[Federal Register Volume 61, Number 241 (Friday, December 13, 1996)]
[Notices]
[Pages 65527-65546]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31589]
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DEPARTMENT OF COMMERCE
[A-570-601]
Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, From the People's Republic of China; Final Results of
Antidumping Duty Administrative Reviews
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty administrative
reviews of tapered roller bearings and parts thereof, finished and
unfinished, from the People's Republic of China.
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SUMMARY: On August 25, 1995, the Department of Commerce (the
Department) published the preliminary results of its administrative
reviews of the antidumping duty order on tapered roller bearings (TRBs)
and parts thereof, finished and unfinished, from the People's Republic
of China (PRC). The periods of review (PORs) are June 1, 1990, through
May 31, 1991; June 1, 1991, through May 31, 1992; and June 1, 1992,
through May 31, 1993.
Based on our analysis of comments received, we have made changes to
the margin calculations, including corrections of certain clerical
errors. Therefore, the final results differ from the preliminary
results. The final weighted-average dumping margins are listed below in
the section entitled ``Final Results of Review.''
We have determined that sales have been made below foreign market
value (FMV) during each of the above periods. Accordingly, we will
instruct the U.S. Customs Service to assess antidumping duties equal to
the difference between United States price (USP) and FMV.Q
EFFECTIVE DATE: December 13, 1996.
FOR FURTHER INFORMATION CONTACT: Charles Riggle, Hermes Pinilla, Andrea
Chu, Donald Little, or Kris Campbell, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone
(202) 482-4733.
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.
SUPPLEMENTARY INFORMATION:
Background
On August 25, 1995, the Department published in the Federal
Register the preliminary results of its administrative reviews of the
antidumping duty order on TRBs from the PRC. See Tapered Roller
Bearings and Parts Thereof, Finished and Unfinished, From the People's
Republic of China; Preliminary Results of Antidumping Duty
Administrative Reviews, 60 FR 44302 (August 25, 1995) (Preliminary
Results). We gave interested parties an opportunity to comment on our
preliminary results and held a public hearing on October 19, 1995. The
following parties submitted comments: The Timken Company (petitioner);
Shanghai General Bearing Company, Limited (Shanghai); Guizhou Machinery
Import and Export Corporation (Guizhou Machinery), Henan Machinery and
Equipment Import and Export Corporation (Henan), Jilin Province
Machinery Import and Export Corporation (Jilin), Liaoning MEC Group
Company Limited (Liaoning), Luoyang Bearing Factory (Luoyang), Premier
Bearing and Equipment Limited (Premier), and Wafangdian Bearing
Industry Corporation (Wafangdian) (collectively referred to as Guizhou
Machinery et al.); Chin Jun Industrial Limited (Chin Jun); Transcom,
Incorporated (Transcom); and L&S Bearing Company/LSB Industries (L&S).
We have conducted these administrative reviews in accordance with
section 751(a)(1) of the Tariff Act of 1930, as amended (the Act), and
19 CFR 353.22.
Scope of Reviews
Imports covered by these reviews are shipments of TRBs and parts
thereof, finished and unfinished, from the PRC. This merchandise is
classifiable under the Harmonized Tariff Schedule (HTS) item numbers
8482.20.00, 8482.91.00.60, 8482.99.30, 8483.20.40, 8483.20.80,
8483.30.80, 8483.90.20, 8483.90.30 and 8483.90.80. Although the HTS
item numbers are provided for convenience and customs purposes, our
written description of the scope of these proceedings is dispositive.
Best Information Available
In accordance with section 776(c) of the 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. Our application of BIA is
further discussed in the Analysis of Comments Received section of this
notice.
Analysis of Comments Received
Comment 1: Petitioner argues that the Department's preliminary
finding that there are nine independent Chinese TRB producers entitled
to separate antidumping margins and duty rates is inconsistent with the
preliminary determination that the TRB industry is not sufficiently
market-oriented to allow for the use of home market prices. Petitioner
states that, where the government retains significant control over an
entire industry, there is sufficient direct or indirect control to
warrant treating all of the producers as ``related'' for purposes of
section 773(e)(4)(F) of the Act and, therefore, to calculate only a
single margin for these companies. Petitioner contends that, if
separate rates are calculated, there is a strong incentive to channel
U.S. exports through exporters with the lowest margins, and that the
record establishes that various TRB producers not only market their own
bearings but also perform sales and marketing functions with respect to
TRB models produced by other companies.
Petitioner further contends that the Department's de jure and de
facto separate rates analysis places an impossible burden of proof on
domestic
[[Page 65528]]
interested parties due to the fact that a state-controlled economy can
amend its laws and regulations without in fact relinquishing control,
and domestic parties, as well as the Department, lack access to
information that would indicate whether such control continues after
the de jure amendments.
Respondents Guizhou Machinery et al. respond that the Department
properly employed its standard separate rates methodology, as
enunciated in Silicon Carbide from the People's Republic of China, 59
FR 22585 (May 2, 1994).
Department's Position: We disagree with petitioner. A determination
that a company is entitled to a separate rate differs from a market-
oriented industry determination with respect to both the analysis
performed by the Department and the impact of the decision. A separate
rates determination does not presume to speak to more than an
individual company's independence in its export activities. The
analysis is narrowly focused and the result, if independence is found,
is resultingly narrow--the Department analyzes that single company's
U.S. sales separately and calculates a company-specific antidumping
rate. Thus, for purposes of calculating margins, we analyze whether
specific exporters are free of government control over their export
activities, using the criteria set forth in Silicon Carbide. Those
exporters who establish their independence from government control are
entitled to a separate margin calculation.
A finding that a company is entitled to a separate rate does not
constitute a finding that its home market or third country prices are
sufficiently market-driven so that such prices may be used to establish
FMV (which would be the result of a market-oriented industry
determination). Rather, it indicates that the company has sufficient
control over its export activities so as to prevent the manipulation of
such activities by a government seeking to channel exports through
companies with relatively low dumping rates. See Disposable Pocket
Lighters from the People's Republic of China; Final Determination of
Sales at Less Than Fair Value, 60 FR 22359, 22363 (May 5, 1995).
Petitioner's argument that there is sufficient direct or indirect
government control to treat all exporters as ``related'' is unsupported
by the record. The PRC companies that responded to our questionnaire
submitted information indicating a lack of both de jure and de facto
control over their export activities. Contrary to petitioner's claim
that the necessary information concerning the de facto portion of the
analysis is inaccessible to both petitioner and to the Department, such
information was in fact subject to verification and was discussed in
the relevant verification reports. Based on our analysis of the Silicon
Carbide factors, the verified information on the record supports our
determination that these nine respondents are, both in law and in fact,
free of government control over their export activities. Thus, it would
be inappropriate to treat these firms as a single enterprise and give
them a single margin. Therefore, we have continued to calculate
separate margins for these companies.
Comment 2: Petitioner argues that the Department should base the
values of all factors of production (FOP) on the annual report of SKF
India (SKF). In the preliminary results, the Department used the SKF
report to value three factors (overhead; selling, general, and
administrative expenses (SG&A); profit), and the Department derived
values for the direct labor and raw material factors from two other,
unrelated sources (International Labor Office (ILO) statistics and
Indian import statistics, respectively). Petitioner argues that the
annual report of SKF is the only record source that yields values for
all five factors and that, as such, the SKF report is a single,
coherent source that includes segregable information on each of the
principal factors of production and other costs necessary to construct
FMV. Petitioner further claims that using other sources to value labor
and raw materials, while using SKF's labor and raw materials
information to derive overhead, SG&A and profit, is inherently
distortive. (The Department included SKF's material and labor expenses
in the denominator of the calculation of percentages for factory
overhead, SG&A and profit.)
Petitioner states that the use of the SKF report for all FOP values
is consistent with the importance the courts attach to use of a single
source when possible (citing Timken Co. v. United States, 12 CIT 955,
962, 963, 699 F. Supp. 300, 306, 307 (1988), affirmed 894 F.2d 385
(Fed. Cir. 1990) (collectively Timken)), and suggests that the SKF
report most nearly approximates a verified, surrogate questionnaire
response of the type the Department formerly sought from producers in
potential surrogate countries.
Petitioner further contends that, whereas SKF's costs and expenses
represent those of a producer of the class or kind of merchandise
subject to review, the surrogate data for direct labor and raw
materials the Department used cover a broad range of industries and
products. Petitioner claims that the direct labor classification the
Department used covers, in addition to bearings producers, hundreds of
industry sectors under broad headings unrelated to bearings production,
and argues that there is no rational basis for using such a non-
specific source as a surrogate when the actual cost data of an Indian
bearings producer is available.
Petitioner notes that record evidence shows the costs of raw
materials and labor incurred by actual bearings producers in India to
be consistently higher than the trade statistics values used by the
Department in the preliminary results, either because the industries or
product categories covered by the labor and raw materials sources are
overly broad or because domestic prices are different from those of
imports. Finally, petitioner adds that the information in the SKF
report could be adjusted by the Department using its normal price-index
approach for use in all three review periods.
Petitioner argues in the alternative that, in the event that the
Department does not use the SKF report to value all FOP, the overhead
and SG&A rates must be adjusted to reflect the use of lower materials
and labor values from the separate sources. Petitioner claims it would
be distortive to include SKF's full materials and labor costs in the
cost of manufacture (COM) denominator of the overhead and SG&A
calculations unless they are also the basis for valuing the raw
materials and direct labor factors in the constructed value (CV)
calculation. Petitioner proposes that the Department multiply the total
weight of materials for SKF by the average value of steel that will be
used in the final results and the total number of hours worked at SKF
by the ILO labor value used for the material and labor figures the
Department included in the overhead and SG&A calculations.
Petitioner states that the most obvious adjustment needed to the
materials element of the overhead and SG&A calculations is due to the
Department's use of Indian values free of duties; specifically, because
the Indian import data applied in the preliminary results are based on
pre-duty import values, it is inappropriate to use an SKF materials
value that includes duties in the overhead and SG&A calculations.
Petitioner suggests that, if the Department does not apply the
adjustment proposed above, i.e., total SKF material weight times the
Indian value used, the amount of duties paid by SKF on imported
materials, as indicated in the SKF annual report, should be deducted
from the materials total in the overhead and SG&A
[[Page 65529]]
calculations in order to derive apples-to-apples ratios.
Guizhou Machinery et al. respond by arguing that it is irrelevant
whether the SKF report represents a single, coherent source for valuing
all FOP components and note that the Department consistently uses
multiple sources of information for surrogate data in NME cases (citing
Final Determination of Sales at Less Than Fair Value: Sebacic Acid from
the People's Republic of China, 59 FR 28053 (May 31, 1994) (Sebacic
Acid), and Final Determination of Sales at Less Than Fair Value:
Certain Cased Pencils from the People's Republic of China, 59 FR 55625
(November 8, 1994) (Certain Cased Pencils)). Guizhou Machinery et al.
add that petitioner's citation to Timken is misplaced and state that,
in that case, the Department was not criticized for the use of
different sources but for the disparity between the ratios resulting
from the Department's calculation and other ratios on the record.
Guizhou Machinery et al. further state that the fact that the SKF
report contains costs and expenses incurred by a producer of the class
or kind of merchandise subject to review does not make the report a
better source of surrogate data. On the contrary, Guizhou Machinery et
al. state, whereas there is no evidence to indicate that SKF used the
same type of steel as respondents, the Indian import statistics enable
the Department to pinpoint a particular type of steel.
In response to petitioner's argument that it is inherently
distortive to use the SKF report for overhead, SG&A and profit, but not
for materials and labor, Guizhou Machinery et al. and Chin Jun argue
that it would be more distortive to use the SKF report for the
materials component due to a lack of detail regarding the types of
steel SKF used. Chin Jun notes that the SKF steel prices do not provide
separate prices for bar, rod or steel sheet, but instead provide a
single figure for all steel used in the factory, including steel used
in the production of non-subject merchandise. Chin Jun submits that the
petitioner, the Department, and respondents do not have any idea what
types of steel were included in SKF's material cost calculation.
Guizhou Machinery et al. add that petitioner has provided no
information demonstrating that the SKF report covers the specific steel
inputs relevant to subject merchandise.
Guizhou Machinery et al. and Chin Jun also dismiss petitioner's
claim that the SKF report most nearly approximates a verified surrogate
questionnaire response. Respondents state that an annual report, though
perhaps audited, is not verified and note that the Department has a
preference for verifiable, public information (citing Sebacic Acid and
Final Determination of Sales at Less Than Fair Value: Manganese
Sulphate from the People's Republic of China, 60 FR 52155 (October 5,
1995) (Manganese Sulphate); Final Determination of Sales at Less Than
Fair Value: Certain Carbon Steel Butt-Weld Pipe Fittings from the
People's Republic of China, 58 FR 21058 (May' 18, 1992)).
Guizhou Machinery et al. respond to petitioner's contention that
the cost of direct materials of actual bearings producers in India is
shown to be consistently higher than the trade- statistics values used
in the preliminary results by stating that such a fact does not render
the trade statistics incorrect and that, furthermore, there is nothing
in the law requiring the Department to use the highest value in
choosing surrogate values.
Shanghai states that, in the event that the Department rejects the
use of SKF materials, labor, and other costs except overhead, profit
and SG&A, the Department should not further adjust overhead and SG&A as
suggested by petitioner's argument in the alternative. Shanghai notes
that the SKF report indicates that, in addition to TRB production, SKF
has other lines of business, including the manufacture of textile
machine components and other types of bearings. Shanghai contends that
the report does not allow for the allocation of labor or materials to
TRB production for SKF's overhead and SG&A, and there is insufficient
information on which to base adjustments to overhead and SG&A based on
different valuations of materials and labor used for TRB production.
Finally, Shanghai notes that, since the report contains no information
concerning the proportion of material represented by TRB steel costs,
what portion of SKF's steel was imported, or how much was paid in
duties, if the Department continues to use the SKF report for overhead
and SG&A it should make no further adjustment to the rate used for the
preliminary results.
Department's Position: We agree with respondents. Section 773(c)(1)
of the Act states that, for purposes of determining FMV in a non-market
economy, ``the valuation of the factors of production shall be based on
the best available information regarding the values of such factors. *
* *'' Our preference is to value factors using public information (PI)
that is most closely concurrent to the specific POR. See Final
Determination of Sales at Less Than Fair Value: Drawer Slides from the
PRC, 60 FR 54472, 54476 (October 24, 1995) (Drawer Slides). Based on
the record evidence for each of these three reviews we have determined
that surrogate country import statistics (Indonesian for valuing steel
used to produce cups and cones, and Indian for steel used to produce
rollers and cages), exclusive of import duties, comprise the best
available information for valuing raw material costs. Our reasons for
preferring Indonesia, rather than our primary surrogate, India, for
valuing steel used to produce cups and cones are set forth in our
response to Comment 4.
