[Federal Register Volume 62, Number 28 (Tuesday, February 11, 1997)]
[Notices]
[Pages 6189-6215]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3356]
[[Page 6189]]
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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 Review and Revocation in Part of
Antidumping Duty Order
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Final results of antidumping duty administrative review and
revocation in part of antidumping duty order on tapered roller bearings
and parts thereof, finished and unfinished, from the People's Republic
of China.
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SUMMARY: On September 26, 1995, the Department of Commerce (the
Department) published the preliminary results of its administrative
review 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 period of review (POR) is June 1, 1993, through May
31, 1994.
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 the period of review. Accordingly, we will instruct
the U.S. Customs Service to assess antidumping duties on all
appropriate entries.
We have also determined that one company has demonstrated that it
has made sales at not less than fair value for three consecutive review
periods. Therefore, we are revoking the order in part with respect to
this firm.
EFFECTIVE DATE: February 11, 1997.
FOR FURTHER INFORMATION CONTACT: Charles Riggle, Hermes Pinilla, Andrea
Chu, Kristie Strecker, 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 September 26, 1995, the Department published in the Federal
Register the preliminary results of its administrative review 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 49572 (September 26, 1995) (Preliminary
Results). We gave interested parties an opportunity to comment on our
preliminary results and held a public hearing on November 29, 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), China National Machinery Import and Export
Corporation (CMC), and Wafangdian Bearing Industry Corporation
(Wafangdian) (collectively referred to as Guizhou Machinery et al.);
Premier Bearing and Equipment Limited (Premier); Peer Bearing Company/
Chin Jun Industrial Limited (Chin Jun); Transcom, Incorporated
(Transcom); and L&S Bearing Company/LSB Industries (L&S).
On June 30, 1994, Shanghai submitted a request, in accordance with
19 CFR 353.25(b), that the antidumping duty order be revoked with
respect to Shanghai's sales of this merchandise. In accordance with 19
CFR 353.25(a)(2)(iii), this request was accompanied by certifications
from the firm that it had sold subject merchandise at not less than FMV
for a three-year period, including this review period, and would not do
so in the future. Shanghai also agreed to its immediate reinstatement
in the antidumping duty order, as long as any firm is subject to this
order, if the Department concludes under 19 CFR 353.22(f) that,
subsequent to revocation, it sold the subject merchandise at less than
FMV.
On March 13, 1996, we published in the Federal Register our notice
of intent to revoke the order in part. See Tapered Roller Bearings and
Parts Thereof, Finished and Unfinished, From the People's Republic of
China; Intent to Revoke the Order (In Part), 61 FR 10314 (March 13,
1996). We gave interested parties an opportunity to comment on our
intent to revoke in part. Petitioner submitted comments; Shanghai
submitted rebuttal comments.
We have conducted this administrative review 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 this proceeding 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
discussed further 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 11 independent Chinese TRB producers entitled to separate
antidumping 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 also to calculate only a single margin for
these companies. Petitioner notes that, in analyzing de facto state
control, the Department considers whether the plants have independent
authority to set prices and the ability to retain profits. However,
Petitioner insists, where input and factor prices are established by
state control and where ownership of the company and the concept of
profits are unclear, there is no truly independent authority to set
prices and retain profits. Petitioner cites the April 25, 1995 public
version of Jilin's supplemental questionnaire
[[Page 6190]]
response which states, at 3, that Jilin's profits may be used, inter
alia, ``for employee bonuses and welfare.'' Petitioner claims that, in
market-oriented companies, employee bonuses and welfare would be
regarded as expenses, not profits (citing Compact Ductile Iron
Waterworks Fittings and Accessories from the People's Republic of
China, 58 FR 37908, 37910 (July 14, 1993) (CDIW)).
Petitioner contends that, if the Department calculates separate
rates, 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 argues that new importations
will inevitably be channeled through companies with the lowest margins,
adding that such behavior is a manifestation of the state control that
permeates the industry and the economy.
