93.6000, 8708.99.06,
8708.99.3100, 8708.99.4000, 8708.99.4960, 8708.99.50, 8708.99.58,
8708.99.8015, 8708.99.8080.
2. Cylindrical Roller Bearings, Mounted or Unmounted, and Parts
Thereof: These products include all AFBs that employ cylindrical
rollers as the rolling element. Imports of these products are
classified under the following categories: Antifriction rollers, all
cylindrical roller bearings (including split cylindrical roller
bearings) and parts thereof, housed or mounted cylindrical roller
bearing units and parts thereof.
Imports of these products are classified under the following HTS
subheadings: 4016.93.10, 4016.93.50, 6909.19.5010, 8482.50.00,
8482.80.00, 8482.91.00, 8482.99.25, 8482.99.6530, 8482.99.6560,
8482.99.70, 8483.20.40, 8483.20.80, 8483.30.40, 8483.30.80, 8483.90.20,
8483.90.30, 8483.90.70, 8708.50.50, 8708.60.50, 8708.99.4000,
8708.99.4960, 8708.99.50, 8708.99.8080.
3. Spherical Plain Bearings, Mounted or Unmounted, and Parts
Thereof: These products include all spherical plain bearings that
employ a spherically shaped sliding element, and include spherical
plain rod ends.
Imports of these products are classified under the following HTS
subheadings: 6909.19.5010, 8483.30.40, 8483.30.80, 8483.90.20,
8483.90.30, 8485.90.00, 8708.99.4000, 8708.99.4960, 8708.99.50,
8708.99.8080.
The HTS item numbers are provided for convenience and Customs
purposes.
[[Page 66476]]
They are not determinative of the products subject to the orders. The
written description remains dispositive.
Size or precision grade of a bearing does not influence whether the
bearing is covered by the orders. These orders cover all the subject
bearings and parts thereof (inner race, outer race, cage, rollers,
balls, seals, shields, etc.) outlined above with certain limitations.
With regard to finished parts, all such parts are included in the scope
of these orders. For unfinished parts, such parts are included if (1)
they have been heat treated, or (2) heat treatment is not required to
be performed on the part. Thus, the only unfinished parts that are not
covered by these orders are those that will be subject to heat
treatment after importation.
The ultimate application of a bearing also does not influence
whether the bearing is covered by the orders. Bearings designed for
highly specialized applications are not excluded. Any of the subject
bearings, regardless of whether they may ultimately be utilized in
aircraft, automobiles, or other equipment, are within the scope of
these orders.
B. Scope Determinations
The Department has issued numerous clarifications of the scope of
the orders. The following is a compilation of the scope rulings and
determinations the Department has made.
Scope determinations made in the Final Determinations of Sales at
Less than Fair Value; Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof from the Federal Republic of Germany (AFBs
Investigation of SLTFV), 54 FR 19006, 19019 (May 3, 1989):
Products Covered
Rod end bearings and parts thereof
AFBs used in aviation applications
Aerospace engine bearings
Split cylindrical roller bearings
Wheel hub units
Slewing rings and slewing bearings (slewing rings and
slewing bearings were subsequently excluded by the International Trade
Commission's negative injury determination (see International Trade
Commission: Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof from the Federal Republic of Germany, France, Italy,
Japan, Romania, Singapore, Sweden, Thailand and the United Kingdom, 54
FR 21488, (May 18, 1989))
Wave generator bearings
Bearings (including mounted or housed units, and flanged
or enhanced bearings) ultimately utilized in textile machinery
Products Excluded
Plain bearings other than spherical plain bearings
Airframe components unrelated to the reduction of friction
Linear motion devices
Split pillow block housings
Nuts, bolts, and sleeves that are not integral parts of a
bearing or attached to a bearing under review
Thermoplastic bearings.
Stainless steel hollow balls.
Textile machinery components that are substantially
advanced in function(s) or value.
Wheel hub units imported as part of front and rear axle
assemblies; wheel hub units that include tapered roller bearings; and
clutch release bearings that are already assembled as parts of
transmissions.
Scope rulings completed between April 1, 1990, and June 30, 1990
(see Scope Rulings, 55 FR 42750 (October 23, 1990)):
Products Excluded
Antifriction bearings, including integral shaft ball
bearings, used in textile machinery and imported with attachments and
augmentations sufficient to advance their function beyond load-bearing/
friction-reducing capability.
Scope rulings completed between July 1, 1990, and September 30,
1990 (see Scope Rulings, 55 FR 43020 (October 25, 1990)):
Products Covered
Rod ends.
Clutch release bearings.
Ball bearings used in the manufacture of helicopters.
Ball bearings used in the manufacture of disk drives.
Scope rulings completed between April 1, 1991, and June 30, 1991
(see Notice of Scope Rulings, 56 FR 36774 (August 1, 1991)):
Products Excluded
Textile machinery components including false twist
spindles, belt guide rollers, separator rollers, damping units, rotor
units, and tension pulleys.
Scope rulings published in Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof; Final Results of
Antidumping Administrative Review (AFBs I), 56 FR 31692, 31696 (July
11, 1991):
Products Covered
Load rollers and thrust rollers, also called mast guide
bearings.
Conveyor system trolley wheels and chain wheels.
Scope rulings completed between July 1, 1991, and September 30,
1991 (see Scope Rulings, 56 FR 57320 (November 8, 1991)):
Products Covered
Snap rings and wire races.
Bearings imported as spare parts.
Custom-made specialty bearings.
Products Excluded
Certain rotor assembly textile machinery components.
Linear motion bearings.
Scope rulings completed between October 1, 1991, and December 31,
1991 (see Notice of Scope Rulings, 57 FR 4597 (February 6, 1992)):
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.
[[Page 66477]]
Scope rulings completed between October 1, 1992, and December 31,
1992 (see Scope Rulings, 58 FR 11209 (February 24, 1993)):
Products Covered
Certain cylindrical bearings with a length-to-diameter
ratio of less than 4:1.
Products Excluded
Certain cartridge assemblies comprised of a machine shaft,
a machined housing and two standard bearings.
Scope rulings completed between January 1, 1993, and March 31, 1993
(see Scope Rulings, 58 FR 27542 (May 10, 1993)):
Products Covered
Certain cylindrical bearings with a length-to-diameter
ratio of less than 4:1.
Scope rulings completed between April 1, 1993, and June 30, 1993
(see Scope Rulings, 58 FR 47124 (September 7, 1993)):
Products Covered
Certain series of INA bearings.
Products Excluded
SAR series of ball bearings.
Certain eccentric locking collars that are part of housed
bearing units.
Scope rulings completed between October 1, 1993, and December 31,
1993 (see Scope Rulings, 59 FR 8910 (February 24, 1994)):
Products Excluded
Certain textile machinery components.
Scope rulings completed after March 31, 1994:
Products Excluded
Certain textile machinery components.
Scope rulings completed between October 1, 1994 and December 31,
1994 (see Scope Rulings, 60 FR 12196 (March 6, 1995)):
Products Excluded
Rotek and Kaydon--Rotek bearings, models M4 and L6, are
slewing rings outside the scope of the order.
Scope rulings completed between April 1, 1995 and June 30, 1995
(see Scope Rulings, 60 FR 36782 (July 18, 1995)):
Products Covered
Consolidated Saw Mill International (CSMI) Inc.--Cambio
bearings contained in CSMI's sawmill debarker are within the scope of
the order.
Nakanishi Manufacturing Corp.--Nakanishi's stamped steel
washer with a zinc phosphate and adhesive coating used in the
manufacture of a ball bearing is within the scope of the order.
Scope rulings completed between January 1, 1996 and March 31, 1996
(see Scope Rulings, 61 FR 18381 (April 25, 1996)):
Products Covered
Marquardt Switches--Medium carbon steel balls imported by
Marquardt are outside the scope of the order.
Scope rulings completed between April 1, 1996 and June 30, 1996.
(see Scope Rulings, 61 FR 40194 (August 1, 1996)):
Products Excluded
Dana Corporation--Automotive component known variously as
a center bracket assembly, center bearings assembly, support bracket,
or shaft support bearing, is outside the scope of the order.
Issues Appendix
Company Abbreviations
Asahi Seiko (Asahi)
FAG/Barden 1--The Barden Corporation (U.K.) Ltd.; The Barden
Corporation; FAG (U.K.) Ltd.
---------------------------------------------------------------------------
\1\ The Department requested that FAG and Barden consolidate all
information in the original questionnaire, which they did as FAG/
Barden. FAG/Barden submitted comments on the preliminary results,
referring to aspects of the Department's analysis of FAG and Barden.
The Department has determined two separate rates for sales by FAG
(U.K.) and Barden in these final results (see our response to
Comment 1 in Section 4A).
---------------------------------------------------------------------------
FAG Germany--FAG Kugelfischer Georg Schaefer KGaA
FAG Italy--FAG Italia S.p.A.; FAG Bearings Corp.
Fichtel & Sachs--Fichtel & Sachs AG; Sachs Automotive Products Co.
GMN--Georg Muller Nurnberg AG; Georg Muller of America
Hoesch--Hoesch Rothe Erde AG
Honda--Honda Motor Co., Ltd.; American Honda Motor Co., Inc.
INA--INA Walzlager Schaeffler KG; INA Bearing Company, Inc.
IKS--Izumoto Seiko Co., Ltd.
Koyo--Koyo Seiko Co. Ltd.
Meter--Meter S.p.A.
Nachi--Nachi-Fujikoshi Corp.; Nachi America, Inc.; Nachi Technology
Inc.
Nankai--Nankai Seiko Co., Ltd.
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 Germany--NTN Kugellagerfabrik (Deutschland) GmbH
NTN--NTN Corporation; NTN Bearing Corporation of America; American NTN
Bearing Manufacturing Corporation
Rollix--Rollix Defontaine, S.A.
SKF France--SKF Compagnie d'Applications Mecaniques, S.A. (Clamart);
ADR; SARMA
SKF Germany--SKF GmbH; SKF Service GmbH; Steyr Walzlager
SKF Italy--SKF Industrie; RIV-SKF Officina de Villar Perosa; SKF
Cuscinetti Speciali; SKF Cuscinetti; RFT
SKF Sweden--AB SKF; SKF Mekanprodukter AB; SKF Sverige
SKF UK--SKF (UK) Limited; SKF Industries; AMPEP Inc.
SKF Group--SKF-France; SKF-Germany; SKF-Sweden; SKF-UK; SKF USA, Inc.
SNFA--SNFA Bearings, Ltd.
SNR France--SNR Nouvelle Roulements
SNR Germany--SNR Roulements; SNR Bearings USA, Inc.
Takeshita--Takeshita Seiko Company
Torrington--The Torrington Company
Other Abbreviations
AM--Aftermarket
COP--Cost of Production
COM--Cost of Manufacturing
CV--Constructed Value
ESP--Exporter's Sales Price
FMV--Foreign Market Value
HM--Home Market
HMP--Home Market Price
ISE(s)--Indirect Selling Expenses
LOT--Level of Trade
OEM--Original Equipment Manufacturer
POR-- Period of Review
PP--Purchase Price
USP--United States Price
VAT--Value Added Tax
AFB Administrative Determinations
AFBs LTFV Investigation--Final Determinations of Sales at Less than
Fair Value; Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof from the Federal Republic of Germany, 54 FR 19006
(May 3, 1989).
AFBs I--Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof from the Federal Republic of Germany; Final Results of
Antidumping Duty Administrative Review, 56 FR 31692 (July 11, 1991).
AFBs II--Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, et al.; Final Results of Antidumping Duty
Administrative Reviews, 57 FR 28360 (June 24, 1992).
[[Page 66478]]
AFBs III--Final Results of Antidumping Duty Administrative Reviews and
Revocation in Part of an Antidumping Duty Order, 58 FR 39729 (July 26,
1993).
AFBs IV--Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews, Partial Termination of Administrative Reviews,
and Revocation in Part of Antidumping Duty Orders, 60 FR 10900
(February 28, 1995).
AFB CIT Decisions
FAG v. United States, Slip Op. 95-158, September 14, 1995 (FAG I)
FAG Kugelfischer Georg Schaefer KGAa v. United States, Slip Op. 96-108
(CIT 1996) (FAG II)
FAG UK Ltd. v. United States, Slip Op. 96-177 (CIT, November 1, 1996)
(FAG III)
Federal Mogul Corp. v. United States, 813 F. Supp 856 (CIT 1993)
(Federal Mogul I)
Federal Mogul Corp. v. United States, 839 F. Supp 881 (CIT 1993),
vacated, 907 F. Supp 432 (1995) (Federal Mogul II)
Federal Mogul Corp. v. United States, 884 F. Supp 1391 (CIT 1993)
(Federal Mogul III)
Federal Mogul Corp. v. United States, 17 CIT 1015 (CIT 1993) (Federal
Mogul IV)
Federal Mogul Corp. v. United States, 924 F. Supp 210 (CIT April 19,
1996) (Federal Mogul V)
Koyo Seiko Co., Ltd. v. United States, 796 F. Supp 1526 (CIT 1992)
(Koyo)
NSK Ltd. v. United States, 910 F. Supp 663 (CIT 1995) (NSK I)
NSK Ltd. v. United States, 896 F. Supp 1263 (CIT 1995) (NSK II)
NTN Bearing Corporation of America v. United States, 903 F. Supp 62
(CIT 1995) (NTN I)
NTN Bearing Corporation of America v. United States, 905 F. Supp. 1083
(CIT 1995) (NTN II)
SKF USA Inc. v. United States, 876 F. Supp 275 (CIT 1995) (SKF)
The Torrington Company v. United States, 818 F. Supp 1563 (CIT 1993)
(Torrington I)
The Torrington Company v. United States, 832 F. Supp. 379 (1993)
(Torrington II)
The Torrington Company v. United States, 881 F. Supp 622 (1995)
(Torrington III)
CAFC AFB Decisions
NTN Bearing Corp. v. United States, 74 F. 3d 1204 (CAFC 1995) (NTN I)
The Torrington Company v. United States, 44 F. 3d 1572 (CAFC 1994)
(Torrington IV)
The Torrington Company v. United States, 82 F. 3d 1039 (CAFC 1996)
(Torrington V)
1. Assessment and Duty Deposits
Comment 1: Torrington contends that the Department should
reconsider its position regarding the calculation of deposit rates
because the new VAT methodology exacerbates the discrepancy between
deposit rates and assessment rates. Torrington suggests that the
Department should calculate deposit rates using entered value, not
United States price (USP), as the denominator, as it does in
calculating assessment rates.
Torrington acknowledges that the Department and the Court of
Appeals for the Federal Circuit (CAFC) have previously rejected
Torrington's argument that deposit rates should be calculated using
entered value as the denominator, citing AFBs I at 31692, noting in
addition that the CAFC upheld the Department regarding this issue in
Torrington IV at 1579. Torrington contends, however, that the new VAT
methodology adversely affects the Department's deposit rate
calculations and increases the disparity between deposit and assessment
rates.
Torrington suggests that the new methodology, whereby the
Department multiplies HMP by the VAT rate and adds this amount equally
to the HMP and USP, increases the USP that serves as the deposit rate
denominator while leaving entered value (the assessment rate
denominator) unchanged. Torrington acknowledges that the previous VAT
methodology (under which the VAT amount that was added to both HMP and
USP was derived by multiplying USP, not FMV, by the VAT rate), also
increased USP by an amount representing VAT. However, Torrington states
that the addition to USP is greater under the new VAT methodology than
it was under the old methodology, because HMP is generally greater than
USP where there is dumping, and Torrington provides a hypothetical
example. Torrington concludes that the new VAT-adjustment methodology
is not tax neutral because the deposit rates for respondents in
countries with high VAT tax rates will be far lower, everything else
being equal, than those in countries with low VAT tax rates. For these
reasons, Torrington argues the Department should calculate antidumping
duty deposit rates on the same basis that it calculates antidumping
duty assessment rates.
FAG, INA, Koyo, NMB/Pelmec, NSK, NTN, and SKF argue that the
Department should not alter its deposit-rate methodology. Respondents
contend that this methodology has been established practice since the
first review of these orders and should not be changed without good
reason. Respondents contend that both the Court of International Trade
(CIT) and CAFC have affirmed the Department's methodology. Respondents
contend that Torrington's arguments regarding the change in VAT
methodology do not constitute sufficient cause to alter the deposit-
rate methodology.
Department's Position: We disagree with Torrington. As we have
noted in previous reviews of these orders, duty deposits are estimates
of future dumping liability, and any difference between the estimate
and the calculated assessment will be collected or refunded with
interest. See AFBs II at 28377, AFBs III at 39738, and AFBs IV at
10905-06. As such, duty deposits need simply to be based on the level
of dumping during the POR; how the duty-deposit rate is derived is
within the Department's discretion, provided that the derivation is
reasonable. Moreover, the duty-deposit rate does not have to be
identical to the assessment rate. See Torrington IV at 1578-79.
We do not use entered value as the denominator in estimating duty
deposits for the following reasons. First, duty deposits calculated on
such a basis will not necessarily reflect the final margin of dumping
any more accurately than deposit rates calculated based on USP. Because
margins generally change from review to review, we have no reason to
believe or suspect that one methodology will necessarily be more
accurate than another. Second, we do not have entered values for all
importers of PP sales. Third, even if we had all entered values, to do
as Torrington suggests would require calculating separate deposit rates
for all importers, which would create an excessive administrative
burden both on us and on the U.S. Customs Service in order to implement
a deposit methodology that has not been shown to be more accurate.
Finally, as we noted in the 90/91 review of these orders, we must
maintain a consistent standard for determining whether margins are de
minimis. In sum, practical concerns favor the approach we have
consistently applied, and there is little theoretical appeal to
changing the approach. This is especially true when any difference
between the estimate and the assessment is collected (or refunded) with
interest when the entries are liquidated.
Nothing in Torrington's argument concerning the new VAT methodology
invalidates the reasons provided above for using USP as the denominator
in
[[Page 66479]]
calculating deposit rates for estimated future liability. As Torrington
acknowledges, both the new and old VAT methodologies resulted in the
addition to USP of an amount for VAT. In fact, under Torrington's
hypothetical example illustrating the difference in deposit rates
caused by the new VAT methodology, the deposit rate calculated using
the new methodology (19 percent) differed by only one percent from that
calculated using the previous methodology (20 percent). Therefore,
Torrington has not shown that the new VAT methodology results in
deposit rates that are not reasonably based on the level of dumping
during the POR. Consequently, we have not changed our methodology for
calculating duty-deposit rates for future entries in these final
results.
Comment 2: NSK argues that the Department's methodology for
calculating dumping duties significantly overstates its dumping
liability. NSK contends that the Department's methodology, which
calculates POR assessment rates by dividing the amount of antidumping
duties determined through its analysis of the six sample week sales
(multiplied by a weight factor of 8.69 in order to derive an annual
duty amount) by the entered value of the sample week sales (also
multiplied by a weight factor of 8.69 to derive an annual entered value
amount for POR sales), results in the over collection of duties from
NSK when applied to the entered value of POR entries. NSK states that
this is due to the fact that the entered value of its POR entries
significantly exceeded the Department's calculated entered value of
NSK's POR sales. NSK asserts that the Department should use the total
entered value of NSK's POR entries as the denominator in the
assessment-rate calculation.
Torrington, citing Koyo at page 1529, argues that the CIT has held
that the Department is afforded ``tremendous deference in selecting the
appropriate [assessment] methodology'' and that the Department's
assessment-rate methodology is reasonable and in accordance with law.
Torrington notes that the Court in Koyo also stated that, as long as
the methodology the Department selects is reasonable, it is appropriate
even if ``another alternative is more reasonable.'' Id at page 1529.
Torrington argues that the Department therefore should apply its
established assessment-rate methodology in the final results.
Department's Position: We disagree with NSK. In litigation arising
from AFBs II, FAG argued (as NSK does here) that we should calculate an
assessment rate by dividing the annualized dumping duties due by the
entered value of entries during the POR, rather than the entered value
of sales during the POR. In our remand determination of May 30, 1995,
we explained that the statute requires us to assess an antidumping duty
equal to the amount by which the FMV of the merchandise exceeds the USP
of the merchandise (section 751(a)(2)(B) of the Act). We stated that
both FAG's methodology and our methodology in AFBs II meet this
standard, since both methods compute the difference between FMV and USP
and use that difference as the basis for assessment.
The CIT agreed with our May 30, 1995 remand redetermination,
stating that ``[a] comparison of FAG's and Commerce's assessment
approaches satisfactorily convinces the Court that Commerce's
methodology is the more accurate in spite of the fact that Commerce was
aware of FAG's data on the record pertaining to total sales and actual
entered values.'' FAG I at 9.
Like FAG's method, NSK's method in this review simply uses the
difference to compute an amount of duties due for sales made during the
POR, while the Department's method uses the difference between FMV and
USP to compute an amount of duties due on entries made during the POR.
Similarly, like FAG's methodology in AFBs II, NSK's method assumes that
the amount of dumping found in the sample pool is representative of the
amount of dumping on POR sales, whereas the Department's method assumes
the rate of dumping found in the same pool is representative of the
rate of dumping found on POR entries as a whole.
In addition, there is some danger that a change to NSK's
methodology from the methodology we used in previous reviews (i.e., the
92/93 review period and the 93/94 review period) will result in
estimating duties on a pool of entries twice. If our methodology
estimates the amount of duties due on entries made during the POR and
NSK's methodology estimates the amount of duties due on sales during
the POR, switching methodologies between two POR's will result in
estimating the duties due on merchandise entered during the first
period and sold during the second period in both periods. In fact, such
an inconsistency in assessment-rate methodologies would also occur when
entries are subject to liquidation without administrative review. NSK's
methodology is inconsistent with the assessment methodology we use for
automatic assessment because, when we automatically liquidate, we
assess duties based on the cash deposit rate at the time of entry. The
cash deposit rate is a ``relative'' dumping rate, i.e., it reflects the
weighted-average margin of dumping which we have calculated using the
value of sales rather than the value of entries made during the POR,
which is similar to our assessment-rate methodology.
Because our methodology is reasonable and the CIT has upheld it
(see FAG I), we have not changed our assessment-rate methodology for
these final results.
2. Best Information Available
Section 776(b) of the Tariff Act provides that, in making a final
determination in an administrative review, if the Department ``is
unable to verify the accuracy of the information submitted, it shall
use the best information available to it as the basis for its action *
* *'' In addition, section 776(c) of the Tariff Act requires the
Department to use BIA ``whenever a party or any other person refuses or
is unable to produce information requested in a timely manner or in the
form required, or otherwise significantly impedes an investigation * *
*.
In deciding what to use as BIA, section 353.37(b) of our
regulations provides that we may take into account whether a party
refuses to provide information. For purposes of these reviews and in
accordance with our practice we have used the more adverse BIA--
generally the highest rate for any company for the same class or kind
of merchandise from the same country from this or any prior segment of
the proceeding, including the less-than-fair-value (LTFV)
investigation--whenever a company refused to cooperate with the
Department or otherwise significantly impeded the proceeding. When a
company substantially cooperated with our requests for information, but
we were unable to verify information it provided or it failed to
provide all information requested in a timely manner or in the form
requested, we used as BIA the higher or (1) the highest rate (including
the ``all others'' rate) ever applicable to the firm for the same class
or kind of merchandise from the same country from either the LTFV
investigation or a prior administrative review; or (2) the highest
calculated rate in this review for any firm for the same class or kind
of merchandise from the same country (see AFBs III at 39739 (July 26,
1993), and Empresa Nacional Siderurgica v. United States, Slip Op. 95-
33 (CIT March 6, 1995)).
Comment 1: INA contends that the Department's application of
second-tier BIA in the preliminary results, based on the results of a
three-day verification at
[[Page 66480]]
INA's U.S. affiliate (INA-USA), is unduly punitive. INA alleges that
the problems experienced at verification were due to its brevity and to
the overlapping demands of preparing supplemental questionnaire
responses while preparing for verification in the two weeks prior to
the verification, and not due to deficient data per se. INA notes that
the Department issued a large supplemental questionnaire for sections
A-C on January 10, 1995, and scheduled the U.S. verification for
January 23 through January 25, 1995. INA suggests that, given this
schedule, the Department's decision to limit the verification to three
days, as opposed to five, adversely affected the company (noting that
the U.S. verification in the previous (92/93) review lasted five days
and that all five days were needed to complete that verification). INA
argues that the verification report suggests that the unresolved issues
were due to a lack of sufficient time to complete verification and,
while the report implies that INA was responsible due to ``periods of
inactivity'' while company officials searched for requested materials,
such periods of inactivity do not take into account the time problems
inherent in a three-day verification.
INA states that it provided supporting documents for certain items
that the verification report nonetheless treated as unverified, as
follows: (1) A reconciliation of certain adjustments necessary to tie
sales data in the company's sales journal to the financial statements
(INA claims it provided this reconciliation but the Department did not
review it due to time constraints); (2) a reconciliation of a monthly
sales amount, as listed in the general ledger, with the financial
statements (INA claims it provided this reconciliation after an initial
error but the Department took as an exhibit the initial and incorrect
reconciliation); and (3) a reconciliation of the gross monthly sales
figures in the transaction register with those in the sales journal
(INA claims that the Department misunderstood this reconciliation,
mistakenly attributing certain sales figures in a summary worksheet to
the transaction register instead of the sales journal). INA suggests
the means by which the Department could establish the accuracy of items
(2) and (3), above, from information already on the record.
In addition, INA provides explanations for other items that the
report states remained open at the end of verification, as follows: (1)
An invoice sequence the Department conducted to establish the
completeness of the invoices for certain POR months (INA claims that
company officials realized during verification that its invoices were
not numbered in a strictly chronological sequence but this could not be
taken into account in the invoice-sequence test due to time
constraints); (2) certain price adjustments, including packing material
and labor, inventory carrying costs, technical services/warranties,
guarantees and servicing, and commissions (INA claims that supporting
documentation for each adjustment was available at the verification
site but was not examined due to time constraints); (3) an information
request for employee expense vouchers (INA claims that this request was
made after the close of business on the last day of verification and
that the employee with access to such vouchers was not available); and
(4) a missing U.S. sale found at verification (INA claims that this was
due to a clerical computer error, which INA later discovered caused the
omission of over 300 sales from the U.S. database, as well as the
absence of HM sales, CV, and COP data for 35 products involved in the
missing U.S. sales; INA requests that it be allowed to submit
information to correct this error (see Comment 6, below).
Finally, INA addresses certain verification items that the company
states were not elements of the Department's decision to apply BIA to
the company, but which were still noted in the verification report, as
follows: (1) Swap agreements that were not included in the reported
credit expense (INA argues that such agreements are not relevant to the
cost of credit); (2) magazine publishing expenses that were not
included in the reported advertising expense (INA claims that this
magazine is published for company employees only); (3) ocean freight
and brokerage and handling discrepancies (INA claims that they are
negligible); and (4) ``PPAP'' revenues as an offset to indirect
expenses (INA claims that this is consistent with generally accepted
accounting principles (GAAP)).
INA suggests that the verification problems the company experienced
are directly related to the time constraints of a three-day
verification, which, given the size and complexity of INA-USA's sales
and accounting records, is not a sufficient time in which to complete
this verification. INA notes that INA-USA is a major U.S. producer of
AFBs, and its sales of purchased bearings, including subject
merchandise, account for only a small percentage of its total sales;
its accounting system and underlying documentation are more complex,
therefore, than those of a related-party importer that is not primarily
a bearing manufacturer. INA states that, given these facts, INA's
failure to complete verification in three days (along with an
inadvertent database error on the U.S. sales listing) does not warrant
the application of a BIA rate that could cost the company millions of
dollars of additional antidumping duties.
Torrington responds that the Department properly applied second-
tier BIA to INA's questionnaire response due to INA-USA's failures at
verification. Torrington cites to the Department's May 24, 1995
memorandum concerning the application of BIA to INA and contends that
the Department should reject INA's attempt to blame the Department for
failing to allot sufficient time for verification for the following
reasons: (1) Much of the time at verification was spent conducting
routine tests; (2) U.S. sales verifications normally require only three
days; (3) according to the report, INA officials were absent from the
verification site for long periods of time; and (4) INA should be
familiar with routine verification procedures, since this is the fifth
annual review. Torrington notes that respondents, not the Department,
carry the responsibility of demonstrating the reliability of reported
information.
Torrington suggests that BIA is particularly warranted in this case
due to the verification finding that INA had omitted certain U.S.
sales, along with an undisclosed number of HM sales. Torrington states
that, if a single alleged programming error resulted in hundreds of
unreported sales, it is a fair concern that the program contains other
equally consequential errors.
Department's Position: We disagree with INA and have assigned a
cooperative (second-tier) BIA rate to the company for these final
results. As noted above, under section 776(b) of the Tariff Act, if we
are ``unable to verify the accuracy of the information submitted,'' we
are authorized to use BIA. In addition, section 776(c) of the Tariff
Act requires that we use BIA ``whenever a party or any other person
refuses or is unable to produce information requested in a timely
manner and in the form required, or otherwise significantly impedes an
investigation.'' When a company has substantially cooperated with our
requests for information and, to some extent, at verification, but we
were unable to verify the information it provided or it failed to
provide complete or accurate information, we assign that company
second-tier BIA. See Allied Signal versus United States, 996 F.2d 1195
(CAFC 1993) (concluding that the Department's two-tiered BIA
[[Page 66481]]
methodology, under which cooperating companies are assigned the lower,
``second tier'' BIA rate, is reasonable).
INA cooperated with our requests for information and agreed to
undergo verification. However, despite our attempts, we were unable to
verify the completeness of its response. First, because we were unable
to verify INA's total U.S. sales of the subject merchandise, we were
unable to establish the proper universe of sales within which we would
conduct our analysis. Establishing the completeness of the response
with respect to sales of the subject merchandise in the United States
is a very significant element of verification. However, as a result of
verification, INA subsequently acknowledged that it had omitted over
300 sales from its U.S. database along with the corresponding HM sales,
CV, and COP data for 35 products involved in the missing U.S. sales.
The completeness of the U.S. sales database is essential because it is
used to calculate the dumping duties. It is our practice to examine at
verification only a randomly selected subset of the reported U.S.
sales, a practice that the CIT has upheld. See Bomont Industries versus
United States, 733 F.Supp. 1507, 1508 (CIT 1990) (``verification is
like an audit, the purpose of which is to test information provided by
a party for accuracy and completeness. Normally an audit entails
selective examination rather than testing of an entire universe.'');
see also Monsanto Co. versus United States, 698 F. Supp. 275, 281 (CIT
1988) (``verification is a spot check and is not intended to be an
exhaustive examination of the respondent's business''). Where the
Department finds discrepancies in this subset, it must judge the effect
on the unexamined portion of the response. In the instant case, ESP
sales are reported on a limited, sampled basis due to the large number
of transactions. Where we have allowed for reduced reporting but
determine that U.S. sales are missing from the database submitted as
the complete sampled sales listing, we must be especially concerned
about the reliability and accuracy of any margin we might calculate
from the database. An omission of this magnitude, by itself, renders
the remainder of INA's response inadequate for the purpose of
calculating a dumping margin in this review. See Persico Pizzamiglio,
S.A. v. United States, Slip Op. 94-61 (Persico) (upholding the
Department's use of BIA for a respondent who was unable to demonstrate
the completeness of its U.S. sales at verification). See also Comment
3, below, regarding INA's request to submit data concerning these sales
for the record.
Second, among a number of other problems in establishing the
completeness of the reported U.S. sales, we were unable to verify that
INA's transaction register (a register allegedly used to record all
sales during the POR) was a complete list of all sales. Specifically,
we were unable to tie this document to either the financial statements
or to the reported sales. See INA USA Verification Report at 3-5. This
inconsistency raises serious concerns regarding the completeness of
INA's reporting because the company, both at verification and in its
brief (at 9), identified the transaction register as the basis for the
sales reported in INA's response. See Memorandum from Office Director
to DAS, Compliance: Antifriction Bearings from Germany; Use of Best
Information Available for the Preliminary Results of the Fifth
Administrative Review (May 24, 1995) (BIA memo). INA contends that the
failure to establish the reliability of the transaction register was
due to the Department's mistaken belief that a ``bridge'' worksheet was
based on the transaction register (INA claims the worksheet was based
instead on INA's sales journal). The verification report clearly
indicates, however, that INA officials told the Department that the
worksheet was based on the transaction register (``the monthly gross
sales figures were claimed to be taken from INA's transaction register,
which is a composite of all sales of subject and non-subject
merchandise made during the POR.'' INA USA Verification Report at 3).
INA's post-hoc explanations for other significant verification
failures with respect to establishing the completeness of its reporting
are similarly unconvincing. For instance, the Department attempted to
establish the completeness of INA's reporting by examining INA's POR
invoices, which the company stated initially were maintained in
chronological sequence. However, as INA acknowledges, company officials
did not discover until the last day of verification that INA's invoices
were not numbered on a chronological basis, but instead were
sequentially numbered by warehouse. As the Department stated in the BIA
memo, by the time this discovery was made, there was insufficient time
to establish the completeness of the reported total volume of sales
using these invoices.
For these reasons, we were unable to verify that INA reported all
U.S. sales of subject merchandise. Moreover, we could not verify the
volume of U.S. sales that may have been unreported. The completeness of
the U.S. sales response is a significant element of verification.
Further, in the instant case, ESP sales are reported on a limited,
sampled basis due to the large number of transactions. Where we have
allowed for reduced reporting but determine that U.S. sales are missing
from the database submitted as the complete sampled sales listing, we
must be especially concerned about the reliability and accuracy of any
margin we might calculate from the database.