We prefer published import data to the SKF data in valuing the
material FOP for the following reasons. First, we are able to obtain
data specific to each POR, which more closely reflect the costs to
producers during the POR. Second, the raw materials costs from the SKF
report do not specify the types of steel purchased by SKF. Although we
agree with petitioner's point that SKF is a producer of subject
merchandise, the report identifies other products it manufactures. From
the information contained in the SKF report, we are unable to allocate
direct labor and raw materials expenses to the production of subject
merchandise. Therefore, contrary to petitioner's assertion, we find
that the use of the SKF data in valuing material and labor costs would
lead to distortive results.
We also disagree with petitioner's contention that the overhead and
SG&A rates should be adjusted if we continue to use the SKF report to
value these rates while valuing the material and labor FOP using other
sources.
In deriving these rates, we used the SKF India data both with
respect to the numerators (total overhead and SG&A expenses,
respectively) and denominator (total cost of manufacturing (COM)),
because this most accurately reflects the ratios of overhead to COM and
of SG&A to COM in the surrogate country. These ratios, when multiplied
by the product-specific material and labor factors of production of
each respondent in these reviews, thereby constitute the best available
information concerning the overhead and SG&A expenses that would be
incurred by those bearings producers given their particular factors of
production for those products. Petitioner's recommended adjustment
would affect (reduce) the denominator by introducing elements unrelated
to SKF's experience, but would leave the overhead and SG&A expenses in
the numerator unchanged. We find that this adjustment would itself
distort the
[[Page 65530]]
overhead and SG&A experience of the surrogate, rather than curing any
distortion in our calculations.
We also disagree with petitioner's argument that an adjustment
should be made for duties paid on material imports included in the
denominator of the overhead and SG&A expense ratios. We multiplied the
overhead and SG&A rates by the material and labor values we used in our
factors calculation. Such values do not include import duties because
they are an estimate of a PRC producer's domestically sourced material
and labor production expenses. Although we would not include duties
paid on the importation of merchandise by SKF, we have no evidence as
to the amount of duties, if any, included in SKF's raw materials costs.
Therefore, we did not subtract any amount for import duties in our
calculation of overhead and SG&A percentages.
Comment 3: Petitioner argues that, in order to conform with the
Department's standard practice of using surrogate values from a time
period contemporaneous with the POR, the Department should use data
relating as closely as possible to each POR (citing Heavy Forged Hand
Tools, Finished or Unfinished, With or Without Handles, from the
People's Republic of China; Final Results of Administrative Review, 60
FR 49251, 49253 (September 22, 1995) (Hand Tools)). Petitioner states
that, although the April-December 1991 surrogate value data assigned
for raw material inputs in the preliminary results could rationally be
used for the 1991-92 POR, Indian import data from the relevant periods
should be used for the 1990-91 and the 1992-93 PORs. Alternatively,
citing Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, from the People's Republic of China; Preliminary Results of
Antidumping Duty Administrative Review, 60 FR 49572 (September 26,
1995), petitioner suggests that data for the 1993-94 review might be
used for the 1992-93 POR.
Guizhou Machinery et al, note that petitioner's preferred source
from which the Department would value raw material inputs is the annual
report from SKF, which covers the period April 1, 1990, through March
31, 1991, and argue that the data the Department used in the
preliminary results is more contemporaneous than the SKF report in that
it overlaps--at least in part--two of the three PORs in question. In
addition, Guizhou Machinery et al. claim that data used for the 1993-94
review (the September 26, 1995, preliminary results) should not be
considered because these statistics are not included in the
administrative records for the reviews at issue, nor are they relevant
to the time periods of these reviews.
Department's Position: We agree with petitioner that, consistent
with Hand Tools, it is preferable, for the sake of accuracy, to apply
surrogate values coincident with the POR whenever possible. For these
final results, we have applied surrogate steel values coincident to
each POR. The Indian import statistics and the Indonesian import
statistics that we used are compiled on a monthly basis. Accordingly,
we calculated POR weighted-average values using the months June through
May for each POR.
Comment 4: Petitioner and respondents Shanghai, Guizhou Machinery
et al., and Chin Jun all submitted comments regarding the appropriate
Indian import classification number(s) to be used in valuing the steel
that comprises the raw materials factor of production. Petitioner
argues that, in the event that the Department does not use the SKF
report to derive this factor, the eight-digit Indian import
classification number 7228.30.19 should be used to value steel bar and
rod that was used to manufacture cups and cones. Petitioner notes that,
whereas the Department used eight-digit categories to value steel sheet
that was used for cages and steel rod that was used for rollers, the
Department used a broader six-digit category (7228.30) for steel bar
used to manufacture cups and cones. Petitioner argues that category
7228.30 includes sub-categories of steel that are not appropriate to
the manufacture of TRBs. Specifically, categories 7228.30.01 and
7228.30.09 include ``bright bars of alloy tool steel'' and ``bright
bars of other steel,'' respectively. Petitioner states that these are
bars with bright, high-finish surfaces, which are not used in the
manufacture of TRBs, as the high finish would be useless given the
cutting, grinding and honing involved in TRB production.
Petitioner further claims that categories 7228.30.12, ``bars and
rods of spring steel,'' and 7228.30.14, ``bars and rods of tool and die
steel,'' contain steel used for specific applications apart from TRB
manufacture. Thus, petitioner argues, the Department should use the
``others'' category (7228.30.19), which it claims is a residual
category containing the steel used in the manufacture of TRBs.
Shanghai submits that category 7228.30.01, ``bright bars of alloy
tool steel,'' is the only category of Indian imports that could
possibly contain the type of steel used in the production of cups and
cones. Shanghai claims that this category shares with U.S. HTS category
7228.30.20 the particular characteristics of hot-rolled, hot-drawn or
extruded steel used for cups and cones.
Shanghai notes that the Department's past use of import statistics
as a surrogate source of data has been affirmed if the import
categories accurately reflect the material used to produce the product
in question (citing Sigma Corp. v. United States, Slip Op. 93-230 (CIT
Dec. 8, 1993); Tehnoimportexport v. United States, 766 F. Supp. 1169
(CIT 1991); and Tehnoimportexport v. United States, 783 F. Supp. 1401
(CIT 1992)). Shanghai states it follows that use of an inappropriate
import category would not be affirmed and argues that the inclusion of
steel categories other than 7228.30.01 to value cups and cones renders
the Department's surrogate steel costs for cups and cones inaccurate.
Shanghai notes that the ``others'' category put forward by petitioner,
7228.30.19, includes all types of steel within the 7228.30 basket other
than those specifically covered by separate eight-digit categories.
Shanghai contends that such ``others'' categories are not intended to
duplicate what is contained in the separate individual categories, and
it is unreasonable, therefore, to conclude that the ``others'' category
includes merchandise that falls within 7228.30.01.
Shanghai additionally argues that category 7228.30.01 should be
further adjusted to exclude exports from Poland and Italy. Shanghai
argues that Indian imports from Poland should be excluded on the basis
that the Department considered Poland to be an NME country during the
period covered by the Indian import statistics, and that Indian imports
from Italy should be deleted because the Italian prices are
aberrational compared with other imports in the category. Shanghai
contends that it is reasonable to assume that this import was of a type
of steel different from that used in the production of cups and cones
and, as such, should be excluded as unrepresentative of the type of
steel used by PRC producers (citing Final Determination of Sales at
Less Than Fair Value: Circular Welded Non-Alloy Steel Pipe From
Romania, 57 FR 42957 (September 7, 1992) (Steel Pipe)).
Petitioner contends that Shanghai's claim regarding category
7228.30.01 (bright bar) as the only category of Indian steel imports
that could possibly contain the type of steel used in the production of
cups and cones is contrary to fact because, to the best of its
knowledge, no one has ever before suggested in the course of this or
any
[[Page 65531]]
other bearing proceeding that bright bars are used to manufacture
bearings. Petitioner states that, by similarly excluding other specific
eight- digit categories which, like 7228.30.01, are known not to
include bearing steel, category 7228.30.19 remains the only category in
subchapter 7228 that would contain bearing steel.
With respect to Shanghai's argument that Indian imports from Italy
be excluded from 7228.30.01 as unrepresentative of the steel type used
to manufacture bearings, petitioner reasserts its argument that the
entire category, 7228.30.01, is unrepresentative of bearing steel and
that Shanghai's argument is therefore irrelevant. Notwithstanding this
point, petitioner takes issue with Shanghai's citing to Steel Pipe as
an example in which the Department excluded certain higher priced
imports as unrepresentative of the type of steel used to manufacture
the product in question. Petitioner claims, first, that bearing quality
steel is inherently higher quality steel than the non-alloy product at
issue in Steel Pipe. Petitioner further argues that a higher value in a
basket category might represent the only bearing quality import in the
category.
With respect to Shanghai's argument concerning the exclusion of
steel imports from Poland, petitioner asserts that Poland is properly
regarded as a market-economy country for purposes of these reviews and,
thus, Indian steel imports from Poland should not be excluded.
Petitioner notes that the Department determined that Poland had
completed the transition to a market economy by 1992, citing Final
Determination of Sales at Less Than Fair Value: Certain Cut-to-Length
Carbon Steel Plate From Poland, 58 FR 37205 (July 9, 1993) (Steel
Plate). Petitioner contends that, while the finding was limited to 1992
because the period of investigation at issue was 1992, it is reasonable
to consider Poland to have been a market-economy country for these PORs
because such a transformation could not be instantaneous.
Guizhou Machinery et al. dispute petitioner's argument regarding
the use of steel category 7228.30.19, contending that petitioner
suggests replacing one basket category, 7228.30, with another basket
category, 7228.30.19. Guizhou Machinery et al. insist that petitioner's
reasons for opposing the use of category 7228.30 apply as well to
category 7228.30.19 and, therefore, do not provide compelling reasons
for the Department to change categories.
In its rebuttal comments, Shanghai concurs with Guizhou Machinery
et al. that the Department should reject petitioner's suggestion that
the eight digit ``others'' category (7228.30.19) is the best category
for valuing steel used to produce cups and cones. Although Shanghai
agrees with petitioner that there is no eight-digit category in the
Indian import statistics isolating bearing quality steel (noting that
7228.30.12 and 7228.30.14 are clearly inapplicable), Shanghai contends
that the ``others'' category recommended by petitioner is too general
and anonymous, containing steel imports of unknown types and
quantities. Shanghai suggests in its rebuttal that the Department could
use category 7227.90.11 (coil steel), speculating that the type of ball
bearing steel used by Chinese producers might enter India under this
category number.
Chin Jun argues that use of the basket category 7228.30 is
unreliable, in that it contains a wide variety of steel products with a
corresponding wide variety of prices. With regard to petitioner's
argument that the Department use category 7228.30.19, Chin Jun asserts
that use of this category would be incorrect unless aberrational data
are excluded. Chin Jun states that the range of prices within this
category is staggering and notes that as a residual category it
contains many different types of steel. Although acknowledging that it
is unclear whether category 7228.30.19 is directly comparable to U.S.
HTS category 7228.30.80--the residual category under HTS 7228.30--Chin
Jun states that the Indian data are aberrational by comparison to U.S.
data from HTS 7228.30.80. Chin Jun argues that the Department should,
as it has in the past, adjust the basket category in order to obtain a
``more reasonable indication of the market-based price for the type of
steel used'' (citing Steel Pipe). Chin Jun suggests that the Department
could accomplish such an adjustment by excluding all steel priced more
than $1,000 per metric ton.
Chin Jun also contends that category 7227.90.11 is the correct
category for steel used in the manufacture of rollers and that the
Department erred in using category 7228.50.09, which is comprised of
cold-rolled steel.
With respect to this last contention, petitioner notes that Chin
Jun placed on the record its supplier's statement that the supplier
``uses cold-rolled alloy steel rod to manufacture rollers.'' Public
Version of Questionnaire Response of Chin Jun Supplier, August 31,
1994, at 6. In addition, petitioner notes, other companies responded
the same way.
Department's Position: We agree with petitioner that none of the
eight-digit tariff categories within the 7228.30 steel group correspond
specifically to bearing quality steel used to manufacture cups and
cones, but do not agree that the best recourse is to the eight-digit
``others'' category (7228.30.19) within this group. We have determined
that the use of Indian import data is not appropriate to value cups and
cones in this case because, as noted in the arguments above and as
shown below, we are unable to isolate bearing quality steel and, as
discussed below, the value of the Indian import data is not reliable.
See Drawer Slides at 54475-76.
We have examined each of the eight-digit categories within the
Indian 7228.30 group and have found that, although bearing quality
steel used to manufacture cups and cones is most likely contained
within this basket category, there is no eight-digit sub-category that
is reasonably specific to this type of steel. We eliminated the
specific categories of alloy steel, commonly identified by petitioner
and respondents, that are clearly not bearing quality steel, as
follows. Under the Indian tariff system, bearing quality steel used to
manufacture cups and cones is contained within the broad category
7228.30 (Other Bars & Rods, Hot-Rolled, Hot-Drawn & Extruded). However,
none of the named sub-categories of this grouping (7228.30.01--bright
bars of alloy tool steel; 7228.30.09--bright bars of other steel;
7228.30.12--bars and rods of spring steel; and 7228.30.14--bars and
rods of tool and die steel) contains steel used in the production of
subject merchandise. This leaves an ``others'' category of steel,
7228.30.19. However, we have no information concerning what this
category contains, and none of the parties in this proceeding has
suggested that this category specifically isolates bearing quality
steel. Further, the value of steel in this eight digit residual
category is greater than the value of the general six-digit basket
category (7228.30), which in turn is valued too high to be considered a
reliable indicator of the price of bearing quality steel, as shown
below.
Where questions have been raised about PI with respect to
particular material inputs in a chosen surrogate country, it is the
Department's responsibility to examine that PI. See Drawer Slides at
54475-76; Certain Cased Pencils, 59 FR 55633, 55629 (1994). Because all
parties raised questions about the validity of the Indian import data
used to value cups and cones in the preliminary results, we compared
the value of Indian imports in category 7228.30 with the only record
source that specifically isolates bearing quality steel used to
manufacture cups and cones: import data regarding U.S.