Petitioner contends further that the Department's de jure and de
facto separate-rates analysis places an impossible burden of proof on
domestic interested parties due to the fact that a state-controlled
economy can amend its laws and regulations without in fact
relinquishing control. Petitioner claims that the state can simply
delete any evidence of de jure control from laws, regulations,
corporate charters and other documents. That being the case, Petitioner
argues, the domestic industry, as well as the Department itself, are
confronted with the requirement that they prove a negative without
having access to information that would indicate continuing control
over production and pricing decisions by the state. Thus, Petitioner
states, claims made by plant managers, themselves interested in
obtaining separate rates, become the basis for the Department's de
facto analysis. Finally, Petitioner argues that domestic interested
parties do not have access to information that might allow them to
rebut the claims of de facto independence, causing irrational results
and defeating the purpose of the statute (citing Rhone Poulenc (page
cite omitted) and The Timken Co. v. United States, 11 CIT 786, 804, 673
F. Supp. 495, 513 (1987)).
Guizhou Machinery et al. acknowledge that in CDIW the Department
determined that it would not consider a request for separate rates for
any state-owned company on the basis that no state-owned company could
be independent enough of state control to be entitled to separate
rates. However, Guizhou Machinery et al. note, citing Final
Determination of Sales at Less Than Fair Value: Silicon Carbide From
the People's Republic of China, 59 FR 22585 (May 2, 1994) (Silicon
Carbide), that the Department subsequently departed from the CDIW
decision and returned to its former practice, with some modifications,
and argue that, in the preliminary results, the Department properly
employed its more recent separate-rates analysis methodology from
Silicon Carbide.
Guizhou Machinery et al. add that the Department has rejected
Petitioner's claim that separate rates should only be applied to
companies which are also found to be part of a market-oriented
industry. Guizhou Machinery et al. note that the Department has
previously stated that the separate-rates analysis and the market-
oriented-industry (MOI) test should not be linked in the manner
Petitioner appears to be suggesting (citing Final Determination of
Sales at Less Than Fair Value: Disposable Pocket Lighters From the
People's Republic of China, 60 FR 22359, 22363 (May 5, 1995)
(Disposable Lighters)).
Shanghai concurs with Guizhou Machinery et al. that an MOI
determination and the separate-rates methodology are not synonymous and
that a negative determination with respect to the former cannot
rationally dictate a negative determination with respect to the latter.
Shanghai asserts that the Department properly determined that Shanghai
was entitled to a separate rate notwithstanding the determination that
the TRB industry in the PRC is not an MOI. Shanghai states that the
separate-rates analysis involves an assessment different from the
determination of whether an MOI exists and that to prove an industry in
the PRC is market-oriented would require proof negating the existence
of any state influence over any factor of production throughout all
segments of an industry, potentially involving hundreds of business
units. Shanghai argues that such a task would be virtually impossible
to achieve--even for the U.S. TRB industry.
Shanghai claims that this is particularly true with respect to
itself, a joint-venture company created under a law guaranteeing that
it operates as a market-oriented producer. Shanghai states that record
evidence shows it operates according to market influences, with all
input-purchase decisions based on its own assessment of production and
quality requirements and with all price negotiations conducted at arm's
length. Shanghai states that the PRC government exercises no control
over the prices of inputs, the type or volume of production, product
prices or distribution of profits. Shanghai adds that there are no
restrictions on its uses of revenues and profits, it has exclusive
control over and access to its bank accounts, and it can earn foreign
currency and retain as much of the foreign currency as it desires.
Therefore, Shanghai asserts that, regardless of the Department's
conclusion that the TRB industry in China is not market-oriented, it is
entitled to a separate rate.
Department's Position
We agree with respondents that MOI determinations and separate-rate
determinations differ with respect to both the analysis we perform and
the pact of the decision. We also agree with Guizhou Machinery et al.
that we have departed, where appropriate, from the CDIW decision. In
CDIW, we took the position that state ownership (i.e., ``ownership by
all the people'') ``provides the central government the opportunity to
manipulate the exporter's prices, whether or not it has taken advantage
of that opportunity during the period of investigation.'' Thus, we
concluded in CDIW that state-owned enterprises would not be eligible
for separate rates.