In accordance with section 776(b) of the Tariff Act, our inability
to verify INA's U.S. sales listing was the determining factor in our
decision to apply BIA to the company's response. With respect to the
other items INA characterized as unresolved due to time constraints, we
note that, regardless of the resolution of these issues, we would not
be able to use INA's response in calculating the dumping margin, given
that we could not verify INA's U.S. sales listing. Further, it is
incumbent upon the respondent to establish the accuracy of the
information it submits during the time period allotted for
verification. As we stated in Final Determination of Sales at Less Than
Fair Value: Photo Albums and Filler Pages from Korea, 50 FR 43754, at
43755-56 (October 29, 1985), ``[i]t is the obligation of respondents to
provide an accurate and complete response prior to verification so that
the Department may have the opportunity to fully analyze the
information and other parties are able to review and comment on it. The
purpose of verification is to establish the accuracy of a response
rather than to reconstruct the information to fit the requirements of
the Department.'' The time allotted for this verification, three days,
is the normal time for which we schedule U.S. sales verifications,
despite the size or complexity of respondents' business operations and
records. This is the normal time period granted for such verifications
and was the time period given for ESP verification of other respondents
in this review. Further, as indicated by the CIT, ``[t]here is no
statutory mandate as to how long the process of verification must
last,'' and the Department ``is afforded discretion when conducting a
verification pursuant to 19 U.S.C. 1677e(b).'' Persico at 19 (holding
that a three-day overseas verification was reasonable). Notably, the
Department conducted six other ESP verifications for this review
period, all of which were completed in three days, the same amount of
time given to INA-USA.
Thus, in accordance with section 776(b) of the Act, we are relying
on
[[Page 66482]]
cooperative BIA to determine INA's antidumping margin for each class or
kind in these reviews.
Comment 2: INA proposes that, instead of applying BIA, the
Department should use its discretion to conduct a supplemental
verification. INA contends that the Department has the authority to
conduct an additional verification and cites to several cases in which
the Department has conducted such verifications (Cyanuric Acid and Its
Chlorinated Derivatives from Japan, 51 FR 45495, 45496 (December 19,
1986); Cell Site Transceivers from Japan, 49 FR 43080, 43084 (October
26, 1984); High Power Microwave Amplifiers and Components Thereof from
Japan, 47 FR 22134 (May 21, 1982); Fireplace Mesh Panels from Taiwan,
47 FR 15393, 15395 (April 9, 1982)). INA states that the Department
examines the necessity of conducting supplemental verifications on a
case-by-case basis, thereby underscoring the discretionary nature of
this decision.
INA notes that there are four reasons why the Department may not
wish to conduct a supplemental verification: inconvenience, cost,
schedule, and precedent. INA argues that none of these reasons
justifies a refusal to conduct an additional verification in this case.
INA contends that the magnitude of the potential penalty in this case
outweighs the inconvenience and cost aspects, that a supplemental
verification would not have an adverse impact on the Department's
schedule in the fifth reviews, and that the case-specific nature of
this decision should alleviate any concern over establishing a
burdensome precedent.
INA states that, considering the above facts, the failure to
conduct a supplemental verification, while applying total BIA, would
constitute an abuse of discretion. INA cites NTN I for the general
proposition that the dumping law is remedial, not punitive. INA notes
that the CAFC has held that the Department's refusal to accept the
correction of clerical errors after the deadline for submitting factual
information was an abuse of discretion when, inter alia, failure to do
so ``resulted in the imposition of many millions of dollars in duties
not justified under the statute,'' citing NTN I at 1208.
Department's Position: We disagree with INA. The facts of this case
do not justify taking the extraordinary step of conducting an
additional verification. Although we have, in an extremely limited
number of cases, conducted a supplemental verification, it is not our
policy to permit re-verification of data. See Sodium Nitrate from
Chile: Final Results of Review, 52 FR 25897 (July 9, 1987).
Conducting a second verification after a company fails its first
verification would be an extraordinary action. To do so would signal
respondents that a failed verification can be overcome, which would
undermine both our ability to obtain complete and accurate information
from respondents in time to conduct proper verifications and to
complete reviews in a timely manner. As we have indicated on the record
in this case, a second verification would cease to be an opportunity to
check the accuracy of a response and would become merely an exercise in
identifying areas in which a response could be improved. See Memorandum
from DAS, Import Administration to Assistant Secretary, Import
Administration: INA Request to Submit New Information (July 29, 1995)
(INA Memorandum).
The most recent of the cases that INA cites occurred in 1986.
Further, in each of the cases cited, re-verification was conducted
pursuant to requests for additional information requested by the
Department, or due to a particular emergency that arose in the case. In
contrast, INA's request is based primarily on the general time
constraints imposed by a three-day ESP verification. As noted in our
response to Comment 1, this is the normal time period granted for such
verifications and was the time period given for ESP verification of
other respondents in this review. Further, as indicated by the CIT,
``[t]here is no statutory mandate as to how long the process of
verification must last,'' and the Department ``is afforded discretion
when conducting a verification pursuant to 19 U.S.C. 1677e(b).''
Persico at 19 (holding that a three-day overseas verification was
reasonable). Accordingly, we have declined to conduct a supplemental
verification.
Comment 3: INA requests that it be permitted to submit new
information that would correct a programming error discovered at
verification. INA states that this error resulted in the omission of
over 300 U.S. sales as well as the HM sales, CV, and COP data
corresponding to such sales.
INA notes that, pursuant to Sec. 353.31(a) of the Department's
regulations, the Department has accepted corrections of clerical errors
after verification if the existence of the error and the accuracy of
the correction could be determined from the existing administrative
record (citing AFBs III at 39780). INA contends that, although this is
not the case for the data in question, the CAFC held in NTN III that
the Department's refusal to waive the deadlines established in
Sec. 353.31(a) to permit correction of clerical errors that were not
apparent from the record constituted an abuse of discretion (at 1207).
In light of this decision, INA requests that the Department accept
correction of the error found at verification. (INA notes that it
previously made this request in a letter to the Department dated
January 26, 1996.)
Torrington objects to INA's request that it be allowed to submit
additional information regarding these missing transactions, stating
that NTN III should be limited to its facts and must not be allowed to
subvert the traditional role played by antidumping verifications.
Torrington contends that INA's error is not a clerical error and is far
more sweeping than that involved in NTN III.
Department's Position: We disagree with INA's position that the
omittance of over 300 U.S. sales as well as the HM sales, CV, and COP
data corresponding to such sales constitutes a clerical error, and we
have not accepted any post-verification submissions regarding these
sales for these final results. As indicated in our response to Comment
1, INA's alleged ``clerical error'' is more appropriately described as
a verification failure.
There are several important distinctions between NTN III and the
present case (see INA Memorandum). First, there is a difference in
breadth and significance of the error. INA's process and strategy for
identifying sales of subject merchandise was flawed; it failed to
recognize its own product designations for subject merchandise and
devise appropriate means to collect and report all sales. As a result,
INA failed to report a significant number of U.S. sales, which, to
correct, would require a substantial and fundamental addition to its
questionnaire response. INA did not simply misreport a small amount of
data requiring a simple correction as occurred in NTN III. The court in
NTN III at 1208 specifically noted that correction of the errors in
that case ``would neither have required beginning anew nor have delayed
making the final determination'' and that ``a straightforward
mathematical adjustment was all that was required.'' See NTN III at
1208. In this case, correction of INA's alleged error would require
collection of substantial amounts of new information and significant
additional time and effort to analyze and examine the new information,
as well as additional time to allow the petitioner to comment on the
new information.
[[Page 66483]]
Second, in NTN III the court found that the respondent was first
alerted to the probability of error upon examination of the preliminary
results at 1207. Here, INA was made aware of a problem with its
questionnaire response when we found a missing sale at verification,
well before the preliminary results were issued. INA was unable to
explain the missing sale at verification or to correct its error at
that time. Indeed, INA did not attempt to correct the alleged error
until a year after the verification at which the error was uncovered.
Further, the error affected an area (total volume and value of sales)
that is always a primary focus of verification. The nature of this
error is not such that it could only be discovered after the
preliminary results of review as was the case in NTN III. Thus, INA's
alleged ``clerical error'' is more appropriately described as a
verification failure.
Third, there is no assurance that any new sales information INA
might submit would be complete and accurate.2 The information INA
seeks to submit purports to cover all missing sales. Unlike the
information in NTN III which could be verified by comparison with a few
supporting documents, the accuracy of INA's new information could only
be assessed through an entirely new verification which, for the reasons
we stated in response to Comment 2, above, is inappropriate in this
situation.
---------------------------------------------------------------------------
\2\ In NTN III, the CAFC noted that NTN had been cooperative
throughout the proceeding, and the Department did not verify NTN's
U.S. sales. Thus, the court indicated that the Department appeared
to lack any basis for questioning the accuracy of NTN's correction
and, moreover, the argument was raised post hoc by counsel, rather
than by the Department as a basis for rejecting the information.
Conversely, given the verification results in the present case, we
have substantial reasons for questioning the accuracy of any
corrections made by INA. See NTN III at 1204.
---------------------------------------------------------------------------
In the context of a review in which INA's response has already
failed verification, we would have little confidence in the
completeness and accuracy of any new ``corrective'' information INA
might submit because we would have no assurance that the particular
error INA found was the only such error leading to omissions of sales,
that any additional sales that INA might report would account for all
of the missing sales, or that the new sales information would be
accurate (i.e., that the errors identified at verification have been
completely remedied). Therefore, we have not accepted a revised
response from INA.
Comment 4: Torrington contends that, although the Department
correctly applied second-tier BIA to INA's questionnaire response, it
did not use the correct second-tier rates. Torrington suggests that the
correct preliminary cooperative BIA rates are 38.18 percent and 52.43
percent for BBs and CRBs, respectively, as opposed to the rates of 31
and 52 percent which the Department preliminarily assigned to INA.
INA responds that the CRB rate suggested by Torrington is a ``no
shipment'' rate that the Department correctly disregarded in
establishing the cooperative BIA rate. With respect to the BB rate, INA
contends that the Department appropriately used its discretion not to
use the highest calculated rate for this review, using instead INA's
highest previous rate.
Department's Position: For these final results, and in accordance
with our policy regarding the derivation of the second-tier BIA rate,
we are applying a rate to INA's sales based on the higher of (1) the
highest rate (including the ``all others'' rate) ever applicable to the
firm for the same class or kind of merchandise from the same country
from either the LTFV investigation or a prior administrative review; or
(2) the highest calculated rate in this review for any firm for the
same class or kind of merchandise from the same country. Accordingly,
we have applied the second-tier BIA rates of 31.29 percent for BBs and
52.43 percent for CRBs.
Comment 5: NPBS asserts that a re-verification of its response is
necessary to correct findings included in the verification report which
influenced the Department's application of BIA to NPBS' sales. First of
all, NPBS argues that the absence of an interpreter at verification
prevented the firm from demonstrating the accuracy and reliability of
its response. NPBS notes that it is a family-owned business and that no
one at the firm understands English well enough to respond to the
intensely nuanced information requests routinely made at verification.
Second, NPBS argues that it was prevented from responding to
verification report findings because the report did not identify or
document specific sale transactions, and because documents taken at
verification were destroyed. NPBS states that, as a result, it cannot
address the following findings in the Department's verification report:
(1) NPBS failed to explain why certain sales of NPBM-manufactured
merchandise had been excluded from its response; (2) NPBS failed to
report three HM sales out of * * * which were originally priced at
zero, but were subsequently adjusted upwards after negotiation with the
customer; (3) NPBS failed to report properly quantity adjustments for
one out of seven selected HM sales; and (4) NPBS failed to justify the
exclusion of sales of certain HM models which the firm initially
claimed did not match the families sold in the United States.
Third, NPBS argues that the verification report states crucial
facts incorrectly regarding whether the prices reported by NPBS to its
largest HM customer were the final and actual prices paid by that
customer. NPBS asserts that a statement in the verification report that
the sales price which NPBS reported for sales to this customer is not
the final price paid is simply false. Finally, NPBS argues that the
Department should accept a printout of sales to this particular company
which NPBS omitted from the original response due to a clerical error
but which it submitted to the Department's representatives at the start
of verification. NPBS claims that, because it submitted the information
to the Department within 180 days of initiation, under 19 CFR 353.31
(a)(1)(ii), the Department should determine that it is timely.
Torrington responds that the Department's application of BIA was
fully warranted by the numerous omissions and errors in NPBS' response.
Torrington argues that the Department is statutorily required to use
BIA in cases where it is unable to verify the accuracy of the
information submitted. Torrington asserts that, as a whole, the number
and significance of NPBS' errors and omissions constitute a failed
verification, noting that the most serious of NPBS deficiencies was the
inability to verify the completeness of the HM and U.S. sales
databases. Torrington asserts that the complete and accurate reporting
of sales databases goes to the heart of the antidumping proceeding and
references AFBs II at 28379, where the Department applied BIA to NPBS
because NPBS failed to report a substantial number of its HM sales.
With respect to NPBS' argument that it was hampered by the lack of
an interpreter, Torrington suggests that NPBS' complaint is without
merit since the Department notified NPBS that it was unable to retain
an interpreter prior to verification. Torrington contends, moreover,
that NPBS is not unfamiliar with the review process and has undergone
verification on five previous occasions. To the extent that an
interpreter was essential, Torrington maintains it was incumbent on
NPBS to arrange for one.
With respect to NPBS' argument that it was unable to demonstrate
the accuracy of its response because the Department destroyed certain
documents, Torrington states that it
[[Page 66484]]
cannot meaningfully comment since it did not attend either the
verification or disclosure. Torrington notes however that, even if
NPBS' assertion that the final price for certain omitted sales was
correctly reported is true, NPBS' failure to explain its response
adequately at verification cannot be corrected at the case-brief stage
of the proceeding. Moreover, Torrington asserts, the Department did not
apply BIA because NPBS omitted these sales from its response. Rather,
Torrington contends, the Department found discrepancies in the
reporting of these sales. Torrington summarizes that, because NPBS
failed to support its HM and U.S. responses, the Department correctly
applied second-tier BIA.
Department's Position: We disagree with NPBS. The number and degree
of discrepancies in both the HM and U.S. verifications render NPBS'
response unusable for our margin calculations. Therefore, for these
final results, we have applied a second-tier BIA rate for NPBS.
First, NPBS does not dispute the results of the U.S. verification,
at which the verification team found, among other discrepancies,
missing U.S. sales. The completeness of the U.S. sales database is
essential because it is used to calculate the dumping duties. It is our
practice to examine at verification only a randomly selected subset of
the reported U.S. sales, a practice that the CIT has upheld. See Bomont
Industries v. United States, 733 F.Supp. 1507, 1508 (CIT 1990)
(``[v]erification is like an audit, the purpose of which is to test
information provided by a party for accuracy and completeness. Normally
an audit entails selective examination rather than testing of an entire
universe.''); see also Monsanto Co. v. United States, 698 F. Supp. 275,
281 (CIT 1988) (``[v]erification is a spot check and is not intended to
be an exhaustive examination of the respondent's business''). Where the
verification team finds discrepancies in the subset of information it
examines, it must judge the effect on the unexamined portion of the
response. In the instant case, ESP sales are reported on a limited,
sampled basis due to the large number of transactions. Where we have
allowed for reduced reporting but determine that U.S. sales are missing
from the database submitted as the complete sampled sales listing, we
must be especially concerned about the reliability and accuracy of any
margin we might calculate from the database.
In addition to the omissions and discrepancies we found at the U.S.
verification, the omission of a large number of HM sales affected our
decision to assign NPBS a margin based on BIA. Notwithstanding the
magnitude of the omitted HM sales, we attempted to verify these sales.
However, the pool of sales that NPBS attempted to place on the record
was not accurate. At verification, the Department's officials
discovered that the sales price for some of these sales was later
adjusted after negotiation with this particular customer. Moreover,
company officials acknowledged that the final sales price for an
unknown number of sales to this particular customer did not take into
account these price adjustments. NPBS was unable to provide the final
sales price, after adjustment, and instead, it provided a list of the
gross monthly adjustments. Because these omitted sales were not
verifiable, we did not accept them voluntarily into the record. After
the verification had concluded NPBS submitted, on December 19, 1994, a
listing of the omitted sales, stating that, under 19 CFR
353.31(a)(1)(ii), December 19, 1994 was the 180th day on which to
submit factual information voluntarily. This submission occurred after
verification was completed, however, and we had already found the sales
information to be inaccurate.
Regarding the four verification-report findings to which, NPBS
claims, it cannot respond, the verification exhibits do not contain
evidence documenting the discrepancies revealed at verification. We
note, however, that NPBS is not disputing that these discrepancies
exist. Rather, NPBS is complaining that it cannot explain the
discrepancies because the verification report did not indicate the
particular sales or models connected to the discrepancies. By raising
this issue only now, in its case brief, NPBS is attempting to
demonstrate the accuracy of its response. We agree with Torrington that
the case brief is not the appropriate forum for NPBS to demonstrate the
accuracy of its response. As indicated in the HM verification report,
NPBS did not demonstrate that its response was accurate within the
scheduled verification time. The Department took an extraordinary step
by rescheduling another firm's verification to allow NPBS an extra day
of verification. Thus, NPBS had the opportunity to explain its response
at the verification. At some point, the Department must close the
record and make a determination based on the information available to
it. Moreover, these particular discrepancies were not the primary
factors in our decision to apply BIA to NPBS.
Finally, the lack of an interpreter did not prevent NPBS from
demonstrating the accuracy of its response. The Department was not
required to provide an interpreter and nothing precluded NPBS from
supplying one itself. Furthermore, the Department informed NPBS before
the start of verification that an interpreter would not be present, and
company officials and the Department's verification team agreed that
the verification would proceed without an interpreter. The parties also
agreed, however, that, if during the course of the verification a
problem arose with regard to the ability to interpret an oral answer or
translate a document, a service would be contacted. In fact, the
company official who led the U.S. verification and co-led the HM
verification spoke excellent English and there was no need to seek
additional assistance.
Comment 6: Asahi disagrees with the Department's decision to apply
first-tier BIA on the basis that the company failed to provide complete
information on its sales of SPBs. Asahi notes that it only sold a small
quantity of SPBs to the United States and claims that the per-bearing
price was high enough to preclude any possibility of dumping. Asahi
argues that the sale of SPBs to the United States was outside its
normal course of business and was akin to a sample sale that occurred
on a one-time basis. Asahi further argues that it is commercially
unreasonable for the Department to require a complete submission for
such a small quantity of sales when the company has already compiled
the required information with regard to its normal commercial line
(BBs). Asahi suggests that, instead of assigning first-tier BIA to
SPBs, the Department apply the rate it applies to BBs, since BBs are
the class or kind of merchandise that Asahi usually sells to the United
States. Alternatively, Asahi requests that the Department either treat
the company as a no-shipper with respect to SPBs, since it only sold a
small quantity of this merchandise to the United States, or assign a
cooperative BIA rate to SPBs, since it provided complete information on
sales of BBs.
Department's Position: We disagree with Asahi that the application
of first-tier BIA was inappropriate. Section 776(c) of the Tariff Act
requires the Department to use BIA ``whenever a party or any other
person refuses or is unable to produce information requested in a
timely manner and in the form required.* * *'' With respect to SPBs,
Asahi only provided invoices in response to the Department's
questionnaire. The data contained on these invoices does not
approximate the transaction-specific price and cost data requested by
the questionnaire. As a
[[Page 66485]]
result, we do not have the information necessary for calculating a
margin on SPBs. Because Asahi failed to produce the information the
Department requested on SPBs, we have assigned first-tier BIA to this
class or kind of merchandise.
Asahi's suggestion that we assign the same rate to SPBs as that
assigned to its sales of BBs is contrary to the Department's practice
for establishing BIA rates. As stated above, whenever a company refused
to cooperate with the Department or otherwise significantly impeded the
proceeding, ``we have used the more adverse BIA--generally the highest
rate for any company for the same class or kind of merchandise * * *.''
BBs is a separate class or kind of merchandise from SPBs and
constitutes a separate antidumping duty order. Thus, the rate
calculated for Asahi's sales of BBs is irrelevant to our review of the
antidumping duty order on SPBs.
Comment 7: SNR Germany claims that the Department erroneously
applied BIA to sales that it could not match to CV. SNR Germany states
that it provided in its questionnaire response the complete CV for each
model sold in the United States but that, because the Department
erroneously renamed PRODCDE to USMODEL, the computer program could not
match the U.S. sales product codes (PRODCDE) with SNR's corresponding
CV information.
Department's Position: We agree with SNR Germany that we made a
mistake in renaming PRODCDE to USMODEL in our preliminary results. For
these final results, we have used the variable PRODCDE in our computer
program.
Comment 8: AVIAC states that it erroneously entered the letter
``O'' rather than the correct digit ``zero'' for several product codes
in its U.S. data set while entering the codes in its CV data set. AVIAC
contends that, due to this error, the Department was not able to match
the CV with the product code, resulting in the application of BIA to
those products. AVIAC requests that the Department correct the codes so
that proper matches will occur.
Department's Position: We find that AVIAC's description of its data
input errors is accurate and have corrected this error for the final
results. As a result, all the products matched their corresponding CVs,
and we did not apply BIA in these final results to AVIAC.
3. Circumstance-of-Sale Adjustments
3A. Technical Services and Warranty Expenses
Comment 1: NSK/RHP argues that the Department should treat
technical services associated with ESP transactions as indirect selling
expenses (ISEs) as opposed to direct expenses. NSK/RHP asserts that it
informed the Department that RHP (U.S.) did not provide technical
services in the United States during the review period. NSK/RHP states
that the United Kingdom divisions, RHP Industrial and RHP Precision,
supplied all technical services for ESP sales. NSK/RHP further argues
that the evidence of record conclusively demonstrates that technical
service expenses incurred in the United Kingdom were a fixed expense
not directly associated with particular transactions. NSK/RHP asserts
that the Department verified that expenses for technical services by
the United Kingdom divisions qualified as ISEs.
Torrington argues that the Department should continue to classify
NSK/RHP's U.S. technical services as direct rather than indirect
expenses. Torrington asserts that NSK/RHP has not sufficiently
demonstrated that the technical service expenses are truly indirect.
Further, Torrington contends that the HM verification report does not
refer to technical services in either general terms or specifically
with respect to the technical service expenses incurred in the HM on
behalf of U.S. sales.
Department's Position: We agree with NSK/RHP. In its August 31,
1994, questionnaire response, NSK/RHP noted that it did not incur
direct technical expenses in the U.S. market. During verification, we
examined NSK/RHP's methodology for calculating such expenses and found
that these costs were not tied to particular transactions. Rather, NSK/
RHP allocated these costs across the total sales for two divisions
(Industrial Bearings Division and Precision Division). See Exhibit 14
of NSK/RHP's August 31, 1994, questionnaire response. Therefore, we
have determined that NSK/RHP has properly demonstrated that technical
expenses should be considered as an ISE, and we have deducted technical
expenses associated with ESP transactions as such.
Comment 2: Torrington argues that the Department incorrectly
classified Koyo's HM warranty expenses as direct expenses. Torrington
contends that Koyo's warranty-expense factor includes both scope and
non-scope merchandise and, consistent with the CAFC's decision in
Torrington V, the Department cannot adjust FMV for expenses incurred on
scope and non-scope merchandise. Torrington maintains that, at best,
these expenses should be considered ISEs.
Koyo states that its methodology for reporting its warranty
expenses in this review is the same as that it used in a number of
previous reviews of the orders on AFBs and tapered roller bearings
(TRBs). Koyo further states that the Department has verified and
accepted Koyo's methodology in previous reviews and has never
challenged Koyo's treatment of warranties.
Department's Position: We agree with Koyo. In general, it is not
possible to tie POR warranty expenses to POR sales, since the warranty
expenses are incurred on pre-POR sales. Further, although Koyo
calculated a warranty expense factor based on the ratio of total
warranty claims to total bearing sales, there is no evidence on the
record that the calculated warranty expense factor would vary by class
or kind of bearing or by customer. Therefore, as in AFBs IV (at 10910)
and AFBs III (at 39743), where Koyo used the same allocation
methodology, we find that Koyo reasonably allocated direct warranty
expenses, and we have accepted them for the final results.
Comment 3: Torrington argues that NSK's HM technical services
primarily support NSK's development and sales of prototypes, and
suggests that, since the Department excluded sales of prototypes from
the HM sales listing, it should also exclude the technical service
expenses provided in support of the development of these prototypes
from the expenses allocated to non-prototype sales.
NSK responds that its engineers provided technical service support
for NSK's selling activities with respect to all HM customers, not just
for those that purchased prototypes, so that no adjustment of its claim
is necessary.
Department's Position: We disagree with Torrington. Based on our
analysis of the information submitted by NSK in this review, as well as
that analyzed at verification, we agree with NSK that its engineers
provided technical support for all of its sales. This technical support
primarily consists of consultations with customers regarding bearing
requirements and applications. Because this expense was both incurred
and reported as an indirect expense (i.e., one that does not vary
directly with the quantity of merchandise sold), we have treated this
expense as an indirect selling expense.
[[Page 66486]]
Comment 4: Torrington argues that, since NSK failed to comply with
the Department's request to segregate reported U.S. technical service
expenses between direct and indirect expenses, the Department should
reclassify NSK's U.S. technical service expenses as direct expenses
rather than as ISEs.
NSK argues that it provided a complete and responsive submission to
the Department's questionnaire. NSK also contends that the Department
could not find any means by which to tie the technical service expenses
to individual sales at verification and argues, therefore, that its
U.S. technical service expense should be treated as indirect expense
for the final results.
Department's Position: We agree with Torrington. Our questionnaire
specifically requests respondents to separate fixed and variable
portions of technical service expenses because we treat fixed servicing
costs as indirect expenses and variable servicing costs as direct
expenses. Based on NSK's questionnaire response, we determine that NSK
could have separated direct and indirect technical service expenses.
NSK explained in its questionnaire response that it would need to trace
certain expenses, such as travel and travel-related expenses to
individual customer calls, manually to separate these expenses between
direct and indirect. This difficulty does not relieve it of its
responsibility, however, to provide the Department with actual expense
information. Therefore, for the final results we have applied BIA and
treated NSK's U.S. technical service expense as a direct selling
expense.
3B. Inventory Carrying Costs
Comment 1: Torrington argues that, because Koyo has not
consistently distinguished between its OEM and AM cost data for other
expense categories, the Department should reject Koyo's allocation
factors for its reported U.S. inventory carrying costs (ICCs) for OEM
and AM sales.
Koyo states that it has reported each of its expenses according to
the methodology that most closely represents the manner in which it
incurs expenses and maintains its records. Koyo argues further that its
methodologies for reporting ICCs, air freight, and technical service
expenses are the same in this review as in all recent reviews of AFBs.
Koyo contends that the Department verified its methodology closely for
calculating ICCs in this review and tied the reported data to the
inventory turnover report by product class, as well as by OEM and AM
groupings, without finding discrepancies in the calculation of the ICC
factors.
Department's Position: We agree with Koyo. We recognize that
certain expenses are incurred in different manners and recorded in
different ways. During verification we examined Koyo's methodology and
tied its data to worksheets and to inventory turnover reports by
product class as well as by either AM or OEM. Based on our findings, we
are satisfied that Koyo allocated its ICCs between OEM and AM sales
properly.
Comment 2: Torrington alleges that NTN's reported inventory
carrying turnover period for U.S.-bound merchandise is unreliable and
should be rejected in favor of its average inventory carrying turnover
period for HM sales. Torrington states that NTN has not supported a
reported difference between production-to-shipment inventory periods
for U.S. and HM sales, and that the Department should presume that
U.S.-destined goods spend an equivalent amount of time in inventory as
HM goods. NTN responds that the inventory periods for HM sales are
properly calculated for the period from production to the first sale to
an unrelated party. Respondent also states that the inventory period
for ESP sales includes the time from production to shipment to NTN's
U.S. subsidiary and the time in the subsidiary's inventory until sale
to the first unrelated customer. NTN notes that this issue has been
verified in previous reviews and has been found accurate. NTN asserts
that Torrington's demand must be rejected without evidence to rebut the
accuracy of the calculation.
Department's Position: We disagree with Torrington. Although we did
not verify this particular aspect of NTN's response, we found at both
the HM and U.S. verifications that NTN's submitted data are basically
reliable. Therefore, because the credibility of NTN's data has been
established on an overall basis, we have no reason to disregard NTN's
reported inventory period and we have used this information for these
final results.
3C. Commissions
Comment 1: NSK argues that the Department incorrectly disallowed
its HM stock transfer commission (COMMH2), which consists of a premium
paid to distributors for purchasing products from other distributors
when a specific part was not available from NSK. NSK contends that its
stock transfer commission is a promotional expense, intended to
encourage distributors to locate stock, and that this payment should be
treated as an indirect expense.
Torrington argues that the Department correctly disallowed NSK's
stock transfer commission, since NSK did not demonstrate that the
reported COMMH2 is based on commissions paid on sales of in-scope
merchandise. Torrington notes that NSK claimed that the Department
should treat its stock transfer commission as a direct selling expense
in its questionnaire response but it is now claiming it as an indirect
promotional expense, and asserts that NSK has changed its position on
the appropriate treatment of this expense to avoid the Department's
disallowance of the entire expense because NSK allocated it on the
basis of both scope and non-scope merchandise.
Department's Position: We agree with NSK. Although NSK refers to
this expense as a ``commission,'' it is evident from the record that
this expense is not related directly to sales made by NSK to its
customers and is properly treated as an indirect selling expense
adjustment. This item is a promotional expense that does not relate to
any particular sale by NSK and does not vary with the quantity of
merchandise that NSK sells. See Zenith Electronics v. United States, 77
F.3d 426, 431 (CAFC 1996).
We do not accept Torrington's argument that we should disallow this
expense because NSK did not demonstrate that the expense is based
solely on commissions paid on sales of in-scope merchandise. Just as we
would not expect a respondent to be able to establish whether a non-
product-specific advertising expense results in more sales of in-scope
or out-of-scope merchandise, there is no reasonable way to establish
the effect of this particular program on in-scope versus out-of-scope
merchandise. As this program was equally available with respect to both
kinds of merchandise, and was not associated with any particular sale,
NSK's calculation of the expense was reasonable.
3D. Credit
Comment 1: Torrington argues that SKF Italy overstated HM credit
expenses by not using net prices in its credit calculation. Torrington
argues that the Department should either instruct SKF Italy to modify
its reporting of credit expenses for HM sales accordingly or reject SKF
Italy's HM credit expenses.
SKF Italy argues that its methodology is the same as that used and
approved by the Department in each of the previous four reviews of
these AFB orders.
Department's Position: We agree with Torrington. SKF Italy
calculated U.S.
[[Page 66487]]
credit expense based on prices net of discounts but did not follow a
similar methodology for HM credit expense. Because credit calculations
should be based on SKF Italy's net prices rather than its gross prices,
we have recalculated SKF Italy's HM credit expense based on prices net
of discounts for the final results.
Comment 2: Torrington contends that SKF Italy's allocation of HM
interest revenue, which is collected for late payments from customers,
is improper because it does not account for the facts that (1) such
revenues are likely to vary depending on the time elapsed between the
due date and actual payment, and (2) SKF Italy might not always collect
interest revenue, even if an amount is due. Torrington notes that,
while SKF's reporting method for credit expenses reflects the amount of
time between invoice date and payment date correctly, its reporting
method for interest revenue does not achieve this. Torrington concludes
that the Department should either instruct SKF Italy to modify its
reporting of interest revenue for HM sales or reject SKF Italy's HM
credit expenses.
SKF Italy argues that its methodology is the same as that which the
Department used in each of the previous four reviews of these AFBs
orders. SKF Italy insists that the Department rejected a similar
argument Federal-Mogul Corp. made in the 92/93 review and further
argues that Torrington's assertion that interest revenues are likely to
vary depending on the time elapsed is hypothetical and not supported by
the record evidence pertaining to SKF Italy. SKF Italy contends that it
calculated its claimed interest revenue adjustment only on interest
revenue it received, not interest revenue due.
Department's Position: We disagree with Torrington that we should
disallow HM credit expenses due to alleged deficiencies in the
reporting of interest revenue. Although we adjusted SKF Italy's HM
credit expense (see our response to Comment 1, above), its calculation
of credit expenses was reasonable and accurate to the extent
practicable. We cannot disallow one claimed adjustment because of
claimed deficiencies in another indirectly related adjustment.
Therefore, we have used SKF Italy's claimed HM credit expense as we
have recalculated it (see our response to Comment 1, above) for the
final results.
While we agree with Torrington that, in theory, interest revenue
should be allocated in a similar manner as credit expense (in this
case, on a customer-specific basis), it is unreasonable to do
otherwise. In this case, we do not have the data on the record to
perform such a reallocation. In fact, we do not have any evidence
indicating whether such a reallocation is possible based on SKF Italy's
accounting records. Accordingly, we have allowed interest revenue as a
direct addition to FMV because it is reasonable to base interest
revenue upon the actual amount collected by SKF Italy.
3E. Indirect Selling Expenses
Comment 1: Torrington states that, because ISEs relate to all sales
and SNR France allocated HM ISEs according to LOT, the Department
should reject the reported HM ISEs for SNR France and apply an adjusted
rate to all SNR France's HM sales. Citing NTN II at 1094-95, Torrington
contends that the ISEs SNR France reported appear to be related to all
HM sales or do not vary according to LOT. Torrington states that it is
likely that SNR France's HM ISE methodology shifts expenses between
LOTs (primarily from non-distributor sales to distributor sales) and
reduces margins in the process.
SNR France argues that it has explained its ISE allocation
methodology according to LOT in its response, and the Department
verified SNR France's allocation methodology fully. SNR France claims
that many of its ISEs vary according to LOT and are incurred entirely
for one of the two HM LOTs. SNR adds that, as shown in the responses,
its ISEs vary either by employee time spent or by sales volume and
value through OEMs and distributors that it identified separately and
accounted for in its record system as maintained in the ordinary course
of trade.
With respect to the shifting of expenses from non-distributor sales
to distributor sales, SNR France states that, in fact, expenses
associated with distributors are greater than those associated with
non-distributor sales. SNR France, therefore, does not agree with
Torrington's argument that SNR France's allocation methodology shifts
expenses from one level of sales to another. SNR France states that a
large majority of the expenses that were reported for distributor sales
were incurred solely on distributor sales.