[[Page 65532]]
tariff category 7228.20.30 (``bearing quality steel''). We found that,
for the time period covered by the PORs, the value of the Indian basket
category 7228.30 was approximately 50 percent higher than the bearing
quality steel imported into the United States. The Indian eight-digit
``others'' category recommended by petitioner, valued approximately 75
percent higher than the U.S. import data, was even more unreliable in
comparison with the value of bearing-quality steel.
In light of these findings, we have determined that the Indian
import data that we used to value cups and cones in the preliminary
results is not reliable. For these final results, we are using import
data from a secondary surrogate, Indonesia, a producer of merchandise
comparable to TRBs, to value steel used to produce these components. As
with India, we were unable to isolate the value of bearing-quality
steel or identify an eight-digit category containing such steel
imported into Indonesia; however, unlike the Indian data, the
Indonesian six-digit category 7228.30 closely approximates the value of
U.S. imports of bearing-quality steel, as well as the comparable six-
digit category in the United States. Thus, we have determined that
Indonesian category 7228.30, which is the narrowest category we can
determine would contain bearing-quality steel, is the best available
information for valuing steel used to produce cups and cones. Although
Indonesia is not the first-choice surrogate country in these reviews,
in past cases the Department has used values from other surrogate
countries for inputs where the value for the first-choice surrogate
country was determined to be unreliable. See Drawer Slides at 54475-76;
Cased Pencils at 55629; Certain Helical Spring Lock Washers, 58 FR
48833, 48835 (Sept. 20, 1993). Because we are valuing the steel used to
produce cups and cones using Indonesian import data, we are valuing the
scrap offset to this steel value using the same source.
We also disagree with Shanghai regarding the appropriateness of
Indian category 7227.90.11 as the steel type for cups and cones.
Respondents reported that they use hot-rolled steel bar to manufacture
cups and cones. Category 7227.90.11 is coil steel and is necessarily
produced by a different mill than bar steel. No respondent reported
using coil steel to manufacture cups and cones. In addition, during
factory tours of various PRC-based bearings producers we found no
evidence that any producer uses coil steel to manufacture cups and
cones. Finally, we note that in its case brief (at 7) Shanghai claimed
that ``the only category of Indian steel imports which could possibly
contain the type of steel used in the production of cups and cones is
AC 72283001, Bright Bars of Alloy Tool Steel.''
With respect to the valuation of steel used in the production of
rollers and cages, we have applied the Indian import statistics used in
the preliminary results. We note that the interested party comments
regarding the validity of Indian import category 7228.30, as discussed
above, pertain only to the valuation of steel used in the production of
cups and cones. We also note that we disagree with Chin Jun concerning
the appropriate category for steel used in the manufacture of rollers.
We selected category 7228.50.09 based on respondents' statements that
they used cold-rolled steel rod to manufacture rollers. In addition to
the response from Chin Jun's own supplier, record evidence indicates
that other manufacturers used the same type of steel. See, e.g., public
versions of Questionnaire Response for 1991-92 and 1992-93 Reviews of
Luoyang, June 13, 1994, at 13, and Questionnaire Response for 1990-91
Review of Henan, December 19, 1991, at 8.
Concerning Shanghai's request that imports from Poland be excluded
from the valuation of the steel input used to manufacture cups and
cones, we note that we revoked Poland's NME status effective January 1,
1992. See Steel Plate at 37207. Therefore, for these final results, we
have, to the extent possible, excluded imports from Poland prior to the
1992-93 POR because such steel was imported from an NME country.
Comment 5: Petitioner contends that market-currency acquisitions of
raw materials should be disregarded in favor of Indian surrogate values
with respect to Luoyang and Henan for several reasons. Petitioner first
argues that the Department should disregard purchases of raw materials
in which the purchase contract provided for delivery after the PORs
because the steel received under such contracts could not have been
used to produce bearings sold during those PORs.
In addition, petitioner claims that steel import contracts do not
reflect market-economy transactions. Petitioner notes that Luoyang did
not purchase steel directly and that contracts examined by the
Department at verification indicated that the sale consisted of a
transaction between a German trading company as the seller and China
Foreign Trade Development Companies, Inc. as the buyer. Citing
Memorandum to Division Director, Office of Antidumping Compliance from
Case Analyst, Office of Antidumping Compliance: Verification Report for
Luoyang Bearing Factory in the Fifth and Sixth Reviews of the
Antidumping Duty Order of Tapered Roller Bearings and Parts Thereof
From the People's Republic of China (August 3, 1995), petitioner
observes that Luoyang has explained that steel is a controlled
commodity and, as such, must be imported through a trading company.
Petitioner insists that, given this fact pattern involving
contracts concerning a controlled commodity, the purchase of which must
be carried out through the mandatory intervention of a state trading
company, any such purchase cannot rationally be considered an arm's-
length transaction reflecting uncontrolled market prices. Petitioner
claims that the Department departs from using surrogate values only
when the actual imports from a market economy reflect market-economy
practices and prices (citing Oscillating Fans and Ceiling Fans from the
PRC, 56 FR 55271 (October 25, 1991) (Ceiling Fans)). Petitioner
contends that, under the circumstances of this case, the state-
controlled trading company is by law given a leading role in
negotiating the terms of sale and such trading companies, acting as
coordinators of steel purchases for the entire Chinese economy, would
enjoy such market power as to enable them to obtain better prices than
any individual bearings producer. Petitioner suggests, in addition,
that steel supplied to Luoyang from the PRC trading company was part
of, or related to, broader deals between Luoyang and the trading
company, which could affect the prices paid by Luoyang for reasons
unrelated to the factors that would govern normal commercial
transactions between market-oriented companies.
Finally, petitioner claims that there are no scrap values
attributable to Luoyang's steel acquisition costs. Petitioner notes
that the net cost of raw materials inputs is based on the steel cost
minus a value for scrap credit and argues that applying a value to the
steel from one source and scrap credit from a different source is
inherently distortive. Petitioner adds that the courts have ruled this
practice to be unsupported, citing Timken, and states that the
Department addressed the issue on remand in Timken by using a single
source, telexes from the U.S. Consulate in Bombay. Petitioner further
notes that, in its remand calculations, the Department derived a scrap
value for one material input, steel sheet, using a ratio as stated in
the telex (which provided that scrap was equal to 20 percent of the
value of the steel sheet),
[[Page 65533]]
instead of the absolute value of scrap provided in the telex, where
this absolute value of scrap was an unreasonable percentage of the
absolute value of steel sheet. Petitioner recommends that if the
Department maintains its position taken in the preliminary results to
use steel prices paid by Luoyang and Henan to value certain steel
inputs while using Indian import statistics to value scrap, it should
use ratios, rather than absolute amounts, to derive the per-unit value
of scrap.
Guizhou Machinery et al. respond that, consistent with section
773(c) of the Act and with 19 C.F.R. 353.52, the Department has
established a practice of using actual import prices if they are from
market-economy countries. Guizhou Machinery et al. contend that the
``Department practice allows for the valuation of inputs in NME cases
based on market prices paid by the manufacturer for goods obtained from
a market-economy source because these prices reflect commercial
reality'' (citing Final Determination of Sales at Less Than Fair Value:
Coumarin From the People's Republic of China, 59 FR 66895 (December 28,
1994) (Coumarin)). Guizhou Machinery et al. state that petitioner's
assertion that the contracts do not reflect market-economy transactions
because steel is a ``controlled commodity'' and because the contracts
involved ``state trading companies'' is irrelevant because such
arguments do not negate the fact that the sellers, who establish the
sales prices, are market-economy companies (citing Hand Tools and Final
Determination of Sales at Less Than Fair Value: Saccharin from the
People's Republic of China, 59 FR 58818 (November 15, 1994)
(Saccharin)). In addition, Guizhou Machinery et al. contend that
petitioner's statement that steel supplied to Luoyang from the PRC
trading company might have been part of related or broader deals is
nothing more than speculation, with no support on the administrative
record.
Guizhou Machinery et al. argue that, because the contracts in
question were all effective and legally binding during the PORs, the
Department should use the market prices contained in the contracts as
the basis for valuing the steel.
Finally, Guizhou Machinery et al. contend that, in Timken, which
petitioner cited in support of its argument that the Department cannot
use one source to value steel inputs and a different source to value
steel scrap, the Court of International Trade (CIT) and the Court of
Appeals for the Federal Circuit (CAFC) did not rule that the Department
cannot use different sources to obtain surrogate values for the various
constructed value components but, rather, that the Department cannot
use surrogate value data which yield distortive results and which are
inconsistent with other record evidence. Guizhou Machinery et al. argue
that petitioner has not shown that the use of market-oriented import
prices for steel together with Indian import statistics for scrap
credit yields distortive results or that it is inconsistent with other
information on the administrative record for these reviews. Guizhou
Machinery et al. contest petitioner's claim that the use of two
different sources to value steel and scrap is ``inherently
distortive,'' and point out that in many cases the Department has used
different sources to value input materials and scrap.
Department's Position: We agree with petitioner that purchases of
steel from PRC trading companies should not be used in these reviews.
Our established policy allows for the valuation of inputs in NME cases
based on market prices paid by the manufacturer for inputs purchased
from a market-economy source because those prices reflect commercial
reality. See Saccharin at 58822-23. However, in these reviews the
transactions were conducted by trading companies instead of the
manufacturers. Therefore, the manufacturer obtained the input from the
trading company--a PRC source--and paid for the input in PRC currency.
Therefore, we determine that the prices paid by the trading companies
do not reflect the producers' prices and the prices paid by the
producers for these inputs do not reflect market prices. We note here
that Guizhou Machinery et al. misread Coumarin. In that case, as in
this case, we did not use purchases from market-economy suppliers but
instead applied surrogate values because producers obtained the input
from a PRC trading company. See Coumarin at 66900.
Because we agree with petitioner that it is not appropriate to use
the value of steel purchased by Luoyang and Henan in our calculations,
and since we used information from the same source to value both the
steel input and the scrap offset, we do not reach petitioner's argument
that we should value scrap using a ratio, rather than an absolute scrap
value, in the event that raw material input values and scrap values are
taken from discrete sources. As noted in our response to Comment 4, we
used Indonesian import data to value the steel input and scrap offset
for cups and cones, and used Indian data to value the steel input and
scrap offset for rollers and cages.
Comment 6: Petitioner argues that the Department should not have
accepted Luoyang and Henan's request that the ``scrap input'' they used
to produce certain cups and cones be valued as scrap. Petitioner argues
that new material remains new product throughout the production process
and the value of the raw material input piece is the same whether the
companies produce one or two finished pieces from the input piece.
Petitioner states that there is no reason for the Department to depart
from its position in the 1989-90 review, in which the Department stated
that the scrap steel input should not be valued at the cost of scrap.
Petitioner argues that the respondents have failed to present rational
alternatives in these PORs for taking account of their production of
two pieces from one bar.
Luoyang and Henan argue that the Department was correct in valuing
the ``scrap input'' as scrap. Luoyang states that it accumulates scrap
pieces and stores them and, from time to time, uses large scrap pieces
to manufacture smaller size bearings. Luoyang argues that petitioner's
argument that new steel costs be used to value scrap input ignores the
fact that different inputs are used in Luoyang's manufacturing process.
Luoyang further contends that steel bar is a high quality material and
can be used ``as is'' and requires no further processing or labor other
than the production itself, while scrap consists of ``leftover'' steel
pieces which have already been ``stressed'' once. Luoyang contends that
petitioner's argument would artificially inflate Luoyang's materials
costs.
Department's Position: We agree with petitioner. The ``scrap
input'' used by Luoyang to produce certain TRBs was not purchased as
scrap. Luoyang paid the full purchase price for this input. Sales of
bearings produced from scrap are indistinguishable from those produced
from new steel in Luoyang's U.S. sales listing. Valuation of the input
as scrap instead of as new steel would result in an undervaluation of
Luoyang's factors of production. Accordingly, we have valued the
``scrap'' steel input as new steel for the final results.
Comment 7: Petitioner claims that the ILO report used by the
Department to derive surrogate labor rates indicates a 46.2-hour work
week in India. Thus, petitioner argues, the Department should calculate
the hourly wage rate in rupees using a 46.2-hour week instead of the
48-hour week it used in the preliminary results.
Petitioner further states that the Department incorrectly used the
labor
[[Page 65534]]
value associated with International Standard Industrial Classification
(ISIC) major group 381, which covers the ``manufacture of metal
products, except machinery and equipment,'' rather than that relevant
to bearing production, 382, which covers the ``manufacture of
machinery, except electrical.'' (citing ILO 1993 Yearbook of Labor
Statistics at 1163). Petitioner suggests that the use of category 382
would be consistent with past practice.
Guizhou Machinery et al. respond that the machinery industry rates
suggested by petitioner are inflated rates that should not be used in
these reviews because the manufacture of machinery products involves
sophisticated manufacturing processes and highly skilled labor.
Respondents also contend that petitioner's argument that a 46.2-hour
work week rather than a 48-hour work week should be used is not
adequately supported by petitioner's brief.
Department's Position: We agree with petitioner with respect to the
use of ISIC major group 382. Upon further inquiry, we found that labor
associated with bearing production is included in this category and
that the labor categories that comprise ISIC major group 381 are not
relevant to bearing production. Therefore, the Department has used
major group 382 for the final results of these reviews. See (ISIC)
series M, No. 4, Rev. 3 at pg. 153.
We also agree with petitioner that we should use a 46.2-hour work
week instead of a 48-hour work week. The ILO data that we used to value
direct labor indicates that the average number of hours worked for ISIC
major group 382 was 46.2 hours per week. Because we are basing the
direct labor value on ILO data as stated above (which provide
information on the basis of average daily wages), it is appropriate to
use the average labor hours per week from the same source to derive an
hourly labor rate from this annual wage data. Although a 48-hour work
week was established as standard under Indian law, we note that other
sources that we have examined (e.g., the Economist Intelligence Unit)
indicate that, in practice, the average number of hours worked is 45-47
hours per week.
Comment 8: Petitioner claims that indirect labor is not reflected
in the SG&A and overhead rates, contrary to the Department's statement
in the preliminary results that ``indirect labor is reflected in the
selling, general and administrative and overhead rates.'' Petitioner
notes that no portion of the amount shown as ``payments to and
provisions for employees'' in SKF's annual report is included in either
the overhead or the SG&A calculation. Petitioner states that,
consistent with the 1989-90 administrative review, indirect labor must
be added to the constructed value.