However, we have modified our separate-rates policy as set forth in
CDIW. We subsequently determined that ownership ``by all the people''
in and of itself cannot be considered as dispositive in establishing
whether a company can receive a separate rate. See Silicon Carbide at
22585. It is our policy that a PRC-based respondent is entitled to a
separate rate if it demonstrates on a de jure and a de facto basis that
there is an absence of government control over its export activities.
A separate-rate 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 at 22585.
Those exporters who establish their independence from government
control are entitled to a separate margin calculation.
Thus, a finding that a company is entitled to a separate rate
indicates that the company has sufficient control over its export
activities to prevent the manipulation of such activities by a
[[Page 6191]]
government seeking to channel exports through companies with relatively
low dumping rates. See Disposable Lighters at 22363. A market-oriented-
industry determination, by way of contrast, focusses on overall control
of the domestic industry, rather than simply on its export activities,
and therefore leads to a decision as to whether home market or third-
country prices within the industry are sufficiently market-driven that
such prices may be used to establish FMV.
Petitioner's argument that there is sufficient direct or indirect
government control to treat all exporters as ``related'' is unsupported
by the record and is not dispositive, since our separate-rates inquiry
focuses on the extent of a respondent's independence with respect to
export activities. 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 11 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 assign them a single margin. Accordingly, we have
continued to calculate separate margins for these companies. See
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,
From the People's Republic of China; Final Results of Antidumping Duty
Administrative Reviews (TRBs IV-VI), 61 FR 65527, 65528 (December 13,
1996).
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).
Petitioner notes that, for the preliminary results, the Department used
the SKF report to value three factors (overhead; selling, general, and
administrative expenses (SG&A); and profit), whereas the Department
derived values for the direct labor and raw material factors from two
other, unrelated sources (Investing, Licensing & Trading Conditions
Abroad, India (IL&T India) 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
segregated information on each of the principal FOP and other costs
necessary to construct FMV. Petitioner contends that the statute
instructs the Department to value FOP based on the best information
regarding the values of such factors in a market-economy country or
countries that are (A) at a level of economic development comparable to
that of the non-market-economy (NME) country, and (B) significant
producers of comparable merchandise (citing sections 773(c) (1) and (4)
of the Act). Petitioner further claims that the Department's use of
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, given the ratios the Department calculated from
these figures.
Petitioner states that the use of the SKF report for all FOP values
is consistent with the importance the courts attach to internal
coherence and the 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)).
Petitioner 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. Petitioner claims that the IL&T India
labor costs cover an aggregate of all Indian industries without
distinction and that the IL&T India report itself points out (at 45)
that wages and fringe benefits ``vary considerably by industry, company
size and region.'' Therefore, Petitioner argues, it is not rational to
view the IL&T India information as representative of labor costs in
bearing production in India.
Petitioner asserts that the ``other'' alloy steel category from the
Indian import statistics, which the Department used to value material
costs for the preliminary results, is similarly broad and may or may
not include imports of the steel used to produce bearings. However,
even if included, Petitioner claims that bearing steel represents only
a part of steel imports in the basket category.
Petitioner notes that record evidence (referencing the SKF India
report, a 1989-1990 report of Asian Bearing, an Indian TRB producer,
and the results of a remand in the original less-than-fair-value (LTFV)
investigation) shows the costs of raw materials and labor incurred by
actual bearings producers in India to be consistently higher than the
trade statistics values the Department used 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.
Petitioner argues in the alternative that, in the event that the
Department does not use the SKF report to value all FOP, the Department
must adjust the overhead and SG&A rates 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 it uses
in the final results and multiply the total number of hours worked at
SKF by the IL&T India 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 steel values free of duties; specifically,
because the Indian import data the Department 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 proposed adjustment (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 report, must be
segregated from the materials total in the overhead and SG&A
calculations in order to derive apples-to-apples ratios.