Department's Position: We agree with SNR France that it has
reported ISEs properly according to LOT. SNR France has demonstrated
that it incurs many of its expenses at a particular LOT. SNR France
also demonstrated that its records segregate ISEs on a LOT-specific
basis. In this respect, SNR France's reporting differs from the
respondent in NTN I at 1094, which was unable to demonstrate that
certain ISEs varied according to LOT. Further, as the Court noted in
NTN I, our long-established practice has been to accept a respondent's
accounting methodology as long as that methodology is reasonable and is
used in the respondent's normal course of business. Id. at 1094.
Accordingly, we have determined that SNR France's ISE-reporting
methodology is appropriate.
Comment 2: Torrington claims that SKF Sweden, France, and Italy are
each over reporting HM ISEs with respect to sales made by Steyr
Walzlager, an SKF affiliate. (Steyr is an Austrian affiliate of the SKF
Group that made POR sales of SKF bearings (after purchasing them from
the SKF companies) back to customers in Sweden, France, and Italy.)
Torrington identifies two alleged deficiencies with respect to the
reporting of HM ISEs for such sales: (1) These SKF companies did not
adequately demonstrate that their own reported HM ISEs incurred on such
sales (reported in the field INDSEL1H) are not duplicative of the
expenses that they claim for Steyr on the same sales (reported in the
field INDSEL2H); and (2) these SKF companies are improperly claiming
additional expenses on such sales (included in the field INDSEL1H) that
represent export selling expenses incurred by the SKF companies on the
initial sales to Steyr. With respect to the second point, Torrington
states that, for a similar situation in AFBs I, the Department
classified certain expenses incurred by INA in Germany as export
selling expenses even though they were incurred by a German parent
company in Germany. Torrington suggests that the Department disallow
all expenses reported in the INDSEL1H field on all Steyr sales, citing
The Timken Company v. United States, 673 F. Supp. 495, 513 (CIT 1987)
(Timken), in support of the proposition that the respondent has the
burden of supporting favorable adjustments.
These SKF companies respond that they did not report duplicative HM
ISEs on sales by Steyr. They state that, for such sales, they reported
only expenses that they incurred in selling the products to Steyr,
along with indirect expenses incurred by Steyr in selling to the
respective markets (i.e., the SKF companies did not report their own
ISEs incurred on HM sales). SKF Sweden, France and Italy state that
this methodology is consistent with their prior reporting and has been
accepted and/or verified by the Department in prior reviews.
Department's Position: We agree with SKF Sweden, France, and Italy.
In their questionnaire responses, these SKF companies stated that they
incur only
[[Page 66488]]
two types of HM ISEs with respect to Steyr sales, namely their export
selling expenses in selling to Steyr (INDSEL1H) and Steyr's ISEs
incurred on sales made in the respective home markets (INDSEL2H). In
Timken, the court stated that the Department ``acts reasonably in
placing the burden of establishing adjustments on a respondent that
seeks the adjustments and that has access to the necessary
information.'' See Timken at 513. SKF Sweden, France and Italy have met
that burden with respect to Steyr sales through the explanations
provided in their submissions and through verification. Further, it is
the Department's practice to accept the information submitted by
respondents as factual, absent verification, unless it has reason to
believe otherwise. The record demonstrates clearly that SKF Sweden
incurs only two types of ISEs with respect to sales in the HM, and
there is nothing on the record to indicate that either of these
reported expenses are duplicative.
We also disagree with Torrington's argument that, in AFBs I, we
determined that selling expenses such as those incurred in connection
with sales to Steyr are export selling expenses that should not be
reported on HM sales. In AFBs I, we found that certain expenses that
INA claimed were related to HM sales were in fact incurred on U.S.
sales. We treated the selling expenses incurred by INA on U.S. sales as
U.S. ISEs, noting that a portion of the cost of INA's export team could
be tied to sales made in the United States. Id. at 31692. In the
present case, SKF Sweden, France and Italy have demonstrated that all
reported expenses are associated with HM sales.
Comment 3: Torrington contends that the Department should reject
SKF France's and SKF Italy's calculations of separate indirect expenses
for OEM sales and AM sales in both the U.S. market and the HM.
Torrington states that the Department has rejected similar reporting by
other respondents in previous reviews (referencing the Department's
position regarding NTN's ISE allocations in AFBs III (at 39750) and
AFBs IV (at 10940)). Torrington argues that these precedents establish
that the Department recognized that ISEs are incurred on all sales and,
therefore, they should be calculated as one rate for both OEM and AM
sales.
The SKF companies claim that the calculation of two separate ISE
rates is consistent with how they incurred these expenses and with
their reporting methodology in each of the four prior administrative
reviews. SKF France adds that the Department verified this methodology
and/or accepted it in each of these previous reviews.
Department's Position: We disagree with Torrington. We have
determined that both SKF France and SKF Italy have demonstrated that
they can segregate such expenses reasonably between OEM and AM sales.
We note that SKF France and SKF Italy stated that the AM division sells
to small OEMs as well as the AM. We examined this situation and found
that the AM factor is the appropriate factor to apply to these small
OEMs. These SKF companies claimed, however, the OEM factor for these
small OEMs. Nevertheless, the application of the OEM factor, instead of
the AM factor, to such sales results in a smaller downward adjustment
to FMV and is, therefore, a conservative measure of the expenses
incurred in selling to small OEMs. For the above reasons, we have used
ISEs for SKF France and Italy as reported for these final results.
Comment 4: Torrington argues that Koyo's HM ISE claim, which the
Department accepted, included a miscellaneous category that constituted
the fifth largest category of Koyo's ISEs. Torrington maintains that
there is insufficient detail regarding this miscellaneous category to
determine whether these expenses are permissible. Torrington states
that Koyo's ISEs appear to have increased for this POR even though
total sales dropped significantly. Torrington argues that, at a
minimum, this category of miscellaneous expenses should be deducted
from Koyo's total ISEs for the final results.
Koyo maintains that the categories it used for the ISEs worksheet
in the response are the same account categories that appear in its
accounting records. Koyo notes that this is the same reporting
methodology that Koyo has used, and the Department has accepted, in all
prior reviews of the AFB orders. Finally, Koyo states that the
Department verified its reporting of ``other ISEs'' in this review and
noted in its verification report that it was able to tie all selected
items to source documents.
Department's Position: We agree with Koyo. When we verified the
various items that comprise ``other ISEs', we not only tied selected
expenses to source documents but we also examined the nature of these
items and found that they were properly included as ISEs.
Comment 5: Torrington contends that the Department should reject
certain downward adjustments to NTN's U.S. ISEs, including: (1) An
adjustment for interest expenses that NTN allegedly incurred when
borrowing to finance cash deposits of estimated antidumping duties, and
(2) an adjustment for commissions paid to a related party on certain PP
sales.
Torrington objects to NTN's reduction of its pool of U.S. ISEs by
the amount it paid in interest expenses on loans taken out to cover
cash deposits of estimated antidumping duties for entries during this
period. Petitioner notes that the Department rejected NTN's downward
adjustment to ISEs for interest paid on loans to finance cash deposits
in AFBs III and contends that the Department should reject the downward
adjustment in this review for the same reasons. Torrington also argues
that certain expenses that NTN classified as related-party U.S.
commissions appear to be directly related to PP sales to one U.S.
customer. Citing LMI-La Metalli Industriale S.p.A. v. United States,
912 F.2d 455, 459 (Fed. Cir. 1990), Torrington contends that the
Department must examine the circumstances surrounding related-party
commissions before determining that they should not be used in the
Department's analysis. Torrington concludes that the Department should
consider these expenses to be direct selling expenses in the U.S.
market and contends that, because NTN failed to report the commission
rate it paid to the related party, the Department should resort to BIA
in determining the commission amount to be deducted. Torrington claims
that these actions reflect current Department policy positions.
Department's Position: We disagree with Torrington regarding the
adjustment for interest expenses that NTN incurred when borrowing to
finance cash deposits of estimated antidumping duties, and consider it
proper to allow the downward adjustment to U.S. ISEs. NTN Bearing
Company of America (NBCA) incurred expenses on actual loans that it
sought specifically to pay antidumping duty cash deposits. As such, the
Department considers these expenses to be comparable to expenses for
legal fees related to antidumping proceedings. The expenses were
incurred only because of the existence of the antidumping duty orders
and NTN's involvement therein. Therefore, the expenses cannot be
categorized as selling expenses. It is the Department's longstanding
practice to not treat expenses related to the dumping proceedings as
selling expenses. For example, in Color Television Receivers From the
Republic of Korea; Final Results of Administrative Review of
Antidumping Duty Order, 58 FR 50336, the Department stated that such
expenses ``are not expenses incurred in
[[Page 66489]]
selling merchandise in the United States.'' The CIT recognized this
line of reasoning in Daewoo Electronics Co. v. United States, 712 F.
Supp. 931 (CIT 1989) (Daewoo), when it concluded that the
classification of such expenses as selling expenses subject to
deduction from USP ``would create artificial dumping margins and might
encourage frivolous claims . . . which would result in increased
margins.'' These expenses were incurred as part of the process
attendant to the antidumping duty orders. Had the antidumping duty
orders not existed, the expenses would not have been incurred. By their
nature, such expenses are not a selling expense, and they should not be
deducted from USP.
We clarified our position on this issue in our Results of
Redetermination Pursuant to Court Remand, Slip Op. 96-37, submitted to
the CIT on September 20, 1996. In that remand the Department was
ordered to explain its acceptance of the downward adjustment to NTN's
ISEs in AFBs III. In the redetermination we determined that the
interest expenses to finance cash deposits were not borne, directly or
indirectly by NBCA, to sell the subject merchandise in the United
States. Consequently, these expenses were not eligible to be deducted
from USP under section 772(e) of the Tariff Act. We also stated that we
believed that we erred in not allowing the offset to U.S. ISEs in the
92/93 administrative review.
We also disagree with Torrington regarding the related-party
commission. NTN stated that it made commission payments to NBCA for
expenses that NBCA incurred with respect to sales to a specific PP
customer. In its questionnaire responses, NTN provided specific data on
the expenses that NBCA incurred with respect to the sales in question.
Accordingly, rather than including in our analysis the commission,
which is the transfer payment between NTN and NBCA, we have taken into
account the actual expenses NBCA incurred with respect to these sales.
Further, an examination of the specific types of expenses that NBCA
incurred with respect to the sales in question indicates that the
expenses are those that we typically consider to be indirect expenses
incurred by sales organizations. Therefore, we have used the actual
expenses that NBCA incurred with respect to the sales in question in
our analysis, and we have treated them as ISEs.
Comment 6: Torrington argues that the Department should reject
Koyo's claim for the deduction of imputed interest expense on
antidumping cash deposits from its U.S. ISEs.
Department's Position: We disagree with Torrington. The imputed
expenses in question represent expenses comparable to expenses for
legal fees related to antidumping proceedings. The expenses were
incurred only because of the existence of the antidumping duty orders
and Koyo's involvement therein. Therefore, these expenses cannot be
categorized as selling expenses. We and the CIT have recognized that
such expenses should not be included as a cost of selling the
merchandise. See, e.g., Daewoo Electronics Co. v. United States, 712 F.
Supp. 931, 947 (CIT 1989).
In Federal Mogul II, the CIT recognized our practice of imputing
expenses where such expenses are not clearly recorded in a respondent's
records. When we impute an expense not otherwise recorded, we adjust a
respondent's actual selling expenses by adding to them the amount of
the imputed selling expenses. Similarly, with respect to Koyo's
interest expense, we removed from selling expenses an amount
attributable to cash deposits, which do not represent a selling expense
at all. As Koyo properly established the amount of cash deposits it
paid during the POR, we must calculate an amount representing the
expense to Koyo of the lost use of the cash deposits. This is required
by section 772(e)(2) of the Tariff Act, which only permits us to deduct
selling expenses from ESP. Therefore, we have allowed Koyo's claimed
deduction of imputed interest expense on antidumping duty deposits from
its U.S. ISEs.
Comment 7: Torrington argues that the Department should reject
NTN's and NTN Germany's allocation of certain indirect expenses to LOTs
in the United States and HM, as it did in the two previous reviews,
because NTN failed to justify or support with evidence the allocation
of these expenses according to LOTs.
Department's Position: We agree with Torrington. The CIT has upheld
the Department's decision in AFBs III to neutralize the allocation of
expenses based on LOTs in NTN II. The Department determined in AFBs III
that the methods NTN and NTN Germany used for allocating their ISEs did
not bear any relationship to the manner in which they incurred the
expenses in question, thereby leading to distorted allocations.
Further, we found that the allocations NTN and NTN Germany calculated
according to LOTs were misplaced and that they could not conclusively
demonstrate that their ISEs vary across LOTs. In the course of this
review respondents did not provide any sufficient evidence
demonstrating that their selling expenses are attributable to LOTs.
Therefore, we have recalculated NTN's and NTN Germany's expenses to
represent selling expenses for all HM sales for the final results.
Comment 8: Torrington notes that NTN submitted selling expenses for
CV on the basis of customer category. Petitioner believes such a basis
is improper and should be rejected in favor of selling expenses based
on all HM sales. Petitioner contends that LOT is irrelevant to the
calculation of CV. Petitioner also notes that the Department rejected
this calculation methodology in AFBs III and AFBs IV.
Department's Position: We agree with Torrington. NTN has not
provided sufficient evidence demonstrating that selling expenses are
attributable to LOT. NTN's allocation of expenses according to LOT is
unacceptable for sales used to calculate FMV and, for the same reasons,
it is unacceptable for purposes of calculating CV in our analysis of
NTN. Therefore, we have recalculated NTN's expenses for CV to represent
those expenses for all HM sales.
3F. Differences in Merchandise
Comment 1: NTN contends that the Department's methodology for
calculating the 20-percent difference-in-merchandise (DIFMER) ceiling
is incorrect. NTN notes that until AFBs III the Department had
calculated the 20-percent DIFMER ceiling as a percentage of the U.S.
variable cost of manufacturing. NTN complains that the Department's
change in testing, from examining the ratio of the difference in U.S.
and HM variable costs to U.S. variable cost (U.S. variable cost--HM
variable cost/U.S. variable cost) to examining the ratio of the
difference in U.S. and HM variable costs to U.S. COM (U.S. variable
cost--HM variable cost/U.S. COM), was unwarranted, illogical and
unnecessary. NTN submits that the new methodology thwarts the
Department's intention of defining HM merchandise as similar only when
the costs of the HM merchandise are reasonably close to the costs of
U.S. merchandise because the new methodology broadens the range of
costs, thereby allowing less similar merchandise to be considered
comparable.
Department's Position: We disagree with NTN. The Department's
standard for commercial comparability was set forth in IA Policy
Bulletin 92.2 (July 29, 1992). In that bulletin we explain that:
(a)lthough the 20% guideline has been used for a number of years,
there have been some differences in practice in the calculation
formula. While the numerator has always
[[Page 66490]]
been the difference in variable production cost, different
denominators have been used. They have sometimes been price, other
times total manufacturing costs, and yet other times the total
variable manufacturing costs. * * * Because variable manufacturing
costs change as a share of total manufacturing costs from product to
product, the size of a 20% difference would consequently vary as
well in relation to both the price and total manufacturing costs.
Therefore, a more stable basis for the denominator is the total
manufacturing costs, and it has been chosen for uniform use.
Since the issuance of this policy bulletin, the Department has used
the 20-percent-of-COM guideline to determine whether HM merchandise is
reasonably comparable to the exported merchandise. This methodology was
employed in AFBs III (at 39766) and AFBs IV and was upheld by the CIT
in NTN II.
4. Cost of Production and Constructed Value
4A. Cost-Test Methodology
Comment 1: FAG/Barden asserts that the Department erred in
excluding sales below COP for Barden. FAG/Barden argues that the
domestic industry has not made an allegation of sales below cost
against FAG in the United Kingdom since AFBs III. Further, FAG/Barden
contends that the cost allegation did not include specific COM data
particular to Barden or to Barden products. FAG/Barden points out that
the below-cost allegation was brought specifically and exclusively
against a particular firm, FAG U.K., and a single product, purchased
ball bearings, and the Department did not apply the below-cost test to
Barden's product when merging the two companies rates in the prior two
reviews. FAG/Barden requests that the Department correct its computer
program and exclude Barden's HM sales from the application of the cost
test in the final results.
Torrington argues that the Department did not err in applying a
cost test to Barden's HM sales. Torrington asserts that the Department
was consistent in its practice to exclude such sales because it found
that Barden had sold these HM sales at below-cost prices. Further,
Torrington argues, given that FAG U.K. and Barden are related parties
and have been recognized to constitute a single legal entity for
virtually every purpose of this review, the Department had an objective
basis to suspect that Barden engaged in below-cost HM sales. Torrington
requests that, for purposes of the final results, the Department not
exempt Barden's HM sales from the application of the cost test.
Department's Position: Consistent with the CIT's instructions in
FAG II, we are treating FAG U.K. and Barden as separate companies for
this review. However, the court did not issue FAG II until July 10,
1996. Prior to that date we considered FAG (U.K.) and Barden to be one
entity, and, upon receipt of the consolidated questionnaire response,
we applied the cost test to all sales made by that entity. As a result
of applying the cost test, there is now information on the record that
shows that Barden made below-cost sales.
In light of the Court's decision that we improperly collapsed the
two companies, we agree with FAG/Barden that we previously did not have
reason to believe or suspect that Barden made below-cost sales.
However, we cannot disregard the fact that we found that Barden-made
products were being sold in the home market below COP. Therefore, we
must proceed in accordance with the statute, which requires that we
disregard such sales. See section 773(b) of the Tariff Act.
Comment 2: FAG Germany contends that the Department made an error
in its margin analysis program by not eliminating models and sales that
failed the cost test from the HM database.
Torrington states that FAG Germany is correct in that the
Department should eliminate certain below-cost sales from the HM
database, but cautions the Department to ensure that, where ninety
percent or more of a model's sales fail the cost test, the program will
match the U.S. sale to CV instead of matching to HM bearings in the
same family.
Department's Position: We disagree with both FAG Germany and
Torrington that a clerical error has occurred. When ninety percent or
more of sales of a model are below cost, we disregard all sales of this
model from our analysis and use CV as the basis for FMV for U.S. sales
that match to such models. When between ten and ninety percent of sales
of a model are below cost, we disregard the individual below-cost sales
in calculating FMV. We use the remaining above-cost sales of such
models in our analysis, and match such sales in the same manner that we
match all HM sales. We have changed our matching methodology in one
respect, however, applicable to all HM sales. We do not match U.S.
sales to HM sales of similar models where we have disregarded all
contemporaneous identical HM sales as below-cost sales. In this
instance, we resort directly to CV. The program achieves this result.
The ``error'' to which FAG and Torrington refer is not an error in
programming, but simply our way of keeping a marker in the HM sales
database so that we do not match to similar merchandise when we should
be matching to CV.
Section 773(b) of the Act requires that:
Whenever sales are disregarded by virtue of having been made at
less than the cost of production and the remaining sales, made at
not less than the cost of production, are determined to be
inadequate as a basis for the determination of foreign market value
under subsection (a) of this section, the administering authority
shall employ the constructed value of the merchandise to determine
its foreign market value.
As explained in Policy Bulletin 92/4, December 15, 1992, ``(i)n
determining FMV, if the Department finds that sales of a given model,
otherwise suitable for comparison, are sold below the cost of
production, and the remaining sales of that model are inadequate to
determine FMV, the Department will use constructed value to determine
FMV.'' In defining the most similar merchandise, section 771(16) of the
Act directs us to descend through a hierarchy of preferences for
determining which merchandise sold in the foreign market is most
similar to the merchandise sold in the United States. Section 771(16)
also states that such-or-similar merchandise is the merchandise that
falls into the first hierarchical category in which we can make
comparisons. Section 771(16) does not direct us to condition the
selection of the best comparison model on any basis other than
similarity of the merchandise. Therefore, the Department does not
select such or similar merchandise only from models which remain after
conducting the below-cost test. As stated in the Policy Bulletin,
``(t)he statute, therefore, directs us to the use of constructed value
when the most similar model is sold below cost.''
In conducting administrative reviews, the Department relies on the
90/60-day guideline to establish the contemporaneity of sales from
which to choose its HM comparison sales 3. If we are conducting a
COP test, it is possible that we disregard all sales of some HM models
within the 90/60-day window, either because between 10 and 90 percent
of the entire POR's sales are below cost or because more than 90
percent of the entire POR's sales are
[[Page 66491]]
below cost. In the AFB cases, we examine first our contemporaneity
window to find identical merchandise to use as our comparator. Where
there are no sales in the HM of identical merchandise, we identify the
``family'' of bearings as similar merchandise. If we have selected
identical merchandise as our comparator with the contemporaneity
guideline in mind, but we disregard all contemporaneous sales of that
identical model as a result of the COP test, i.e., all sales within the
90/60-day window, the logic of the statute described in the Policy
Bulletin still applies. In other words, in determining FMV, if the
Department finds that contemporaneous sales of a given model, otherwise
suitable for comparison, are sold below COP, and the remaining sales of
that model are inadequate to determine FMV, the Department uses CV to
determine FMV.
---------------------------------------------------------------------------
\3\ This guideline establishes the following order of preference
for matching sales of subject merchandise to HM sales. We first
examine whether any identical HM sales were made in the same month
as the U.S. sale. If there were no such identical sales in the same
month, we look for HM sales in the three months that preceded the
U.S. sale. Finally, we look for HM sales in the two months following
the U.S. sale. If we do not find HM identical sales during this
``90/60'' day window, we repeat this process for similar
merchandise.
---------------------------------------------------------------------------
In conducting these administrative reviews of the AFB orders, we
have relied either on the 90/60-day guideline to establish the
contemporaneity of sales from which to choose HM comparison sales or,
as explained in our preliminary results, we have relied on annual-
average FMVs. Where we have relied on annual-average FMVs, the
applicability of the Policy Bulletin's interpretation of the statute is
clear. If between 10 and 90 percent of a model's sales are below cost
and we disregard those below-cost sales, above-cost sales remain in the
annual-average FMV. Where we have identified that only HM sales which
fall within the 90/60-day contemporaneity guideline are suitable as
potential matches to U.S. sales, the Policy Bulletin's interpretation
of the statute applies equally to the pool of potential matches, i.e.,
those sales within the 90/60-day window. It would be inappropriate to
apply the Policy Bulletin's interpretation differently based on
different contemporaneity periods. Moreover, the Department's
longstanding practice of applying the 10/90 test across the entire POR
is not affected by the 90/60-day guideline, since the 10/90 test is an
interpretation of the quantity requirements of section 773(b)(1).
Therefore, for these final results, if we disregarded all
contemporaneous sales of the best model because they are below COP, we
relied on CV in our determination of FMV.
4B. Research and Development
Comment 1: Torrington claims that the COP and CV formats in SKF
Germany's cost response include separate entries only for general
research and development (R&D) expenses but that there are no
corresponding entries for factory R&D costs. Torrington asks the
Department to determine whether SKF Germany allocated its factory R&D
expense properly and, if not, to resort to an appropriate BIA.
SKF Germany argues that its overhead variance is computed on a
product-division and factory basis, thereby making that variance also
specific on a class-or-kind basis. It claims that, as stated in its
cost response, basic R&D is conducted by SKF Germany ERC in the
Netherlands, and SKF Germany only conducts limited process-engineering
and application R&D at the factory level. According to SKF Germany,
this limited factory-level R&D is included in the fixed overhead
expense of each factory and product division, as adjusted for the
product division and factory-specific overhead variances and job order
variances. SKF Germany contends that this methodology captures the
actual costs of process and application engineering at the factory
level in the COM on a class-or-kind basis. SKF Germany asserts that,
since the involved operations are not product-specific, inclusion of
the factory-level actual process and application engineering costs in
factory overhead, and thereby the COM of each bearing, is the proper
methodology for reporting the costs. Since these costs are included in
overhead costs, SKF Germany concludes, a separate breakout for factory
R&D costs is not possible.
Department's Position: We disagree with Torrington. SKF Germany's
overhead variance is computed on a product- and factory-specific basis.
Hence, the variance is also specific on a class-or-kind basis. SKF
Germany's methodology captures the actual costs of process and
application engineering at the factory level in the COM on a class-or-
kind basis. We have accepted SKF Germany's methodology because the
costs of necessary operations are not product-specific but relate to
the products generally produced in the product division or are in the
factory overhead. In this case, the COM of each bearing on a class-or-
kind basis reflects an acceptable methodology for reporting these
costs. SKF Germany accounted for its factory-level R&D costs and
allocated these costs on a class-or-kind basis appropriately.
Comment 2: Torrington argues that the Department should restate FAG
Germany's R&D costs for all products under review. Torrington observes
that the questionnaire asked respondents to report ``product-specific
or product-line'' R&D costs and, Torrington claims, while FAG Germany
reported average amounts for all roller bearing products calculated
using a broadly based factor, statements by FAG Germany on the
administrative record suggest that actual amounts could have been
reported. Torrington asks that the Department restate FAG Germany's R&D
cost by substituting partial BIA for R&D costs in FAG Germany's COP and
CV datasets.
FAG Germany argues that it incurs the bulk of R&D costs before the
first regular production unit is manufactured. FAG Germany contends
that, because GAAP requires that most R&D costs be expensed when
incurred and the bulk of R&D costs incurred during the POR relate to
products which have not yet begun production, R&D costs for individual
products reported in its response would be minimal or non-existent if
calculated in the manner petitioner suggests. FAG Germany states that,
to the extent possible, R&D costs have been assigned to the product
lines for which they were incurred. FAG Germany also states that the
Department verified FAG Germany's methodology for calculating and
allocating R&D costs and found no discrepancies.
Department's Position: We agree with FAG Germany. When we examined
FAG Germany's accounting system at verification, we found that
allocating FAG Germany's R&D expenses on a product-specific basis would
not be feasible because a large portion of R&D projects are on-going
and benefit more than one product or category of products. FAG
Germany's response and the documentation it provided at verification
confirmed that, to the extent possible, R&D expenses have been assigned
directly to particular manufacturing and distribution cost-center
areas. Thus, we conclude that FAG Germany's allocation method for R&D
costs is appropriate.
4C. Profit for Constructed Value
Comment 1: Torrington argues that the Department should recalculate
profit for CV to exclude below-cost sales. Torrington acknowledges that
the Department has previously rejected this position (citing AFBs IV at
10922-23) but argues that, from a policy perspective, the Department
should adopt an approach that is consistent with the long-standing
construction of ``ordinary course of trade'' under the GATT code and
find that below-cost sales are outside the ordinary course of trade
and, therefore, inappropriate for use in the CV profit calculation.
Respondents FAG, INA, NSK, NTN, and SKF maintain that it would be
incorrect for the Department to disregard below-cost sales in the
calculation of profit for CV, arguing that such an action is not
supported by the
[[Page 66492]]
statute and would be inconsistent with prior reviews. Respondents first
note that the Department has rejected Torrington's position in past
reviews and that the CV profit methodology used in these previous
reviews has been upheld by the CIT (citing AFBs II at 28374, AFBs III
at 39752, AFBs IV at 10922, and Torrington I at 633). NSK adds that
below-cost sales can only be excluded from the CV profit calculation if
such sales are ``outside the ordinary course of trade,'' which does not
exclude below-cost sales per se. NSK states that it is well accepted
that respondents in these reviews make some sales above and some sales
below cost as a regular business practice during the ordinary course of
trade.
Department's Position: We disagree with Torrington that the
calculation of profit should include only sales priced above the COP.
Section 773(e)(1)(B) of the Tariff Act directs that profit should be
equal to that usually reflected on sales: (1) Of the same general class
or kind of merchandise; (2) made by producers in the country of
exportation; (3) in the usual commercial quantities; and (4) in the
ordinary course of trade. Thus, the statute does not explicitly provide
that below-cost sales be disregarded in the calculation of profit. The
detailed nature of this subsection suggests that any requirement
concerning the exclusion of below-cost sales in the calculation of
profit for CV would explicitly be included in this provision.
Accordingly, it would be inappropriate to read such a requirement into
the statute. See AFBs III at 39752 and AFBs IV at 10922. Further, the
``ordinary course of trade'' provision in the statute (section 771(15))
does not include or even mention below-cost sales. Finally, Torrington
has not demonstrated that the below-cost sales at issue are actually
outside the ordinary course of trade. See also FAG III and case cited
therein.
Comment 2: Torrington argues that, if the Department rejects
petitioner's position that below-cost sales should not be included in
calculating profit for CV, the Department should assign a profit rate
of zero to such sales instead of the actual, negative, profit rates
realized. Torrington suggests that this result could be reached by
setting the negative profit amounts realized on such sales to zero in
the profit ratio numerator, while continuing to include the actual cost
of production of unprofitable sales (along with all other sales) in the
profit ratio denominator. Torrington contends that the inclusion of
negative profit rates on such sales in the CV profit calculation allows
respondents to offset or ``mask'' profits on selected sales with losses
on unprofitable sales. Torrington states that setting negative profits
to zero would be consistent with other Department practices designed to
avoid the possibility of manipulation via targeted high-priced and low-
priced sales, and cites as an example the Department's practice of
setting negative transaction-specific dumping margins to zero when
calculating the weighted-average dumping margin.
FAG, INA, NSK, NTN, and SKF respond that Torrington's proposal
should be disregarded because the Department's current practice of
calculating profit for CV without regard to the profitability of
individual sales is statutorily correct and has been upheld by the CIT.
SKF notes in addition that Torrington provides no direct statutory or
case law support for its position and contends that Torrington's
argument is incorrect because: (1) The statute requires that profit be
calculated for the general class or kind of merchandise at issue
without regard to the inclusion or exclusion of particular sales; (2)
Congress intended profit for CV to be a ``representative'' profit
(including both below-cost and above-cost sales) and that the remedy
that Congress provided for situations involving a profit too low to be
considered representative is the eight-percent statutory minimum; (3)
Congress addressed the concern regarding ``targeted'' below-cost sales
through the below-cost provisions of the statute; and (4) Torrington's
suggested calculation methodology is distortive because it excludes
below-cost sales in the numerator (total profit) but includes such
sales in the denominator (total COP).
FAG adds that the statute requires that the profit must be that
``usually reflected'' in sales of the same general class or kind. FAG
contends that Torrington's methodology does not meet this requirement
because it excludes profit on certain sales in the general class or
kind, namely those made at below-cost prices.
Department's Position: We disagree with Torrington for the same
reasons as those provided in Comment 1, above. Specifically, the
statute requires that we base profit on sales of the general class or
kind of merchandise at issue, provided that they are made in the
ordinary course of trade. With respect to such sales, the statute does
not provide that the sale, if profit is negative, be treated as a zero-
profit sale.
Comment 3: Torrington argues that the Department should calculate
profit for CV based on profits observed on reported HM sales made
during the designated sample weeks, not on sales of the same general
class or kind of merchandise in the HM as calculated by respondents.
Torrington notes that the Department has previously rejected this
position (citing AFBs IV at 10923), but asks that the Department
reconsider its position for the following reasons: (1) Use of sample-
week sales insures that profit data are based on a verified database of
sales of in-scope merchandise; and (2) general class-or-kind profit
data are based on the particular cost-accounting methods employed by
respondents and do not provide assurance that the reported profits are
based on sales of in-scope merchandise.
FAG, INA, and NSK respond that Torrington has provided no new
evidence to alter the Department's longstanding position. Respondents
contend that the Department's preference for non-sampled profit data is
consistent with section 773(e)(1)(B) of the Tariff Act, which requires
the use of profit based on sales of the same general class or kind of
merchandise, not such-or-similar merchandise.
Department's Position: We disagree with Torrington with respect to
calculating profit on the basis of sample-week sales. See AFBs III at
39752 and AFBs IV at 10923. Because the profit on sales of such-or-
similar merchandise may not be representative of the profit for the
general class or kind of merchandise, we requested profit information
based on the general class or kind of merchandise. This method for
calculating profit for CV is in compliance with section 773(e) of the
Tariff Act and has been upheld by the CIT. See FAG III.
Comment 4: Torrington argues that the Department should exclude
from the profit calculation sales to related parties that were not at
arm's-length prices. Torrington states that this policy has been
employed in other administrative reviews (citing AFBs IV at 10921 and
Certain Hot-Rolled, Cold-Rolled, Corrosion-Resistant and Cut-to-Length
Carbon Steel Flat Products from Korea, 58 FR 37176). Torrington
requests that the Department ensure that the CV profit calculations for
a number of companies, including NTN, Koyo, NSK, and SNR, do not
include non-arm's-length sales.
NSK responds that it only made sales to unrelated parties in the
HM, and that this issue therefore does not apply to NSK. NTN states
that the Department did not exclude any of its related-party sales in
the 92/93 review and requests that the Department include all HM sales
in the CV profit calculation for this review.
[[Page 66493]]
Department's Position: We agree with Torrington, in part. As we
stated in AFBs IV, contrary to Torrington's contention, there is no
basis for automatically excluding, for the purposes of calculating
profit for CV, sales to related parties that fail the arm's-length
test. Section 773(e)(2) of the Tariff Act provides that a transaction
between related parties may be ``disregarded if, in the case of an
element of value required to be considered, the amount representing
that element does not fairly reflect the amount usually reflected in
sales in the market under consideration.'' The arm's-length test, which
is conducted on a class-or-kind basis, determines whether sales prices
to related parties are equal to, or higher than, sales prices to
unrelated parties in the same market. This test, therefore, is not
dispositive of whether the element of profit on related-party sales is
somehow not reflective of the amount usually earned on sales of the
merchandise under consideration.