Petitioner further contends that the indirect labor amounts
supplied by respondents are inadequate since the submitted indirect
labor data, reported as a percentage of direct labor costs, are
generally unsupported by explanation, calculations or documentation.
Petitioner suggests that the Department should use as BIA the highest
indirect labor rate on the record in these reviews.
Chin Jun claims that its supplier provided indirect labor data and
was subject to verification, and that the Department should therefore
reject petitioner's argument.
Guizhou Machinery et al. note that the Department used the SKF
annual report to calculate the SG&A rate and that, since that
calculated rate was below the statutory minimum, the Department applied
the statutory minimum of 10 percent in the calculation. Guizhou
Machinery et al. contend that there is no basis for asserting that the
Department must add an amount to the statutory minimum for indirect
SG&A labor since this is not the Department's practice.
With respect to overhead, Guizhou Machinery et al. contend that the
Department can reasonably conclude that the activities listed as
overhead in the SKF annual report are inclusive of the labor costs
associated with such activities.
Department's Position: We agree with petitioner that indirect
labor, which is attributable to overhead, and labor attributable to
SG&A were not included in our constructed value calculations in the
preliminary results. For these final results, we calculated overhead
and SG&A expenses using the line items pertaining to these expenses
from the SKF annual report. We did not use the statutory minimum since
our calculations from the SKF report resulted in an SG&A rate that
exceeded the minimum. We did not include any item from the SKF report
specifically representing indirect labor costs in calculating the
overhead and SG&A expenses, nor did we include the item ``payments to
and provisions for employees'', since this item does not segregate
direct from indirect labor. Further, contrary to Guizhou Machinery et
al.'s suggestion, there is no evidence in the SKF report to indicate
that the line items (e.g., power and fuel) that we used to calculate
these expenses included the indirect labor costs, if any, associated
with each line item.
However, we disagree with petitioner that the indirect labor
amounts supplied by respondents are inadequate. The record evidence in
this case, based on our initial and supplemental questionnaires as well
as verification, does not indicate any misreporting of the indirect
labor ratios supplied by respondents. For these final results, we have
calculated the expenses for indirect and SG&A labor using the ratios of
indirect and SG&A labor to direct labor, as reported in the responses.
Comment 9: Petitioner states that the Department did not include
interest expenses incurred by SKF in the constructed value calculation.
Petitioner contends that interest expenses and other financing charges
are ordinarily incurred in market economies and should be included in
the constructed value calculation as instructed by the Department's
Antidumping Manual, Ch. 8 at 55 (7/93 ed.). Petitioner notes that Jilin
and Henan identified ``loan interest'' in their itemized list of
expenses and that, in the 1989-90 review, the Department included
interest expense in SG&A for its constructed value calculations.
Guizhou Machinery et al. argue that petitioner provides no basis
for its assertion that SKF's interest expenses are in fact
representative of producers in appropriate market-economy surrogate
countries. Guizhou Machinery et al. state further that petitioner only
cites legal authority for the proposition that the SG&A should include
an amount for interest expenses but does not specify which charges from
SKF's annual report should be included in the calculations.
Department's Position: We agree with petitioner that, consistent
with our practice, financing charges should be treated as ordinary
business expenses. Therefore, we have included interest expenses, as
listed in SKF's 1991-92 financial statements, in the SG&A calculation
in the final results. As noted in our response to Comment 8, we
calculated the SG&A expenses by adding each line item from the SKF
report that pertained to such expenses. The line items used in the
preliminary results did not include interest expense, which was
included in a separate category in the SKF report.
Concerning Guizhou Machinery et al.'s comment that petitioner has
not sufficiently demonstrated the representativeness of SKF's interest
expense, we note that this source constitutes the best available
information and that Guizhou Machinery et al. have provided no
alternative source for the valuation of this expense.
[[Page 65535]]
Comment 10: Petitioner argues that section 772(e)(2) of the Act
requires the Department to deduct direct and indirect selling expenses
incurred by respondents' U.S. subsidiaries from exporter's sales price
(ESP). Petitioner states that the Department lacks the discretion to
create an exception for selling expenses incurred by U.S. companies in
NME countries, arguing that section 772 has never been amended to
distinguish USPs with respect to NME-produced imports; rather, the
adjustments required to calculate dumping margins with respect to NME
cases have been codified in section 773.
Petitioner recognizes that the Department declined to make ESP
adjustments in Ceiling Fans on the grounds that ``there is a lack of
information on the record to make adjustment to both sides of the
equation. * * * '' (citing Ceiling Fans at 55276). Petitioner claims
that these reviews are distinct from Ceiling Fans because the U.S.
importers of TRBs function at a different level of trade than that
derived by the Department's constructed value of home market sales.
Petitioner explains that the U.S. importers are resellers that function
as distributors while, conversely, the Department's constructed value
does not include SG&A expenses that represent expenses associated with
reselling. Petitioner adds that in the preliminary results the
Department relied on the statutory minimum, which represents the
minimum activities of the manufacturer, to determine SG&A expenses to
include in constructed value.
Petitioner further distinguishes the current reviews from Ceiling
Fans by arguing that the SKF Annual Report provides sufficient evidence
to calculate an adjustment to FMV as provided in 19 C.F.R. 353.56(b)(2)
(ESP offset), which would not necessarily equal the U.S. selling
expenses, if the Department chooses to make such an adjustment.
With respect to deductions of selling expenses from FMV, petitioner
contends that, by using the SG&A expenses of SKF in the final results,
the Department would exclude those expenses analogous to resale
activities. Therefore, petitioner contends, there is no basis to
conclude that constructed value requires any deduction similar to the
statutory deduction from ESP. Petitioner also asserts that the home
market or third-country selling expenses of the foreign producer/U.S.
importer are not relevant to the derivation of constructed value and
that these expenses cannot therefore be deducted from the surrogate or
statutory minimum SG&A expenses used in constructed value. Finally,
petitioner asserts that, if the Department does choose to grant an ESP
offset, there is no basis on which to assume that an ESP offset would
be equal to U.S. selling expenses; rather, the Department should
subtract only that portion of SG&A attributable to indirect selling
expenses (referencing schedule 6(d), ``Other Expenses,'' of the SKF
Annual Report).
Shanghai supports the Department's preliminary decision not to
deduct direct and indirect selling expenses from ESP, stating that
there is insufficient information to make a corresponding adjustment to
FMV which would thereby permit the fair and accurate comparison between
USP and FMV required by the antidumping statute. Shanghai points out
that the SKF Annual Report does not present the breakdown of selling
expenses necessary to make the required adjustments. Shanghai further
states that the Department recognized in Ceiling Fans that section
772(e) of the statute does not require the unfair adjustment of USP in
ESP transactions without the corresponding adjustments to FMV. Shanghai
asserts that the antidumping statute requires the Department to make
fair comparisons between USP and FMV, pursuant to The Budd Company v.
United States, 746 F. Supp. 1093, 1098. Shanghai concludes that a fair
comparison cannot be made if the information available does not permit
the FMV adjustment.
Guizhou Machinery et al. state that an adjustment to ESP without
the companion ESP offset to FMV would lead to distorted results.
Guizhou Machinery et al. argue that, while deductions for U.S. selling
expenses and the ESP offset can be made in market-economy cases without
difficulty, it is problematic to do so in NME cases because there is no
market-based value for indirect selling expenses on the FMV side of the
dumping equation.
Guizhou Machinery et al. cite Ceiling Fans as the Department's best
explanation of the calculation problem and of the Department's reasons
for traditionally declining to adjust both USP and FMV for U.S. selling
expenses in an NME case, and they suggest that Ceiling Fans is a direct
precedent for the Department's treatment of selling expenses in this
case. Guizhou Machinery et al. state that the U.S. importers in Ceiling
Fans, as in virtually every ESP case, were resellers and that the
current reviews cannot therefore be distinguished from Ceiling Fans on
this basis. Guizhou Machinery et al. also state that petitioner's
argument does not deal with the fact that the statutory minimum SG&A
the Department used as a surrogate value includes all selling expenses
necessary to sell TRBs, including an amount for indirect selling
expenses that would normally be deducted from FMV as an ESP offset.
With respect to petitioner's argument that, if necessary, there is
record evidence that will allow for an ESP offset to FMV, Guizhou
Machinery et al. further contend that petitioner's reference to
schedule 6(d) in the SKF Annual Report as an appropriate source of
indirect selling expenses is unsupported by any evidence.
Department's Position: We agree with petitioner with respect to the
deduction of U.S. selling expenses from USP. We have reevaluated our
practice concerning the deduction of expenses incurred by U.S.
affiliates of respondent companies in NME cases and have concluded that
such deductions are explicitly required by section 772(e)(2) of the
statute, which states that ESP shall be reduced by the amount of
``expenses generally incurred by or for the account of the exporter in
the United States in selling identical or substantially identical
merchandise.'' See Notice of Final Determination of Sales at Less Than
Fair Value: Bicycles from the PRC, 61 FR 19026, 19031 (April 30, 1996)
(Bicycles) 1. The statute provides no exceptions for cases
involving NME countries. We have subtracted, therefore, direct and
indirect selling expenses incurred by such U.S. affiliates from the
starting price in deriving the USP.
---------------------------------------------------------------------------
1 Although the statutory citation in this case is to the
law as it existed on December 31, 1994, whereas the relevant
citation in Bicycles is to the law as it exists subsequent to that
date, both versions explicitly require the deduction of expenses
generally incurred by or for the account of the exporter (or a U.S.
affiliate) in the United States.
---------------------------------------------------------------------------
We have made an ESP offset to FMV which, in conformance with
section 353.56 of our regulations, is in an amount not to exceed
indirect selling expenses incurred in the United States. We based this
offset on the ``other expenses'' item from the SKF report, and
subtracted from this item the amount for debentures as indicated in a
footnote to ``other expenses'' in the SKF report. The SKF report notes
that the general category of expenses containing the ``other expenses''
item includes ``selling expenses.'' However, none of the named items
(e.g., ``power and fuel'') pertain to selling expenses. We have
concluded that, as suggested by petitioner, the ``other expenses''
item, minus debentures, represents these ``selling expenses.''
Comment 11: Petitioner claims that verification of Jilin and
Liaoning revealed that these companies function in some circumstances
as sales agents
[[Page 65536]]
and states that the Department's calculation of USP does not
distinguish between sales for which Jilin and Liaoning acted as agents
and sales for which they purchased the bearings for their own accounts
and then resold them for export to the United States. Petitioner argues
that, in a market economy, the functions of an agent involve additional
selling activities for which the agent would be compensated by
commissions. Petitioner states that commissions, as selling expenses,
should be reflected in constructed value. If commissions are not taken
into account in constructed value, petitioner contends, these sales are
not at the same level of trade as the Indian sales by SKF that are the
basis for assigning values to the factors of production. Petitioner
suggests that the Department use the commission rate reported by
Premier and Henan as a proxy.
Guizhou Machinery et al. state that petitioner misunderstood the
verification reports. Guizhou Machinery et al. state that in this
situation Jilin and Liaoning do not act as commission agents, but
simply provide assistance with transaction details after the factory
has found a buyer. According to Guizhou Machinery et al., the factory
and the customer negotiate a sales price, which includes a fixed profit
amount for Jilin or Liaoning, adding that the only difference between
the two types of transactions is the nature of the profit. Guizhou
Machinery et al. further state that if the Department does classify
this fee as a commission it would be inappropriate to impute a
commission in the manner suggested by petitioner because (1) all of the
factories' selling expenses have been included in the statutory minimum
SG&A, and (2) it would be improper to use one respondent's proprietary
data to calculate a margin for another respondent.
Department's Position: We disagree with petitioner. With respect to
petitioner's suggestion that we make an adjustment to FMV for
commission expenses, we first note that all transactions by Jilin and
Liaoning under review were purchase price transactions. We do not make
circumstance-of-sale (COS) adjustments for selling expenses incurred on
purchase price sales in NME cases because the surrogate data on the
record do not allow us to quantify the direct surrogate home market
selling expenses necessary for such an adjustment. See Final
Determination of Sales at Less Than Fair Value: Certain Helical Spring
Lock Washers From the People's Republic of China, 58 FR 48833, 48839
(Sept. 20, 1993) (Lock Washers). (Pursuant to our COS methodology, we
first subtract home market direct selling expenses from FMV, then add
U.S. direct selling expenses.) As noted in our response to Comment 10,
we have adjusted for home market indirect selling expenses in ESP
situations by deducting the ``other expenses'' item as listed in the
SKF report. However, there is insufficient data to allow for a direct
home market selling expense adjustment because we are unable to isolate
direct selling expenses in the SKF report.
Second, even if we were to make COS adjustments for purchase price
sales, we would make this adjustment using the U.S. selling expenses
incurred by Jilin and Liaoning on these transactions. The commission
expenses at issue are not incurred by Jilin and Liaoning; rather, they
are paid by the PRC suppliers. We reviewed export transactions between
the PRC exporter and the unrelated U.S. customer. We did not examine
internal PRC transactions between the suppliers and the exporters.
Comment 12: Petitioner and Shanghai both submitted comments
concerning the appropriate basis for valuing the ocean freight expense.
Petitioner asserts that the freight rate for shipments from Japan to
the United States used as the surrogate value by the Department to
calculate ocean freight is inappropriate because the distance between
Japan and the United States is shorter than that between China and the
United States. Petitioner further states that, since Japan is
considered one of the world's most advanced countries, it is not
appropriate to use the port and maritime transportation system of Japan
to calculate ocean freight expenses for the PRC, which is a developing
country. Petitioner suggests that, in the absence of market-economy
freight rates from China to the United States, the Department use ocean
freight from India instead of Japan, since India is the surrogate
country selected by the Department. Petitioner suggests that an Indian
rate can be established by adding 30 percent to the Japanese rate based
on a comparison of the CIF/FOB ratios for the two countries published
by the International Monetary Fund (IMF) (1.09 for Japan and 1.117 for
India, i.e., 11.7 percent is approximately 30 percent greater than 9
percent).
Shanghai contends that the Department should have used the publicly
available rate for shipments from the PRC to the United States, using
data from the Federal Maritime Commission (FMC). Shanghai claims that
publicly available information on file with the FMC indicates that the
Asia North America Eastbound Rate Agreement (ANERA) maintained rates
for shipments from the PRC to the United States by several market-
country carriers throughout the periods of review.