[[Page 6192]]
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)), selecting the best source for each element of the
FOP. Guizhou Machinery et al. add that Petitioner's citation to Timken
is misplaced and state that, in that instance, 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. Shanghai concurs that, in the past, the
Department has not required the use of a ``single, coherent source''
for all FOP information when that source is a single, private company,
particularly one engaged in lines of business other than the
manufacture of subject merchandise. Shanghai states that the Department
correctly calculated surrogate labor costs and that the IL&T India data
represent a better choice than the SKF report. Shanghai explains that
the SKF data constitutes unverified data covering several different
product lines of a single producer and that there is a much greater
risk of unacceptable distortions and aberrations in data derived from
one producer with disparate products than could exist with aggregate
national data.
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.
With respect to Petitioner's argument that the overhead and SG&A
rates must be adjusted to reflect the use of lower materials and labor
values from separate sources, Guizhou Machinery et al. cite Final
Determination of Sales at Less Than Fair Value: Coumarin From the
People's Republic of China, 59 FR 66895 (December 28, 1994) (Coumarin),
in which the Department calculated materials costs from various sources
and used the Reserve Bank of India Bulletin (RBI) data to calculate
SG&A but did not adjust SG&A and overhead costs simply because it did
not use the same source as material costs. Shanghai adds 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
alternative argument. 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. Guizhou Machinery et al.
state that the Department's use of data contained in SKF's annual
report to establish percentages or ratios to be used for determination
of surrogate value for overhead and SG&A is fully consistent with the
Department's standard surrogate methodology.
Guizhou Machinery et al. state that the Department's NME/surrogate-
country methodology is based upon the application of reliable and
representative ratios and input values selected from multiple sources
and that the Department does not typically ``adjust'' the component
values used to derive SG&A and overhead ratios in the manner proffered
by Petitioner. Consequently, Guizhou Machinery et al. argue, the
Department should not adjust the expenses taken from the SKF report, as
suggested by Petitioner, in determining representative ratios for use
in determining actual amounts for overhead and SG&A.
Guizhou Machinery et al. argue further that Petitioner's assertion
that the Department must deduct import duties from the materials
elements of the overhead and SG&A rate calculation is based on the
assumption that steel inputs were imported, but Petitioner has provided
no evidence regarding which particular materials were imported. Guizhou
Machinery et al. claim that the annual report itself contradicts
Petitioner's suggestion because it shows that almost half of the
materials purchased by SKF India were from local sources, which would
suggest that the effect of import duties would not affect the entire
materials component of the calculation. Additionally, Guizhou Machinery
et al. claim that Petitioner has not accounted for the fact that Indian
producers are entitled to duty drawback upon exportation of finished
products that incorporate imported materials, which further reduces the
effect of import duties. Shanghai suggests that, because the SKF report
contains no information concerning the proportion of materials
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 it used for the preliminary results.
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 the use of the SKF report for the materials component would be
more distortive than the import statistics used by the Department due
to a lack of detail regarding the types of steel SKF used. Chin Jun
notes that the SKF report does not provide separate prices for bar, rod
or steel sheet but instead provides a single value 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 have no 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. Chin Jun
suggests that the steel referenced in the SKF report could be tube
steel (instead of bar steel), stainless steel (a much more expensive
product), already machined ``green parts'' supplied by SKF India's many
related companies, or innumerable other types of steel.
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,
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), and 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)). Chin Jun adds
that the SKF report has data only through March 1991 and this review
[[Page 6193]]
includes 1993-94 transactions. Therefore, Chin Jun reasons, the SKF
data is so stale that the use of it would not be proper. Chin Jun
states that the Department's preference is to use data which is
contemporaneous to the period of review.
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-statistic 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.
Transcom submits that the Department should rely on the Indian
import statistics in factor valuation, rather than on the company-
specific data contained in the SKF report, because the Indian data are
contemporaneous with the period of review, while the SKF data are
outdated. Transcom agrees with Chin Jun and Guizhou Machinery et al.
that the import data provide a more detailed description, and therefore
more exact valuation, of steel used by the Chinese producers, whereas
the SKF report does not provide sufficient information concerning the
type of steel for which costs are reported and provides no guidance in
determining a surrogate valuation of the FOP used in producing bearings
in China.