Related-party sales that fail the arm's-length test do give rise to
the possibility, however, that certain elements of value, such as
profit, may not fairly reflect an amount usually earned on sales of the
merchandise. We considered whether the amount for profit on these sales
to related parties was reflective of an amount for profit usually
experienced on sales of the merchandise. To do so, we compared profit
on sales to related parties that failed the arm's-length test to profit
on sales to unrelated parties. If the profit on sales to related
parties varied significantly from the profit on sales to unrelated
parties, we disregarded related-party sales for the purposes of
calculating profit for CV. We first calculated profit on sales to
unrelated parties on a class-or-kind basis. If the profit on these
sales was less than the statutory minimum of eight percent, we used the
eight-percent statutory minimum in the calculation of CV. If the profit
on these sales was equal to or greater than the eight-percent statutory
minimum, we calculated profit on the sales to related parties that
failed the arm's-length test and compared it to the profit on sales to
unrelated parties as described above. If the profits on such sales to
related parties varied significantly from the profits on sales to
unrelated parties, we excluded those related-party sales for the
purpose of calculating profit on CV. See AFBs IV at 10922.
Comment 5: Torrington argues that the Department improperly
accepted the statutory minimum profit figures submitted by a number of
companies, including NTN, Koyo, NSK, and NMB/Pelmec, without
independently testing them. Torrington argues that the Department
should test these claims using the sales and cost data submitted by
respondents, adjusted for below-cost sales and sales to related
parties.
NMB/Pelmec responds that it calculated weighted-average profit
margins and determined whether the actual profit was above or below the
statutory minimum before applying it to CV. NMB/Pelmec contends,
therefore, that it performed a proper analysis of the profit margins
prior to entering the information into the computer database.
Department's Position: We disagree with Torrington. Torrington's
proposal amounts to taking the higher of the reported profit for the
general class or kind of merchandise or that found using the reported
sales and cost data, which is inappropriate for the reasons we stated
in response to Comment 3. As noted in that position, we have based
profit on all sales of the general class or kind, where this data is
available, and not on reported sales and costs. With respect to NMB/
Pelmec, we neglected to determine whether NMB/Pelmec's actual profit
was greater than the statutory minimum. We have corrected this error
for these final results.
Comment 6: Asahi contends that the Department erroneously excluded
arm's-length sales to certain related customers when calculating profit
for CV. Asahi states that sales to only two customers should have been
disregarded under the related-party CV profit test but that the
Department excluded sales to a number of other customers as well.
Department's Position: We agree with Asahi that we made an error in
our calculation of profit for CV and have corrected this error for the
final results.
Comment 7: Torrington argues that NMB/Pelmec arbitrarily calculated
profit margins for small and medium-size BBs while the statute refers
to the profits earned on the general class or kind of merchandise.
Given the requirements of the statute, Torrington argues that the
Department should recalculate the actual average profit rate on the
basis of all BB sales in Singapore.
Department's Position: We agree with Torrington that the statute
requires profit to be calculated on sales of the general class or kind
of merchandise and not be based on subsets of bearings. We have
recalculated the company's profit rate based on BB sales to reflect
profit on the general class or kind of merchandise sold by NMB/Pelmec
in Singapore.
4D. Related-Party Inputs
Comment 1: Torrington contends that the Department should
scrutinize all related-party material costs and verify data for which
questions remain regarding related-party component costs. Torrington
argues that the Department should apply BIA to the material costs in
question if the Department is not satisfied that all related-party
material costs are accurate and sold at arm's length. It claims further
that SKF Germany did not respond sufficiently to the Department's
supplemental question addressing the percentage of total material costs
for each part purchased from a related supplier, but instead stated
that the information was not available. Torrington claims that SKF
Germany should have provided the information. Torrington also contends
that SKF Germany stated that it has not reported, and cannot report,
discrete elements of costs for the products not manufactured by SKF
Germany and, Torrington concludes, there is little basis for the
Department to accept representations of actual costs.
SKF Germany replies that its response indicates clearly that it
only purchased two component types from a related supplier for use in
the production of subject merchandise. It states further that, in
another proceeding, a related supplier provided the Department with a
complete description of its methodology for determining the actual cost
of the finished bearing and this related supplier's cost-accounting
methodology has been previously verified by the Department with no
discrepancies noted. SKF Germany states that it used the greater of
transfer price or actual cost for CV purposes to arrive at the actual
cost of purchased components for COP purposes and used the greater of
the transfer or actual cost for CV purposes.
Department's Position: We disagree with Torrington. SKF Germany has
stated on the record that it applied its internal transfer price
indices to arrive at the actual cost of purchased components for
reported COP and used the greater of the transfer price or actual costs
for CV reporting. SKF Germany has explained and provided examples of
the methodology it used to determine the actual cost of components
purchased from related suppliers. Because its methodology is reasonable
and reflects respondent's normal records, we have accepted the costs of
inputs from related suppliers, as we have done in prior reviews.
Comment 2: Torrington argues that, if Ovako Steel, a 100-percent-
owned related supplier, sold the same or a reasonably comparable
product to unrelated buyers of steel, SKF Germany should have reported
Ovako Steel's arm's-length price information in order
[[Page 66494]]
to demonstrate whether Ovako Steel's sales to SKF fairly reflect market
price. Torrington claims further that Ovako Steel apparently
experienced improved operations during the POR and, if Ovako Steel's
profits became healthy, market prices might exceed transfer prices and/
or COP.
SKF Germany states that it had no referent market price data for
the material it purchased from Ovako Steel because the steel products
were unique to SKF. Hence, SKF Germany reported Ovako Steel's actual
costs to manufacture the material. With respect to CV, SKF Germany
claims that it relied on the greater of COP or transfer price for
material purchased from Ovako Steel. SKF Germany claims that this
methodology is consistent with instructions in the Department's
questionnaire. Specifically, SKF Germany claims to have followed the
Department's instructions by providing COP information for the input
where the purchase prices for an identical or comparable input was not
available. SKF Germany also states that its annual report, at pages 46
and 47, makes clear that Ovako Steel continued to operate at a loss in
1993, albeit slightly less than that experienced in 1992.
Department's Position: We disagree with Torrington and we affirm
our methodology from prior reviews with respect to SKF Germany's
purchases of raw materials from the related supplier, Ovako Steel. The
inputs that SKF Germany purchased from Ovako Steel were unique, and
they were produced according to SKF Germany's specific product
specifications. Absent referent market prices for the inputs, we are
accepting SKF Germany's cost reporting with respect to CV by relying on
the greater of the COP or transfer price for these inputs.
Comment 3: Torrington argues that the Department should eliminate
any related-party input transfers by Koyo that do not reflect the
higher of arm's-length prices or COP.
Koyo argues that the Department does not have statutory authority
to investigate the cost of inputs Koyo obtained from related suppliers.
Koyo contends that, in order to request information regarding the COP
of inputs obtained from related suppliers, the Department must have
``reasonable grounds to believe or suspect'' that the value Koyo
reported for such inputs is below the COP of the inputs, citing section
773(e)(3) of the Tariff Act. Koyo maintains that, according to the
language of the statute, in order to launch an investigation under
section 773(e)(3) and demand cost data for inputs obtained from related
suppliers, there must be a ``bona fide allegation'' or a ``specific and
objective basis for suspecting'' that the related suppliers of major
inputs were transferring them to Koyo at values less than their COP.
Since no such allegation has ever been made by the petitioner, and the
Department had no independent basis upon which to believe or suspect
that such sales were made at below COP, Koyo requests that the
Department remove the COP data for such inputs from the administrative
record in this review and use the transfer prices Koyo reported in
calculating the CV of the affected bearing models.
Torrington responds that related-party transfers are inherently
different from arm's-length HMPs and, therefore, the Department may
treat the question of below-cost related-party transfers differently
than the issue of below-cost arm's-length sales. Torrington claims
that, while the Department may require petitioners or domestic parties
to show that arm's-length sales in the HM are below cost, it may
require respondents to supply evidence as to whether related-party
sales are below cost because (1) related-party transfers are a suspect
category under the law, and (2) foreign manufacturers and their
subsidiaries inherently have access to the best information for
purposes of analyzing transfer prices. Finally, Torrington asserts that
it has been the practice of the Department since enactment of section
773(e)(3) of the Tariff Act to require respondents to submit evidence
concerning related-party production costs.
Department's Position: As we stated in AFBs IV (at 10923), we
disagree with Koyo that the Department lacks authority to request cost
data from related suppliers. In calculating CV, the Department does not
necessarily accept the transfer prices the respondent paid to related
suppliers as the appropriate value of inputs. Related parties for this
purpose are defined in section 773(e)(4) of the Tariff Act. In
accordance with section 773(e)(2) of the Tariff Act, we generally do
not use transfer prices between such related parties unless those
prices reflect the market value of the inputs purchased. To show that
the transfer prices for its inputs reflect market value, a respondent
may compare the transfer prices to prices in transactions between
unrelated parties. A respondent may provide prices for similar
purchases from an unrelated supplier or similar sales by its related
supplier to unrelated purchasers. If no comparable market price for
similar transactions between related parties is available, we may use
the actual COP incurred by the related supplier as an indication of
market value. If the transfer price is less than the market value of
the input, we may value the input using the best evidence available,
which may be the COP.
Koyo did not provide information regarding prices between unrelated
parties for some inputs it purchased from related suppliers. In those
instances, we require the actual COP of those inputs to determine
whether the transfer prices reflected the market value of the inputs.
Where the transfer prices were less than the COP, we used the COP as
the best evidence available for valuing the input. Under section
773(e)(3) of the Tariff Act, if the Department has reason to believe or
suspect that the price paid to a related party for a major input is
below the COP of that input, we may investigate whether the transfer
price is in fact lower than the supplier's actual COP of that input
even if the transfer price reflects the market value of the input. If
the transfer price is below the related supplier's COP for that input,
we may use the actual COP as the value for that input.
We found in AFBs IV that Koyo had purchased major inputs from
related parties at prices below COP. Therefore, in accordance with
normal practice, we determined that we had reasonable grounds to
believe or suspect that Koyo purchased major inputs from related
suppliers at prices below the COP of those inputs during this review
period. See AFBs IV (at 10923-10924).
Comment 4: NSK argues that the Department did not have statutory
authority to request supplier cost information absent a bona fide
allegation that the transfer prices from suppliers are below cost,
citing section 773(e)(3) of the Tariff Act. NSK contends further that
the Department does not have authority to substitute COP for transfer
price for the finished bearings NSK purchased from a related supplier.
NSK notes that petitioners have never alleged that NSK purchased inputs
from specific related parties at prices below the input's COP, and
argues that the Department improperly rejected related-supplier
transfer prices when calculating CV. NSK suggests that the Department's
calculation of CV, using the higher of transfer price or cost for each
input, is an unreasonable interpretation of the statute as it fails to
consider the total return to the supplier for transfer of inputs for
the same finished bearing or the entire relationship of the supplier
with NSK.
Torrington argues that there is nothing in the statute that
supports NSK's contention that the Department should consider factors
other than cost
[[Page 66495]]
or transfer price in determining whether related-supplier inputs
reflect fair market value. Torrington argues that the Department should
reject NSK's argument as it did in the prior review.
Department's Position: As we stated in AFBs IV at 10923-24, we
disagree with NSK that the Department violated the antidumping law by
requesting cost data from related suppliers. In calculating CV, the
Department does not accept the transfer prices paid by the respondent
to related suppliers as the appropriate value of inputs. Related
parties for this purpose are defined in section 773(e)(4) of the Tariff
Act. In accordance with section 773(e)(2) of the Tariff Act, we
generally do not use transfer prices between such related parties
unless those prices reflect the market value of the inputs purchased.
To show that the transfer prices for its inputs reflect market value, a
respondent may compare the transfer prices to prices in transactions
between unrelated parties. A respondent may provide prices for similar
purchases from an unrelated supplier or similar sales by its related
supplier to unrelated purchasers. If no comparable market price for
similar transactions between related parties is available, we may use
the actual COP incurred by the related supplier as an indication of
market value. If the transfer price is less than the market value of
the input, we may value the input using the best evidence available,
which may be the COP. Absent information from a respondent regarding
prices between unrelated parties for some inputs it purchased from
related suppliers, we require the actual COP of those inputs to
determine whether the transfer prices reflected the market value of the
inputs. In these cases, where the transfer prices were less than the
COP, we used the COP as the best evidence available for valuing the
input. Under section 773(e)(3) of the Tariff Act, if the Department has
reason to believe or suspect that the price paid to a related party for
a major input is below the COP of that input, we may investigate
whether the transfer price is in fact lower than the supplier's actual
COP of that input even if the transfer price reflects the market value
of the input. If the transfer price is below the related supplier's COP
for that input, we may use the actual COP as the value for that input.
4E. Inventory Write-down and Write-off
Comment 1: Torrington claims that FAG Germany did not report
inventory write-down amounts as costs in its response. Citing Canned
Pineapple Fruit from Thailand, 60 FR 29553, 29571 (June 5, 1995), and
other cases, Torrington states that write-downs are production costs
that should be included in antidumping cost calculations. Torrington
argues further that the Department should include inventory write-down
amounts on a model-specific basis and that, if this cannot be done, the
Department should use BIA in determining inventory write-down expense.
FAG Germany argues that inventory write-downs are not true costs
for the Department's antidumping calculations. FAG Germany states that,
if a product that had been written-down is later sold, the product
would still be matched under the Department's antidumping methodology
to the actual COM and selling, general, administrative, and financing
expenses of the relevant periods as contained in the COP and CV data
for the product. FAG Germany states further that, if the product that
was written-down was later written-off, then reporting the write-down
as a cost would effectively ``double-count'' the cost. Finally, FAG
Germany claims that the Department verified that FAG Germany had a
substantial net write-up of inventories and that, if the Department
accepts Torrington's argument, it should also allow the amounts of
inventory write-ups as an offset to cost.
Department's Position: We agree with FAG Germany. As demonstrated
during the cost verification, FAG Germany did not incur inventory
write-downs during the POR. Thus, Torrington's argument concerning
write-downs is moot.
Comment 2: Torrington claims that FAG Germany did not report
inventory write-off amounts on a model-specific basis, but rather
spread the charge over numerous or all models. Torrington says that
write-offs are model-specific by their nature and should be reported
that way. Torrington argues that the Department should restate FAG
Germany's inventory write-off charges to be model-specific or, if this
cannot be done, use BIA in determining inventory write-off expense.
FAG Germany argues that it has included all write-offs of
materials, components and finished goods in its COP and CV
calculations, and that its record-keeping system does not permit ready
identification and valuation of finished goods write-offs of individual
bearing models. FAG Germany also argues that model-specific
calculations and application of inventory write-offs defy commercial
reality.
Department's Position: We agree with FAG Germany. As demonstrated
at verification, FAG Germany accounted for the finished goods write-
offs in FAG Germany's COP/CV calculation as an addition to COM. We
found that, due to FAG Germany's record-keeping system, it is not
feasible for FAG Germany to allocate write-off charges to specific
models. Since FAG Germany has allocated its write-off costs to COP/CV,
we conclude that FAG Germany's allocation methodology is appropriate.
4F. Interest Expense Offset
Comment 1: Torrington argues that, because NSK did not demonstrate
that its reported short-term interest income was derived from business
operations, the Department should disallow this offset and use total
interest expense as a percentage of cost of goods sold.
NSK responds that it consistently invests excess cash from
operations in short-term investments to maximize the return on such
funds until they are needed. NSK states further that the short-term
income it used in the offset involves income from short-term
investments related to the production of subject merchandise and income
from investments of working capital. NSK contends that it determined
the percentage of total interest income that was short-term following
the methodology the Department recommended, i.e., by calculating the
ratio of short-term (current) assets to long-term (non-current) assets,
using the information on its Ministry of Finance report. NSK explains
that it then applied the ratio to total interest income so as to
determine the portion of interest income that was deducted from gross
interest expense in order to calculate net interest expense. NSK argues
that it had to calculate short-term interest indirectly because its
record-keeping system does not track how much interest income from its
consolidated subsidiaries is, in fact, short-term or long-term in
nature.
Department's Position: We agree with NSK. We are satisfied from
information on the record that NSK's business records do not report
separately the short- and long-term nature of the interest income
earned by the company and its subsidiaries. NSK's alternative
calculation of its income offset reasonably reflects the short-term
interest income related to production activities and the investment of
working capital.
4G. Other Issues
Comment 1: Torrington asserts that the Department omitted SKF
Sweden's R&D and imputed interest expenses from the calculation of
general expenses of the CV section in the Department's computer program
which applies the statutory minimum test for reported GS&A expenses.
Torrington suggests
[[Page 66496]]
that the Department correct this error by adding SKF Sweden's R&D and
imputed interest expenses to the calculation of general expenses.
SKF Sweden agrees with Torrington that R&D and imputed interest
expenses should be included in the general expense calculation. SKF
Sweden states that the methodology that Torrington presents to correct
the problem, however, is incorrect because it would leave the imputed
expenses out of the CV selling expense fields. SKF Sweden proposes
instead that the Department add the direct imputed interest charges
expense to HM direct expenses for CV and add the indirect imputed
interest charges to HM indirect expenses for CV. SKF Sweden also states
that the R&D expenses should be added separately to the calculation of
general expenses.
Department's Position: We agree with the methodology proposed by
SKF Sweden and have made the necessary changes to the final margin
calculation program.
Comment 2: Torrington claims that, in the Department's correction
of SKF France's G&A ratio, as provided in SKF France's supplemental
questionnaire at page 2, the Department omitted the R&D expenses
reported by SKF France in the calculations of CV and COP.
SKF France agrees with Torrington that the Department made this
clerical error and notes further that the Department failed to add the
imputed expenses in calculating CV selling expenses. In addition, SKF
France states that the Department omitted inventory carrying costs from
the calculation of HM ISEs for CV.
Department's Position: We agree with both Torrington and SKF France
and have corrected these errors.
Comment 3: Torrington contends that SKF Germany did not report
severance pay and/or restructuring costs on a class-or-kind basis, and
recommends that, as a BIA solution, the Department assume that all POR
severance pay and restructuring costs were attributable exclusively to
each class or kind and should allocate these costs on that basis.
Torrington claims that SKF Germany's reporting methodology is incorrect
since each class or kind of bearing is produced in a completely
separate industry and costs associated with closures in one industry
are not appropriately allocated to another.
SKF Germany claims that, as the Department has previously verified,
its job order variance and cost adjustments are computed by product
division and by factory, which assures that the job order variance and
adjustments are specific by class or kind of merchandise. SKF Germany
notes, in addition, that the general adjustments to the product
division and factory-specific job order variances are also product
division and factory-specific, although they contain, in part, amounts
allocated from company-wide expenses in addition to the product
division and factory-specific costs.
Department's Position: We disagree with Torrington. SKF Germany's
job order variance and cost adjustments are computed by product
division and by factory, as supported by SKF Germany in its submission.
This assures that the job order variance and adjustments are specific
by class or kind of merchandise. Because SKF Germany's calculation of
both the job order variance and the general adjustment to the job order
variance are specific by product division and by factory, there is no
reason to apply BIA to severance pay and/or restructuring costs.
Comment 4: Torrington argues that the Department should use BIA in
calculating FAG Germany's severance pay and restructuring costs because
FAG Germany did not calculate such costs on a class-or-kind basis.
Torrington contends that the Department should reject FAG Germany's
argument that such costs are general in nature and not specifically
attributable to any particular bearing type. Torrington argues that if,
for example, a respondent closed a BB plant, the costs involved in the
closure should not be allocated to other types of bearings. Torrington
states that FAG Germany would have known which plants closed and where
laid-off workers had worked and, thus, should have been able to report
such costs on a class-or-kind basis. Torrington recommends that, as
BIA, the Department assume that all POR severance pay and restructuring
costs were attributable exclusively to each class or kind.
FAG Germany states that its reported restructuring costs were
general in nature, relating to company-wide downsizing and the closure
of DKFL, and that these costs were incurred in a prior POR. FAG Germany
also claims that they were captured and allocated properly in general
and administrative (G&A) expenses by the ``bridge'' calculation. FAG
Germany states that none of the plants that it closed produced specific
bearing classes and that no single class or kind of merchandise bore a
disproportionate share of the expense. FAG Germany claims that
dismissed workers were not necessarily associated with the particular
areas being downsized because, in addition to laying off workers, FAG
Germany shifted workers and administrators extensively within the
organization. FAG Germany contends that attempting to calculate such
costs on a class-or-kind basis would be impossible and contrary to FAG
Germany's actual experience.
Department's Position: We agree with FAG Germany that it recognized
the majority of restructuring costs related to the closure of DKFL, a
subsidiary, in 1992. At verification we examined the restructuring
costs indicated in the footnotes of the 1993 audited financial
statements. We traced the amounts stated in the footnotes to FAG's
``bridge'' adjustments and G&A expenses. We noted that the downsizing
and closure costs of DKFL were general in nature and the related
expenses FAG incurred cannot be applied to specific classes or kinds of
merchandise produced at each facility. Therefore, we have included FAG
Germany's restructuring costs and severance pay in G&A expenses for the
final results.
Comment 5: Torrington states that SKF Germany's responses contain
conflicting statements as to whether it purchased finished products
from outside suppliers. Torrington asserts SKF Germany should clarify
the record on this matter.
SKF Germany maintains that, for five successive administrative
reviews, SKF Germany has reported, as sales of its own product, certain
finished bearings manufactured by unrelated subcontractors. SKF states
that the Department has repeatedly verified that SKF Germany's cost-
reporting and cost-accounting methodologies are correct. SKF Germany
acknowledges that it purchased finished bearings from unrelated
subcontractors but states that it has reported sales of such
subcontracted bearings in the HM and United States. SKF Germany states
that it has also reported the acquisition costs of such bearings in its
cost response. SKF Germany claims that its unrelated subcontractors do
not know the destination of the subcontracted products at the time of
their acquisition and, since these products are manufactured for SKF
Germany, SKF Germany has treated them consistently as its own
production.
Department's Position: As SKF Germany has stated on the record, it
reports, as sales of its own product, certain finished bearings
manufactured by unrelated suppliers. In addition, SKF Germany reported
the acquisition costs of these bearings in its cost response. Because
the unrelated suppliers do not know the destination of these finished
bearings and because SKF Germany has consistently controlled the
production and sale of these bearings, we have
[[Page 66497]]
treated them as SKF bearings in our analysis.
Comment 6: Torrington contends that it is unclear whether FAG
Germany included costs associated with DKFL-produced ``FAG Germany-
brand'' bearings in its cost response. Torrington states that, although
FAG Germany said that it included such costs in its submission, FAG
Germany's cost response contains very little discussion of DKFL and
focuses on FAG Germany-KGS. Torrington argues that the Department
should resolve this question prior to issuing the final results and
that, if weighted-average DKFL costs are not included, the Department
should not accept FAG Germany's cost response for the models in
question.
FAG Germany argues that, because no identical DKFL-made and FAG
Germany-made bearing types were sold in the United States during the
POR, weight-averaging the costs is not necessary. FAG Germany states
that it included all appropriate DKFL production costs in its response
for DKFL-made bearings sold in the United States during the POR. FAG
Germany claims that the reason it placed little emphasis on DKFL in its
narrative cost response is due to the fact that FAG Germany withdrew
from the DKFL business three months into the POR, so DKFL's production
had little overall impact on the response.
Department's Position: We agree with FAG Germany. We examined FAG
Germany's cost response and found that it had reported the costs for
DKFL bearings properly. Therefore, we have accepted FAG Germany's
reported costs for such bearings for the final results.
Comment 7: Torrington notes that, at verification, the Department
found that FAG Germany did not include a loss it incurred on the sale
of a Korean subsidiary in its G&A expense calculation. Torrington
argues that the Department should assign the amount of the loss to the
type of merchandise the Korean facility produced. Torrington argues
further that, if the Department rejects its arguments about
restructuring costs, then the Department should allocate the amount of
the loss on the sale of the Korean subsidiary to all bearings under
review.
FAG Germany argues that the Department should not include the loss
it incurred on the sale of its Korean affiliate because this entity
produced bearings in Korea, not Germany, and thus the merchandise
produced was not within the scope of the order. FAG Germany argues that
this loss should be treated as an investment loss and not included in
the pool of G&A expenses.
Department's Position: We disagree with Torrington that we should
allocate the loss on the sale of the Korean subsidiary to FAG Germany's
sales on a class-or-kind basis. This cost relates to the overall
operation of the company. Therefore, it is most appropriately
characterized as a G&A expense and, for the preliminary results, we
recalculated FAG Germany's G&A expense to include this expense. For
these final results, we have also allocated the amount of the loss on
the sale of the Korean subsidiary on the basis of all costs incurred by
the company during the POR, including non-subject merchandise.
Comment 8: Torrington observes that FAG Germany reported different
CVs for further-manufactured products depending on whether they were
sold to OEM or to distributor customers, and argues that the printout
of CV of further-manufactured products shows that FAG Germany did not
report distributor values for certain parts. Torrington concedes that
it may be possible that there were no distributor sales for these
parts, but argues that the Department should insure that it calculates
margins properly if there were such sales. Torrington suggests
computer- programming language to conduct this test.
Department's Position: We agree with Torrington that, in the event
that FAG Germany did not report the CV for all further-manufactured
products to distributors, we must apply BIA to such sales. Torrington's
suggestion is reasonable and appropriate in this case, as the value we
would use would be calculated for the same component for the same
manufacturer, albeit for a different LOT. Therefore, we made the
programming change suggested by Torrington for the final results as a
safeguard. However, we note that information on the record does not
indicate that FAG Germany actually failed to report the CV for
components further manufactured into products sold to distributors.
Comment 9: Torrington argues that the Department should adjust the
reported G&A data to include certain miscellaneous, non-operating
expenses which (i) the Department adjusted for in the previous review,
(ii) the Department did not verify in the current review, and (iii) it
appears are not included in Koyo's response in this review. Torrington
suggests that the adjustment be made based on Koyo's 1993-94 financial
statements, which indicate that nonoperating expenses amounted to about
two percent of the cost of goods sold.
Koyo argues that the Department's reclassification of these
expenses was erroneous in the previous review because these expenses
were clearly unrelated to its production activities, and Koyo has
appealed the Department's treatment of these expenses to the CIT.
According to Koyo, even if the Department were to accept Torrington's
argument, the total amount of the adjustment for the prior review was
de minimis, as identified in the Department's cost verification report.
Assuming that the specific expenses the Department identified in the
previous review remained a consistent percentage of total non-operating
expenses, Koyo states that, since the total non-operating expenses as a
percentage of cost of sales declined in this review, these expenses
would be even lower.
Department's Position: We disagree with Torrington. In the previous
review, as a result of a cost verification, we adjusted for certain
non-operating expenses, i.e., bonus payments to directors and auditors,
exchange losses, and miscellaneous non-operating expenses, that were
not included in Koyo's reported costs of production. Although we did
not verify costs in this review, there is no evidence on the record for
this review that indicates that an adjustment is needed.
Comment 10: Torrington argues that Koyo did not provide sufficient
information for the Department to determine where it has reported
depreciation on idle assets. Torrington recommends that the Department
apply as BIA the highest amount of depreciation on idle assets reported
by any other respondent.
Koyo asserts that it responded directly to the Department's
supplemental questionnaire regarding changes in the manner in which it
calculated its depreciation of idled assets. Koyo claims that
Torrington has provided no evidence that Koyo had additional
depreciation on idle assets which it did not report and, therefore,
there is no reason for the Department to apply BIA in this situation.
Department's Position: We agree with Koyo. Koyo responded to our
supplemental questions on this issue, adequately explaining that it
reported an amount for depreciation on idled assets. There is no
evidence that Koyo's reporting of depreciation on idle assets was
deficient.
Comment 11: Torrington argues that NSK has excluded depreciation on
some classes of assets since its non-consolidated financial statements
indicate that depreciation of plant and equipment declined during the
POR while non-current assets increased. Thus, Torrington argues, the
Department should apply as BIA the
[[Page 66498]]
highest amount of depreciation on idle assets reported by any other
respondent.
NSK responds that Torrington failed to note that, in its financial
statements, NSK uses a declining-balance method of depreciation which
results in larger depreciation expenses in early years. NSK contends
that there is no need for adjustment for idle asset depreciation, since
the full expense is already included in NSK's reported costs.
Department's Position: We agree with NSK. We found no indication
from information on the record that NSK excluded depreciation from its
reported totals.
Comment 12: Torrington states that the Department used the ten-
percent statutory minimum selling, general and administrative expense
(SG&A) calculation for NMB/Pelmec without first determining whether
NMB/Pelmec's actual SG&A exceeded the statutory minimum. Torrington
asserts that the Department must confirm that the use of the statutory
minimum is appropriate.
Department's Position: We have reviewed our calculations. In our
preliminary results, we neglected to test actual SG&A for NMB/Pelmec to
determine whether NMB/Pelmec's actual SG&A exceeded the statutory
minimum. We have corrected this error for these final results.
5. Discounts, Rebates, and Price Adjustments
As a general matter, the Department only accepts claims for
discounts, rebates, and other price adjustments as direct adjustments
to price if actual amounts are reported for each transaction.
Discounts, rebates, or other price adjustments based on allocations are
not allowable as adjustments to price unless, as described below, they
are based on a fixed and constant percentage of sales price. Allocated
price adjustments have the effect of distorting individual prices by
diluting the discounts or rebates received on some sales, inflating
them on other sales, and attributing them to still other sales that did
not actually receive any at all. Thus, they have the effect of
partially averaging prices. Just as we do not normally allow
respondents to report average prices, we do not allow respondents to
average direct additions to or subtractions from price. Although we
usually average FMVs on a monthly basis, we require individual prices
to be reported for each sale.
Therefore, we have made direct adjustments for reported HM
discounts, rebates, and price adjustments if (a) they were reported on
a transaction-specific basis, or (b) they were granted as a fixed and
constant percentage of sales price on all transactions for which they
are reported, as in the case with a fixed-percentage rebate program or
an early-payment discount granted on the total price of a pool of
sales. In other words, we did not accept as direct deductions discounts
or rebates unless the actual amount for each individual sale was
calculated. This is consistent with the policy we established and
followed in AFBs II (at 28400), AFBs III (at 39759), and AFBs IV (at
10929).
In accordance with the CAFC's decision in Torrington V (at 1047-
51), we have not treated improperly allocated HM price adjustments as
ISEs, but have instead disallowed negative (downward) adjustments in
their entirety. We have included positive (upward) HM price adjustments
(e.g., positive billing adjustments that increase the final sales
price) in our analysis. The treatment of positive billing adjustments
as direct adjustments is appropriate because disallowing such
adjustments would provide an incentive to report positive billing
adjustments on an allocated (e.g., customer-specific) basis in order to
minimize their effect on the margin calculations. That is, if we were
to disregard positive billing adjustments, which would be upward
adjustments to FMV, respondents would have no incentive to report these
adjustments on a transaction-specific basis, as requested. See AFBs IV
at 10933.
With respect to the CIT's decision in Torrington V (at 640) that we
must disallow HM price adjustments that respondents allocated in a
manner that does not allow us to separate expenses incurred on sales of
scope products from those incurred on non-scope products, we note that
our methodology incorporates this decision because we have denied all
allocated price adjustments except those granted as a fixed and
constant percentage of sales price on all transactions for which they
are reported. If a respondent grants and reports a price adjustment as
a fixed percentage across only those sales to which it pertains, the
fact that this pool of sales may include non-scope merchandise does not
distort the amount of the adjustment respondent granted and reported on
sales of subject merchandise, since the same percentage applies to both
subject and non-subject merchandise.
For USP adjustments, we deducted the per-unit amounts reported for
U.S. discounts, rebates, or price adjustments if respondents granted
and reported these adjustments on a transaction-specific basis or as a
fixed and constant percentage of sales price. If these expenses were
not reported on a transaction-specific basis, we used BIA for the
adjustment and treated the adjustment as a direct deduction from USP.
See AFBs IV at 10929.
Post-Sale Price Adjustments (PSPAs)
Comment 1: Torrington argues that the Department should not accept
customer-specific billing adjustments reported by SKF Germany, SKF
France, SKF Italy, and SKF Sweden because the reporting methodology
does not tie the adjustments to individual transactions and does not
separate billing adjustments granted on in-scope merchandise from those
granted on out-of-scope merchandise. Torrington cites Torrington III
(at 640) for the proposition that the Department must develop a
methodology that removes HM PSPAs and rebates paid on sales of out-of-
scope merchandise from any adjustments made to FMV or, if no viable
method can be developed, the Department must deny such adjustments to
FMV. Torrington recommends that, since these SKF companies could not
provide evidence to support limiting their allocation of these billing
adjustments with respect to in-scope merchandise only, the Department
should disallow any downward adjustments to FMV for the claimed
adjustments. Torrington further requests that the Department retain all
upward adjustments so that these respondents do not benefit from a
failure to report information (citing AFBs IV at 10907, 10933).
The SKF companies argue that there is no basis for the treatment of
these billing adjustments in the manner Torrington suggests. These
respondents contend that, since these billing adjustments were
associated with multiple invoices and multiple invoice-lines, it was
necessary to report these adjustments on a customer-specific basis
rather than on a transaction-specific basis. The respondents assert
that the manner in which these adjustments were reported was not the
result of an unwillingness to report more narrowly, but was the only
manner feasible. The companies contend that the fact that they are
unable to prove the negative (that these allocations were not affected
by price adjustments made on out-of-scope merchandise) is not a
sufficient reason to treat these adjustments in the manner suggested by
Torrington. Further, the respondents contend that the CIT's rationale
for denying any allocated adjustment that is not limited to in-scope
merchandise is unreasonable, and note that this argument is now on
appeal.
[[Page 66499]]
The SKF companies also argue that Torrington's proposal that only
upward adjustments to FMV be retained serves no useful purpose since
the treatment of such adjustments as indirect expenses, or even their
complete denial, serves as an adequate incentive for respondents to
report such adjustments in the most accurate manner possible. Moreover,
Torrington's proposal contravenes the CIT's remand order in that no
adjustments should be made on merchandise that cannot be limited to in-
scope merchandise.
Finally, the respondents contend that Torrington's cite to AFBs IV
is incorrect with respect to the treatment of positive and negative
billing adjustments. They state that, in that review, the Department
did not disallow negative billing adjustments but instead treated them
as ISEs.