Shanghai further argues that the port costs in Japan are among the
highest in the world and are several times as high as those in other
Asian ports and that, therefore, if the Department rejects the use of
publicly available ocean freight rates from the PRC to the United
States, it should not continue to use the inflated Japanese ocean
freight rates but should instead use publicly available rates to the
United States from other Asian ports (e.g., Hong Kong/Macau and
Taiwan). Shanghai states, in addition, that the Department erroneously
applied a USD 3.00 surcharge to the ocean freight value. Shanghai
contends that such a surcharge was applicable only on cargo from Japan
during the period prior to September 30, 1993 and that there is no
evidence of a fuel surcharge on ocean freight from the PRC to the
United States. Finally, Shanghai responds to petitioner's suggested
approach by stating that Indian rates are totally unrepresentative when
compared with the market-based rates from the PRC to the United States.
Guizhou Machinery et al. respond to petitioner's suggested approach
by arguing that the Department's ocean freight calculation is
reasonable because it is based on market-economy rates and relates to
the transportation between the United States and an Asian country
within reasonable proximity to the PRC. Guizhou Machinery et al.
further state that a comparison of the CIF/FOB ratios for Japan and
India does not reflect the difference in ocean freight expenses charged
by ocean freight providers in those counties or the actual freight
rates charged in India. Guizhou Machinery et al. note that the
valuation methodology used by the Department, which relies on the
actual rates provided by the FMC, specifically accounts for the
transportation of bearing products. Finally, Guizhou Machinery et al.
suggest that the use of Japanese shipping rates is consistent with
Department practice in many other NME cases.
Department's Position: We agree with Guizhou Machinery et al. and
have used Japanese shipping rates for the final results. We are not
using FMC data involving shipments from the PRC to the United States
because we were not able to obtain ocean freight information for
shipments of subject merchandise from the PRC to the United States
during the periods of review. Although we found a shipment of bearings
from Hong Kong to the United States during
[[Page 65537]]
the periods of review, it was provided on a per-container basis and we
were unable to allocate these charges on a per-unit basis. The Indian
rate suggested by petitioner is inappropriate due to the significantly
greater distance involved in shipments from India to the United States
compared with shipments from the PRC to the United States. Although the
distance from Japan to the United States is shorter than the distance
from the PRC to the United States, the Japan-to-United States distance
more closely approximates the PRC-to-United States distance than does
the distance from India to the United States. Thus, the Japan rate is
the best available information by which to value this expense.
Comment 13: Petitioner contends that the Department has understated
the marine insurance expense by applying an insurance rate based on
weight applicable to sulfur dyes from India rather than on value.
Petitioner argues that the value of one ton of sulfur dye may be
significantly less than the value of one ton of TRBs, in which case the
payment for loss of one ton of sulfur dye would be less than the
payment for the loss of bearings. Petitioner recommends that the
Department calculate a marine insurance factor based on the ratio of
the insurance charge per ton of sulfur dye divided by the value of
sulfur dye per ton (based on U.S. Customs value) and apply this factor
to the price of TRBs sold in the United States.
Guizhou Machinery et al. respond to petitioner by stating that
value is not the only basis for insurance rates and that it is not
reasonable to assume that the difference in Indian marine insurance
rates applicable to sulfur dye and TRBs can be accurately measured
simply by comparing the difference in product values. Guizhou Machinery
et al. note that petitioner's argument about the customs values of
sulfur dye is new information and has not been previously submitted on
the record for these reviews. Guizhou Machinery et al. further state
that the Department's approach of using the marine insurance rates from
the Sulfur Dyes investigation is consistent with its calculations in
NME cases. Finally, Guizhou Machinery et al. argue that the Department
did not understate but rather overstated the marine insurance expenses
due to ministerial errors in calculating several respondents' marine
insurance expenses. Guizhou Machinery et al. urge the Department to
therefore reject petitioner's request to make an upward adjustment to
the marine insurance calculations.
Department's Position: We disagree with petitioner. We have relied
on the publicly available information on marine insurance for sulfur
dyes that we used for the preliminary results. These data are the only
publicly available information that are available to us; further, we
have used the same rate repeatedly for other PRC analyses. See, e.g.,
Final Results of Administrative Review: Certain Helical Spring Lock
Washers from the PRC, 61 FR 41994 (August 13, 1996).
Comment 14: Petitioner argues that, where the Department discovered
significant errors or omissions during verification of the information
pertaining to one of the current review periods (1990-91, 91-92 or 92-
93), such findings should also be applied to the other periods.
Petitioner states that it requested verifications for all three
outstanding review periods, but that the Department elected to verify
only one or two of the periods. Petitioner states that, with respect to
several of the exporters or producers, the Department subsequently
rejected responses for one POR because of verification findings and
applied BIA either in whole or in part with respect to that period, but
accepted unverified responses for an earlier or later POR.
Citing section 751(a)(2) of the Act, petitioner argues that the
Department is directed to consider all relevant information in its
possession at the time the Department determines antidumping duties.
Petitioner states that in Floral Trade Council of Davis, California v.
United States, 709 F. Supp. 229, 230 (CIT 1989) (Floral Trade Council),
the court held that documents in the Department's possession which had
become sufficiently intertwined with the relevant inquiry are part of
the record, no matter how or when they arrive at the Department.
Petitioner asserts that, because the three reviews at issue have become
intertwined, errors or omissions discovered during verification of one
review period cannot be ignored for purposes of another review period.
Petitioner argues that, since the results of verification were known to
the Department before publication of the preliminary results for any of
the three pending reviews, relevant information obtained with respect
to a company in the course of one review is also before the Department
for purposes of the other intertwined reviews. Noting the fact that
there was a single briefing schedule, one hearing and one disclosure
conference, petitioner argues that the Department is treating these
reviews virtually as a unified proceeding.
Petitioner further argues that the Department routinely applies BIA
from past reviews and cites as an example a review of a countervailing
duty order on fabricated auto glass from Mexico, in which the
Department relied upon information contained in a verification report
from a past review of litharge, red lead and lead stabilizers from
Mexico (citing PPG, Inc. v. United States, 708 F. Supp. 1327 (CIT 1989)
(PPG)). Petitioner distinguishes Cabot Corp. v. United States, 664 F.
Supp. 525, 527 (CIT 1987) (Cabot), in which the CIT held that a
verification report for a subsequent review of the same order was not
before the Department for consideration in the previous review, by
noting that in Cabot the Department issued the final results of the
previous review prior to issuance of the verification report in
question. Petitioner argues that, in the pending review, because
verification reports for subsequent reviews have been issued prior to
the issuance of final results of the previous reviews, those reports
are before the Department for consideration in the previous reviews.
Petitioner further contends that the failure to consider
information from the verification reports in the other intertwined
reviews shifts an impossible burden to petitioner. Petitioner asserts
that such was the case in Final Results of Antidumping Duty
Administrative Review; Tapered Roller Bearings and Parts Thereof,
Finished and Unfinished, From Japan, and Tapered Roller Bearings, Four
Inches or Less in Outside Diameter and Components Thereof, From Japan,
58 FR 64720, 64723 (December 9, 1993) (TRBs from Japan), in which the
Department refused to consider knowledge gained from a verification for
the 1991-92 review to correct errors likely to have been made in the
1990-91 review in order to avoid holding respondent in that case
responsible for the Department's delay in conducting the earlier
review. Petitioner claims that, because domestic interested parties
necessarily depend upon information from a variety of sources,
including verification reports from other review periods, in order to
rebut arguments made by respondents, denying petitioner the ability to
consult such reports and show inaccuracies in reported information
interferes with fundamental rights of participation.
Finally, petitioner argues that, even if the Department refuses to
consider verification results in the context of an earlier review, to
the extent that the Department applied partial or complete BIA for the
1991-92 POR based on verification, the same BIA should be applied with
respect to the 1992-93 POR.
Guizhou Machinery et al. respond that the Department should reject
petitioner's request to combine the
[[Page 65538]]
administrative records of the three reviews in question. Citing Win-Tex
Products, Inc. v. United States, 797 F. Supp. 1025 (CIT 1992) (Win-
Tex), Guizhou Machinery et al. argue that the results of each
proceeding must be based upon substantial evidence of the
administrative record for that proceeding. Guizhou Machinery et al.
argue that each administrative review is considered a separate
administrative proceeding and, absent affirmative incorporation,
documents contained in the administrative record of one review are not
part of the administrative record of another review.
Guizhou Machinery et al. further claim that petitioner's argument,
based on its citation of Floral Trade Council, in which the CIT granted
plaintiff's motion to supplement the administrative record of a scope
proceeding with information from the underlying investigations by the
Department and the International Trade Commission (ITC), is flawed.
Guizhou Machinery et al. note that the CIT's decision was based on the
fact that the Department itself stated in its scope decision that it
had examined both original investigations. Thus, respondents argue, the
CIT did not hold that the Department had to examine documents from
earlier parts of the proceeding, but allowed the documents to be
incorporated, not because plaintiff deemed them relevant, but, rather,
because the Department itself had incorporated the documents in its
determination.
Department's Position: We disagree with petitioner. Section
516A(b)(2)(A) of the Act states that the record for review includes ``a
copy of all information presented to or obtained by the [Department]
during the course of the administrative proceeding, including all
government memoranda pertaining to the case and the record of ex parte
meetings required to be kept by section 777(a)(3)'' as well as ``a copy
of the determination, all transcripts or records of conferences or
hearings, and all notices published in the Federal Register.'' As
elaborated in our regulations, ``[f]or purposes of section 516A(b)(2)
of the Act, the record is the official record of each judicially
reviewable segment of the proceeding.'' 19 C.F.R. 353.3(a) (1994). The
CIT has consistently held that antidumping investigations and
administrative reviews are wholly independent segments of a proceeding.
See, e.g., Outokumpu Copper Rolled Products AB v. United States, 829 F.
Supp. 318, 322 (CIT 1992) (``Each of Commerce's subsequent
determinations must be supported by the record obtained during the
course of [the] respective administrative proceeding.'').
We agree with respondents with respect to Floral Trade Council.
There, the Court reviewed a scope decision in which the Department
stated ``without qualification that it has examined `the original
investigations by the ITC and the Department.* * *' '' Floral Trade
Council at 230. Thus, the Court allowed the plaintiff to supplement the
record with certain documents from the investigation that had become
``sufficiently intertwined'' with the Department's scope inquiry. Here,
in contrast, the Department is conducting a review pursuant to section
751 to determine whether, and to what extent, the respondents have sold
subject merchandise at less than foreign market value during three
separate periods of review. To make these determinations, we have
relied on information pertaining to each separate period; we have not
relied on administrative records for other segments of the proceeding
in reaching any of these determinations.
With respect to PPG, in which we relied on a verification report
from another case in making our determination, the report from the
unrelated case was placed on the record of the case in question because
it contained public information regarding Mexican interest rates. See
PPG at 1328. Thus, the Department relied on the verification report in
a similar manner as our current use of publicly available information
from the Sulfur Dyes petition in valuing marine insurance. See Comment
13.
Although the preliminary results for these three reviews were
published in the same notice and we conducted them concurrently,
including a single briefing schedule, one hearing and one disclosure
conference, as noted by petitioner, we did so for the convenience of
all parties involved in these reviews. However, each review is a
separate segment of the proceeding as defined in our regulations. See
19 C.F.R. 353.3(q). Despite the fact that reviews sometimes proceed
concurrently or overlap, we generally do not apply the results of
verification of one review period to other review periods. See TRBs
from Japan at 64723. In this instance, we found no discrepancies during
verifications of one POR that would also apply to other PORs based on
record evidence.
Comment 15: Petitioner argues that the Department erred in its
choice of the BIA rate to apply to certain transactions by Jilin,
Liaoning, Chin Jun, Guizhou, and Henan. Petitioner states that the
appropriate BIA rate for U.S. sales involving models for which
insufficient data was supplied to allow the calculation of FMVs should
be the highest rate found for any individual U.S. transaction, instead
of the greater of the highest company-specific rate from a prior review
or the highest rate calculated in the current review. Petitioner
asserts that to do otherwise is to encourage respondents to selectively
withhold relevant data whenever by doing so the Department would select
a BIA rate lower than the actual margin of dumping.
Respondents Jilin, Liaoning, and Guizhou respond that they
cooperated in these reviews and that petitioner has provided no reason
to deviate from the Department's established practice concerning
cooperative firms, nor has petitioner shown that the Department's
results are aberrational as a result of the use of its policy.
Chin Jun responds that the highest single transaction recommended
by petitioner is punitive and must be rejected because the Department
expressly found in its preliminary results that Chin Jun was
cooperative in the reviews at issue. Chin Jun further notes that it was
unable to supply the missing information because such information was
under the control of unrelated third parties.
Department's Position: We disagree with petitioner. The BIA that we
have selected, as detailed in our response to Comment 29, is in
accordance with the BIA policy for antidumping administrative reviews.
See Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof from France, et al.; Final Results of Antidumping
Administrative Reviews, 58 FR 39729, 39739 (July 26, 1993). All of the
companies in question, except Chin Jun during the 1990-91 review,
substantially cooperated with our requests for information for the
periods in question but failed to provide complete or accurate
information with respect to certain transactions. For these specific
transactions, we find that our BIA approach accomplishes the statutory
goal of encouraging compliance with our requests for information as
well as allowing us to determine current margins as accurately as
possible. See Rhone Poulenc, Inc. v. United States, 899 F.2d 1185, 1190
(Fed. Cir. 1990). Petitioner's suggested BIA (i.e., the highest rate
found for any individual U.S. transaction) is unwarranted given the
level of cooperation and the nature of the reporting deficiencies.
Comment 16: Petitioner states that Shanghai's bearing weights and
scrap weights were unverifiable and that the
[[Page 65539]]
Department should therefore resort to partial BIA by adjusting the
reported amounts to reflect the highest actual materials or lowest
actual scrap costs.
Shanghai argues that the Department weighed actual bearings and
scrap samples at verification and determined that any discrepancies
found at verification were insignificant. Shanghai states that the
Department has previously found no cause to resort to BIA on the basis
of insignificant discrepancies (citing Silicon Carbide at 19749).
Department's Position: We disagree with petitioner. Although at
verification we did find discrepancies from the reported weights, we
determined these discrepancies to be insignificant. Therefore, they did
not undermine the validity of Shanghai's responses. In addition, we
found some discrepancies to be above reported weights and others to be
below; we found no pattern of under-reporting.