Petitioner responds to Chin Jun's argument that the use of SKF data
is inappropriate as SKF is typical of neither China nor India by
stating that the report is consistent with that of Asian Bearing,
another producer in India, which the Department declined to use.
Petitioner claims that the Department did not use data from SKF Sweden
or consolidated data from the SKF Group, but data from SKF India, which
reflect the operating conditions of an Indian bearing company.
Department's Position
We agree with respondents. Section 773(c)(1) of the Act states
that, for purposes of determining FMV in a NME, ``the valuation of the
FOP shall be based on the best available information regarding the
values of such factors. * * *'' Our preference is to value factors
using published information (PI) that is most closely concurrent to the
specific POR. See Final Determination of Sales at Less Than Fair Value:
Certain Partial-Extension Drawer Slides From the People's Republic of
China, 60 FR 54472, 54476 (October 24, 1995). Based on the record
evidence we have determined that surrogate country import statistics
(Indonesian for valuing steel used to produce cups and cones, 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 data for Indonesia, rather
than for our primary surrogate, India, for valuing steel used to
produce cups and cones are set forth in our response to Comment 3.
We prefer published surrogate import data to the SKF data in
valuing the material FOP for the following reasons. First, we are able
to obtain data specific to the POR, which more closely reflect the
costs to producers during the POR. Second, the raw material costs from
the SKF report do not specify the types of steel purchased by SKF. The
record does not indicate whether SKF purchased bar steel (the type used
by the Chinese manufacturers) or more expensive tube steel to produce
bearings parts. Third, although we agree with Petitioner's point that
SKF is a producer of subject merchandise, the report also 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. For these reasons,
we have valued the material FOP using surrogate import data.
Furthermore, we agree with respondents that Petitioner's citation
to Timken for the proposition that we must use a single surrogate
source when possible is misplaced. That case, which criticized the
Department's failure to justify its choice between adjustment factors,
does not state that all factors must be valued in the same surrogate
country. Indeed, the opinion in Timken explicitly states that
``Commerce may avail itself with data from a country other than the
designated conduit, adoption of such an inter-surrogate methodology
[although departing from the normal practice at that time] remains
within the scope of Commerce's discretionary powers.'' 12 CIT at 959.
The fact that the 1989-90 report of Indian producer Asian Bearing,
like the SKF data, shows higher raw materials costs than the import
data we used in the preliminary results does not compel the conclusion
that we must use some domestic Indian data source. In addition to being
stale, the Asian Bearing data suffers from the same defects as the SKF
data. The purpose of the NME factor methodology is not to construct the
cost of manufacturing the subject merchandise in India per se but to
use data from one or more surrogate countries to construct what the
cost of production would have been in China, were China a market-
economy country. See Sulfanilic Acid from the People's Republic of
China; Final Results and Partial Recession of Antidumping Duty
Administrative Review, 61 FR 53702, 53710 (Comment 12) (Oct. 15, 1996).
We also disagree with Petitioner's contention that we should adjust
the overhead and SG&A rates if we continue to use the SKF report to
value these rates while valuing the material and labor FOP using other
sources. As noted above, we prefer to base our factors information on
industry-wide PI. Because such information is not available regarding
overhead and SG&A rates for producers of subject merchandise during the
POR, we used the overhead and SG&A rates applicable to SKF India, a
company that produces subject and non-subject merchandise.
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). This
methodology allowed us to derive ratios of SKF India's overhead and
SG&A expenses. These ratios, when multiplied by the FOP we used in our
analysis, thereby constitute the best available information concerning
the overhead and SG&A expenses that would be incurred by a bearings
producer given such FOP. Petitioner's recommended adjustment would
affect (reduce) the denominator, but it would leave the overhead and
SG&A expenses in the numerator unchanged. As such, we find that this
adjustment would itself distort the resulting ratio, rather than curing
the alleged distortion in our calculations.
Finally, with respect to Petitioner's assertion that the overhead,
SG&A, and profit denominators we used in the preliminary results
improperly included import duties paid, we note that Petitioner has not
provided any information regarding the amount of import duties that are
included nor has Petitioner provided a means of identifying and
eliminating such duties from our calculations. 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, that are 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.