Department's Position: We agree with Torrington. The SKF companies
did not tie the billing adjustments in question to specific
transactions, but instead calculated and reported them using customer-
specific allocations. The contention that these adjustments could not
be reported on a transaction-specific basis because they were granted
on multiple invoices or multiple invoice lines is beside the point; the
fact that a single billing adjustment is granted with respect to
multiple transactions does not preclude our treatment of the item as a
direct adjustment to FMV. However, in order for us to do so, each
individual billing adjustment must be reported only with respect to the
specific transaction(s) involved in the invoice (or group of invoices)
on which the billing adjustment is granted. Further, the per-unit
amount reported must be the amount specifically credited to the
transaction in the company's records or, if there is no such
transaction-specific recording, the adjustment must be granted and
reported as a fixed and constant percentage of the sales price on all
transactions to which the adjustment applies.
The reporting methodology used by respondents does not tie each
billing adjustment to the specific transaction(s) on which each
adjustment was granted. Instead, all POR billing adjustments were
cumulated by customer and allocated across all POR sales to the
customer, regardless of whether the customer actually received a
billing adjustment on a particular sale. Therefore, in accordance with
the guidelines regarding the acceptance of such adjustments, as stated
above, we have disallowed the allocated negative HM billing adjustments
and have included positive billing adjustments in our analysis.
Because we have disallowed these negative billing adjustments due
to the allocation methodology used by these companies, and these
adjustments were not granted as a fixed percentage across sales, we do
not reach Torrington's argument that we should disregard these
adjustments because they do not remove the effect of adjustments paid
on out-of-scope merchandise. However, as noted above, our methodology
is consistent with, and incorporates, the CIT's decision regarding the
in-scope/out-of-scope distinction in Torrington III at 640.
Comment 2: Torrington argues that the Department's allowance of
Koyo's HM billing adjustments (BILLADJH1, BILLADJH2) as ISEs in the
preliminary results was incorrect. Torrington states that Koyo granted
these adjustments on a transaction- or product-specific basis but
allocated both adjustments on a customer-specific basis. Torrington
notes that Koyo assigns debit and credit memos to the POR without any
ties to specific invoice numbers establishing that the debits or
credits related to period sales or to non-scope products. Torrington
recommends that the Department deny negative HM billing and include
positive billing adjustments in the antidumping analysis. Torrington
further suggests that, since positive billing adjustments were not
reported on a transaction-specific basis, the Department should not use
the reported positive billing amounts but should apply, as partial BIA,
Koyo's highest reported positive billing adjustment to all sales
involving positive adjustments.
Koyo acknowledges that it reported both types of billing
adjustments using customer-specific allocations. Koyo maintains,
however, that the Department should accept these adjustments for the
final results as, at a minimum, ISEs. Koyo notes that, contrary to
Torrington's statements, the Department in fact treated only BILLADJH1
as an ISE in the preliminary results, while denying BILLADJH2
altogether.
With respect to the billing adjustments reported in the field
BILLADJH1, Koyo contends that, although it reported these adjustments
on a customer-specific basis, the granting and reporting of such
billing adjustments were limited to scope merchandise (AFBs). Koyo
requests that the Department therefore treat this adjustment as an ISE.
With respect to billing adjustments reported in the BILLADJH2
field, Koyo argues that the Department's rejection of this adjustment
was improper because Koyo reported the PSPAs that comprise this
adjustment as accurately as possible according to the records it
maintained in the normal course of business. Koyo states that it
granted its second billing adjustment (BILLADJH2) on a model-specific
basis, but it did not maintain the adjustment in that format in its
computer records. Koyo therefore reported this adjustment by
calculating customer-specific allocation ratios and applying such
ratios across all POR sales to the customer. (Koyo calculated the
customer-specific ratios by summing all POR billing adjustments per
customer, multiplying the customer-specific adjustment totals by the
ratio of its POR AFB sales to that customer to the total POR sales to
that customer, then divided the resulting amount by the POR AFB sales
to each customer, thus deriving a factor).
Department's Position: We agree with Torrington, in part. In
accordance with our guidelines regarding PSPAs, as stated above, we
have denied Koyo's negative HM billing adjustments reported under the
BILLADJH1 and BILLADJH2 fields, and have retained positive billing
adjustments for both fields, because Koyo reported these adjustments
using customer-specific allocations. Although we verified that Koyo's
billing adjustments were allocated on a customer-specific basis, they
were not reported on a transaction-specific basis. As previously stated
in this section, we do not accept allocations that do not result in the
reporting of the actual amount of price adjustments incurred on each
transaction. We do not agree with Torrington's proposal that we apply
the highest reported HM billing adjustment for each field to all
reported HM transactions because this would be unnecessarily punitive.
We are satisfied that our guidelines in this area provide sufficient
incentive to report transaction-specific adjustments in the manner in
which they are granted.
Discounts
Comment 3: Torrington argues that the Department should disallow
SKF Germany's reported HM ``cash discounts'' (early payment discounts)
because SKF Germany claimed amounts on the basis of broad allocations
that included sales of non-subject merchandise and SKF Germany did not
establish that all sales earned the cash discount or did so on a
proportional basis.
SKF Germany argues that its reported cash discounts are typically
taken by SKF Germany's customers by submitting a single discounted
payment covering multiple invoices. SKF Germany claims that, because it
grants the cash discount against a bundle of invoices, it is
[[Page 66500]]
impossible to report these discounts more narrowly than by customer
number. SKF Germany recognizes the CIT has determined that SKF
Germany's allocation approach is unacceptable, but argues that the
Court has imposed an excessively stringent test of requiring SKF
Germany to prove that no adjustments on non-subject merchandise appear
in any of these customer-number-specific allocations.
Department's Position: We agree with Torrington. According to our
guidelines as stated above, we have disallowed SKF Germany's cash
discounts because SKF Germany did not report these discounts on a
transaction-specific basis or as a fixed and constant percentage of
sales price for each transaction on which the company incurred this
expense. See Torrington I, AFBs IV (at 10932), and Comment 1, above.
Comment 4: Torrington argues that the Department should disallow a
discount paid by SKF Italy to one customer for 1994 transactions
because the supporting documentation submitted by SKF Italy was limited
to 1993 sales to this customer.
SKF Italy argues that, as proof of the availability and amount of
the cash discount for the entire POR, it submitted a copy of a letter
confirming the discount to this customer for 1993 sales. SKF Italy
states that this is the same type of information the Department
verified and upon which it allowed a cash discount for all sales in the
relevant POR in prior reviews (citing AFBs IV at 10963). SKF Italy
offers to provide, upon request by the Department, copies of the cash
discount documentation for sales made to this customer in 1994.
Department's Position: We disagree with Torrington. While SKF Italy
provided supporting documentation only with respect to discounts given
to the customer for 1993 sales, we are satisfied that the documentation
is representative of discounts paid for the entire POR. Had we
suspected a possible error or misrepresentation with regard to this
matter in SKF Italy's response, we would have asked SKF Italy to
provide additional documentation.
Comment 5: SKF Germany claims the Department inconsistently treated
its ``Other Discounts'' field as an ISE in deriving HMP for price-to-
price comparisons, while treating it as a direct adjustment in deriving
the adjusted HMP used in the COP test. SKF Germany states that, in
fact, ``Other Discounts'' are indirect and the Department should treat
them as such in the cost test.
Torrington argues that these cash discounts are direct in nature
since they are earned on an invoice-by-invoice basis and go directly to
actual price. Torrington recommends that they be treated as such for
COP purposes. Torrington asserts that the fact that SKF Germany failed
to report these discounts on a sale-by-sale basis should not alter
their treatment as direct expenses in deriving the adjusted price for
the cost test. Hence, Torrington claims that the Department should
treat these as direct for COP purposes but should treat them as
indirect for the FMV calculation due to SKF Germany's deficiency in
reporting.
Department's Position: We disagree with SKF Germany. SKF Germany
reported this field using customer-specific allocations. Accordingly,
we are disallowing these HM discounts for the purpose of deriving the
FMV in price-to-price comparisons. However, we are treating them as
direct adjustments to the adjusted HMP used in the cost comparison
because to do otherwise (i.e. to make no adjustment to HMP for these
discounts) would provide respondents with an adjustment that is
preferable to the adjustment that would be made if this expense was
reported as incurred (on a transaction-specific basis).
Comment 6: FAG Germany argues that the Department should not treat
HM third-party payments and early-payment discounts as an ISE. FAG
Germany argues that it reported these expenses on a transaction-
specific basis and they are tied directly to the sales for which they
are reported. FAG Germany contends that the Department should treat
these expenses as direct adjustments to FMV.
Torrington argues that the Department should require FAG Germany to
submit additional data to substantiate its claims that it reported
these expenses on a transaction-specific basis. Torrington argues that,
if FAG Germany cannot tie these expenses to specific transactions, the
Department should treat these expenses as indirect for the final
results.
Department's Position: We agree with FAG Germany with regard to
early-payment discounts, but we disagree with FAG Germany with regard
to third-party payments. With regard to early-payment discounts,
information that FAG Germany submitted in its supplemental
questionnaire response indicates that the company grants, tracks, and
reports such discounts on a transaction-specific basis. Because FAG
Germany has tied early-payment discounts to individual transactions, we
have treated these discounts as a direct expense.
However, the evidence submitted by FAG Germany does not demonstrate
that the company's third-party payments are directly related to the
products under review. Contrary to FAG Germany's assertions in its
brief, the company failed to provide information demonstrating how it
ties its third-party payments directly to the sale by FAG Germany to
the distributor, which is the sale we use for comparison purposes.
Further, the information on the record does not clearly indicate that
the amount of this expense varies with the quantity of merchandise sold
from FAG Germany to the distributor.
In this respect, FAG Germany's third-party payments are akin to a
promotional expense. See discussion of NSK's stock transfer commission,
item 3.C, supra. As with NSK's stock transfer commission, it is evident
from the record that FAG Germany's third-party payment expense is not
related directly to sales by FAG Germany to its customers and is
properly treated as an indirect selling expense adjustment. This item
does not relate to any particular sale by FAG Germany and does not vary
with the quantity of merchandise that FAG Germany sells. See Zenith
Electronics v. United States, 77 F.3d 426, 431 (Fed. Cir. 1996).
Accordingly, as this program was equally available with respect to both
kinds of merchandise, and was not associated with any particular sale,
we have treated FAG Germany's third-party payments as an ISE for the
final results.
Comment 7: Torrington agrees with the Department's decision to
disallow NSK's early-payment discounts to distributors (OTHDISH)
because NSK failed to demonstrate that it calculated such discounts on
the basis of sale of in-scope merchandise only.
NSK argues that, regardless of the mix of scope and non-scope
merchandise that a distributor might have purchased in any one month,
the early-payment discount for that month applies as a fixed percentage
equally to both the scope and non-scope sales. Citing AFBs IV (at
10935), NSK asserts that proof of stable payment patterns for all early
payment discount customers is adequate to prove a direct expense. NSK
argues, further, that the Department verified that NSK incurred this
expense with respect to sales of scope merchandise to specific
customers and on equal percentages for both scope and non-scope sales.
NSK claims that the process of reporting and verification are intended
to determine whether the respondent's methods accurately represent the
facts. NSK notes that the Department verified NSK's HM early-payment
discounts for this review and noted in the verification report that it
found no discrepancies.
[[Page 66501]]
Department's Position: We agree with NSK. In accordance with our
guidelines, as stated above, since these early payment discounts were
granted as a fixed percentage of all purchases by a given customer, we
have allowed these early payment discounts as a direct adjustment to
price.
Comment 8: Torrington claims that, because NTN used an aggregate
method of reporting some billing adjustments rather than reporting HM
billing adjustments on a transaction-specific basis, the Department
should reject the billing adjustments or, in the absence of outright
rejection, treat the adjustments as indirect expenses. Torrington
contends that respondents must tie FMV adjustments to sales of subject
merchandise, rather than simply allocate them over all sales.
Torrington also asserts that certain discounts NTN claimed do not
qualify as direct adjustments to price because they are not
transaction-specific or constant across all sales. Petitioner asserts
that NTN did not report the discounts on a transaction-specific basis
and it provided no evidence that it granted discounts as a fixed
percentage of all HM sales. Torrington recommends that the Department
reject the claimed discounts.
NTN contends that it reported the billing adjustments on a
customer- and product-specific basis and that, in the vast majority of
cases, the reporting was transaction specific. NTN notes that only in a
very few cases are adjustments only customer- and product-specific.
Department's Position: We agree, in part, with Torrington. As
stated above, we allow direct adjustments for discounts and price
adjustments if they are reported on a transaction-specific basis
(rather than allocated) or if they were granted and reported as a fixed
and constant percentage on all sales to a customer. NTN reported its
discounts on product- and customer-specific bases, not on a
transaction-specific basis, and did not grant and report such discounts
as a fixed and constant percentage of sales. Accordingly, we have
disallowed those discounts because NTN did not report them on a
transaction-specific basis.
However, we disagree with Torrington that we should reject NTN's
billing adjustments. During verification, we examined NTN's HM sales,
and found no reason to believe or suspect that NTN failed to report its
HM billing adjustments accurately and completely. In addition, we found
that the great majority of adjustments were transaction-specific; the
number of instances of non-transaction-specific reporting is so slight
as to not render the billing adjustments distortive. Accordingly, we
have treated NTN's reported HM billing adjustments as direct
adjustments to price for these final results.
Rebates
Comment 9: Torrington contends that the Department should not
accept SKF Sweden's reported HM rebates (REBATE1H) because SKF Sweden
only describes the available rebate programs in vague, general terms
and does not explain how the rebates are reported on a transaction-
specific basis. Further, Torrington states, SKF Sweden reported imputed
rebates for the first four months of 1994 but did not elaborate on the
precise methodology it employed to impute these rebate amounts.
Torrington also states that SKF Sweden does not have a rebate schedule
and therefore has no straightforward mathematical calculation to
determine rebates. As a result of the absence of a rebate schedule,
Torrington argues the rebates SKF Sweden gives will vary based on
numerous factors, and SKF Sweden's customers may not know the rebate
terms at the time of sale. Torrington also asserts that SKF Sweden did
not limit its reporting of rebates to in-scope merchandise. Torrington
states that, for these reasons, the Department should not make any
adjustment to FMV for the claimed HM rebates.
SKF Sweden responds that it granted and reported its rebates as
fixed-percentage rebates and they should therefore qualify as direct
price adjustments. SKF Sweden asserts that this reporting is consistent
with the Department's guidelines for reporting rebates and with the
CIT's decision in Torrington II (at 390). SKF Sweden also contends that
it described the rebates in full in its questionnaire response, and
that it only reported rebates for those transactions for which
customers received the rebates. SKF Sweden contends that the fixed-
percentage rebate is not distorted by PSPAs paid on sales of out-of-
scope merchandise, if the rebates or PSPAs paid to each customer are
the same for each sale of in-scope and out-of-scope merchandise that
occurred during the POR, citing Federal Mogul III. With respect to the
issue of imputed rebate amounts for sales made in the first four months
of 1994, SKF Sweden argues that it reported imputed rebate amounts for
those customers who qualified for the rebate in 1993. SKF Sweden states
that the Department previously verified SKF Sweden's rebates and SKF
Sweden has not changed its methodology for reporting rebates in this
review. Thus, SKF Sweden asserts, the price methodology for imputing
rebates for 1994 is in the record, and the Department should reject
Torrington's assertion that SKF Sweden did not elaborate on its pricing
methodology.
Department's Position: We agree with SKF Sweden. As noted above, we
make direct adjustments for reported rebates if they are granted as a
fixed and constant percentage of sales on all transactions for which
they are reported. SKF Sweden reported its rebates as a fixed
percentage of sales, and maintained the fixed-rebate percentage granted
to its customers throughout the POR. The fact that SKF Sweden did not
provide a rebate schedule in its response does not mandate rejection of
the reported rebates. Absent verification, it is the Department's
practice to accept the information respondent submits as factual unless
it has reason to believe otherwise. There is nothing on the record to
demonstrate that SKF Sweden's customers did not know the HM rebates
terms at the time of sale.
SKF Sweden granted its HM rebates for the following: (1) certain
customers and certain product codes; (2) certain customers achieving
specified sales levels; and (3) certain customers for all sales. In
each of these situations, SKF Sweden applied a fixed-percentage rebate
to those sales of in-scope merchandise that received a fixed-percentage
rebate. Under this methodology, SKF Sweden has not distorted the rebate
amounts in its response.
With respect to imputed HM rebates, SKF Sweden explained that it
did not know the total amount of rebates its qualified customers
received when it was preparing its response and, therefore, SKF Sweden
imputed this amount based on historical experience. We find that the
manner in which it imputed HM rebates for qualified customers was
reasonable, and we have accepted and used the imputed HM rebates for
the final results of this review.
Comment 10: Torrington argues that the Department should reject SNR
France's HM rebates. Torrington asserts that rebates are not an
allowable adjustment unless the terms of the rebate are set forth at
the time of the sale, therefore, the rebate schedules must be known at
the time of the sale for a reported rebate to be allowable. Torrington
states that the record evidence suggests that SNR France determines its
rebate schedules after a year of sales has occurred. Torrington
suggests that, under this program, SNR France could choose to pay
rebates as it anticipates dumping margins, thereby
[[Page 66502]]
providing funds to customers rather than paying antidumping duties.
SNR France responds that, although it does not have a rebate policy
for all customers, the company grants rebate payments, as the
Department verified, to its customers periodically throughout the year.
SNR France emphasizes that it calculates rebates on a customer-specific
basis and its rebate programs are granted and paid as a part of the
company's standard business practice. Therefore, SNR France contends,
it does not use the rebate programs to anticipate dumping margins as
speculated by petitioner. SNR France notes that the Department has
verified in past reviews that SNR France's rebate methodology is part
of SNR France's standard business practice, and cites AFBs II (at
28401-02) to support its argument that the Department's policy is to
accept rebate programs that are granted and paid as part of the
respondent's standard business practice.
Department's Position: We agree with SNR France. Information
submitted by SNR France, as well as our findings at verification,
indicates that SNR France granted these rebates as a fixed and constant
percentage of price and reported them as such. Moreover, SNR France's
submission and the documentation that it provided at verification
support a conclusion that the adjustments it claimed were customary and
in the ordinary course of trade and, thus, were known to SNR France's
customers at the time of sale. Therefore, we have allowed SNR France's
HM rebate adjustments for our final results.
Comment 11: Torrington argues that the Department should disallow
SKF Germany's reported HM rebate 2 because these payments were lump-sum
amounts to compensate customers for inadequate profits. Torrington
claims that SKF Germany claimed amounts on the basis of broad
allocations that included sales of non-subject merchandise but it did
not demonstrate that resales of subject merchandise caused the rebates
to be earned.
SKF Germany argues that its rebate 2 calculation aggregates rebate
payments made to certain of SKF Germany's dealer/distributor customers
to compensate them for competitive conditions in the German market. SKF
Germany states that these rebates are based on sales by SKF Germany's
customers rather than to SKF Germany's customers and payment can only
be allocated over the entire sales base to the dealer/distributor. SKF
Germany recognizes the CIT's decision that SKF Germany's allocation is
not acceptable, but argues that the court has imposed an excessively
stringent test in requiring SKF Germany to prove that no adjustments on
non- subject merchandise appear in any of these customer-number
specific allocations.
Department's Position: We disagree with Torrington. As is the case
with NSK's stock transfer commission (see Item 3.C, Comment 1) and FAG
Germany's third-party payments (see Item 5, Comment 6) this expense is
not related directly to sales by SKF Germany to its customers, and is
properly treated as an indirect selling expense adjustment. This item
is a promotional expense that does not relate to any particular sale by
SKF Germany and does not vary with the quantity of merchandise that SKF
Germany sells. See Zenith Electronics v. United States, 77 F.3d 426,
431 (Fed. Cir. 1996).
Comment 12: Torrington contends that the Department should not
accept certain of SKF Italy's rebate claims. Torrington argues that
these claimed adjustments were allocated on a customer-specific basis
and that SKF Italy has not demonstrated that it did not allocate
rebates it paid on out-of-scope merchandise to in-scope merchandise.
Torrington suggests that, as partial BIA, the Department should
disallow these rebate claims for the final results, with the exception
that, if the claim increases FMV, the Department should keep the claim
so that the respondent does not benefit from failure to report
appropriate information.
SKF Italy argues that Torrington has mischaracterized its rebate
programs and states that it granted and reported both its rebates as
fixed-percentage rebates, and that they therefore qualify as direct
price adjustments.
Department's Position: We disagree with Torrington. SKF Italy
demonstrated that it pays both types of rebates to individual customers
based on a fixed percentage of all sales to the customer. Therefore,
because SKF Italy granted these rebates on a fixed and constant basis,
SKF Italy qualifies for a direct price adjustment to FMV for its HM
rebate programs.
Comment 13: Torrington claims that FAG Germany based its claimed HM
rebates on broad allocations that included out-of-scope merchandise,
and that FAG Germany has not demonstrated that resales of in-scope
bearings caused the rebates to be earned or that straightforward
mathematical apportionment yielded accurate amounts. Torrington argues
that the Department should reject FAG Germany's claimed rebates.
FAG Germany states that it granted such rebates on the basis of a
fixed percentage of all sales of merchandise, whether in-scope or non-
scope, to a customer during the POR. FAG Germany contends that its
methodology directly ties the rebates it paid to individual
transactions.
Department's Position: We agree with FAG Germany. Because FAG
Germany granted and reported rebates based on a fixed percentage of all
sales to a customer during the year, we have allowed FAG Germany's
claimed rebates as a direct adjustment to FMV for the final results.
Comment 14: Torrington argues that the Department should not adjust
FMV using FAG Italy's reported HM rebates. Torrington states that
rebates are not an allowable adjustment unless the terms of the rebate
are set forth at the time of the sale. Torrington contends that FAG
Italy's HM rebate schedules were not negotiated until after the sales
occurred, based on FAG Italy's questionnaire responses. In addition,
Torrington asserts that FAG Italy's rebate program suggests that its
rebates are reported on a customer-specific basis only and do not
account for non-scope merchandise.
FAG Italy responds that Torrington misunderstands the nature of its
rebate programs. FAG Italy states that its rebates are not determined
at the end of the year depending upon the achievement of certain sales
volumes, but are instead negotiated at the beginning of the year and,
if the requisite sales volume is met by the end of that year, the
rebate is then paid or credited as a fixed percentage applicable to all
covered sales. FAG Italy notes that, for a reported rebate to be
allowable, the rebate schedule (i.e., specific rebate percentages or
amounts associated with specific levels of sales or other factors) must
be known at the time of the sale. FAG Italy holds that its rebate
program meets the Department's standard for the allowance of HM
rebates.
With respect to Torrington's argument regarding non-scope
merchandise, FAG Italy claims that Torrington has misinterpreted
established case law. FAG Italy states that, pursuant to specific CIT
direction, PSPAs and rebates are permitted if granted on a fixed-
percentage basis on all sales of merchandise (in-scope and out-of-
scope) to a customer during the POR. FAG Italy claims that it grants
its rebates in this fashion, i.e., they are fixed-percentage rebates,
negotiated at the beginning of the year, and applied to total sales of
all merchandise to a customer where the customer has met the agreed-
upon requisite sales volume.
Department's Position: We agree with FAG Italy. We are satisfied
from the
[[Page 66503]]
record that FAG Italy sets the terms of its rebates at or before the
time of sale. Consistent with our standards for allowable rebate
adjustments (above), we have accepted FAG Italy's rebate adjustments
because it grants the rebates as a fixed and constant percentage of all
sales of merchandise to a customer.
Comment 15: NSK argues that the Department incorrectly treated its
return rebate as an ISE (NSK pays return rebates to its distributors if
the distributors resell the bearings to certain customers approved in
advance by NSK). NSK explains that it has improved its methodology from
prior AFB reviews and is able to match exactly the reported rebate
amounts paid to distributors during the POR to the number of pieces
actually sold to the distributor during the POR and to those that were
resold by the distributor to the approved customers. NSK contends that,
at the verification for this review, NSK demonstrated that its return
rebate is transaction-specific and that it calculated it at the part-
number and customer level. NSK argues that the Department should treat
this rebate as a direct adjustment to price for the final results.
Torrington responds that NSK's narrative response in its
supplemental response contradicts NSK's claim that it reported return
rebates on a transaction-specific basis: ``* * * NSK * * * cannot tie
specific return rebates to specific sales because there is nothing in
its computer records to tie the two transactions together,'' citing
NSK's supplemental response of November 30, 1994 at 23-24. Torrington
argues that the Department correctly determined not to treat NSK's
return rebates as a direct adjustment to price. Torrington argues,
further, that the Department should have disallowed the return rebates
rather than treat them as ISEs since these rebates are price
adjustments, not selling expenses.
Department's Position: We agree with NSK. We consider NSK's return
rebates to be a promotional expense as opposed to a price adjustment
because NSK grants these rebates to promote sales made by distributors.
NSK has demonstrated that it incurs, and has reported, this expense on
a model-specific basis. Because NSK has tied this promotional expense
to the subject merchandise, we consider it to be a direct selling
expense.
Comment 16: Torrington contends that the Department properly
disallowed NSK's distributor incentives (REBATEH2) because NSK did not
demonstrate that this rebate does not include rebates paid on non-scope
merchandise, citing AFBs IV (at 10935).
NSK argues that the Department's treatment of this rebate in this
review is totally at odds with its recently issued remand in the 1990-
91 review of these orders. NSK contends that the Department defended
its findings in its response to comments parties filed in the remand
determination that this rebate ``was granted as a straight percentage
of sales and, therefore, treated as a direct expense.'' NSK argues that
the record before the Department in this review is virtually identical
to the earlier record.
Department's Position: Since NSK's distributor incentive rebates
were granted as a fixed percentage of the sales on which they were
reported, we have allowed them as direct expenses.
Comment 17: NSK contends that the Department should treat its
PSPAs, which NSK reported in its REBATEH3 and REBATEH5 fields, as
direct adjustments to FMV. NSK argues that it is able to match the
PSPAs recorded as REBATEH3 or REBATEH5 to underlying transactions. NSK
claims that these PSPAs are incurred, calculated, and reported with
respect to sales of individual part numbers to individual customers.
NSK contends that it did not allocate them across models or customers
and, as they are part-number specific, they are by definition limited
to scope merchandise. NSK claims that it determined the exact quantity
of sales to which the PSPA applied and it applied the PSPA to that
quantity of sales, working backwards from the date the price change was
recorded in its computer system. In this way, NSK contends, it reported
only the pieces that generated the PSPA as having received a REBATEH3
or REBATEH5. NSK argues that the Department should treat these rebates
as direct adjustments to FMV.
Torrington argues that NSK, in its description of its PSPAs in its
response, states that it was not able to tie its PSPAs to the specific
transactions on which they were incurred. Torrington argues that the
Department determined correctly in its preliminary results not to treat
NSK's PSPAs, recorded as REBATEH3 or REBATEH5, as direct adjustments to
price. Furthermore, Torrington argues, this adjustment is a price
adjustment by nature, not a selling expense and should, therefore, be
disallowed completely rather than be treated as an indirect expense.
Department's Position: We agree with NSK. We have allowed NSK's
PSPAs because NSK's methodology matches PSPAs to particular underlying
transactions using product and customer codes as they were originally
paid.
Comment 18: Torrington argues that, although the Department treated
NSK's lump-sum PSPA as an HM ISE, the Department should disallow it
because there is no evidence to link such adjustments to in-scope
merchandise.
NSK contends that its lump sum rebates were claimed as an indirect
expense adjustment because they were granted on a customer-specific
basis, not a product-specific or sale-specific basis. NSK further
claims that, although the customer negotiations leading up to these
rebates proceed from a base of sales, the end result represents
negotiation and compromise, and cannot be said to specific sales. NSK
argues that what is relevant is whether the methodology used by NSK to
apportion the lump-sum rebates between scope and non-scope merchandise
is fair and non-distortive. NSK states that it used an allocation
method based on the percentage of scope to non-scope merchandise for
those customers accounting for a significant percent of the total lump-
sum rebates granted during the POR. NSK also states that it
demonstrated the stability of the purchasing patterns of these
customers at verification.
Department's Position: We agree with Torrington. We have disallowed
this adjustment because it is a direct price adjustment and NSK did not
tie these adjustments to the particular sales affected by the
adjustment. Based on NSK's description, it grants lump-sum discounts as
a fixed percentage of a discrete group of sales. However, instead of
tying the discount to the particular transactions covered by the base
of sales, NSK allocated the lump-sum discounts by the proportion of
scope and non-scope merchandise purchased by certain customers, i.e.,
NSK allocated this expense across a broader base of sales than those on
which it granted the rebates. Accordingly, we have disallowed these
expenses for these final results.
Comment 19: Torrington claims that NTN and NTN Germany used an
improper allocation methodology to attribute U.S. rebates to sales.
Torrington contends that NTN and NTN Germany allocated rebates to sales
that were not eligible for the rebates, thereby diluting the rebate
amounts for sales that were eligible. Torrington urges the Department
to apply some form of BIA to the U.S. rebates.
Department's Position: We disagree with Torrington. NTN's and NTN
Germany's U.S. rebates were customer-specific, were not tied to
specific invoices, and were granted on a fixed basis for sales of all
merchandise. NTN and NTN Germany have demonstrated
[[Page 66504]]
that they offered rebates to certain U.S. customers who attained
specified target sales volumes, and granted the rebate amounts based on
the total sales volume goals. NTN and NTN Germany reported these
rebates as a fixed and constant percentage across all eligible sales to
each customer. Therefore, we have treated these rebates as direct
adjustments to FMV for these final results.
6. Further Manufacturing and Roller Chain
Section 772(e)(3) of the Tariff Act requires that we reduce ESP by
the amount of any increased value to the subject merchandise resulting
from further manufacturing performed after importation in the United
States and prior to sale to the unrelated U.S. customer. Based on this
section of the Tariff Act and the applicable legislative history, we
have developed a practice whereby we do not calculate and do not assess
antidumping duties on subject merchandise imported by a related party
and further processed where the value of the subject merchandise
comprises less than one percent of the value of the finished product
sold to the first unrelated customer in the United States. See AFBs III
at 39732 and 39737. This practice has come to be known as the ``Roller
Chain'' principle after the first case in which we articulated this
convention. See Roller Chain, Other Than Bicycle, from Japan, 48 FR
51801, 51804 (November 14, 1983).
Comment 1: Torrington argues that the Department should reconsider
and discontinue application of the ``Roller Chain'' principle.
Torrington contends that the Uruguay Round Agreements Act (URAA)
clarifies that Congress never intended to limit the antidumping law to
imports accounting for a ``significant percentage'' of the value of the
completed product via the Roller Chain principle. Torrington asserts
that Congress intends that the Department determine USP for such
products on the basis of the ``price of identical merchandise sold * *
* to an unaffiliated person,'' the price of ``other subject
merchandise sold,'' or ``any other reasonable means,'' citing the URAA
amendments to section 772 of the Tariff Act.
Torrington argues that there is no concern over retroactive
application of the law because Congress always intended that the
Department resort to alternative bases to determine USP rather than
exclude the imports. Torrington asserts the following: (1) excluding
such imports vitiates Congress' purpose to ensure that ``imported
merchandise for which an exporter's sales price calculation must be
made will not escape the purview of the Tariff Act by virtue of its
being further processed or manufactured subsequent to its importation
but before its sale to the first purchaser in the United States
unrelated to the foreign exporter,'' citing S. Rep. No. 1298, 93d
Cong., 2d Sess. 172-3; (2) when enacting the further-manufacturing
provision of the statute, Congress intended that existing Department of
Treasury regulations, which do not exempt such merchandise, would apply
to this section; and (3) the pre-1995 GATT Antidumping Code does not
exempt such imports. Torrington concludes, therefore, that applying
this new-law provision to respondents would not be a retroactive
application of the law, but would implement the law as Congress had
originally intended.
Torrington argues in the alternative that, if the Department
continues to use the Roller Chain principle, it should revisit the
methodology it uses to apply the one-percent test. Torrington contends
that the Department's current practice is improper because the value of
the imported bearings may be based on entered value, which can be
artificially lowered through low-cost transfer pricing. Torrington
argues that, through low-cost pricing, respondents are able to
manipulate entered values such that, as a result of its current test,
the Department will disregard transactions and circumvention of the
order will occur. Torrington contends that, instead of entered value,
the value of imported bearings should be based upon the ESP or PP of
such or similar bearings sold at arm's-length prices. Torrington
suggests that the Department compare this value to the resale price of
the finished merchandise, which is not subject to manipulation by
related parties. Where the importer does not resell bearings, or
resells only a small quantity, Torrington asserts that the Department
should base the USPs for the model in question on sales by another
manufacturer or the manufacturer who produced the model in question.
NSK responds that it agrees with Torrington that the Department
must, under certain circumstances, assess dumping duties on further-
manufactured imports based on the weighted-average margin for the
remainder of goods in the class or kind. NSK states, however, that the
circumstances under which this is appropriate are where the imported
merchandise is further manufactured into finished products of the same
class or kind of the imported product (e.g., BBs, CRBs, SPBs). NSK
states that the further-manufacturing provision of the statute does not
apply to such situations, and the Department must therefore discontinue
its further-manufacturing analysis of bearing parts made into bearings.
NSK contends that the Department must use its sampling authority to
estimate the dumping duties applicable to these imported parts.
NTN argues that Torrington is attempting to apply the URAA
amendments retroactively. NTN contends that the Statement of
Administrative Action (SAA) states that the elimination of the Roller
Chain principle is a change in the law, thus confirming the validity of
the Roller Chain principle under prior law.
Koyo argues that the Department's treatment of further-manufactured
merchandise has been used in every review of the AFB orders and that
the CIT has affirmed this treatment. Koyo also contends that Congress
intended that the further-processing provisions not apply unless the
product ultimately sold to an unrelated purchaser contains a
significant amount by quantity or value of the imported product. Koyo
notes that the SAA indicates that the law has changed with respect to
further-manufactured merchandise and the new approach is not a mere
clarification.