Comment 17: Petitioner argues that the Department reported that it
was unable to verify the number of Shanghai's employees assigned to the
production of TRBs, citing the verification report for the 5th and 6th
PORs. Petitioner claims that, as a result, the Department could not
verify reported indirect labor nor was it able to determine the extent
to which labor costs were understated by the omission of trained
employee hours from the direct labor costs reported. Petitioner further
argues that, given that overhead costs, SG&A and profit are all derived
on the basis of materials and labor costs, the inability to verify
labor hours is fatal to Shanghai's entire questionnaire response.
Petitioner argues that, if the Department uses the partial information
submitted by Shanghai, labor hours should be adjusted to account for
trained employees. Petitioner refers to the verification report, which
notes that, although Shanghai reported only skilled workers, the
Department determined at verification that production teams consisted
of both skilled and trained workers. Thus, petitioner asserts, the
Department should, as BIA, reject the response entirely, or,
alternatively, calculate the ratio of all workers to skilled workers
and apply that ratio to Shanghai's reported labor hours.
Shanghai claims that petitioner has misinterpreted the verification
report. Rather than stating that the number of employees assigned to
TRB production was unverifiable, Shanghai says the report noted that it
was not verifiable from personnel department worksheets, which do not
contain such information. Shanghai says that it did report the number
of employees assigned to TRB production and that such information was
verifiable through a variety of means. Shanghai further claims that its
reported labor hours accounted for trained workers. Shanghai counters
petitioner's argument for use of BIA on the basis that it did not
refuse information and it was able to produce, in a timely manner, any
information requested by the Department.
Department's Position: We agree with Shanghai's contention that
petitioner misinterpreted our verification report. In the report, we
noted that there was nothing to which we could trace the numbers from a
worksheet prepared for these administrative reviews in order to verify
the number of employees assigned to the production of subject
merchandise. However, based on company records examined at
verification, we determined that Shanghai accurately reported the
number of employees assigned to the production of TRBs.
We were able to verify the direct labor hours from Shanghai's
internal record-keeping derived from work tickets. We found at
verification that by reporting direct labor from the work tickets
Shanghai did not account for trained workers. To calculate direct labor
for the preliminary results, we adjusted Shanghai's reported labor
hours in order to account for trained workers by adding the direct
labor hours for trained workers to the direct labor hours for skilled
workers. We have applied this same methodology for these final results.
Because we were able to verify Shanghai's direct labor and there was no
evidence indicating that indirect labor was misreported, we have used
the indirect labor as reported.
Comment 18: Petitioner notes that the Department's analysis
memoranda for Jilin and Liaoning for the fifth and sixth reviews do not
indicate whether it corrected the databases for clerical errors
discovered during verification.
Department's Position: For these final results, we have corrected
Jilin and Liaoning's sales databases for the clerical errors we
discovered during verification.
Comment 19: Petitioner states that, whether or not verified, the
Department should make an adjustment for commissions incurred on U.S.
sales (valued in a market economy) in the Department's analysis of
Guizhou Machinery based on the commission rates reported by Premier and
Henan, both of which disclosed sales through commission agents and the
commission rates.
Guizhou Machinery states that the failure to report certain
commission payments amounted to an insignificant ``clerical error.''
Guizhou Machinery further argues that it would be unfair to make
wholesale adjustments to Guizhou's calculations which would affect all
sales, including those sales which are unaffected by the error, and
that it would be inappropriate to base an adjustment on the average
commission rate reported by Premier and Henan because it would violate
the administrative protective order (APO) rules applicable to that
information.
Department's Position: We disagree with petitioner. Guizhou
Machinery had only purchase price sales. Therefore, any adjustments for
commissions would be circumstance-of-sale adjustments, which we do not
make in NME cases. See our response to Comment 11.
Comment 20: Petitioner argues that, with respect to Guizhou
Machinery and the 1992-93 review, the Department should reclassify as
U.S. sales those transactions with purchase orders placed by a U.S.
firm that were listed as third-country sales.
Guizhou Machinery argues that the administrative record indicates
that the merchandise was shipped to a third country, not the United
States, and that, although purchase orders were placed by a U.S.
company, Guizhou Machinery did not know the ultimate destination of the
TRBs because the merchandise was shipped to a third country. Guizhou
Machinery argues that it would therefore be inappropriate to reclassify
these third country sales as U.S. sales.
Department's Position: We disagree with petitioner. Section
773(f)(2) of the Act requires that the producer of the merchandise
know, at the time of sale to the reseller, the country to which the
reseller intends to export the merchandise in order for the Department
to treat sales to a reseller as sales to the United States. Although
there were certain purchase orders placed by a U.S. company, there is
insufficient evidence that the respondent had knowledge of whether the
subject merchandise was destined for the United States. During
verification of Guizhou Machinery, the Department confirmed that these
sales were shipped and sold to a Hong Kong-based company. Accordingly,
we have classified these transactions as third country sales for the
final results.
Comment 21: Petitioner asserts that the factory that supplies
Guizhou Machinery with TRBs failed to report ``helpers'' (i.e., workers
assisting the basic production workers) in its reporting of direct
labor. Petitioner requests that the Department increase the labor hours
to account for unreported workers.
[[Page 65540]]
Guizhou Machinery responds that the Department's verification
report clearly states that ``helpers'' are ``auxiliary workers,'' which
are different than the ``basic production workers.'' Guizhou Machinery
further argues that the auxiliary workers typically perform maintenance
work and move containers and that ``auxiliary workers'' labor is
indirect labor and is not part of direct labor.
Department's Position: We agree with petitioner. The Department
verified that the function of ``helpers'' is to support the basic
workers in the production of TRBs. Although ``helpers'' have a
supporting role in the production process, they do perform a function
in the production of TRBs. Therefore, the Department has adjusted its
calculations for direct labor to account for unreported workers.
Comment 22: Petitioner notes that the Department stated that
reported duties and charges incurred by Central Bearing, Luoyang's
wholly owned subsidiary in the United States, on ESP sales were
deducted from the unit price. Petitioner argues that, because printouts
associated with Luoyang's ESP sales do not reflect such calculations,
such expenses should be deducted in the calculation of USP for the
final results.
Luoyang notes that, although the printout for ESP sales appears to
be incomplete, the calculation of net USP does include relevant
information regarding these expenses, and a review of the calculation
formula indicates that the Department deducted duties and other
charges. Thus, Luoyang argues, no revision is necessary for the final
results.
Department's Position: We agree with Luoyang. A review of the
formula we used to calculate net USP, which was provided to petitioner,
indicates that net USP was the price after making deductions for duties
and charges incurred by Central Bearing. Therefore, for these final
results, we have made no further adjustment with respect to these
expenses.
Comment 23: Petitioner contends that the Department should reject
the factors data submitted by one of the suppliers involved in these
reviews because it under reported its material consumption by using
theoretical instead of actual yields in the denominator of the gross
weight factor. Petitioner argues in the alternative that, if these data
are not disregarded, the Department should adjust the data to account
for this error.
Guizhou Machinery et al. respond that petitioner has not
established that the error was so substantial as to justify the
rejection of the supplier's response in its entirety.
Department's Position: We disagree with petitioner concerning its
claim that the supplier response in question should be disregarded in
its entirety. However, we agree that an adjustment should be made to
the data submitted to correct for the difference between theoretical
and actual yields. We have made this correction for the final results.
Comment 24: Shanghai argues that the SKF overhead rate that the
Department used in the preliminary results should not be used for the
final results because it is excessive and unrepresentative of Chinese
producers for the following reasons. First, Shanghai argues that the
Department's analysis improperly allocates the full amount of the
depreciation expense to overhead, and it does not consider that certain
depreciation expenses are allocable to SG&A. Shanghai notes that, for
the final results of the 1989-90 review, the Department allocated a
portion of depreciation to SG&A. Shanghai states that, according to the
SKF annual report, 7.3 percent of total depreciation pertains to SG&A.
Second, Shanghai notes that the SKF annual report does not identify
the nature of rent and lease expenses. Shanghai claims that office
space and housing for executives should be charged to SG&A and that
these lease and rent payments should therefore be allocated to SG&A,
not to overhead.
Third, Shanghai argues that it is not reasonable to allocate
``Rates and Taxes'' to overhead since they are not characterized as
such in the SKF annual report. Shanghai states that this treatment is
inconsistent with the 1989-90 administrative review, in which the
Department allocated the rates and taxes to SG&A. Shanghai requests
that the Department accordingly reduce the SKF overhead by this amount
in the event that it continues to rely on the SKF overhead rate.
Shanghai suggests that, since there is inadequate information to
determine SG&A in the SKF Report, the Department should use the Tata
Iron and Steel Company (TISCO) overhead figure of 19.24 percent of
materials and direct labor as indicated in the July 16, 1991, cable
from the Indian Embassy or use the data compiled by the Reserve Bank of
India (RBI) for the overhead calculation.
Chin Jun also claims that attributing the entire amount of SKF's
depreciation to overhead is improper because some depreciation, e.g.,
depreciation on buildings, computer and furniture, should be included
in SG&A. Chin Jun requests, therefore, that at least one quarter of
depreciation should be allocated to SG&A. Chin Jun also recommends an
alternative method for calculation of SG&A, resulting in an overhead
rate of 11.76 percent.
Department's Response: We disagree with Shanghai that we should
either use TISCO's SG&A rate or the RBI information for the calculation
of SG&A and overhead rates instead of using SKF's annual report. TISCO,
Tata Iron and Steel Company, as the name implies, is an iron and steel
company, not a bearing company such as SKF. The information published
by RBI represents over 600 companies in India from various industries.
It is the Department's practice to utilize industry-specific PI when
possible. See Notice of Final Determination of Sales at Less Than Fair
Value; Disposable Pocket Lighters From the People's Republic of China,
60 FR 22359, 22364 (May 5, 1995). Accordingly, for the final results,
we have continued to calculate SG&A and overhead rates based on the
information stated in SKF's annual report.
However, we agree that it is appropriate to adjust the SKF overhead
rate as follows. We agree with Shanghai and Chin Jun that it is
improper to include all of SKF's depreciation in overhead because
depreciation associated with office buildings and office equipment
should be included in SG&A. Therefore, for the final results we
allocated depreciation costs to overhead and SG&A according to the
function and value of the assets; that is, we included in overhead only
the depreciation expenses allocated to manufacturing. The information
pertaining to the function and value of SKF's assets was obtained from
the SKF annual report.
We also agree with Shanghai that rates and taxes should be
allocated to SG&A and not to overhead. This allocation methodology is
consistent with our practice in the 1989-90 administrative review of
this proceeding and with other recent PRC cases. See memorandum from
analyst to file Factor Values Used for the Preliminary Results of the
First Administrative Review of Certain Helical Spring Lock Washers from
the People's Republic of China, for the Period October 15, 1993,
through September 30, 1994 dated August 3, 1995.
With respect to lease rental expenses, we agree with Shanghai that
the SKF annual report does not identify the nature of those expenses.
However, we do not agree that all of the lease rental expenses are for
SG&A, since a portion of those expenses could be attributed to overhead
as well. Accordingly, we allocated lease rental expenses equally to
SG&A and overhead, i.e., 50 percent for SG&A and 50 percent for
overhead.
[[Page 65541]]
Comment 25: Shanghai states that the Department should correct
apparent calculation errors that, Shanghai contends, resulted in a
higher reported steel cost for cups and cones. Shanghai notes a
discrepancy between the steel cost for cups and cones reported in the
analysis memorandum and that provided in surrogate data source
memorandum.
Department's Position: For the final results, we have changed the
surrogate source with which we valued the steel used to manufacture
cups and cones, necessitating a recalculation. This change renders
Shanghai's argument moot.
Comment 26: Shanghai argues that the actual prices at which it
purchased steel from PRC steel producers are sufficiently market-driven
to be used instead of surrogate values. In support of its contention
that the use of market-driven NME prices is appropriate, Shanghai cites
Ceiling Fans, wherein the Department has stated that the presumption
that no domestic factor of production is valued on market principles
``can be overcome for individual factors by individual respondents with
a showing that a particular NME value is market driven'' (citing
Ceiling Fans at 55273). Shanghai argues that, where this standard is
met, the Department should apply its normal (non-NME) methodology
(citing S. Rep. No. 71, 100th Cong., 1st Sess., 108 (1987)).
Shanghai states that the domestic steel producers from which it
purchased steel compete against steel producers from market-economy
countries. Shanghai also notes that there are no import restrictions
limiting its ability to purchase either domestic or imported steel and
that, under PRC joint venture law, it has the legal right to purchase
steel from any supplier in the world. Shanghai states that the prices
at which it purchased steel from domestic suppliers during these PORs
were consistent with world steel prices for comparable types of steel.
Shanghai argues in the alternative that, if the Department
determines Shanghai's steel purchases were not sufficiently market-
driven, it should use the verified market costs of PRC steel imports
otherwise on the record as the basis for valuing steel inputs. Shanghai
claims that, in view of the Department's policy stated in Ceiling Fans
of accepting market-based costs incurred during the POR, the Department
should apply such costs to all respondents as the best evidence of the
market cost of steel available to PRC producers during the PORs.
Finally, Shanghai proposes that the Department should consider
using Shanghai's verified steel imports placed on the record of the
1993-94 review. Shanghai claims that, when adjusted for inflation,
these costs would also represent a reliable alternative as to the
market cost of steel available during these PORs. Shanghai argues that
the Department has previously determined that, if an NME producer
reports prices that are market-based, it is appropriate to use those
prices as opposed to surrogate values. Shanghai claims that ``market-
based costs incurred by the respondents in producing the subject
merchandise . . . are the most accurate and appropriate values for . .
. the purposes of calculating FMV'' (quoting Ceiling Fans at 55275).
Petitioner counters that there is no basis for adopting Shanghai's
claim that its actual domestic steel purchases were market-driven,
claiming that steel purchased in the PRC is not free of the effects of
state controls on labor, energy, input and infrastructure prices.
Petitioner adds that the participation of a market-economy investor
will not purge the PRC inputs of the effects of state control.
In response to Shanghai's argument that the Department should value
steel inputs based on import costs incurred by other respondents during
the PORs, petitioner responds that Shanghai has not shown that it had
any connection with any other companies' market-economy acquisitions
during these PORs. Petitioners adds that the fact that Shanghai made
market purchases of these inputs in subsequent years is irrelevant to
these reviews.