See TRBs IV-VI at 65529-65530.
Comment 3
Shanghai and Chin Jun submitted comments regarding the appropriate
Indian import classification number(s)
[[Page 6194]]
to be used in valuing the steel that comprises the raw materials factor
of production. Chin Jun argues that category 7228.30.19, which the
Department used to value steel used to manufacture cups and cones,
contains a wide variety of steel products and a correspondingly wide
range of prices. Chin Jun points out that the average price per metric
ton of steel contained in this category ranges from $610 to $3,087.
Chin Jun further argues that, as bearing-quality steel is available
throughout the world at prices less than $800 per metric ton, the
Department should, if it uses category 7228.30.19 to value hot-rolled
alloy steel bar, exclude steel prices in excess of $1,000 per metric
ton as being not reflective of the price of bearing-quality steel.
Shanghai states that, although the Indian Trade Classification
system is derived from the international harmonized schedules, it does
not entirely duplicate the harmonized schedules. Nevertheless, Shanghai
contends, the eight-digit subdivisions of the International Trade
Commission (ITC) are described with sufficiently familiar terminology
to determine which subdivisions are likely to include steel similar to
or the same as the steel used in the production of cups and cones.
Shanghai asserts that the Department should select an eight-digit
subdivision covering imports of types of steel which most closely match
the qualities of the steel used to produce the product at issue, citing
Sigma Corp. v. United States, CIT, No. 91-02-00154, Slip Op. 93-230,
December 8, 1993 (15 ITRD 2500), and Tehnoimportexport v. United
States, 16 CIT 13, 783 F. Supp. 1401 (1992). Furthermore, given the
lack of a specific harmonization of the Indian Trade Classification
System at the eight-digit subdivision level, Chin Jun and Shanghai both
argue that the Department should, as it has previously, test the
reliability of whichever subdivision it chooses by comparing the values
within that subdivision with world steel prices from other available
information (citing Certain Partial-Extension Steel Drawer Slides with
Rollers from the People's Republic of China (Drawer Slides), 60 FR
54472, 54475 (October 24, 1995), and Heavy Forged Hand Tools From the
People's Republic of China (Hand Tools) 60 FR 49251, 49254 (September
22, 1995), as examples). Shanghai claims that the aberrationally high
values of the steel included in category 7228.30.19, in comparison with
world steel prices on the record in this review, compel the conclusion
that it should not be used.
Shanghai submits that categories 7227.90.30 and 7228.30.01 more
accurately reflect the steel used to manufacture cups and cones than
does the residual category, 7228.30.19, which the Department used.
Shanghai states that there is a category reported under 7227.90,
``Other Hot-Rolled Bars & Rods of Other Alloy Steel in Irregularly
Wound Coils,'' which is consistent with U.S. HTS 7227.90.30 which
contains ball-bearing-grade steel.
Shanghai suggests that the fact that an eight-digit category
comparable to the U.S. HTS listing for ball-bearing-quality steel bars
does not exist in the Indian import statistics probably reflects the
absence of imports of that type of steel into India. Therefore,
Shanghai argues, it would be unreasonable and arbitrary to assume ball-
bearing-grade steel enters under the residual category 7228.30.19.
Instead, Shanghai says that other eight-digit subdivisions among the
Indian import statistics do describe types of steel closely correlated
to the type of steel used to produce bearings.
Shanghai suggests that the Department use category 7227.90.11,
speculating that the type of ball-bearing steel used by Chinese
producers might enter India under this category number. Differences
between steel included in this category and the steel used to produce
TRBs is, Shanghai states, insignificant. Alternatively, Shanghai
suggests use of category 7228.30.01, ``Bright Bars of Alloy Tool
Steel,'' noting that ball bearing steel is a ``tool'' steel as defined
by its carbon content. Shanghai claims that this category and U.S. HTS
category 7228.30.20.001, ``Other Bars and Rods of Other Alloy Steel * *
* *, Not Further Worked than Hot-Rolled * * * of Ball Bearing Steel,''
share the particular characteristics of the type of steel used to
manufacture cups and cones. Shanghai adds that, notwithstanding use of
the term ``bright,'' category 7228.30.01 is, by definition, not further
worked than hot-rolled, hot-drawn or extruded steel and, therefore, is
not further worked with respect to any of a number of surface
treatments, i.e., polishing and burnishing, lacquering, enameling,
painting, varnishing, etc. Accordingly, Shanghai concludes that the
``bright steel'' cannot be steel with a finish inappropriate for
bearing manufacture. In contrast to these two categories, Shanghai
states, the residual category contains unknown types of steel.