Koyo further argues that the Department's methodology in its one-
percent test is correct. Koyo claims that the purpose is to compare the
value of the component as imported to the value of the non-scope
merchandise as ultimately sold to an unrelated purchaser.
Department's Position: We disagree with Torrington. As NTN and Koyo
note, the SAA clearly indicates that the new law represents a change,
not merely a clarification, in the treatment of imported merchandise
that does not constitute a significant portion of the value of the
product into which it is further manufactured. The SAA notes that
``under existing law, in some situations, Commerce has been left with
no choice but to exempt imported components from the assessment of
antidumping duties.'' See SAA at 155-156.
Our approach in following the Roller Chain principle in this review
is identical to our approach and practice in previous reviews of these
orders. Moreover, this practice has been affirmed by the CIT. See
Torrington III at 645. As we stated in AFBs IV, section 772(e)(3) of
the Tariff Act requires that, where subject merchandise is imported by
a related party and further processed before being sold to an unrelated
party in the United States, we reduce ESP by
[[Page 66505]]
any increased value, including additional material and labor, resulting
from a process of manufacture or assembly performed on the imported
merchandise after importation but before its sale to an unrelated
party. In ESP transactions, therefore, we typically back out any U.S.
value added to arrive at a USP for the subject merchandise. See, e.g.,
Final Determination of Sales at Less Than Fair Value: Certain Small
Business Telephone Systems and Subassemblies Thereof from Korea, 54 FR
53141, 53143 (December 27, 1989).
The legislative history of this provision suggests that the
practice of subtracting the value added by the further-processing
operations in the United States should be employed only where the
manufactured or assembled product contains more than an insignificant
amount by quantity or value of the imported product. See S. Rep. No.
1298, 93d Cong. 2d Sess. 172-73, 245, reprinted in 1974 U.S.C.C.A.N.
7185, 7310. Conversely, when the quantity or value of the imported
product is insignificant in comparison to that of the finished product,
we are not required to calculate a USP for the imported merchandise.
Therefore, we conclude that Congress did not intend that a USP be
calculated in these situations and hence that no dumping duties are
due. See H. Rep. No. 571, 93d Cong. 1st. Sess. 70 (1973).
In situations such as this, in which the statute provides general
guidance and leaves the application of a particular methodology to the
administering authority, we are given significant discretion in
determining the precise methodology to be applied. The application of a
one-percent threshold, based on a comparison of entered value of the
imported product to the sale price of the finished product, constitutes
a proper use of the Department's discretion. Inasmuch as our statutory
interpretation is not an unalterable rule, it does not constitute rule-
making within the meaning of the Administrative Procedure Act. See
Zenith Elec. Corp. v. United States, 988 F.2d 1573, 1583 (CAFC 1993).
We disagree with Torrington's assertion that the Roller Chain
principle has created a vehicle for circumvention of the antidumping
duty order. The antidumping statute provides for the assessment of
antidumping duties only to the extent of the dumping that occurs. If
there can be no determination of any dumping margin where the imported
merchandise is an insignificant part of the product sold in the United
States, assessment of antidumping duties is not appropriate.
Furthermore, the Roller Chain principle acts only to exclude subject
merchandise from assessment of antidumping duties during the POR. We
continue to require cash deposits of estimated antidumping duties for
all future entries, including entries of bearings potentially
excludable from assessment under the Roller Chain principle. This is
because we have no way of knowing at the time of entry whether the
Roller Chain principle will operate to exclude any particular entry
from assessment of antidumping duties. Any decision to exclude subject
merchandise from assessment of antidumping duties based on a Roller
Chain analysis is made on a case-by-case basis during administrative
reviews. See AFBs I at 31703.
With regard to Torrington's argument that we should base the
numerator of the ``one-percent test'' ratio on arm's-length prices of
identical or similar merchandise, we agree with Koyo that entered value
is the best reflection of the value of the component as it is imported.
The price of identical or similar imported components sold to
unaffiliated customers without being further manufactured in the United
States will invariably reflect certain costs, such as advertising, that
are not normally incurred on products sold to affiliates. Therefore, to
use the price to an unaffiliated party would overstate the numerator of
the ``one-percent test'' ratio. In addition, our reliance on
respondents' reported entered values which, in ESP situations, are
generally based on transfer price, is not misplaced. Antidumping
proceedings are only one of the forces applicable to a respondent's
transfer pricing practices, and such prices are subject to Internal
Revenue Service audits for U.S. tax purposes. Finally, as noted above,
our practice has been affirmed by the CIT. Accordingly, we have not
modified our treatment of minor components further manufactured in the
United States or our methodology for determining whether a component is
minor for the final results.
Regarding NSK's comment, please see Comment 2 and our response,
below.
Comment 2: NSK argues that the Department lacks a statutory basis
for conducting a further-manufacturing analysis with respect to
imported bearings that are further processed into merchandise that
remains within the class or kind of merchandise covered by the order.
NSK contends that the legislative history to the further-manufacturing
provision of section 772(e)(3) of the Tariff Act limits this provision
clearly to imports ``changed by further process or manufacture so as to
remove it from the class or kind of merchandise involved in the
proceeding before it is sold to an unrelated purchaser,'' citing H.R.
Rep't No. 571, 93rd Cong., 1st Sess. 70 (1973). NSK states that the
Department excluded such merchandise correctly from the further-
manufacturing analysis in the original investigation and in the 88/90
administrative review, assigning a margin to such merchandise based on
the margins calculated for imports of complete bearings, but that it
has wrongly deviated from this approach in subsequent reviews.
NSK acknowledges that the CIT has rejected its previous challenges
to the Department's further-manufacturing methodology, citing the CIT's
decision on AFBs II in NSK I and the CIT's decision on AFBs III in NSK
II. NSK contends, however, that the CIT has not ruled on the particular
argument NSK is making in this segment of the proceeding. NSK concludes
that the CIT has affirmed that the Department is not required to review
every U.S. sale, citing NSK II at 1270.
Torrington responds that the statute, administrative practice, and
judicial precedent support the Department's application of a further-
manufacturing analysis to NSK's further-manufactured sales, pursuant to
section 772(e)(3) of the Tariff Act. Torrington notes that the CIT has
held that, where the imported parts at issue are covered by the
antidumping order, they ``are not eligible for automatic exclusion from
Commerce's analysis,'' citing NSK II at 1270. Torrington notes that the
CIT excepted from the further-manufacturing analysis only
``manufactured or assembled products which contain less than a
significant amount of the imported merchandise,'' citing Id., and did
not exempt imported parts that are further manufactured into products
that remain within the scope of the order.
Department's Position: We disagree with NSK that we should not
calculate dumping margins for merchandise which NSK further
manufactured (but which stayed within the class or kind) in the United
States. As we have explained in previous reviews (see AFBs II at 28360,
AFBs III at 39737, and AFBs IV at 10939), we disregard antidumping
duties only on those parts and bearings that comprise less than one
percent of the value of the finished product sold to the first
unrelated customer in the United States, pursuant to the Roller Chain
principle (see our description above). Because imported merchandise
that has been further manufactured is subject to antidumping duties,
the Department cannot disregard sales of this merchandise in its
analysis or the
[[Page 66506]]
adjustments to USP provided for in section 772(e)(3) of the Tariff Act.
The purpose of section 772(e)(3) is to include within the
Department's antidumping margin calculations subject merchandise that
is further-processed in the United States, with the proviso that the
USP of such merchandise must not include value added in the United
States prior to sale to the first unrelated buyer. While NSK argues
that this provision only applies to merchandise that is transformed by
the U.S. affiliate into non-subject merchandise prior to sale to the
first unrelated buyer, the plain language of section 772(e)(3) makes no
distinction between subject merchandise which is transformed by a
related party in the United States into non-subject merchandise, and
subject merchandise which is further-processed by a related party in
the United States into merchandise which is still within the class or
kind subject to the order. Section 772(e)(3) states that, ``[f]or
purposes of this section, the exporter's sales price shall also be
adjusted by being reduced by the amount, if any of--* * * (3) any
increased value, including additional material and labor, resulting
from a process of manufacture or assembly performed on the imported
merchandise after the importation of the merchandise and before its
sale to a person who is not the exporter of the merchandise.''
Contrary to NSK's argument, the legislative history did not
unambiguously alter the plain language of the provision. It is true
that the House Report that accompanied the Trade and Tariff Act of 1974
seems to focus on merchandise which continues to be subject merchandise
after processing by a related party in the United States. See H.R. Rep.
No. 571, 93d Cong., 1st Sess. 70 (1973). The Senate Report that
accompanied the Trade and Tariff Act of 1974, however, was in
accordance with the plain language of the statute and made no
distinction between merchandise which was ultimately sold as subject
merchandise and merchandise which was ultimately sold as non-subject
merchandise. The relevant paragraph stated:
The first amendment would codify existing Treasury regulations
in providing that imported merchandise for which an exporter's sales
price calculation must be made will not escape the purview of the
Act by virtue of its being further processed or manufactured
subsequent to its importation but before its sale to the first
purchaser in the United States unrelated to the foreign exporter.
Under the amendment, adjustments to the prices at which the article
is ultimately sold to an unrelated purchaser would be made in order
to subtract out the value added to the merchandise after
importation.
S. Rep. No. 1298, 93d Cong., 2d Sess. 172, 173 (1974).
Comment 3: NSK/RHP argues that the Department should not apply BIA
to calculate the FMV for those bearings that the Department has agreed
are not subject to a further-manufacturing analysis. NSK/RHP contends
that, through a series of conversations with the Department, it
confirmed that reporting further-manufacturing data for ``first
category'' bearings (e.g., bearings that involve greasing, change of
preload, or etching) was not necessary. Moreover, NSK/RHP asserts that
the Department never asked the company to change its response to
include further-manufacturing cost data for first category bearings.
NSK/RHP states that it should not be penalized because it responded
correctly to the Department's request for information.
Torrington argues that the Department should continue to classify
NSK/RHP's first category bearings as subject to a further-manufacturing
analysis. Torrington asserts that the record indicates that the first
category bearings were in fact subject to further manufacturing in the
United States. Torrington contends that the burden is properly placed
on the respondent to provide all data the Department requests in its
questionnaire. For these reasons, Torrington argues, the Department
should apply BIA to calculate the FMV for the first category bearings.
Department's Position: We agree with NSK/RHP. We determined that
NSK/RHP's first category bearings do not require a further-
manufacturing analysis because such bearings entered the U.S. market as
complete bearings (first category) and underwent minor alterations that
did not significantly change the costs of these bearings. See NSK/RHP's
February 1, 1995 questionnaire response. Further, Torrington has not
provided any evidence to suggest otherwise. Therefore, for these final
results, we did not apply BIA to calculate the FMV for the first
category bearings NSK exported to the United States.
Comment 4: Torrington argues that the Department should include
group administrative expenses in FAG Germany's further-manufacturing
response. Torrington states that FAG Germany did not report such
expenses and that FAG Germany stated that such expenses are typically
recovered by way of transfer prices and distribution of profit. Citing
Color Picture Tubes from Japan, 52 FR 44171, 44174 (November 18, 1987),
and Certain Carbon Steel Butt-Weld Pipe Fittings from the United
Kingdom, 60 FR 1558, 10561 (February 27, 1995), Torrington contends
that group-level headquarters expenses and broadly based R&D benefit
all group members, including U.S. subsidiaries engaged in adding value.
Torrington also claims that another respondent in this proceeding, SKF,
reported such costs in its further-manufacturing response. Torrington
argues that the Department should restate FAG Germany's further-
manufacturing costs so that they include group administrative expenses.
FAG Germany states that it included the portion of group
administrative expense related to production in its CV for further-
manufactured parts, but it did not include the portion of the expense
related to sales. Citing Brass Sheet and Strip from the Federal
Republic of Germany; Final Results of Administrative Review, 56 FR
60087 (November 27, 1991), FAG Germany argues that the statute
authorizes a deduction from ESP of increased value resulting from a
process of manufacture or assembly performed on the imported
merchandise after importation of the merchandise, and that the
Department has held that headquarters G&A expense incurred abroad to
support U.S. sales is not within this definition of value added. FAG
Germany also states that its methodology is consistent with the cases
petitioner cites in support of its argument.
Department's Position: We agree with Torrington that group-level
headquarters expenses and broadly based R&D benefit all group members,
including U.S. subsidiaries engaged in adding value. While FAG Germany
reported such expenses for the cost of the parts imported, it did not
include such expenses in the cost of further processing in the United
States. In addition, we consider these expenses to affect the
processing cost in the United States as well as support sales.
Therefore, we have recalculated the G&A expenses for further processing
in the United States to include group-level headquarters expenses and
broadly based R&D expenses.
In addition, we discovered that we erred in our calculation of
further manufacturing performed in the United States by calculating the
further manufacturing based on COM instead of COP. We have corrected
this error for the final results.
Comment 5: Torrington asserts that Koyo incorrectly used weighted
averages of entered value rather than an arm's-length price for resale
at the same LOT as the finished goods in its ``Roller Chain''
calculations. Torrington claims
[[Page 66507]]
that using a weighted-average entered total value for all models, i.e.,
including non-scope (U.S.-made) bearings, rather than a separate
average for each bearing model, distorts the Roller Chain calculation.
Torrington contends that the Department should reject Koyo's request
for exclusion from reporting full further-manufacturing information.
Torrington also contends that there is insufficient documentation to
support Koyo's use of estimated resale prices in its calculations and
that the Department did not verify these estimated prices. Torrington
argues that the Department should use the highest Koyo margin as BIA
for each entry that is further manufactured.
Koyo contends that Torrington has raised these same challenges to
its Roller Chain calculations in past AFB reviews and the Department
has rejected them in every such review. Koyo claims that Torrington's
argument that, instead of using the entered value of the imported scope
merchandise as the numerator of the Roller Chain calculation (to
determine whether the value of the imports is less than one percent of
the value of the non-scope merchandise that is sold to the unrelated
customer and hence should be excluded from the antidumping order), the
Department should use the price at which the scope imports are sold to
unrelated customers in the United States, is contrary to the whole
thrust of the Roller Chain one-percent test which is to determine the
value of the scope product as imported in relation to the value of the
non-scope merchandise as sold to an unrelated customer. Koyo argues
that Torrington has no evidence to support its claim that Koyo may have
manipulated entered value, and notes that it is required to report all
entered values to the Customs Service at the time of entry of its
imports and is subject to severe penalties for improper reporting.
Since there is no way for Koyo to know which units of a model were used
in the production of particular units of the non-scope merchandise,
Koyo asserts that the use of a weighted average is perfectly
reasonable. Finally, Koyo explains that it used estimated resale values
for the finished non-scope merchandise not out of choice but because
the so-called ``affiliates'' that produced that merchandise refused to
provide Koyo with the necessary pricing information. Koyo asserts that
the CIT specifically upheld this aspect of Koyo's methodology in
Torrington III (at 645).
Koyo claims that, according to the legislative history of the 1974
Act, when Congress enacted the provision of the antidumping law
authorizing the Department to deduct further- processing expenses
incurred in the United States in ESP situations, Congress recognized
that there would be situations in which the value added in the United
States would be so great that it would be inappropriate to apply the
further-processing provision of the antidumping law. Moreover, Koyo
points out that the CIT has affirmed the Department's use of the Roller
Chain methodology, in finding ``Commerce's decision to accept the
estimates and allocations for the calculation of the `Roller Chain'
percentage [to be] reasonable and supported by substantial evidence and
in accordance with law,'' citing Torrington III (at 645).
Department's Position: We disagree with Torrington. We addressed
this in detail in AFBs IV at 10937-10938. Koyo provided sufficient
information in its letter of November 27, 1994, to demonstrate the
applicability of the Roller Chain principle to certain identified
sales. Notably, Koyo submitted examples of all calculations necessary
to determine that the value of this imported merchandise was below the
one-percent threshold. Furthermore, there is no evidence on the record
to indicate that the estimated resale prices Koyo submitted are
unreliable.
Comment 6: Torrington argues that Koyo's U.S. sales database is
incomplete with respect to sales of products further-processed into
non-scope merchandise. Torrington contends that since the Department,
not Koyo, determines what, if any, merchandise is excluded on the basis
of the Roller Chain principle, the Department should apply a BIA rate
to all models where Koyo refused to report on the grounds that further
manufacturing produced non-scope merchandise.
Koyo states that the Department rejected this identical argument in
the prior review. Koyo also states that the Department has specified in
this review, as in all prior reviews, the threshold for determining
which merchandise is to be excluded, i.e., merchandise that passes the
one-percent test. Koyo contends that, as in all past reviews, it has
provided the data to demonstrate which models satisfy that test. Koyo
explains that, once it had determined that certain sales should be
excluded from the order on the basis of the Roller Chain principle, it
deleted those sales from its U.S. sales database, as it did for any
other sale of non-scope merchandise. Finally, Koyo explains that, in
two previous reviews the Department applied BIA to certain of Koyo's
Roller Chain sales where Koyo's calculations indicated that these
bearing models failed the Roller Chain test. Koyo concludes that,
because none of its products failed the one-percent test in this
review, the issue is moot.
Department's Position: We disagree with Torrington. There is no
evidence on the record to suggest that Koyo has failed to report any
sales of in-scope merchandise further-processed into non-scope
merchandise.
7. Level of Trade
Comment 1: Torrington contends that the Department should
reclassify SKF France's SOS (an SKF subsidiary) sales as distributor/
aftermarket sales rather than as consumer sales. Torrington states that
SOS is strictly a sales organization in France whose purpose is to
offer a complete line of bearing products to its customers on an
emergency basis. Torrington argues, further, that the Department
determined in AFBs I that SOS and the other SKF France affiliates all
sell to the same customers. Torrington concludes that the fact that SOS
promotes faster delivery does not demonstrate that its customers
function at a different LOT from SKF France's other customers and, as a
result, the Department should not treat its sales separately.
Torrington claims that the Department should classify such sales as
distributor/aftermarket sales.
SKF France claims that SOS serves a specialized function in the
French market in its resale of bearings on an emergency basis and the
Department has considered similar factors in other cases recently which
led it to recognize differences in LOT. SKF France claims that, in
Stainless Steel Bar From Spain, 59 FR 66931 (1994), the Department
recognized a different LOT for products involving a shorter lead time
and comprising relatively small orders filled from inventory of already
manufactured products. SKF France states that, because SOS sells on
average less than ten percent the number of units per transaction than
the other SKF France companies in the HM, and because these sales
constitute a unique niche in SOS's selling practices, the Department
properly allowed SKF France's distinct customer categorization of SOS
sales.
SKF France also comments that the CIT overturned the Department's
AFBs I decision regarding SKF France's claim of two levels of ISEs on
SOS sales, supporting SKF's position that SOS sales incur additional
expenses.
Department's Position: We agree with Torrington and have
reclassified the claimed consumer-level sales as distributor/
aftermarket sales. As we stated in AFBs I, the fact that SOS may
provide fast delivery of bearings and incurs higher selling expenses
does not
[[Page 66508]]
demonstrate a LOT distinct from other SKF France selling units which
service distributors. Therefore, we have considered SOS sales to be at
the same LOT as that of the other SKF France selling units which sell
to distributors. Further, the CIT's decision in SKF, to allow the ISEs
SKF France incurred on sales to SOS as an adjustment to SOS's sales to
unrelated parties, does not affect our decision to consider SOS's sales
to be made at the distributor/aftermarket level, because the CIT did
not address the issue of the nature of the sales from SOS to their
unrelated customers in its decision. In addition, the fact that SKF
France incurs differing expenses on different sales does not
necessarily mean that those sales are made at different levels of
trade.
Comment 2: Torrington argues that the Department should reject FAG
Italy's separate treatment of government sales and reclassify them as
OEM sales. Torrington contends that LOT classifications are based on
the function of the class of customers, citing AFBs III (at 39767).
Torrington states that FAG Italy has offered no evidence that its
government customers perform a different function than other OEM
customers and notes that the Department specifically rejected similar
arguments INA raised in AFBs III. Torrington requests that the
Department reclassify FAG Italy's government sales as OEM sales.
FAG Italy notes that, pursuant to Section 1335 of the Omnibus Trade
and Competitiveness Act of 1988, the Department will exclude those U.S.
sales from its margin calculation that have no substantial non-military
use and are made pursuant to an existing Memorandum of Understanding
(MOU), citing AFBs I at 31713. FAG Italy claims that it has properly
identified Government sales made pursuant to the U.S.-Italian MOU that
have no substantial non-military use. FAG Italy states that these sales
are properly categorized as a separate LOT and have been correctly
excluded from the U.S. sales database for purposes of calculating FAG
Italy's dumping margin. FAG Italy notes that Torrington has raised
similar arguments in prior reviews and the Department has rejected
Torrington's position on each occasion.
Department's Position: We agree with Torrington that FAG Italy's
U.S. government sales should not be classified as a separate LOT from
OEM sales. According to the record, FAG Italy's government customers
function as end-users, just like OEMs. Therefore, absent any evidence
to the contrary, we would classify FAG Italy's OEM sales and sales to
government customers as the same LOT. However, the LOT classification
of FAG Italy's government sales is irrelevant to the Department's
margin analysis in this review. The United States and Italian
Governments maintain a current MOU covering the AFBs subject to these
orders and, in accordance with section 1335 of the Omnibus Trade and
Competitiveness Act of 1988, we have excluded FAG Italy's government
sales from the U.S. sales database used for the margin analysis.
Comment 3: NTN argues that the Department should make a LOT
adjustment to its FMV based on differences in price to distinct levels
in the HM. Respondent cites NTN I, in which the Court agreed that NTN
incurred different expenses at different LOTs. NTN also claims that the
changes to the antidumping laws under the URAA, which directs the use
of a LOT adjustment based on differences in prices, should be applied
in these reviews.
Department's Position: We disagree with NTN that we should make a
price-based LOT adjustment. We note that the standards established in
the antidumping laws under the URAA are not controlling in these
reviews. For pre-URAA reviews, we have an established standard
requiring that respondents correlate the degree to which differences in
prices are due to differences in LOT or to any other factors that might
affect prices. As we said in AFBs III (at 39767-68), ``(r)espondents
must quantify any price differentials that are directly attributable to
differences in levels of trade.'' During the course of this
administrative review, NTN made no attempt to quantify the degree to
which differences in prices were attributable wholly or partly to
differences in levels of trade. Consequently, we are unable to consider
a LOT adjustment based on differences in price. The CIT has upheld this
line of reasoning in NTN II.
Comment 4: Torrington contends that respondents bear the burden of
demonstrating that reported LOTs are proper and NTN has failed to
demonstrate that AM sales are a distinct LOT. Torrington asserts that
allowing NTN to classify sales as AM would permit NTN to circumvent the
selection of such or similar merchandise. Torrington also states that
inaccuracies in the designation of customer category for certain
customers in NTN's response make the acceptance of the AM customer
category untenable. Petitioner urges the Department to reclassify NTN's
AM sales as OEM sales.
Department's Position: We disagree with Torrington. We have an
established practice of applying a ``functional test'' to determine
whether different levels of trade exist. This functional test involves
an examination of the type of customer and customer functions
respondents report, which reporting is subject to verification. See,
e.g., Disposable Pocket Lighters from Thailand, 60 FR 14263, 14264
(1995), and Certain Carbon and Alloy Steel Wire Rod from Canada, 59 FR
18791, 18794 (1994). When, through the application of the functional
test, we find different levels of trade, we may make price comparisons
at these levels of trade. Our practice has been that satisfaction of
the functional test creates an economic presumption that LOT has an
impact on price and, therefore, the comparability of the sales.
Notably, this presumption exists regardless of which party (respondent
or petitioner) supports or opposes the finding of distinct LOTs.
Once the functional test has been satisfied, a party opposed to
reliance on the resulting LOTs for matching purposes bears the burden
of rebutting the presumption that the distinct LOTs have an impact on
price. That rebuttal may be made by presenting information to
demonstrate a lack of correlation between selling prices or selling
expenses and LOTs. If rebuttal information is presented, we conduct a
correlation test and, if appropriate, disregard LOTs when comparing
U.S. and foreign market prices. See, e.g., Certain Stainless Steel
Butt-Weld Pipe and Tube Fittings From Japan, 59 FR 12240, 12241 (1994).
In 1992, we articulated this practice by announcement in Import
Administration Policy Bulletin 92/1. Therein, we summarized our
practice, stating:
(i)n our questionnaire we will request that respondents list the
levels of trade at which they sell the merchandise under
investigation. The respondent will also be asked to explain what
function each level of trade performs. Initially, the analyst will
have to determine, based on the reported functions, if the
respondent sells to distinct, discernable levels of trade. Either
party will have an opportunity to contest the reported levels of
trade by presenting evidence that there is not a significant
correlation between prices and selling expenses on one hand, and
levels of trade on the other. The information on level of trade will
be subject to the same verification requirements as other
information presented to the Department. * * * If a party wishes to
contest matching at LOT, the party will either have to rebut the
claim that there are discernable functions or will have to show that
there is no correlation between prices and selling expenses on the
one hand, and LOT on the other.
In other words, our practice is to create the presumption after the
[[Page 66509]]
application of the functional test. Our policy, based on established
practice, has been that the correlation test need not be performed in
order to recognize sales at distinct LOTs. Rather, the correlation test
need only be applied when a party opposed to recognition of the LOTs
presents information calling into question those LOTs established by
the application of the functional test. Certain Stainless Steel Butt-
Weld Pipe and Tube Fittings From Japan, 59 FR 12240, 12241 (1994). Only
then will we examine whether there is a correlation between selling
prices, selling expenses, and LOTs.
In applying the functional test in this instance, we note that NTN
was unable to adequately attribute ISEs to LOTs. However, an
examination of direct selling expenses and prices shows distinct
differences in NTN's three LOTs. We disagree with Torrington that NTN's
designations for customer category are unreliable, although we have
redesignated one customer. Torrington provided no other information
calling into question the LOTs NTN reported and which we tested.
Therefore, for the final results we have continued to recognize NTN's
three LOTs.
8. Packing and Movement Expenses
Comment 1: SNR Germany claims that the Department intended to
subtract movement expenses from unit price, including domestic inland
insurance expense, from unit price as indicated in the Department's
December 1, 1995, ``Preliminary Results Analysis Memorandum,'' but the
Department inadvertently added domestic inland insurance to net price.
Department's Position: We agree with SNR Germany that we should
have subtracted domestic inland insurance expense from unit price.
Accordingly, we have made appropriate changes to the calculation of net
price for the final results.
Comment 2: Torrington asserts that, because FAG/Barden failed to
report its air freight separately from its ocean freight expenses for
its FAG U.S. sales, and because it failed to report air freight
expenses on a transaction-specific basis for its Barden sales, the
Department should apply partial BIA for these expenses in the final
results. Torrington argues that the record indicates that FAG/Barden
was able to report air freight expenses on a transaction-specific
basis. Torrington further states that FAG U.S.'s claim that its
internal record-keeping precludes segregating the two types of freight
charges is inconsistent with other record evidence.
FAG/Barden responds that this argument is not applicable to ESP
sales because of the inability to tie shipments to the United States to
sales by the subsidiary in the United States. FAG/Barden contends that
this can only be relevant to PP sales. FAG/Barden suggests that
Torrington's claim that the factual record supports such a transaction-
specific methodology is unfounded since, contrary to Torrington's
statement, nowhere is there any indication that Barden can trace
imports to sales and thus report ocean freight expenses on a sale- or
transaction-specific basis. FAG/Barden states that, even if
Torrington's argument were applicable to ESP sales, there is no
commingling of air and ocean expenses in Barden's calculation such that
the ocean freight factor could be skewed or unrepresentative.
Department's Position: We agree with FAG/Barden. We verified that
FAG/Barden's records do not allow the company to link its entries to
its ESP sales. The Department has long recognized this common problem
with respect to this generally fungible commodity product. See AFBs I
at 31700 and AFBs IV at 10942-43. Additionally, the Department has
recognized that allocation is appropriate for freight expenses, which
are often not incurred on a transaction-specific basis. See AFBs II at
28398; See also Certain Steel Flat Products from Japan, 58 FR 37154,
37163 (1993). The record evidence discussed by Torrington demonstrates
that it may have been possible for FAG/Barden to link freight expenses
with specific entries; however it does not indicate that FAG/Barden
could link freight expenses with ESP sales to unrelated customers.
Given that verified inability, FAG/Barden's allocation of ocean and air
freight expenses was in accordance with the Department's instructions
and was reasonable.
Comment 3: Torrington asserts that RHP did not properly report its
air freight expenses for U.S. sales. Torrington states that, because
RHP failed to provide separate figures for its air freight and its
ocean freight expenses, the Department should not accept RHP's
reporting methodology pertaining to ocean and air freight expenses for
the final results. Torrington requests that the Department apply
partial BIA to U.S. sales for these expenses in the final results.
NSK/RHP argues that there is nothing to support Torrington's
argument that, because NSK did not divide its ocean freight expense
variable into air- and sea-freight portions, the Department should
apply BIA to NSK/RHP. NSK/RHP contends that the Department never
requested that NSK/RHP segregate the two freight expenses and that, in
fact, the company is unable to do so due to the lack of a direct link
between entries and ESP sales to the unrelated U.S. customer. NSK/RHP
states that, since it cannot link individual ocean freight costs to
specific U.S. sales, it cannot link groupings of such costs (e.g.,
ocean freight, air freight) with specific U.S. sales.
In addition, NSK/RHP suggests that Torrington's request is not
timely, because it did not raise this issue in its deficiency comments
during the ``fact finding'' stage of the proceeding.
Department's Position: We disagree with Torrington. In the case of
NSK/RHP's ESP transactions, the respondent explained in its section B
response, and the Department verified, that its records did not permit
it to tie specific shipments to specific resales. As noted in Comment
2, above, the Department has long recognized that few AFB producers can
link their entries to their resales in ESP situations. See AFBs I at
31700 and AFBs IV at 10942-43. It follows that respondents will be
unable to tie freight expenses on entries to specific resales. In past
reviews the Department has permitted respondents to allocate air and
ocean freight. See AFBs IV at 10942. The Department found no evidence
at verification that NSK/RHP could link its air freight expenses to
specific sales or customers.
The Department has also recognized that freight expenses are often
not incurred on a transaction-specific basis. Therefore, the Department
does not require transaction-specific reporting of this expense, but
rather permits reasonable allocations. See AFBs II at 28398; See also
Certain Steel Flat Products from Japan, 58 FR 37154, 37163 (1993). In
accordance with the Department's instructions, because NSK/RHP incurred
its freight expenses on the basis of weight, it allocated those
expenses on the same basis in its section B response.
Comment 4: NSK/RHP requests that the Department calculate a packing
expense factor for bearings manufactured by RHP Aerospace (a division
within NSK/RHP) and deduct this packing expense from the FMV as a
direct expense. NSK/RHP states that it does not maintain these expenses
as separate components of standard cost in RHP Aerospace's standard COP
overhead, although it made every effort to identify material and labor
costs for packing from RHP Aerospace's standard COP overhead. NSK/RHP
requests that the Department use this information in the final results
as the most accurate
[[Page 66510]]
cost calculation of packing for bearings manufactured by RHP Aerospace.
NSK/RHP contends that the Department confirmed the accuracy of the
information in its verification of NSK/RHP.
Torrington responds that, given that NSK/RHP's normal business
records do not document or otherwise support NSK/RHP's estimated
packing expenses, the Department should not deduct this estimated
expense from FMV. In addition, Torrington contends that NSK/RHP has not
adequately demonstrated that its attempt to segregate this expense from
RHP Aerospace's standard COP overhead reflects its actual experience.
For the reasons stated above, Torrington request that the Department
not make an adjustment to FMV for packing expenses (materials and
labor) for bearings manufactured by RHP Aerospace.
Department's Position: We agree with NSK/RHP. Prior to
verification, NSK/RHP identified, in its supplemental response, those
expenses in RHP Aerospace's standard COP overhead associated with
packing material costs and packing labor costs. See NSK/RHP's January
19, 1995 supplemental questionnaire response. We verified the accuracy
of these expenses and found no discrepancies. We also verified that
packing expenses were included in RHP Aerospace's COM and CV.
Therefore, we have accepted NSK/RHP's packing material costs and
packing labor costs data and have deducted packing expenses from FMV
calculated for bearings manufactured by RHP Aerospace for these final
results.
Comment 5: NSK/RHP argues that the Department should split domestic
inland freight for all RHP-brand bearings, other than those
manufactured by RHP Aerospace, into pre-sale freight and post-sale
freight components, and should deduct post-sale domestic inland freight
from FMV as a direct expense. NSK/RHP states that it did its best to
comply with the Department's request to segregate these costs by
calculating two expenses based on available transport records from the
months May-December 1994 for RHP-brand products delivered to and from a
specific warehouse.
Furthermore, NSK/RHP argues, the Department should separately
calculate a post-sale domestic inland freight factor for bearings
manufactured by RHP Aerospace and deduct that post-sale domestic inland
freight from FMV as a direct expense. NSK/RHP asserts that it complied
with the Department's request and, as noted above, identified those
expenses within the Material Control Department (a division of the
standard COP overhead) associated with post-sale domestic inland
freight. NSK/RHP states that, if the Department decides to take this
action, then it must also reduce RHP Aerospace's COM and CV by the same
expense factor to avoid double counting.
Torrington responds that the Department should not adjust FMV for
these estimated post-sale domestic inland freight expenses. Torrington
asserts that NSK/RHP has not adequately demonstrated that its estimated
calculations are reflective of actual costs, nor has it demonstrated
that its attempt to isolate post-sale domestic inland freight expense
from RHP Aerospace's standard COP overhead reflects its actual costs.