Department's Position: We agree with petitioner. In order to use
the prices paid by Shanghai for domestically produced steel inputs in
our analysis, we must find that the PRC steel industry as a whole is
governed by market-driven prices. The absence of explicit government
involvement in the transactions involving Shanghai's steel purchases is
not sufficient to warrant the conclusion that the prices for these
inputs are market-driven. See Amendment to Final Determination of Sales
at Less Than Fair Value and Amendment to Antidumping Duty Order: Chrome
Plated Lug Nuts from the People's Republic of China, 57 FR 15052, 15053
(April 24, 1992). Shanghai has provided no evidence that would indicate
that either the steel industry or the bearings industry in the PRC is a
market-oriented industry.
As stated in Ceiling Fans, we will use, outside the context of a
market-oriented industry, actual prices paid for inputs by NME-based
producers to market-economy suppliers in a convertible or market
currency. See Ceiling Fans, 56 FR at 55275. However, because Shanghai
provided no evidence of having paid such prices for its steel inputs we
have, for the final results, valued Shanghai's steel inputs using
surrogate values. Regarding Shanghai's claim that we should value its
steel inputs based on import costs incurred by other respondents, we
note that we have not valued any respondent's steel inputs in these
reviews based on the company's steel purchases. See Comment 5.
Comment 27: Chin Jun argues that the Department should use the
verified import price incurred by other respondents as the steel value
for all PRC producers on the basis that the Indian import data used by
the Department far exceeds the value of steel used to produce TRBs, as
evidenced by copies of invoices submitted by Chin Jun showing the
acquisition price of steel by companies in market-economy countries.
Chin Jun claims that the Department has previously determined that it
must compare the surrogate price it selects with world prices to
determine whether the proposed surrogate values are aberrational
(citing Hand Tools).
Petitioner responds that the steel values used in the preliminary
results are very low when compared with actual steel prices paid by
Indian bearing producers, including prices on the record for the less-
than-fair-value investigation (LTFV) remand results.
Department's Position: We disagree with Chin Jun. As noted in our
response to Comments 5 and 26, we have not used the value of any
respondent's imported steel in calculating factor values in these
reviews because no respondent purchased such steel directly from
market-economy suppliers. We have also not considered prices indicated
on the invoices provided by Chin Jun because such a small number of
invoices as was provided by Chin Jun cannot be deemed indicative,
absent additional supportive data, of the values of steel used to
produce TRBs. Finally, the invoices submitted by Chin Jun contain
business proprietary information, and, as noted in our response to
Comment 2, we prefer to base surrogate values on PI where possible.
However, we note that we have determined that the Indian import
data on steel used to produce cups and cones is not reliable in
comparison with U.S. import data regarding bearing quality steel.
Therefore, we have used Indonesian import data to value such steel. See
Comment 4.
[[Page 65542]]
Comment 28: Shanghai claims that the Department arbitrarily
inflated Shanghai's dumping margin for the 1990-91 POR by rounding its
calculations of per unit dumping duties and of total value to four
decimal places. Shanghai argues that, had the Department rounded the
numbers to two decimal places, the result would have been a de minimis
margin of 0.47 percent instead of the 0.51 percent rate published in
the preliminary results. Shanghai states that, although the
Department's calculations display the numbers in the AD column rounded
to two decimal places, the Department advised it that the calculations
actually extended the figures to four decimal places. Shanghai asserts
that the only apparent reason for using the four-digit method is to
inflate the margin. Shanghai adds that the Department should not
exercise its judgment in a manner that denies a respondent a de minimis
margin.
Department's Position: We disagree with Shanghai. Although the
computer printout of the Department's preliminary margin calculations
shows numbers that appear to be rounded to four decimal places, the
actual margin calculation was based on unrounded numbers, consistent
with our standard practice for antidumping analysis. We calculate
margins using unrounded numbers to obtain more accurate results. The
numbers are displayed to only four decimal places for ease of printing.
Furthermore, changes to Shanghai's margin calculation for these final
results have yielded a de minimis margin.
Comment 29: Premier contends that the Department inappropriately
based its dumping margin entirely on a so-called cooperative BIA rate
for all three review periods at issue. Premier notes that, for each
period, the cooperative rate assigned is identical to the uncooperative
rate and states that such rates are punitive as applied to Premier,
since the company cooperated to the best of its ability, including
participating in a three-day verification. Premier states that it was
unable to provide certain factors of production information to the
Department because such information resides with unrelated suppliers
that often compete with Premier and that the Department's application
of BIA under such circumstances constitutes an abuse of discretion
since it amounts to penalizing a company for failing to provide
information it does not have. Premier cites Usinor Sacilor v. United
States, 872 F. Supp. 1000 (CIT 1994), in support of its contention that
the Department cannot select a severely adverse BIA rate when the
deficiencies in the data are outside the respondent's control.
Premier further states that this data is not necessary in order to
calculate a dumping margin for Premier, since it is a Hong Kong company
for which the Department can use acquisition costs in lieu of factors
of production data. Premier notes that in the 1989-90 review the
Department did not disregard the entire response, which lacked factors
data, and instead applied cooperative BIA only to those U.S. sales for
which there was no identical foreign market match.
Finally, Premier notes that the Department has modified its
standard two-tiered approach in the past where strict application of
this methodology would result in aberrational margins (citing Certain
Steel Products from Mexico, 58 FR 37352 (July 9, 1993), and
Professional Electric Cutting Tools and Professional Electric Sanding
Grinding Tools from Japan, 58 FR 30144 (May 26, 1993)). Premier
suggests that the Department could reasonably use other alternatives
other than the two-tiered methodology in the pending reviews, including
(1) the highest rate calculated for Premier in any prior segment of the
proceeding (0.97 percent); (2) the second highest calculated rate in
each of the three reviews; or (3) the highest calculated rate from the
prior (1989-90) review (8.83 percent).
Similarly, Chin Jun contends that the cooperative BIA rate that the
Department applied to transactions for which it was unable to provide
factors of production data is unnecessarily punitive and that, if the
Department applies BIA to such transactions in the final results, it
should use the actual dumping margins found for Chin Jun's transactions
for which factors data was provided. Alternatively, Chin Jun states
that, for those models for which Chin Jun was unable to provide factors
data, the Department should have used factors data from any PRC-based
producer which provided such data.
Petitioner responds that the BIA rate applied to Premier was not
punitive but was in fact a cooperative rate under the Department's two-
tiered methodology. Petitioner also contends that the deficiencies in
Premier's response extend beyond a lack of supplier data and include
significant errors in Premier's U.S. sales database. Petitioner
requests that the Department apply a non-cooperative BIA rate to
Premier and to each of its non-cooperative suppliers.
Petitioner further states that Chin Jun's suggestion that its
actual calculated dumping margins should be used with respect to U.S.
sales for which it could not provide factors data is inappropriate and
requests that the Department adhere to the BIA guidelines provided in
petitioner's case brief.
Department's Position: We do not accept Premier's contention that
it is being penalized for factors that are outside of its control. We
are using a cooperative BIA rate due to several failures on the part of
Premier to supply information, including the failure to provide, at
verification, certain information which was within Premier's control.
The company's responses had several deficiencies. In addition to its
failure to provide factors information on a transaction-specific basis,
Premier was unable to accurately identify its suppliers or provide the
quantities of merchandise supplied to the company during the PORs. See
Memorandum from Analysts to File: Verification Report for Premier
Bearing and Equipment, Ltd. (August 3, 1995) at 2. Therefore, we
applied, to all U.S. sales, as cooperative BIA, the higher of the
highest rate ever applicable to Premier or the highest calculated rate
in the review period for each of the three reviews. Since these
cooperative BIA rates are lower than the highest rate found for the
1989-90 review, we do not reach Premier's suggestion that we use the
highest rate from 1989-90 review of this order. Further, our policy of
requiring factor-of-production information for NME cases was adopted
subsequent to that review.
Chin Jun substantially cooperated with our requests for information
in the 1991-92 and 1992-93 reviews, but failed to provide FOP
information with respect to sales of certain models. Under section
776(c) of the Act we have the authority to use BIA ``whenever a party
or any other person refuses or is unable to produce information
requested.'' Therefore, we can use BIA not only when a party
``refuses,'' but also when a party is ``unable'' to provide
information.
Accordingly, we applied, as partial BIA for those specific
transactions where Chin Jun was unable to provide us with the requested
cost information, the highest rate ever applicable to Chin Jun in any
previous review. See Fresh and Chilled Atlantic Salmon From Norway;
Final Results of Antidumping Duty Administrative Review, 58 FR 37912
(July 14, 1993); see also our response to Comment 15.
Furthermore, we do not accept Chin Jun's argument that, for those
models for which Chin Jun was unable to provide factors data, we should
use factors data from any PRC-based producer because such data
constitutes business proprietary information.
[[Page 65543]]
Finally, we disagree with petitioner's claim that an uncooperative
BIA rate is appropriate under these circumstances. As stated in the
preliminary results, we apply uncooperative BIA only in those
circumstances where a party refuses to provide the information
requested in the form required or otherwise significantly impedes the
Department's review. Although both Premier and Chin Jun failed to
provide certain information, they otherwise cooperated with our
requests for information. Therefore, we decline to apply uncooperative
BIA for these companies.
Comment 30: Henan claims that the Department made several clerical
errors in its preliminary calculations with respect to several models
in the 1991-92 and 1992-93 administrative reviews. Henan states that
the errors are in the columns entitled ``Net Cost of Materials'' and
``Total Net Cost of Materials.'' Henan states that these errors created
further distortions when the Department added SG&A and profit as a
percentage of the inflated cost of production. As a result, Henan
contends, the constructed value for these models exceeded the USP,
creating the dumping margins found in the preliminary results. Henan
requests that the Department reconstruct the calculations by using the
correct figures for the total net cost of materials. Petitioner also
asserts that there were clerical errors made in the calculations for
Henan's 1991-92 and 1992-93 administrative reviews.
Department's Position: The Department agrees with both Henan and
petitioner and has corrected the errors for the final results.
Comment 31: Luoyang claims that the Department erroneously assigned
a value of zero for saleable scrap in calculating the margin for the
1992-93 POR. Luoyang argues that the Department should have allowed a
credit as in the 1991-92 POR and as stated in the analysis memorandum
for both PORs.
Petitioner states that an adjustment is not warranted for one POR
simply on the basis that such an adjustment was made in the previous
review. Petitioner further notes that it has long argued that a scrap
adjustment is warranted only if the sale of scrap is documented in the
particular POR in question, and, on that basis, Luoyang is not entitled
to a scrap adjustment for the 1992-93 POR. Petitioner adds that the
Department should explain why it stated in the analysis memo that it
made a scrap adjustment yet in its calculations it denied the scrap
adjustment for the 1992-93 POR.
Department's Position: We agree with Luoyang. We verified Luoyang's
sale of scrap for the 1992-93 POR and intended to adjust for saleable
scrap as we did in the previous PORs. See Verification Report for
Luoyang Bearing Factory in the Fifth and Sixth Reviews of the
Antidumping Duty Order of Tapered Roller Bearings and Parts Thereof
From the People's Republic of China (August 3, 1995) at 6. For these
final results, we have deducted scrap credit from Luoyang's gross cost
of manufacture.
Comment 32: Chin Jun argues that the Department should use steel
data on the record related to European Union (EU) and Japanese steel
exports to India. Chin Jun states that, in addition to being reliable,
the data is contemporaneous with the PORs. Chin Jun further submits
that invoices showing prices paid by a U.S. producer of bearings to
market-economy steel producers constitutes an acceptable alternative
source of steel values, in that such information establishes a world
price for bearing-quality steel which shows the Indian import
statistics used for the preliminary results to be aberrational.
Petitioner counters that two of the three invoices supplied by Chin
Jun in support of its argument that prices paid by a U.S. bearings
producer are a valid source of steel values are dated outside the PORs.
Petitioner also says that Chin Jun fails to explain how these selective
data are more reliable than the data used by the Department.
Department's Position: We agree with Chin Jun that certain of the
Indian import statistics should not be used to value bearing-quality
steel. We compared the Indian import data with other sources and found
it to be unreliable. See our response to Comment 4. However, we have
not used EU and Japanese export data submitted by Chin Jun because we
prefer import statistics to export statistics, as import statistics
more accurately reflect the costs incurred by the bearings producer to
procure the raw material inputs. Accordingly, we have, for these final
results, used the Indonesian import statistics to value steel used to
manufacture cups and cones.
Comment 33: Chin Jun asserts that the Department incorrectly
inflated steel prices, noting that, from 1990 to 1992, average import
prices under U.S. HTS 7228.30.80--a basket category which contains the
type of steel used to produce cups and cones--dropped in the United
States. Chin Jun says it is logical that steel prices in India also
dropped during the PORs.
Petitioner responds that U.S. steel prices are irrelevant in these
reviews. In addition, petitioner argues, according to Chin Jun's
reasoning there would be uniform prices everywhere and no need to argue
as to which surrogates to use.
Department's Position: For these final results we have applied
surrogate steel values coincident with each POR. Therefore, we have not
used price inflators for these final results, rendering Chin Jun's
argument moot.
Comment 34: Transcom and L&S, domestic importers of subject
merchandise, argue that the Department's decision to apply what they
consider to be punitive BIA appraisement and deposit rates to companies
that were never part of any of the reviews is unlawful. Transcom and
L&S state that, for each of the three reviews in question, there were
various companies from which they purchased subject merchandise, none
of which received a questionnaire, nor were any named in the notice of
initiation of review. Transcom states that entries from each of the
unnamed companies were subject to estimated antidumping duty deposits
at the ``all others'' rate in effect at the time of entry and argues
that the Department is precluded as a matter of law from either
assessing final antidumping duties on the unreviewed companies at any
rate other than that at which estimated antidumping duty deposits were
made or imposing the new BIA-based deposit rate on shipments from
unreviewed companies.
Transcom and L&S, citing section 751(a) of the Act, state that the
Department is directed to determine the amount of antidumping duties to
be imposed pursuant to periodic reviews. They add that, in accordance
with 19 C.F.R. 353.22(e), unreviewed companies are subject to automatic
assessment of antidumping duties and a deposit of estimated duties at
the rate previously established.