Torrington further states that, given that NSK/RHP's normal business
records do not document or otherwise support NSK/RHP's estimated
amounts for pre-sale freight and post-sale freight and post-sale
freight for bearings manufactured by RHP Aerospace, the Department
should not deduct the estimated pre-sale/post-sale domestic inland
freight expense and post-sale domestic inland freight expense from
bearings manufactured by RHP Aerospace from FMV. Torrington also argues
that NSK/RHP has not adequately demonstrated that the months it
selected for its estimates were representative of its actual
experience. Finally, Torrington contends that, while the Department
examined NSK-RHP's calculation of domestic inland freight expenses at
verification, it did not specifically examine the estimated split
between post-sale and pre-sale domestic inland freight.
Additionally, with respect to RHP-brand bearings manufactured by
RHP Aerospace, Torrington argues that if the Department permits such an
adjustment, it should not reduce RHP's Aerospace COM and CV by the same
expense factor. Torrington takes issue with NSK/RHP's argument that not
to do so would be double-counting, stating that NSK/RHP has not
demonstrated that post-sale domestic inland freight expenses were
actually included in RHP Aerospace's COM and CV. For these reasons, the
Department should not deduct these estimated expenses from FMV.
Department's Position: We agree with NSK/RHP, in part. Prior to
verification, NSK/RHP, in its supplemental response, presented
calculations of pre-sale and post-sale expenses based on available
transport records for the months May-December 1994 and stated that a
separate break-out for domestic inland freight did not exist for RHP
Aerospace in the normal course of business but was included within the
standard COP overhead. NSK/RHP identified those expenses associated
with post-sale domestic inland freight for RHP Aerospace. See NSK/RHP's
January 19, 1995 supplemental questionnaire response. We verified the
accuracy of NSK/RHP's domestic freight methodology and noted no
discrepancies. Therefore, for these final results, we have accepted
NSK/RHP's pre-sale/post-sale domestic-freight methodology and have
deducted post-sale domestic inland freight from FMV for all
transactions except those involving bearings manufactured by RHP
Aerospace. We have also accepted NSK/RHP's calculated post-sale
domestic inland freight for bearings manufactured by RHP Aerospace.
We disagree with NSK/RHP's contention that, if the Department
accepts NSK/RHP's post-sale domestic inland freight calculation for
bearings manufactured by RHP Aerospace, it must also reduce RHP
Aerospace's COM and CV by the same expense factor. Since we cannot
determine from NSK/RHP's questionnaire response whether post-sale
domestic inland freight expenses were actually included in RHP
Aerospace's COM and CV, we will not reduce RHP Aerospace's COM and CV
by the post-sale domestic inland freight factor that NSK/RHP
calculated.
Comment 6: Torrington argues that the Department has improperly
allowed Koyo to report aggregated air- and ocean-freight expenses.
Torrington claims that Koyo has allocated air-freight expenses over all
bearings shipped from Japan rather than reporting these expenses on a
transaction-specific basis. Torrington cites examples in the
verification report, stating that Koyo maintains records that enable it
to calculate air-freight adjustments on a transaction-specific basis
and, if it refuses to do so, the Department should apply a partial BIA
rate, i.e., the highest movement expenses reported by any Japanese
respondent.
Koyo responds that the Department's verification report for this
review specifically notes that there were no discrepancies in Koyo's
reporting of air-freight expenses. According to Koyo, the verification
report supports its contention that, although it tracks its air-freight
costs, Koyo is unable to tie individual air shipments to particular
sales to unrelated customers in the United States. Finally, Koyo
contends that it has treated its air-freight expenses in this review as
it has in every past review of the orders on TRBs and AFBs, and the
Department should continue to accept Koyo's methodology for reporting
its air-freight expenses.
[[Page 66511]]
Department's Position: We agree with Koyo. In the case of ESP
transactions, there is often no direct link between shipments and
resales. We agree with Koyo's characterization of its freight records
as described in the verification report. In the one instance cited by
Torrington, there is no evidence that Koyo was able to link the air-
freight costs associated with the shipment to subsequent sales of the
bearings involved in this shipment, nor does it establish that Koyo's
records generally allow it to link air-freight shipments to subsequent
sales. We also agree with Koyo that the verification report establishes
that, with respect to the example cited by Torrington, air freight was
used to maintain inventory and was not incurred on direct shipments to
the unrelated U.S. customer. Therefore, because we verified Koyo's air-
and ocean-freight expenses and found them to have been reasonably
allocated, we have accepted Koyo's freight-expense calculations.
Comment 7: NTN claims that the Department identified HM pre-sale
freight expenses erroneously as ISEs rather than as movement expenses
in its calculations, and that the Department also failed to recognize
the attribution of model-specific COP by customer category. NTN
requests that the Department correct these clerical errors.
Department's Position: We disagree that our identification of HM
pre-sale freight expenses as ISEs is a clerical error. Our calculations
are consistent with the methodology resulting from the CAFC's decision
in Ad Hoc Comm. of AZ-NM-TX-FL Producers of Gray Portland Cement v.
United States, 13 F.3d 398, 401-02 (CAFC 1994) . We also disagree that
we should attribute model-specific COP to customer categories. As noted
above, NTN was unable to adequately attribute ISEs to LOTs. Therefore
we have used only a model-specific cost for our final calculations.
9. Related Parties
Comment 1: SKF Sweden asserts that the customer numbers for which
the Department applied an arm's-length test in the preliminary margin
calculations do not correspond to the customer numbers SKF Sweden
provided in its COP/CV supplemental questionnaire response. SKF Sweden
states that the Department should use only those customer numbers
reported in the COP/CV section of its supplemental questionnaire
response.
Torrington contends that the Department established the related-
party customer code properly in its calculations and should not adjust
its calculations.
Department's Position: We have examined the record and agree with
SKF Sweden that we made an error in identifying which customers to
include in the related-party arm's length test. Therefore we have
modified the customer-code list in the arm's-length test to reflect
only those customers SKF Sweden identified in its COP/CV supplemental
questionnaire response.
Comment 2: Torrington asserts that the Department should test SKF
France's reported HMPs for differences in selling prices to related and
unrelated customers as it did for other respondents in this review.
SKF France contends that, pursuant to the Department's
instructions, it excluded sales to related parties from the sales file,
so no test is necessary.
Department's Position: We disagree with Torrington. Because SKF
France reported HM sales to unrelated customers only and did not
request the Department to consider sales it made to related parties,
there are no relevant related-party sales for which we need to conduct
an arm's-length test.
Comment 3: NTN objects to the Department's standards for
eliminating related-party HM sales not made at arm's length. NTN
contends that the Department's method of comparing sales prices by
class, model, and customer category is inadequate to determine whether
prices are comparable without consideration of other factors such as
payment terms and quantities sold.
Department's Position: We disagree with NTN. Section 353.45 our
regulations provides that we will use related-party sales in the
calculation of FMV ``only if satisfied that the price is comparable to
the price at which the producer or reseller sold such merchandise to a
person not related to the seller'' (emphasis added). The regulations
direct us to focus on price. We have established a reasonable and
objective standard for determining whether related-party-sales prices
are comparable to unrelated-party-sales prices; if at least 99.5% of
the volume of a related-party's sales are made at prices equal to, or
greater than, prices to unrelated parties, then we consider those
related-party sales to be reliable. We used this methodology in AFBs
III and the CIT upheld it in NTN II.
Further, we disagree with NTN that we do not consider payment
terms. We take payment terms into account by adjusting prices for
credit expenses. Because we deduct credit and conduct our analysis by
level of trade, our arm's-length test accounts for differences in
payment terms and, to the extent that they are reflected in sales to
different levels of trade, differences in quantities of sale. See AFBs
IV at 10946-47. Finally, with respect to NTN's contention that the
related-party test does not adequately consider quantities sold, we
note that NTN has not shown the affect, if any, that quantity
differences had on its selling prices.
10. Samples, Prototypes, and Ordinary Course of Trade
Although we may exclude sales from the home market database under
section 773(a)(1) of the Tariff Act where we determine that those sales
were not made in the ordinary course of trade, there is no parallel
provision allowing for exclusion of such sales from the U.S. database.
See Floral Trade Council of Davis, Cal. v. United States, 775 F. Supp.
1492, 1503 n.18 (CIT 1991). As we have explained in past reviews, we do
not exclude U.S. sales from our review merely because they are
designated as 'samples'' or ``prototype.'' See AFBs II at 28395 and
AFBs III at 39744. However, we will only exclude U.S. sales from our
review in unusual situations, in which those sales are unrepresentative
and extremely distortive. See, e.g., Chang Tieh Indus. Co. v. United
States, 840 F. Supp. 141, 145-46 (CIT 1993) (exclusion of sales may be
necessary to prevent fraud on the Department's proceedings).
Contrary to the statements made by several parties, while we have
acknowledged that we may exclude small quantities of sales in
investigations, we do not follow the same policy in reviews. This is
because, under the statute, the Department is required in an
administrative review to calculate an amount of duties to be assessed
on all entries of subject merchandise, and not merely to set a cash
deposit rate.
Our treatment of samples and prototypes was recently upheld by the
CIT in FAG III. In that case, the CIT recognized the limitations on our
authority to exclude U.S. sales in an administrative review. The CIT
upheld our procedural requirements for establishing that a sale is a
true sample, which require the respondents to establish that: (1)
Ownership of the merchandise has not changed hands; and (2) the sample
was returned to the respondent or destroyed in the testing process. Id.
at 11, citing Granular Polytetrafluoroethylene Resin from Japan, 58 FR
50343, 50345 (September 27, 1993).
The fact that merchandise is sold at a very low price, or even
priced at zero is not sufficient to establish that the sale is a
sample. The reason for this policy is that a respondent could disguise
[[Page 66512]]
dumping by matching zero-priced sales, designated as ``samples,'' with
sales above fair value. Although, on average, customers would be
purchasing the merchandise below fair value, if we were to disregard
the sales designated as ``samples,'' our calculations would find no
dumping. For this reason, we require additional evidence that sales are
true samples before they will be excluded from the U.S. sales database.
Comment 1: Torrington asserts that the Department properly included
in the preliminary results U.S. sales that SKF France had deemed sales
of sample and prototype merchandise and requested excluded. Torrington
claims that the statute mandates that the Department must analyze the
USP of each entry of subject merchandise and assess antidumping duties
on each entry, and the statute does not make an exception for sample or
prototype sales. Torrington also claims that, in all previous reviews
of these orders, the Department agreed with this position. Torrington
states, in addition, that SKF France did not provide adequate factual
information regarding the alleged samples or prototypes to support its
position.
SKF France argues that the Department may exclude U.S. sample or
prototype sales from its margin calculation, as the Department
explained in a recent brief to the CIT. See Defendant's Response Brief
(December 15, 1995) in Ct. No. 95-03-00335-S at 16. According to SKF
France, the Department cited three circumstances in which it can
exclude certain U.S. sales, including where sample sales do not
constitute true sales (citing Defendant's Response Brief, Dec. 15,
1995, CT No. 95-03-00335-S at 16). SKF France contends that the statute
sets forth general requirements for conducting administrative reviews
and the general definition of dumping, but does not preclude the
Department from exercising its discretion to exclude sales in which the
failure to exclude such sales would result in an inaccurate margin
calculation, citing NTN I. In addition, SKF France claims the
Department has recognized its authority to exclude U.S. sample and
prototype sales in administrative reviews. SKF France claims that it
provided full cost information and sales prices for each of the
reported sample and prototype sales.
Department's Position: We agree with Torrington. As we explained in
AFBs II (at 28395), other than for sampling, and except under the
limited circumstances discussed above, there is neither a statutory nor
a regulatory basis for excluding U.S. sales from review. The Department
must examine all U.S. sales within the POR. See also Final Results of
Antidumping Administrative Review; Color Television Receivers From the
Republic of Korea, 56 FR 12701, 12709 (March 27, 1991).
Comment 2: Torrington states that the Department should reject
SNR's claims that it should exclude certain U.S. and HM sales from the
dumping analysis. First, Torrington claims, the Department has no
statutory authority to exclude any U.S. sales. With respect to HM
sales, Torrington argues that SNR has recorded a separate product code
for the sample models and it did not clarify how this affected the code
reported in field IDNUM (which SNR claims should be used for matching
purposes). Additionally, Torrington contends that SNR did not supply
any documentation nor has it offered a description of the types or
models involved. Therefore, the Department should deny SNR's requests
for exclusions.
SNR responds that Torrington is in error and that, in fact, the
Department used all U.S. and HM sample sales in its analysis. SNR
concludes that the Department does not need to make any changes in the
margin program for the final results with regard to this comment.
Department's Position: We agree with Torrington that we should not
exclude any of SNR's U.S. and HM sample sales from our analysis. We
also agree with SNR that we included all such sales in our preliminary
margin calculations. Therefore, no change for the final results is
necessary.
Comment 3: Torrington contends that the Department should not
exclude any of SKF Sweden's U.S. sample and prototype sales. Torrington
cites section 751(a)(2)(A) in support of its position that any imports
that are dumped should be subject to antidumping duty assessments.
Torrington also cites AFBs I at 31713, AFBS II at 28394-95, AFBs III at
39776, and AFBs IV at 10947 in noting the Department's practice of
including all U.S. sales in these reviews. Torrington states that,
although the Department will exclude sample sales in situations where
there is no transfer of ownership between the exporter and the U.S.
purchaser, SKF Sweden did not demonstrate that it retained ownership of
its sample sales.
In addition, Torrington states, because SKF Sweden did not provide
any factual information regarding the sample or prototype sales, the
Department should not exclude HM sales of samples and prototypes from
its analysis. Furthermore, Torrington contends, in SKF Sweden's
supplemental questionnaire response, SKF Sweden stated that there were
no sales of samples and prototypes in the HM. Thus, since SKF Sweden
claims that none of its HM sales were of samples or prototypes, there
is no basis to exclude these sales from the HM database.
SKF Sweden responds that the Department may, under certain
circumstances, exclude sample or prototype U.S. sales from the margin
calculation. SKF Sweden states that, in arguments before the CIT, the
Department explained that it would exercise its authority to exclude
certain U.S. sales when small quantities are sold, to prevent fraud in
the proceeding, or where sample sales do not reflect true sales. SKF
Sweden contends that the Department also has the discretion to exclude
sales when the inclusion of such sales may result in an inaccurate
margin calculation, citing NTN I at 1208. SKF Sweden also contends that
the transfer of ownership between seller and purchaser is not a sole
criterion upon which the Department bases its analysis. SKF Sweden
asserts that the record demonstrates that its sample and prototype U.S.
sales are not representative of the products sold within the ordinary
course of trade and, therefore, they should be excluded from the margin
calculations.
SKF Sweden notes that its supplemental questionnaire response
indicates that there were no HM sales of samples and prototypes, and
states that Torrington's assertions regarding the inclusion of these
sales in the Department's analysis are moot.
Department's Position: We agree with Torrington. As noted above, we
will only exclude U.S. sales from our review in unusual situations,
i.e., where the sales are unrepresentative and extremely distortive.
SKF Sweden has not submitted evidence sufficient to satisfy the
criteria for excluding U.S. sample sales from our analysis.
Specifically, SKF Sweden has failed to demonstrate that: (1) It
maintains ownership of the subject merchandise after exportation to the
United States, and (2) the customer destroyed the merchandise during
testing or returned it to SKF Sweden.
We also disagree with SKF Sweden's argument that we may exercise
discretion to exclude sales in which the quantities are small. The case
that SKF Sweden cites in support of its argument concerns an LTFV
investigation. As noted above, we have the discretion to eliminate
unusual U.S. sales in an investigative proceeding; we do not have the
same discretion in an administrative review.
SKF Sweden did not have HM sales of samples and prototypes.
Therefore, Torrington's argument that the
[[Page 66513]]
Department should not exclude these sales from the HM database is moot.
Comment 4: NSK/RHP argues that the Department should remove from
the calculation of USP those transactions of bearings NSK/RHP gave away
in the United States as samples. NSK/RHP states that the antidumping
law applies only to sales of the subject merchandise in the United
States and that, by including such samples in the U.S. database, the
Department fails to acknowledge that consideration must be promised or
paid by the buyer to the seller in order for the transaction to
constitute a sale. NSK/RHP argues that the Department should revise its
definition of the term ``sale'' to comport with a standard definition
of this term.
Torrington asserts that NSK/RHP's contention that alleged
``sample'' sales made at ``zero prices'' should not be included in the
U.S. sales database is contrary to the statute. Torrington argues that,
in administrative reviews, the Department must analyze the USP of each
entry of merchandise subject to the antidumping duty order and there is
no exception to this categorical mandate for zero-price ``sample''
sales. Torrington argues that NSK/RHP's argument that the Department
should revise its definition of the term ``sale'' to comport with an
alleged non-legal ``standard'' definition of the term ``sale'' lacks
merit because NSK/RHP has not demonstrated that its purported non-legal
definition of the term ``sale'' comports with the definition of the
term ``sample sale'' sanctioned by law and the courts.
Department's Position: We agree with Torrington. NSK/RHP failed to
demonstrate either of the two criteria, described above, which must be
met for sample sales to be excluded from the U.S. sales database.
Therefore, we have continued to review and calculate margins on the
basis of NSK/RHP's claimed samples. With regard to NSK/RHP's argument
that the ``samples'' are not true ``sales,'' we note that we cannot
accept a sample sales claim simply on the basis of designation.
Furthermore, as noted above, were we to accept NSK/RHP's argument that
the alleged samples are not actually sales per se, we would be allowing
a loophole that respondents could use to mask dumping.
Comment 5: Torrington argues that the Department should not exclude
SKF Italy's sample and prototype sales from the U.S. or HM databases.
Torrington notes that the Department properly did not exclude such
sales in its preliminary margin calculation.
SKF Italy argues that the Department has the discretion to exclude
sample sales from both the U.S. and HM databases. SKF Italy asserts
that it has demonstrated that its reported sample sales in both the
U.S. market and the HM are samples and, therefore, they should be
excluded.
Department's Position: We disagree with SKF Italy. As noted above,
merely designating a sale as a ``sample'' does not entitle a respondent
to exclusion of that sale from the database. The respondent must
provide evidence to prove its claim that the designated sales are
actually sample sales. Further, they must meet the criteria discussed
above in order to merit the exclusion of U.S. sample sales, and must
demonstrate that HM sample sales are outside the ordinary course of
trade. In this instance, SKF Italy failed to provide any evidence to
support its sample sale claims. Therefore, we have continued to review
and calculate margins on the basis of SKF Italy's sample sales.
Comment 6: Torrington requests that the Department examine all of
FAG Italy's U.S. sales. Torrington argues that section 751(a)(2) of the
Tariff Act requires that the Department analyze the USP of each entry
of merchandise subject to the antidumping duty order. Petitioner states
that there is no exception for zero-price sample or prototype sales.
FAG Italy responds that the Department has consistently held that,
where merchandise is not sold within the meaning of section 772 of the
Tariff Act, the transaction is not a sale for antidumping purposes. FAG
Italy contends that section 772 defines an ESP sale as the price at
which merchandise is sold or agreed to be sold in the United States. In
FAG Italy's case, respondent asserts, all sample transactions were
zero-priced so there was no price at which merchandise was sold.
FAG Italy argues that Torrington's reliance on section 751(a)(2)(A)
of the Tariff Act is misplaced. Respondent contends that the provision
requiring the Department to analyze the USP of each entry of
merchandise subject to the antidumping duty order applies in its
literal sense only to PP situations. In ESP situations, FAG Italy
holds, the Department does not review any entries; it reviews sales. In
conclusion, FAG Italy requests that the Department exclude sales of
zero-priced sample/prototype merchandise from FAG Italy's U.S. sales
database.
Department's Position: We agree with Torrington. FAG Italy failed
to substantiate its claims that the sales were actually sample sales or
to demonstrate that either of the two criteria described above were
met. Therefore, we have continued to review and calculate margins on
the basis of FAG Italy's claimed sample sales.
Comment 7: NSK argues that the Department should eliminate zero-
price sample transactions from the U.S. database because the record
demonstrates that the provision of these samples are not sales but
rather promotional expenses. NSK contends that the Department verified
that NSK did not ``sell'' sample bearings in the United States during
the review period, but rather supplied sample bearings to customers
free of charge.
Torrington argues that every entry is subject to review and that,
if the Department excludes the zero-priced sample sales from the U.S.
sales database, it will allow NSK to evade the antidumping law by
providing zero-based sales coupled with higher-priced sales to yield
lower weighted-average margins. Torrington contends that the Department
should continue to include NSK's zero-priced sample sales in the U.S.
sales database for the final results.
Department's Position: We disagree with NSK. NSK failed to
demonstrate either of the two criteria described above. Therefore, we
have continued to review and calculate margins on the basis of NSK's
claimed samples. With regard to NSK's argument that the ``samples'' are
not true ``sales,'' we note that we cannot accept a sample sales claim
simply on the basis of designation. Furthermore, as noted above, were
we to accept NSK's argument that the alleged samples are not actually
sales per se, we would be allowing a loophole that respondents could
use to mask dumping.
Comment 8: NTN argues that it identified certain HM sales as sample
sales and that the Department erred in not excluding these sales from
the calculation of weighted-average FMVs. NTN also asserts that the
Department included certain other HM sales respondent had identified as
not in the ordinary course of trade in the calculation of weighted-
average prices. NTN requests that the Department disregard these sales
for the purposes of calculating FMV.
Torrington believes that NTN has not met the burden of proving that
sample sales are outside the ordinary course of trade. Torrington
contends that respondents must meet a standard such as that affirmed in
Murata Mfg. Co., Ltd v. United States, (820 F. Supp. 603, 606 (1993)),
which establishes that, if sample sales are to be excluded, respondents
must demonstrate different sales practices with respect to sample
sales, such as negotiating sample-sales prices separately from standard
sales
[[Page 66514]]
transactions, in order to have such sales excluded.
Department's Position: We disagree with NTN that we should exclude
certain sample sales from the calculation of FMV. Based on information
we examined at verification we are satisfied that these sales were not
made outside the ordinary course of trade. As the Department stated in
AFBs III (at 39775), ``identify(ing) sales as sample * * * sales does
not necessarily render such sales outside the ordinary course of trade.
* * * Such evidence does not indicate that such sales were made outside
the ordinary course of trade.'' We also disagree that we should
disregard other sales NTN identified as not in the ordinary course of
trade. NTN's standard of ``low volume of sales'' is inadequate as a
definition of sales not in the ordinary course of trade. NTN has
presented no other supporting information that identifies a low-volume
sale as outside the ordinary course of trade. The Department has
determined that ``(i)nfrequent sales of small quantities of certain
models is insufficient evidence to establish that sales were made
outside the ordinary course of trade.'' Id.
11. Taxes, Duties, and Drawback
Comment 1: FAG/Barden claims that the Department inadvertently
dropped the variable for ``other revenue'' in its calculation of
adjusted USP at a certain point in its computer program. Further, FAG/
Barden argues that, in the calculation of VAT for HM sales, the
Department should add the variable ``other revenue'' to the total unit
price. FAG/Barden requests that the Department correct these clerical
errors for the final results.
Torrington disagrees with FAG/Barden's argument that, in the
calculation of VAT for HM sales, the Department should add the variable
``other revenue'' to the total unit price. Torrington argues that FAG/
Barden has not provided a narrative description of this field nor did
FAG/Barden identify this in its narrative description of the VAT.
Torrington argues that the Department should not make the revisions
FAG/Barden requests.
Department's Position: We disagree with FAG/Barden. FAG/Barden has
misread the purpose of the language at a certain point in the
Department's computer program. FAG/Barden contends that this language
in the computer program refers to the calculation of adjusted USP.
However, at the point in the computer program to which FAG/Barden
refers, we adjust FMV for the application of the cost test, not for the
adjustment of USP. Therefore, we have not made FAG/Barden's suggested
changes to the computer program for these final results.
With respect to FAG/Barden's second contention, that the Department
should add the variable ``other revenue'' to the total unit price in
the calculation of VAT for HM sales, we determined that, because FAG/
Barden did not provide a narrative description of this field in its
questionnaire responses and did not identify this expense in its
narrative description of VAT, we cannot accurately determine what the
variable ``other revenue'' includes. Therefore, we have not adjusted
VAT for HM sales to include the variable ``other revenue'' for these
final results.
Comment 2: SKF France claims that the Department failed to make
adjustments for billing adjustments 2, freight revenue, and packing
revenue to the taxable base on which it calculated VAT.
Torrington argues that expenses for billing adjustments should not
be an adjustment to the taxable base. Torrington contends that SKF
France did not report this expense correctly because the reporting
methodology does not isolate amounts incurred on in-scope sales. For
freight revenue and packing revenue, Torrington contends that, for SOS
sales, SKF France did not report these revenues on transaction-specific
bases. Torrington asserts that the reporting methodology of these three
expenses do not meet the standard that it claims the Court required in
Torrington I at 1579.
Department's Position: We agree with SKF France and have included
its home market billing adjustment 2, except as noted below, packing
revenue, and freight revenue amounts in the taxable base used to
calculate VAT. Torrington acknowledges that a significant majority of
SKF France's packing and freight revenues were reported on a
transaction-specific basis and provides only a conclusory statement
that SKF France allocated a small portion of its revenue amounts.
We base the VAT adjustment on adjusted FMV; we factored these
variables fully into FMV and have therefore included them in the VAT
calculation. However, as noted in Discounts, Rebates, and Price
Adjustments, above, we have disallowed SKF France's negative billing
adjustment 2 amounts. Accordingly, we did not include negative billing
adjustments in our VAT calculation.
Comment 3: SKF Germany argues that the Department neglected to
adjust the price upon which it calculated VAT for billing adjustment 2,
freight revenue 2, and packing revenue. SKF Germany also states that
the HMP on which the Department calculated the VAT includes these
adjustments.
Torrington argues that the Department should not adjust for billing
adjustments because SKF Germany did not report them correctly, relying
instead on a reporting methodology that does not isolate amounts
incurred on in-scope sales. Torrington contends that freight revenues
and packing revenues are also allocated amounts and these three
expenses do not meet the CIT's allocation criteria since the expenses
are allocated across sales that include non-subject merchandise.
Department's Position: We agree with SKF Germany for the reasons
provided in response to Comment 2, above, and have included its home
market billing adjustment 2, packing revenue, and freight revenue
amounts in the taxable base used to calculate VAT. Torrington
acknowledges that a significant majority of SKF Germany's packing and
freight revenues were reported on a transaction-specific basis and
provides only a conclusory statement that SKF Germany allocated a small
portion of its revenue amounts. However, as noted in Discounts,
Rebates, and Price Adjustments, above, we have disallowed SKF Germany's
negative billing adjustment 2 amounts. Accordingly, we did not include
negative billing adjustments in our VAT calculation.
Comment 4: SKF Italy argues that the Department should change its
calculation of VAT by including packing revenue in the net price
because the price on which VAT is actually assessed includes packing
revenue.
Torrington notes that packing revenue is described as a negotiated
charge for packing, expressed as a percentage of invoice price and
separately listed on the invoice, and that SKF Italy did not provide
any further details. Torrington contends that, on the basis of the
record evidence, the Department is not required to modify its
methodology for the final results.
Department's Position: We agree with SKF Italy. Because packing
revenue is included in the price on which VAT is charged, the VAT we
calculate for the HM sale should reflect packing revenue. We have made
this change for the final results.
Comment 5: Torrington argues that the Department should disallow
the duty drawback SKF Italy claimed in connection with its U.S. sales.
Torrington contends that SKF Italy failed to demonstrate the link
between
[[Page 66515]]
the import duties it paid and the rebate it received, and that SKF
Italy failed to demonstrate that there were sufficient imports of the
imported material to account for the duty drawback it received for the
export of the manufactured product.
SKF Italy argues that its methodology for calculating duty drawback
adjustment has not changed since the LTFV investigation and that the
Department has accepted it in all segments of the proceeding. SKF Italy
contends that the Italian legislation makes clear what is eligible for
duty drawback and that the Department has verified the link between the
legislation, SKF Italy's methodology, and SKF Italy's actual
experience. SKF Italy observes that neither the legislation nor its
methodology has changed since that verification. Finally, SKF Italy
argues that its response demonstrates the sufficiency of imports of raw
material inputs to account for the duty drawback it received on exports
of finished goods.
Department's Position: We disagree with Torrington. We apply a two-
part test to determine whether to grant a respondent's claimed
adjustment to USP for duty drawback. In this test, a respondent must
demonstrate that (1) a link exists between the import duties it paid
and the rebate it received, and (2) there were sufficient imports of
the imported material to account for the duty drawback it received for
the export of the manufactured product. We applied this test in
addressing the issue of SKF Italy's claimed duty drawback adjustment
and, based on those verification findings, accepted the adjustment for
the final results. See AFBs II at 28420. Thus, we have determined
previously that, under the Italian duty drawback system, a sufficient
link exists between the amount of duties paid and the amount of duty
drawback claimed. In addition, as in prior reviews, we have reviewed
SKF Italy's cost response and conclude that it purchased sufficient
inputs from overseas related parties to support its claimed duty
drawback adjustment. See Federal Mogul V, 924 F. Supp. 210 (CIT April
19, 1996). Furthermore, SKF Italy submitted copies and English
translations of the applicable laws and duty drawback rates, and we
observed from this evidence that the factual situation has not changed
since the 90/91 review. Therefore, because SKF Italy used the same
method to report duty drawback in this review as it did in the previous
reviews, and because the factual situation had not changed during this
review or during previous reviews, we conclude that SKF Italy's duty
drawback claim for this review satisfies both parts of our tests.
12. U.S. Price Methodology
Comment 1: Torrington believes that the Department should reject
NTN's and NTN Germany's allocation of certain U.S. expenses according
to transfer price in favor of an allocation based on resale value.
Torrington contends that NTN's and NTN Germany's reasoning that a
transfer-price methodology eliminates distortions caused by profit
margins on individual sales is not rational, since profit margins can
only be determined after expenses have been allocated and deducted from
each sale.
NTN answers that Torrington's contention is only correct if the
allocation of selling expenses is based on a pre-profit price, which
essentially equates to a transfer price.
Department's Position: We agree with Torrington. While transfer
price is essentially equivalent to the cost of goods sold for an
importing subsidiary, transfer price is not the same as cost of goods
sold for the manufacturing parent if, for instance, transfer prices are
below the manufacturing parent's COP. We consider resale prices to be
the more reliable measure of value available to us, as we stated in
AFBs IV (at 10919) that ``we prefer to allocate expenses using resale
prices to unrelated parties because such prices are not completely
under respondents' control and, therefore, provide a more reliable
measure of the value that is not subject to potential manipulation by
respondents.'' Consequently, we have recalculated NTN's U.S. expenses
according to resale prices.
Comment 2: Torrington contends that the Department should
reclassify NTN's and NTN Germany's U.S. advertising expenses as a
direct selling expense based on a statement in both firms' responses
that ``most of the advertising is general and promotes the company and
not specific products,'' citing NTN's questionnaire response of
September 6, 1994 at 21.
Department's Position: We disagree with Torrington. Although we
stated in AFBs IV (at 10909) that NTN tacitly acknowledged that it
incurred some direct advertising expenses in the United States by
claiming that most of its U.S. advertising expenses were indirect in
nature, we did not conduct a U.S. verification to examine the issue
further in that review. In our U.S. verification of NTN in this review,
we determined that respondent's advertising and sales promotion was
general in nature. Thus, the expenses are properly classified as
indirect selling expenses. For these final results, we have treated
U.S. advertising expenses as an indirect selling expense for NTN and
NTN Germany.
13. Accuracy of HM Database
Comment 1: Torrington claims that the Department should establish a
rebuttable presumption that a sale is an export sale whenever the
circumstances suggest that the sales are not in fact for HM
consumption, and should remove those HM sales from respondents' HM
sales listings . Torrington provides the following examples of such
situations: (1) Sales to a home market customer with manufacturing
facilities in the United States which include the bearings in a
further-manufactured article (in which case Torrington recommends
presuming sales of such bearings are U.S. sales), and (2) sales for
which the manufacturer prepared export documents for the purchaser.
Torrington suggests that respondents could rebut such presumptions by
providing adequate evidence establishing that the sales are for home
market consumption.
Torrington acknowledges that the Department rejected this
rebuttable presumption in AFBs IV. Torrington urges the Department to
reconsider its policy and revise its approach regarding this issue.
Koyo argues that the Department should reject Torrington's
presumption. Koyo notes that the Department examined and verified
whether respondents properly excluded export sales from the HM database
in the current review and identified no problems. Koyo asserts that the
dispositive question is whether respondents knew at the time of sale,
when making price decisions, that the ultimate destination of the
merchandise was the HM or some export destination. Koyo claims that
requiring respondents to prove the ultimate destination of all HM sales
is extremely burdensome and is of no relevance to the purpose of the
antidumping statute, which is to prevent less-than-fair-value sales of
merchandise in the United States. Koyo argues that the fact that some
manufacturers do not know the ultimate destination of some of their
merchandise guarantees that they are not engaging in price
discrimination based on the markets in which they are selling their
merchandise. Finally, Koyo states, Torrington litigated this issue at
the CIT in its appeal of AFBs I and did not file an appeal after the
court did not rule in its favor.
NSK argues that, pursuant to section 773 of the Tariff Act, it
reported sales that it knew were intended for export as export sales,
and it reported sales that it knew were intended for domestic
[[Page 66516]]
consumption as HM sales. NSK asserts that there is no statutory
requirement that respondents seek or obtain propriety business
information from unrelated customers in order to determine whether the
customer may export a respondent's bearing at a later time. NSK
contends that Torrington's argument, which assumes that certain,
undefined classes of sales are export sales unless respondents can
prove otherwise, has no support in the statute or case law.
NTN argues that Torrington's proposed test would nullify the
statutory and regulatory provisions concerning resellers, citing
section 772 of the Tariff Act and 19 CFR 353.2(5) (1994). NTN contends
that, under Torrington's test, antidumping margins could never be
calculated based on the reseller's price since the manufacturer would
always be deemed to have knowledge that the sales were destined for the
United States.
INA argues that Torrington's vague reference to ``circumstances
suggesting that sales are not for HM consumption'' provides no guidance
for determining to which sales the presumption would apply and would
require respondents and the Department to make subjective judgments.
FAG contends that Torrington neither recognizes the pure
subjectivity nor the administrative burdens involved in applying a
``circumstances suggest'' test for HM sales. FAG argues that only
section 772(b) of the Tariff Act provides a basis for excluding sales
from the HM database, and that it applies only to sales the Department
characterizes as U.S. sales because the company knew at the time of
sale that the merchandise would ultimately be destined for the United
States. FAG Germany contends that section 772(b) of the Tariff Act
requires that two standards must be met in order to exclude a sale from
the home market database: (1) The Department must determine that
knowledge of the export existed at the time of the sales and (2) the
Department must establish that the export sale was made to the United
States. With regard to the first criterion, FAG argues that the
standard for imputing knowledge, as the Department has properly applied
it in this case, is high. FAG contends that, even if it had reason to
know that its customers would export the bearings, as long as it
shipped the bearing to the customer in Germany, the sales should not be
excluded from the sales database. FAG argues that, where the Department
cannot say with objective certainty that all of a reseller's goods go
to a known destination, the Department has not held that the supplier
had reason to know the ultimate destination of those goods. FAG
contends that, because the customer could dispose of the bearings in
any manner it wished once the bearings were shipped to that customer,
even if it believed the bearings would be exported, it cannot be sure
of the ultimate disposition of the bearings. Therefore, FAG contends,
the standard for imputing knowledge has not been met.
With regard to the second criterion, FAG argues that the only
statutory basis for excluding sales from the HM database is where the
producer knew at the time of sale that the product was destined for the
United States. FAG argues that, because the bearings sold to its
customers cannot be shown to have been ultimately shipped to the United
States, the Department cannot exclude any such sales.
Department's Position: We disagree with Torrington regarding its
proposal to establish rebuttable presumptions that certain home market
sales were destined for export or, more specifically, destined to be
exported to the United States. Indeed, in Federal-Mogul IV, Torrington
unsuccessfully argued to the CIT that the Department should impose such
a presumption. Instead, the Court held that, if we determined that
certain information on the record provided evidence that respondents
knew or should have known that certain sales were destined for the U.S.
market, we must disregard those sales in calculating FMV. Id. Thus, we
agree that home market sales made with knowledge of export should not
be included in the home market database.
As we noted in AFBs IV at 10952-53, in accordance with section
772(b) of the Tariff Act, transactions in which the merchandise was
``purchased * * * for exportation to the United States'' must be
reported as U.S. sales in an antidumping proceeding. However, we have
examined the record closely with regard to every respondent and did not
find sufficient evidence in these reviews to conclude that any alleged
HM sales are in fact U.S. sales under section 772(b) of the Tariff Act.
Furthermore, Torrington has not met its burden of proof of
demonstrating, and the administrative record is lacking in evidence
indicating, that our decision to use FAG Germany's home market sales is
unreasonable. See Torrington III at 629 (holding that Torrington bears
the burden of proving certain allegations concerning certain sales,
including its allegation that they were not for home market
consumption). Therefore, we have not reclassified any HM sales as U.S.
sales in these reviews.
Section 773(a) of the Tariff Act provides that we must base FMV on
sales ``for home consumption.'' Therefore, sales which are not for home
consumption, even if they are not classifiable as U.S. sales under
section 772(b), are not appropriately classified as HM sales for
antidumping purposes. In these reviews, except for certain sales FAG
Germany reported as HM sales by FAG Germany (see Comment 2, below), we
did not find sufficient evidence to reasonably conclude that reported
HM sales were not ``for home consumption'' as required by section
773(a) of the Tariff Act.
Comment 2: FAG Germany contends that the Department should not have
excluded from the HM sales database sales to two customers in its
preliminary results. FAG Germany argues that the Department gave no
explanation for this exclusion and that there is nothing on the record
to warrant such an exclusion. FAG Germany notes that, in AFBs IV, the
Department excluded sales to these customers on the grounds that they
were indirect exporters and that FAG Germany had reason to know that
merchandise sold to these customers was to be exported. However, FAG
Germany contends, there is nothing on the record in this review to
justify such a conclusion. Citing Natural Bristle Paint Brushes from
the People's Republic of China; Final Results of Antidumping
Administrative Review, 55 FR 42599, 42600 (October 22, 1990) and Fuel
Ethanol from Brazil; Final Determination of Sales at Less Than Fair
Value, 51 FR 5572 (February 14, 1986), FAG argues that the standard for
imputing that a respondent knew or had reason to know that merchandise
it sold was not for home market consumption is high. FAG also argues,
citing Television Receivers, Monochrome and Color, from Japan; Final
Results of Antidumping Administrative Review, 58 FR 11211 (February 24,
1993), and Oil Tubular Good from Canada; Final Results of Antidumping
Administrative Review, 55 FR 50739 (December 10, 1990), that where the
Department cannot say with objective certainty that 100 percent of a
reseller's goods go to a known destination, then the Department has not
held that the supplier ``should have known'' the disposition of the
goods. FAG contends that, beyond having a very high standard for
imputing knowledge that the manufacturer knew at the time of the sale
that the goods were not for home market consumption, the Department
requires objective information that can be corroborated by the
administrative record. In light of
[[Page 66517]]
this, FAG Germany requests that the Department change its analysis of
the sales to the two customers for its final results. FAG Germany also
notes that one of the customer codes the Department excluded does not
exist.
Torrington contends that, if these two customers are the same two
indirect exporters whose sales were excluded from the database in AFBs
IV, the Department acted properly by excluding sales to these customers
in the preliminary results. Torrington observes that, in AFBs IV, the
Department found that FAG Germany misreported certain transactions
after the Department and Torrington expended considerable time and
effort to verify the factual situation. Torrington argues that this was
necessary because the Department does not have power to compel evidence
by legal process. Torrington contends that past findings of misreported
sales should create presumptions in subsequent reviews, requiring
respondents to demonstrate a change in the factual situation.
Torrington argues that, with respect to FAG Germany's argument that
the standard for imputing knowledge is high, this is not a normal case
because the Department found sales to these customers to be misreported
in AFBs IV. Torrington argues that the existence in this review of
evidence of misreporting in the home market database for the
immediately preceding review distinguishes the instant situation from
the situations in the cases that FAG Germany cited.
With respect to FAG Germany's argument that the Department can only
exclude, from the HM sales database, sales of bearings which have been
shown to have been ultimately shipped to the United States, Torrington
contends that this interpretation could create a large legal loophole
which would allow respondents to dump anywhere in the world through
indirect exporters and then claim the sales as HM sales, thereby
reducing FMV. Torrington observes that the Department has deemed that
this would be improper and that such sales cannot be considered HM
sales. Torrington argues that the Department has interpreted the
statute reasonably with respect to the exclusion of sales improperly
included in the HM database.
Department's Position: We disagree with FAG Germany. Section 773(a)
of the Tariff Act states that FMV must be based on the price ``at which
such or similar merchandise is sold * * * in the principal markets of
the country from which exported, in the usual commercial quantities and
in the ordinary course of trade for home consumption'' (emphasis
added). This indicates clearly that HM sales must consist of only those
sales consumed in the HM.
Only rarely will we be able to identify direct evidence of a
respondent's knowledge with respect to the destination of merchandise.
Therefore, we must impute whether knowledge existed based on the
factual situation of each case. FAG Germany is correct in noting that,
in deciding whether to impute knowledge that bearings sold to a HM
customer were ultimately destined for the United States, the standard
for imputing such knowledge is high. The cases FAG Germany cites to
support this position state this clearly. FAG Germany overlooks the
fact, however, that the statute establishes two separate tests for
imputing knowledge. We use the first test, which FAG Germany discusses,
to determine whether to treat a sale as a sale for exportation to the
United States. We use a second test, which FAG Germany does not
discuss, to determine whether to treat a sale as a sale for home
consumption because the company had reason to know that the merchandise
would be exported.
The standard for imputing knowledge for the second test is not as
high as the standard for the first test. Under the second test,
established in section 773(a)(1), we merely need to determine whether
the company had reason to know that the merchandise was not intended
for HM consumption, and we do not need to determine the specific market
for which the merchandise was destined.
In addition, we note that section 773(a) does not require that the
merchandise actually be consumed in the HM, but rather that it be sold
for HM consumption. FAG Germany suggests that it only had to report
sales it had certain knowledge would be exported because the customer
might not actually export the merchandise. Under this interpretation of
the statute, however, we would be required to trace HM sales in order
to ensure that HM customers did not export the merchandise. Not only is
FAG Germany's interpretation inconsistent with the statute but,
assuming such an inquiry were possible, it would severely restrict the
Department's ability to complete administrative reviews in a timely
manner.
With regard to our factual conclusions, FAG Germany argues that
there is nothing on the record to justify our exclusion of these
companies' sales from the HM database. However, we decided in AFBs IV
that:
With respect to FAG Germany, for these final results we excluded
reported HM sales to two customers. For these sales, the evidence
indicates that the merchandise in question was destined for export
and thus not for home consumption. We found at verification that FAG
Germany referred to these customers as ``indirect exporters'' and
that FAG Germany excluded sales to other ``indirect exporters''
based on its conclusion that these were export sales. In addition,
one FAG Germany subsidiary sold to one of these two ``indirect
exporters'' from its export, rather than domestic, price list. We
also visited and interviewed one of these resellers and found that
it only sells in export markets. This reseller claimed that its
suppliers, including FAG Germany, know that it does not resell
within Germany. For these reasons, we conclude that these sales were
for export and not for domestic consumption. Therefore, these sales
cannot be included in FAG Germany's HM sales.
See AFBs IV at 10953.
While some of the evidence which led to our factual conclusion in
AFBs IV is not on the record of the current review, neither is there
evidence on the record to show that the factual situation for these
customers has changed since that POR, nor is there any new evidence
about them on the record. In addition, FAG Germany has never challenged
the factual situation underlying our conclusions in that review, but
has only challenged our interpretation of the statute as applied to
those facts. Therefore, in the absence of evidence demonstrating
otherwise, we must assume that the factual situation in the immediately
prior review still remains.
In PPG Industries, Inc. v. United States, 978 F.2d 1232, 1242 (Fed.
Cir.1992) (PPG Industries), the CAFC ruled that the Department was
correct in treating a government program as not countervailable in the
review in question. In that review, petitioner submitted factual
evidence that it claimed demonstrated that the program was
countervailable. The Department disagreed, stating that the information
did not contradict its finding in the original investigation with
regard to the program. Thus, the Department relied on its analysis and
conclusions in a prior segment of the proceeding to make its
determination in the review in question. The CAFC upheld this position,
stating that the petitioner went astray ``in assuming that the ITA's
determination * * * in this review is based on a `clean slate.' It is
not.'' See PPG Industries at 1242. The CAFC also held that ``[b]ecause
the allegedly new information was previously considered by the ITA * *
* and because the allegedly new information does not cast substantial
doubt on the ITA original determination, the ITA's conclusion that the
new evidence submitted did not
[[Page 66518]]
justify a further investigation in this review cannot be an abuse of
discretion and, therefore, must be affirmed.'' Id.
In this review, FAG Germany has provided no evidence to disabuse us
of our conclusion in AFBs IV that it had reason to know that bearings
sold to the two customers in question would subsequently be exported.
Therefore, in accordance with section 773(a)(1) of the Tariff Act,
which states that HM sales must be sales for HM consumption, and our
factual conclusions from AFBs IV, we have excluded sales to these two
customers from the HM database for these final results.
We note, however, that FAG Germany is correct that one of the
customer codes we used in the computer program does not exist. This was
a clerical error and we have corrected it for the final results.
Comment 3: Torrington notes that the Department found in AFBs IV
that FAG Germany mischaracterized certain HM sales. Torrington contends
that the Department should examine FAG Germany's sales listings to be
certain that respondent reported all sales accurately for purposes of
this review.
Department's Position: In the preliminary results, and in the final
results, we have revised FAG Germany's HM sales database to exclude
sales which were not for HM consumption. (see our response to Comment 2
for a complete discussion of this issue).
Comment 4: SKF Sweden states that it reported fewer than 2,000
sales of CRBs to the Department. In light of the Department's practice
of not treating transactions as sampled sales for purposes of our
calculations in instances where a party has reported fewer than 2,000
sales transactions, SKF Sweden contends that the Department should not
treat these transactions as sampled sales in its calculations.
Torrington notes that SKF Sweden reported in its questionnaire
response that it had more than 2,000 transactions of Swedish CRBs in
Italy. In addition, Torrington cites to the Department's Preliminary
Analysis Memo which indicates that respondent reported sales of CRBs in
the third country based on sample months. Thus, Torrington requests
that the Department determine whether SKF Sweden reported complete data
in its database of third-country sales for CRBs before making any
adjustment to its calculations.
Department's Position: We agree with SKF Sweden. While SKF Sweden
reported that it had more than 2,000 transactions of Swedish CRBs in
Italy, the sales data it submitted to us demonstrates otherwise. In
fact, SKF Sweden also stated explicitly in its response that it
reported all sales of CRBs and did not sample for purposes of reporting
its data to us. Accordingly, for these final results of review, we made
the necessary change to the margin calculation program as respondent
suggested.
Comment 5: Torrington asserts that FAG/Barden's HM database is
incomplete. Torrington states that FAG purchased a minimal quantity of
Barden-produced scope merchandise which FAG failed to report to the
Department. Torrington states that accurate model matching and a
complete database are essential to the Department's dumping analysis.
Torrington contends that omission of this type of information should
not be left to the discretion of the respondent. Torrington requests
that, to the extent that FAG/Barden did not report all sales of Barden-
produced merchandise, the Department should apply BIA.
FAG/Barden argues that it reported all HM sales correctly in its
database. FAG/Barden argues that it reported all sales of subject
merchandise, by month, in its initial database as required by the
Department's questionnaire. FAG/Barden states that it reported all
sales in the HM sample months of bearing families and part types
corresponding to those bearings and part types reported in its U.S.
sales listing, as instructed by the Department's questionnaire.
Finally, FAG/Barden asserts that the Department verified Barden's HM
database and it found no discrepancies or deficiencies. For the reasons
discussed above, FAG/Barden contends that the Department should accept
its HM database as reported and verified.
Department's Position: We disagree with Torrington. We verified
Barden's HM database and found no discrepancies. We agree with
Torrington that accurate model matching and a complete database are
important to our analysis. However, Torrington has not adequately
supported its assertion that FAG/Barden's HM database excludes sales of
subject merchandise which should have been included. Furthermore, our
verification of FAG/Barden's HM database did not indicate that FAG/
Barden failed to provide complete sales information. We have
determined, therefore, that application of BIA to FAG/Barden is not
warranted for these final results. Thus, we have used FAG/Barden's
reported data for our calculations.
14. Programming
FAG/Barden, FAG Germany, FAG Italy, NSK/RHP, SKF Germany, SKF
Sweden, and Torrington commented on alleged errors in the Department's
computer programs. Where all parties agreed with a programming error
allegation, we made the necessary changes to correct the error. Our
final results analysis memoranda describe the programming errors and
changes we made to correct the problems. The following comments address
the programing error allegations, or rebuttals to such allegations, on
which parties disagree.
Comment 1: NSK/RHP contends that the Department erred by
subtracting U.K. commissions from its calculation of HM direct expenses
instead of adding them. NSK/RHP states that this error results in
increasing FMV by the cost of the expense.
Torrington argues that the Department had already accounted for HM
commissions elsewhere in its computer program and disagrees with NSK/
RHP that the Department should correct a clerical error in the computer
program as NSK/RHP describes it. Torrington argues that the Department
should not make a direct addition to or subtraction from FMV for U.K.
commissions, since these commissions are addressed in the commission
offset step of the computer program.
Department's Position: We agree with Torrington. We have accounted
for U.K. commissions in the separate commission-offset step of the
computer program. Therefore, we should not have included commissions in
the HM direct expense calculation. We have changed the program as
requested by Torrington to ensure that we adjust FMV properly for U.K.
commissions.
Comment 2: Torrington alleges that the Department made a clerical
error that results in below-cost sales not being excluded from the HM
database. SKF Italy agrees with Torrington.
Department's Position: We disagree with Torrington and SKF Italy.
For a complete discussion of this issue, see Comment 2 of Section 4.a.
above, regarding a clerical error alleged by FAG Germany and
Torrington. We did discover, however, that we inadvertently did not set
the quantity and value of some of these transactions to zero as we
should have. We have corrected this error for the final results.
Comment 3: FAG Italy states that the Department's program appears
to calculate U.S. corporate rebates deducted from USP using a BIA
methodology the Department applied in the 92/93 review. FAG requests
that the Department rely on the actual U.S. corporate rebate
information FAG submitted for the current review period instead of BIA.
Torrington argues that the Department's use of the BIA rate is a
clerical error only if the Department did
[[Page 66519]]
not intend to apply BIA for this adjustment, and that the Department
should first ascertain whether FAG correctly estimated and included
1994 rebates on reported U.S. sales before making the change FAG Italy
requests.
Department's Position: We agree with FAG Italy. Because we
determined that FAG Italy correctly estimated and included 1994 rebates
on reported U.S. sales, we have corrected the program in order to use
FAG Italy's reported U.S. corporate rebates for these final results.
Comment 4: Torrington claims that the Department should assign a
BIA value to certain U.S. sales for which FAG Italy did not submit
similar merchandise information or CV data. Petitioner states that the
rate the Department should apply to the U.S. sales with no matching
data is the final rate it calculated for FAG Italy ball bearings in the
LTFV investigation.
In rebuttal, FAG Italy states that Torrington's argument is moot
because no BIA sales should have appeared in the Department's margin
analysis. FAG explains that the BIA sales involved the transfer of
Italian-made parts to the United States for use in further-manufactured
bearings. According to FAG Italy, due to an error in the Department's
program, no further-manufacturing analysis was performed for these
sales, and this resulted in transactions being identified as BIA sales.
FAG Italy requests that the Department insert the appropriate
programming language to combine further-manufacturing data with the
U.S. sales database and perform the further-manufacturing analysis. FAG
Italy contends that these changes will reveal that there are no U.S.
sales with missing home market data.
Department's Position: We disagree with Torrington. There is no
need to assign a BIA value to certain U.S. sales because, as a result
of making the programming changes requested by FAG Italy, there are no
U.S. sales with missing home market data.
Comment 5: FAG Italy argues that the Department made an inadvertent
clerical error in its cost test. FAG Italy states that, due to a
missing programming instruction, the Department aggregated observations
that failed the cost test with observations that passed the cost test.
Torrington agrees with FAG Italy that observations which failed the
cost test are aggregated into a single database with observations that
passed the cost test. However, Torrington contends that the Department
intended to aggregate the observations in order to avoid price-to-price
comparisons between HM below-cost sales of models and U.S. sales.
Torrington explains that the sales of models that failed the cost test
are retained in the database for matching the models' CVs to USPs.
Torrington contends that, if the Department did not aggregate the sales
into a single database and instead ``tossed'' the below-cost sales, the
matching U.S. sales could be compared with prices of similar
merchandise, instead of CV.
Department's Position: We disagree with FAG Italy. Torrington's
understanding of our programming is accurate. There is no clerical
error as FAG Italy claimed and, therefore, we have not made the change.
15. Duty Absorption and Reimbursement
Comment 1: Torrington requests that the Department reconsider its
treatment of antidumping duties and deduct such duties from ESP as a
selling cost. Torrington argues that the Department should recognize
that, where a related U.S. importer absorbs antidumping duties as a
cost of doing business, the duties themselves are selling expenses,
just as are ordinary customs duties, movement expenses, or credit
terms. As such, Torrington contends, they should be deducted from ESP
pursuant to section 772(d)(2)(A) of the Tariff Act. Alternatively,
Torrington argues, the Department should apply its reimbursement
regulation, citing 19 CFR 353.26, where transfer prices between related
parties are less than cost plus profit (or cost) and actual dumping
margins are found.
Koyo maintains that the Department's position on this issue is
correct and has been upheld in court. Koyo urges the Department to
reject Torrington's argument since Torrington does not provide
sufficient reason for the Department to alter its methodology. Koyo
adds that, if Torrington is suggesting that duties ultimately assessed
on merchandise covered by the current review should be counted as
expenses in the review during which they are paid, such expenses would
bear no relation to pricing policies during the review period in which
the final assessment of duties occurred. Furthermore, Koyo argues,
because final liquidation and payment of duties occurs at lengthy,
unpredictable time periods after the deposit rate is set, it would be
extremely difficult for a respondent to anticipate when and at what
rate its entries would finally be liquidated.
NTN and FAG reject Torrington's arguments concerning both
reimbursement and the deduction of antidumping duties from ESP and note
that the Department has rejected Torrington's request in prior reviews,
citing AFBs III at 39736 and AFBs IV at 10906-07.
Department's Position: We disagree with Torrington that we should
recognize that, where a related U.S. importer simply ``absorbs''
antidumping duties as a cost of doing business, the duties are
themselves a selling expense, similar to ordinary customs duties,
movement expenses, or credit terms, which we should deduct from ESP as
a selling cost. Our position was upheld in Federal Mogul I. Moreover,
making an additional deduction from USP for the same antidumping duties
that correct for price discrimination between comparable goods in the
U.S. and foreign markets would result in double-counting. See AFBs IV
at 10907.
On the separate issue of reimbursement, we will apply the
reimbursement regulation if record evidence demonstrates that the
exporter directly pays antidumping duties for the importer or
reimburses the importer for such duties in PP or ESP situations,
regardless of the relationship of the parties. See Color Television
Receivers from the Republic of Korea; Final Results of Antidumping Duty
Administrative Reviews, 61 FR 4408, 4410-11 (February 6, 1996), Brass
Sheet and Strip from the Netherlands, 57 FR 9534, 9537 (March 19,
1992), Brass Sheet and Strip from Sweden, 57 FR 2706, 2708 (January 23,
1992), and Brass Sheet and Strip from Korea, 54 FR 33257, 33258 (August
14, 1989). For example, we applied the reimbursement regulation in one
case where we stated our position on the applicability of the
reimbursement regulation to related-subsidiary situations and indeed
made an affirmative determination based upon evidence demonstrating
that the exporter reimbursed its related importer for antidumping
duties. In these reviews, Torrington has not identified record evidence
that there was reimbursement of antidumping duties, and we have not
adjusted USP for the duties.
However, we disagree with Torrington's argument that we should
apply the reimbursement regulation where transfer prices between
related parties are less than cost plus profit (or cost) and where we
find actual dumping margins. These two factual situations do not, in
and of themselves, constitute sufficient evidence for us to conclude
that reimbursement is taking place. Therefore, we disagree with both of
Torrington's arguments. See AFBs III at 39736 and AFBs IV at 10906-07.
Comment 2: Torrington argues that Koyo reimburses Koyo Corporation
of U.S.A. (KCU) for antidumping duties
[[Page 66520]]
through low transfer prices and direct and indirect transfers of funds
and financial guarantees.
Koyo responds that the Department stated in AFBs IV that the
antidumping statute and regulations make no distinction in the
calculation of USP between costs incurred by a foreign parent company
and those incurred by its U.S. subsidiary. Koyo contends further that,
since the Department treats related companies as a single consolidated
entity, neither transfer prices between related parties nor the
transfer of funds from one affiliate to another within such an entity
are relevant for purposes of the antidumping law.
Department's Position: We disagree with Torrington. As noted in our
response to Comment 1 of this section, we do not find that facts of the
kind Torrington alleges apply to Koyo, in and of themselves, constitute
sufficient evidence for us to conclude that reimbursement is taking
place. As there is not other record evidence to support Torrington's
assertion that Koyo is reimbursing its U.S. affiliate for antidumping
duties, we have not applied the reimbursement regulation with regard to
Koyo.
Comment 3: Torrington contends that since the Department continues
to find significant dumping margins, it is clear that many respondents
have adopted a strategy of simply absorbing antidumping duties rather
than correcting their price discrimination. Therefore, Torrington
argues, the Department should treat these duties as selling expenses to
be deducted from gross price in calculating ESP. Torrington suggests,
as an alternative, that the Department should consider that the foreign
manufacturer is reimbursing the importer for the duties and deduct the
duties under the Department's reimbursement regulation.
Koyo argues that there is no legal basis for Torrington's argument
that the Department should treat antidumping duties as selling expenses
to be deducted from USP. Koyo argues further that Torrington's
alternative proposal of applying the reimbursement regulation should be
rejected as the record contains no evidence whatsoever of a pattern of
reimbursement of antidumping duties. Koyo argues that this is a purely
theoretical issue because none of its entries have yet been liquidated.
Department's Position: We disagree with Torrington. As noted in our
positions on comment 7 of section 11 and on comment 1 of this section,
evidence of reimbursement is necessary before we can make an adjustment
to USP. As no such evidence has been found in the context of this
review for any respondent, we have not adjusted USP for antidumping
duties.
16. Miscellaneous Issues
16A. Verification
Comment: Torrington contends that the Department's cost
verification did not resolve all issues regarding FAG Germany's cost
response and asks that the Department re-verify to ensure that FAG
Germany is not shifting costs from in-scope products to out-of-scope
products.
FAG Germany states that the petitioner's concern about the
relationship of standard costs to actual costs has been addressed in
verifications of FAG Germany's cost response in this review and in two
prior reviews. In every case, FAG Germany claims, the Department found
that its system of standard cost calculation was valid and reasonable,
and that FAG Germany made the calculations on an accurate and
consistent basis. FAG Germany contends that Torrington has provided
nothing on the record of this review to controvert the Department's
findings or to establish that cost-accounting distortions are present.
Department's Position: As indicated in the verification report, we
reconciled FAG Germany's actual and standard costs and did not find any
discrepancies. We also reviewed production costs for both subject and
non-subject merchandise. We did not note, in examining FAG Germany's
accounting documents, that its standard cost calculation for both
subject and non-subject merchandise was unreasonable or inconsistent
with its submissions. Had we been unsatisfied with the accuracy of FAG
Germany's cost reporting, we would either not have concluded the
verification when we did, or else have rejected FAG Germany's cost
response and resorted to BIA. Accordingly, we have not re-verified FAG
Germany's cost response for this POR.
16B. Pre-Final Reviews
Comment: Asahi contends that, in order to avoid potential problems
such as ministerial errors prior to issuance of the final results of
review, the Department should provide it with an opportunity to comment
on any changes in methodology from the preliminary results.
Department's Position: As noted in previous reviews (see AFBs III
(at 39786) and AFBs IV (at 10957)), in the interest of issuing the
final results in a timely manner, the Department cannot implement this
step. Moreover, the regulations provide a procedure for correcting
ministerial errors in the final results of review. See 19 CFR 353.28.
16C. No Sales During Period of Review
Comment: Kaydon contends that the Department mistakenly determined
that Hoesch and Rollix had no shipments during the POR. Kaydon states
that the Department determined in a scope ruling that the products
Hoesch sold to Consolidated Saw Mill Machinery International, Inc.
(CSMI) are within the scope of the antidumping order on BBs from
Germany, citing Final Scope Ruling: Certain Spring Steel Wires (or
Rotor Bearing Wires) Imported by CSMI; Antifriction Bearings (Other
than Tapered Roller Bearings) and Parts Thereof from the Federal
Republic of Germany (May 2, 1995). Kaydon asserts that Hoesch may have
known at the time of its sales to CSMI that the bearing parts were
intended for the United States, as Hoesch stated in a letter to the
Department on October 16, 1995. Kaydon comments that, in a letter to
the Department on January 16, 1996, Hoesch asserted that it was not the
manufacturer of the wire races sold to CSMI, but CSMI submitted a
letter on June 23, 1994 in which it certified that a company official
indicated that Hoesch produces the wire races. Kaydon argues that this
alleged contradiction gives the Department reason to clarify this issue
by requiring Hoesch to respond fully to the questionnaire.
Department's Position: We disagree with Kaydon that we determined
erroneously that Hoesch and Rollix had no shipments during the POR. We
have confirmed through the U.S. Customs Service that no subject
merchandise exported by Hoesch or Rollix entered the U.S. market during
the POR. Furthermore, there is no information on the record to support
Kaydon's assertion that these respondents, or related affiliates in the
United States, have made sales of subject merchandise during the POR.
While we agree with Kaydon that the CSMI scope ruling found certain
merchandise to be within the scope of the order, we confirmed with the
U.S. Customs Service that, at the time we suspended liquidation of the
entries of this merchandise, there was no record of shipment by Hoesch
or Rollix.
16D. Certification of Conformance to Past Practice
Comment: Torrington argues that the Department should require
respondents to affirm that responses conform to prior Departmental
determinations for reviews of these orders. Torrington
[[Page 66521]]
suggests that, at a minimum, respondents identify where they have
continued to use any methodology that the Department rejected in a
prior review, accompanied by a statement justifying the departure from
established practice. Torrington proposes that, in such cases, the
Department require respondents to supply data both in the format
established by past practice and the manner that respondents hope will
be acceptable to the Department despite the prior practice. Torrington
suggests that, without such identification, the emergence of a
consistent Departmental practice is dependent on the continued
vigilance of the Department in analyzing responses and in the
availability of funding for repeated verification. Torrington cites
examples of respondents' unidentified use of reporting methodologies
that do not conform to Department practice and which the Department has
previously rejected.
NTN responds that Torrington's suggestion is unfair and must be
rejected on several grounds. First, NTN contends, respondents must
submit information in the administrative review that conforms to their
position regarding the appropriate reporting methodology or forfeit
their judicial right to argue their position. Second, Torrington's
suggestions that respondents maintain their right of appeal by
preparing alternative data sets is not administratively feasible, since
it would require respondents to prepare, and the Department to analyze
and verify, multiple responses. Third, Torrington's argument ignores
the fact that each review is a distinct segment of the proceeding.
FAG agrees with NTN that each administrative review is a separate
segment involving different sales, adjustments, and underlying facts,
and that what transpired in previous AFBs reviews is not binding
precedent in later reviews. FAG further argues that Torrington's
proposal would place upon respondents the need to, in effect, provide
in each succeeding review, a history over multiple prior reviews of the
methodology they used for each field of data, the facts on which that
methodology was based, and the Department's acceptance, rejection, or
modification of that methodology (noting also that respondents would
have to consider judicial review and overlapping proceedings in
detailing their methodologies). FAG states that, as a practical matter,
methodologies accepted by the Department in one review are generally
used by respondents in subsequent reviews, and methodologies rejected
by the Department are not perpetuated in later reviews.
NSK contends that Torrington's suggestion is impossible because
factual records differ from review to review, as do respondents'
explanations of the information they submit. NSK argues in addition
that, since the final results for a prior review may not be published
until after submissions are entered and verifications are conducted for
subsequent reviews, there is no way for respondents to determine in
advance how current submissions differ from those final results.
INA suggests that Torrington's proposal is unrealistic because the
responses for this review have already been submitted, and reiterates
NTN and NSK's concern for the administrative burden that would result
from Torrington's proposal, as well as the difficulty in anticipating
the Department's position in a given review.
SKF adds that the appropriate standard for responding to the
questionnaire should be that which is most consistent with
respondents'' business records and the facts of the specific review.
Department's Position: We disagree with Torrington that we should
require that all respondents conform their submissions, their
allocations, and their methodology to the Department's most recent
prior determinations and rulings. We also disagree with Torrington that
respondents should identify where they have continued to use any
methodology that we rejected in a prior review and justify the
departure from established practice. Each administrative review is a
separate reviewable segment of the proceeding involving different
sales, adjustments, and underlying facts. What transpired in previous
reviews is not binding precedent in later reviews, and parties are
entitled, at the risk of the Department's determining otherwise, to
argue against a prior Department determination. As a practical matter,
methodologies accepted by the Department in one review are generally
used by respondents in subsequent reviews, and methodologies rejected
by the Department are not perpetuated in later reviews. The Department,
however, may reconsider its position on an issue during the course of
the proceeding in light of facts and arguments presented by the
parties.
16E. All-Others Rate
Comment: SKF Italy requests that the Department correct the ``all
others'' rate for ball bearings from Italy. SKF Italy contends that the
rate given in the preliminary results is incorrect because it does not
reflect changes resulting from judicial review. SKF argues that the
correct ``all others'' rate should reflect the ``all others'' rate from
the LTFV investigation with corrections resulting from judicial review.
Torrington notes that SKF Italy has no apparent interest in what
the ``all others'' rate is, since SKF Italy has its own rate.
Torrington argues that SKF Italy should clarify its interest and that,
barring such clarification, the Department is under no obligation to
address this issue.
Department's Position: We agree with SKF Italy that the ``all
others'' rate should reflect corrections made to the LTFV margins as a
result of judicial review. We note that this is true regardless of
whether SKF Italy has any interest in the matter. The ``all others''
rate for BBs from Italy is 69.98 percent.
16F. Resellers
Comment: Godo Kogyo states that the Department stated in the
preliminary results that Godo Kogyo had no shipments or sales subject
to the review. At the same time, the Department terminated reviews with
respect to five companies who were resellers of Japanese-made bearings
on the grounds that those firms were not resellers as defined in 19 CFR
353.2(s) because all their suppliers had knowledge at the time of sale
that the merchandise was destined for the United States. Godo Kogyo
states that it reported in its questionnaire response that it sold
subject AFBs in the United States during the POR. However, Godo Kogyo
states that it did not produce any of the subject merchandise that it
sold, but was a reseller of bearings produced by other unrelated firms.
Therefore, as Godo Kogyo does not qualify as a reseller pursuant to 19
CFR 353.2(s), it states that it requested that the Department
discontinue the review with respect to Godo Kogyo and the Department
determined in August 1994 that Godo Kogyo did not need to respond
further to the questionnaire. Godo Kogyo requests that the Department's
final results reflect that Godo Kogyo does not qualify as a reseller
and that the Department terminate the review with respect to Godo
Kogyo.
Department's Position: We examined the information on the record
and have determined that Godo Kogyo is not a reseller as defined in 19
CFR 353.2(s) because all of its suppliers had knowledge at the time of
sale that the merchandise was destined for the United States.
[FR Doc. 96-31753 Filed 12-16-96; 8:45 am]
BILLING CODE 3510-DS-P