Transcom and L&S note that the CIT has concluded that in situations
where a company's entries are not reviewed, the prior cash deposit rate
from the LTFV investigation becomes the assessment rate, ``which must
in turn become the new cash deposit rate for that company'' (citing
Federal Mogul Corp. v. United States, 822 F. Supp. 782, 787-88 (CIT 19
3) (Federal Mogul II)). Transcom and L&S claim that the CIT has
affirmed this rationale in other more recent decisions as well,
concluding that the Department's use of a new ``all other'' rate
calculated during a particular administrative review as the new cash
deposit rate for unreviewed companies which have previously received
the ``all other'' rating is not in accordance with law (citing Federal
Mogul Corp. v. United States, 862 F. Supp. 384 (CIT 1994), and also
citing
[[Page 65544]]
UCF America, Inc. v. United States, 870 F. Supp. 1120, 1127-28 (CIT
1994) (UCF America)).
Based on the cited CIT decisions, Transcom says that an exporter
that is not under review would have no reason to anticipate that
antidumping duties assessed on its merchandise would vary from the
amount deposited. Transcom notes that Federal Mogul II (at 788) states
that parties rely on the cash deposit rates in making their decision
whether to request an administrative review of certain merchandise. In
view of the Department's regulations, Transcom claims that the absence
of any notice from the Department that unnamed companies faced the
possibility of increased antidumping duty liability is fundamentally
prejudicial to the unnamed companies. Transcom states that previous
attempts by the Department to impose the BIA rate on an exporter
neither named in the review request nor in the notice of initiation
have been overturned, citing Sigma Corp. v. United States, 841 F. Supp.
1255 (CIT 1993) (Sigma Corp. I). In that case, Transcom contends, the
CIT held that the Department was required to provide the company in
question adequate notice to defend its interests, and, because it
failed to do so, ordered that the merchandise exported by that company
was to be liquidated at the entered deposit rate.
Transcom also explains that it purchased subject merchandise from
certain provincial branches of China National Machinery Import & Export
Corporation (CMC) and from China National Machinery & Equipment Import
& Export Company (CMEC), both of which were named in the notice of
initiation. Certain other provincial branches of both CMC and CMEC,
from which Transcom did not purchase subject merchandise, were also
named in the notice of initiation and received questionnaires. Rather
than establishing that the branches from which Transcom purchased
subject merchandise were subject to review, Transcom argues, the
initiation notice implies that the unnamed branches were not subject to
review. As a result, Transcom argues, the unnamed companies were not
afforded an opportunity to defend their interests by demonstrating that
they were independent from the umbrella company and, therefore, the
Department should assign company-specific margins to these unnamed
exporters.
Transcom contends that, in accordance with section 776 of the Act,
the Department must have requested, and been unable to obtain,
information before applying punitive BIA. Transcom claims that the
Department may not resort to BIA ``because of an alleged failure to
provide further explanation when that additional explanation was never
requested'' (quoting Olympic Adhesives, Inc. v. United States, 889 F.
2d 1565 (Fed. Cir. 1990), and citing Mitsui & Co., Ltd. v. United
States, Slip Op. 94-44 (CIT March 11, 1994), and Usinor Sacilor v.
United States, 872 F. Supp. 1000 (CIT 1994)).
Petitioner claims that at the outset of this order CMEC was
identified by the PRC authorities as the only PRC exporter of subject
merchandise to the United States, i.e., CMEC was the umbrella
organization through which all companies in the PRC exported TRBs to
the United States (see Final Results of Antidumping Duty Administrative
Review: Tapered Roller Bearings and Parts Thereof From the People's
Republic of China, 56 FR 67590, 67596 (December 31, 1991)). Petitioner
adds that, during the 1989-90 review, PRC authorities stated, for the
first time, that there were other producers/exporters of the subject
merchandise and that the Department stated that the review initiated
for CMEC was ``meant to include all exports of TRBs from the PRC.'' Id.
Petitioner also contends that there is no reason to believe that there
is any meaningful difference between CMEC and CMC. Furthermore,
petitioner notes, CMEC was specifically named in the notices of
initiation for all three reviews in question. Finally, petitioner
argues that all branches and subsidiaries, or provincial companies, of
a company covered by a review are themselves included in that review,
and the fact that certain individual entities within the organization
were found to be entitled to separate rates does not exempt other
entities within the organization from the review.
Department's Position: We disagree with Transcom and L&S. It is our
policy to treat all exporters of subject merchandise in NME countries
as a single government-controlled enterprise and assign them a single
rate, except for those exporters which demonstrate an absence of
government control, both in law and in fact, with respect to exports.
Our guidelines concerning the de jure! and de facto separate rates
analyses, as well as the company-specific separate rates
determinations, are discussed in the Preliminary Results at 44303-
44304. We have determined that companies in the government-controlled
enterprise failed to respond to our requests for information and,
accordingly, have established the rate applicable to such companies
(the PRC rate) using uncooperative BIA. As discussed below, the Act
mandates application of BIA for such companies because they were
properly included in the review and did not respond to the Department's
requests for information.
Pursuant to our NME policy, all PRC exporters or producers that
have not demonstrated that they are separate from PRC government
control are presumed to belong to a single, state- controlled entity
(the ``NME entity''), for which we must calculate a single rate (the
``PRC rate''). Previously the CIT has upheld our presumption of a
single, state-controlled entity in NME cases. See UCF America, Inc. v.
United States, 870 F. Supp. 1120, 1126 (CIT 1994); Sigma Corp. v.
United States, 841 F. Supp. 1255, 1266-67 (CIT 1993); Tianjin Machinery
Import & Export Corp. v. United States, 806 F. Supp. 1008, 1013-15 (CIT
1992). Section 353.22(a) of our regulations allows interested parties
to request an administrative review of an antidumping duty order once a
year during the anniversary month. This regulation specifically states
that interested parties must list the ``specified individual
producers'' to be covered by the review. 19 CFR 353.22(a) (1994). In
the context of NME cases, we interpret this regulation to mean that, if
at least one named producer or exporter does not qualify for a separate
rate, all exporters that are part of the NME entity are part of the
review. On the other hand, if all named producers or exporters are
entitled to separate rates, the NME entity is not represented in the
review and, therefore, the NME rate remains unchanged. Accord Federal-
Mogul Corp. v. United States, 822 F. Supp. 782, 788 (CIT 1993) (``In a
situation where a company's entries are unreviewed, the prior cash
deposit rate from the LTFV investigation becomes the assessment rate,
which must in turn become the new cash deposit rate for that
company.'').
In these reviews, numerous companies named in the notices of
initiation did not respond to our questionnaires. On March 15, 1994, we
sent a letter to the PRC embassy in Washington and to the Ministry of
Foreign Trade and Economic Cooperation (MOFTEC), requesting the
identification of TRB producers and manufacturers, as well as
information on the production of TRBs and the sale of TRBs to the
United States. We sent a second request to MOFTEC on July 26, 1994.
MOFTEC informed us that the China Chamber of Commerce for Machinery and
Electronics Products Import & Export (CCCME) was responsible for
coordinating the TRBs case. MOFTEC also said it forwarded our letter
and questionnaire to the CCCME. We sent a copy of our letter and the
questionnaire directly to the
[[Page 65545]]
CCCME, asking that the questionnaire be transmitted to all companies in
the PRC that produced TRBs for export to the United States and to all
companies that exported TRBs to the United States during the PORs.
Since we did not receive information concerning many of the
companies named in the notices of initiation, we have presumed that
these companies are under government control. In accordance with our
NME policy, therefore, the government-controlled enterprise, which is
comprised of all exporters of subject merchandise that have not
demonstrated they are separate from PRC control, is part of this review
and we must calculate a ``PRC'' rate for that enterprise. Since we did
not receive responses from these exporters, we have based the PRC rate
on BIA, pursuant to section 776(c) of the Act. This rate will form the
basis of assessment for these reviews as well as the cash deposit rate
for future entries.
We acknowledge a recent CIT decision, UCF America Inc. v. United
States, Slip Op. 96-42 (CIT Feb. 27, 1996), in which the Court affirmed
the Department's remand results for reinstatement of the relevant cash
deposit rate but expressed disagreement with the PRC rate methodology,
which formed the underlying rationale for reinstatement. The Court
raised various concerns with the Department's application of a PRC
rate.
The Court suggested that the Department lacks authority for
applying a PRC rate in lieu of an ``all others'' rate. However, despite
the concerns expressed by the Court, it is the Department's view that
it has the authority to use the PRC rate in lieu of an ``all others''
rate. See Heavy Forged Hand Tools, Finished or Unfinished, With or
Without Handles, from the People's Republic of China; Preliminary
Results of Antidumping Duty Administrative Review, 61 FR 15218, 15221
(April 5, 1996).
The PRC rate is consistent with the statute and regulations. As
discussed above, in NME cases we presume that all producers and
exporters comprise a single entity. Thus, we assign the PRC rate to the
NME entity just as we assign an individual rate to a single exporter or
producer, or group of related exporters or producers, operating in a
market economy. Because the PRC rate is the equivalent of a company-
specific rate, it changes only when we review the NME entity. As noted
above, all exporters or producers will either qualify for a separate
company-specific rate or will be part of the NME enterprise and receive
the PRC rate. Consequently, whenever the NME enterprise has been
investigated or reviewed, calculation of an ``all others'' rate is
unnecessary, since there can be no exporters or producers that are not
reviewed. Thus, contrary to the argument by Transcom and L&S, the
Department's automatic assessment regulation (19 CFR 353.22(e)) does
not apply to these reviews except in the case of companies that
demonstrate that they are separate from PRC government control and are
not part of this review, as discussed below.
We also disagree with Transcom and L&S's assertion that companies
not named in the initiation notices did not have an opportunity to
defend their interests by demonstrating their independence from the PRC
entity. Any company that believes it is entitled to a separate rate may
place evidence on the record supporting its claim, as two companies
(Hubei and Guizhou Automotive) did in the 1991-92 and 1992-93 reviews.
The companies referenced by Transcom and L&S made no such showing,
despite our efforts to transmit the questionnaire to all PRC companies
that produce TRBs for export to the United States.
Comment 35: Transcom argues that, in the event that the Department
assigns a punitive BIA margin to the unnamed PRC exporters, it should
not assign the ``all others'' rate to exports made by companies outside
of the PRC. As with respondents Premier and Chin Jun, Transcom insists
that a separate rate analysis is unnecessary for privately owned
trading companies located in Hong Kong or Japan from which Transcom
purchased subject merchandise. Transcom argues that, because such
companies are independent from government control and because a timely
request for review of their entries was not made, these reviews should
not effect those companies.
Department's Position: We disagree with Transcom and L&S. We have
not assigned an all others rate to non-PRC exporters of subject
merchandise that we have not reviewed. Instead, in accordance with our
standard policy regarding such exporters, the cash deposit rate is the
rate applicable to the PRC supplier of that exporter. See Heavy Forged
Hand Tools, Finished and Unfinished, With or Without Handles, from the
People's Republic of China; Final Results of Antidumping Duty
Administrative Review, 61 FR 15028, 15033 (April 4, 1996).
Final Results of Reviews
As a result of our analysis of the comments we received, we
determine the following weighted-average margins to exist:
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Margin (percent)
---------------------------------------------------------------
Manufacturer/exporter 6/1/90 to 5/31/ 6/1/91 to 5/31/
91 92 6/1/92 to 5/31/93
----------------------------------------------------------------------------------------------------------------
Premier Bearing and Equipment, Limited.......... \2\ 4.24 \2\ 5.25 5.25 2.
Guizhou Machinery Import and Export Corporation. 2.48 \2\ 3.70 0.00.
Henan Machinery and Equipment Import and Export 0.00 0.14 0.00.
Corporation.
Luoyang Bearing Factory......................... 1.14 0.00 0.00.
Shanghai General Bearing Company, Ltd........... 0.00 0.00 0.24.
Jilin Machinery Import and Export Corporation... 4.24 5.05 0.00.
Chin Jun Industrial Ltd......................... \1\ 8.83 0.61 1.54.
Wafangdian Bearing Factory...................... \1\ 8.83 5.25 No sales.
Liaoning Co., Ltd............................... \1\ 8.83 1.75 0.66.
PRC rate........................................ 8.83 8.83 8.83.
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\1\ This party did not respond to the questionnaire or did not respond to the supplemental questionnaire;
therefore, as uncooperative BIA, we assigned the highest rate calculated in the investigation or in this or
any other review of sales of subject merchandise from the PRC. This does not constitute a separate rate
finding for this firm.
\2\ As cooperative BIA, we assigned in each review the higher of 1) the highest rate ever applicable to that
company in the investigation or any previous review; or 2) the highest calculated margin for any respondent in
the same review.
[[Page 65546]]
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. Individual
differences between USP and FMV may vary from the percentages stated
above. The Department will issue appraisement instructions directly to
the Customs Service.
Furthermore, the following cash deposit requirements will be
effective upon publication of these final results for all shipments of
the subject merchandise entered, or withdrawn from warehouse, for
consumption on or after the publication date, as provided for by
section 751(a)(1) of the Act: (1) for the companies named above that
have separate rates and were reviewed (Premier, Guizhou, Henan, Jilin,
Luoyang, Shanghai, Liaoning, Chin Jun, and Wafangdian), the cash
deposit rates will be the rates for these firms established in the
final results of the 1992-93 administrative review, except that when
margins are de minimis, i.e., less than 0.5 percent, no cash deposit
will be required; (2) for Hubei and Guizhou Automotive, both of which
we determine to be entitled to separate rates, the rates will continue
be those that currently apply to these companies (8.83 percent for
both); (3) for all remaining PRC exporters, all of which were found not
to be entitled to separate rates, the cash deposit will be 8.83
percent; and (4) for other non-PRC exporters of subject merchandise
from the PRC, the cash deposit rate will be the rate applicable to the
PRC supplier of that exporter. These deposit requirements shall remain
in effect until publication of the final results of the next
administrative review.
This notice serves as a reminder to importers of their
responsibility under 19 C.F.R. 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 a reminder to parties subject to APOs of
their responsibility concerning disposition of proprietary information
disclosed under APO in accordance with 19 C.F.R. 353.34(d). Timely
written notification of the return/destruction of APO materials or
conversion to judicial protective order is hereby requested. Failure to
comply with the regulations and the terms of an APO is a sanctionable
violation.
These administrative reviews and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 C.F.R
353.22.
Dated: December 5, 1996.
Jeffrey P. Bialos,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-31589 Filed 12-12-96; 8:45 am]
BILLING CODE 3510-DS-P