Shanghai states that the values of steel covered by category
7228.30.19 are aberrationally high and should not be used. Shanghai
explains that the Department's use of import statistics as surrogate
information has been affirmed in the past only where the import
categories accurately reflect the material used to produce the product
at issue and argues that the clearly greater cost of the steel covered
by category 7228.30.19 indicates that the types of steel in this
category are not representative of bearing-grade steel. Thus, Shanghai
claims, the steel values included in category 7228.30.19 are clearly
aberrational, rendering the Department's surrogate steel costs for cups
and cones an inaccurate representation of the actual experience of
Chinese producers. Because of the lack of specific harmonization of the
Indian Trade Classification system at the eight-digit subdivision
levels, Shanghai urges the Department to weigh the reliability of
whichever subdivision it proposes to use by comparing the values within
that subdivision with other available information on world steel
prices. Citing Drawer Slides, Shanghai claims that in the past the
Department has tested the reliability of Indian import values by
comparing them with other record data. In Hand Tools, Shanghai quotes
the Department as saying, ``where we have other sources of market value
such as Indonesian import statistics or U.S. import statistics, we have
compared the Indian import statistics to these sources of market value
to determine whether the Indian import values are aberrational, i.e.,
too high or too low'' (at 49251). Accordingly, Shanghai suggests that
the Department compare the values reported in category 7228.30.19 with
the substantial evidence of relevant world steel prices already in the
record of this administrative review. The high values in category
722.30.19 should not be used, respondent argues, because they are
aberrational; the import values reported in either category 7227.90.11
or category 7228.30.01 are more consistent with world steel prices and
should be used instead.
Chin Jun also claims that the Department's calculation of the value
of category 7228.30.19 contains apparent clerical errors, adding that,
aside from the apparent clerical errors, the price for said category
far exceeds the value of steel used to produce TRBs. With regard to the
calculation, Chin Jun argues that the Department apparently double-
counted by adding the subtotal for category 7228.30.19 with the total
of all steel under heading 7228.30. Regarding its second point, Chin
Jun argues that the Department has previously concluded that it must
compare surrogate steel prices with world prices in order to determine
if the proposed surrogate values are aberrational (citing Hand Tools).
Chin Jun claims that a
[[Page 6195]]
comparison of the Indian import statistics with other sources, e.g.,
U.S. import data, will confirm that the Indian import data are
aberrational and must be adjusted.
Petitioner contends that Shanghai's discussion of the steel
category to be used for cups and cones is largely based on speculation
unsupported by record evidence and is, to a large extent, factually
wrong. First, Petitioner notes Shanghai's assertion that the absence in
the Indian import statistics of a specific subdivision for bearing-
quality steel indicates only a lack of imports of this type of steel
during the period covered by the statistics. Petitioner claims that
there is no basis for such speculation.
Second, with respect to Shanghai's argument that the exact type of
bearing steel used by PRC-based producers could enter India under
category 7227.90.11, Petitioner notes that category 7227.90.11 refers
to bars and rods of bearing-quality steel in coils. Petitioner argues
that Shanghai does not cite any record evidence to suggest that any
respondent uses bar in coil. Petitioner adds that bar steel not in coil
could not be entered into India under category 7227.90.11.
Petitioner contends that Shanghai's claim regarding category
7228.30.01 as the proper category of Indian steel imports for the type
of steel used in the production of cups and cones is inappropriate
because category 7228.30.01 represents bright bars. Petitioner claims
that, to the best of its knowledge, no one has ever before suggested in
the course of this or any other proceeding that bright bars are used to
manufacture bearings. Petitioner states that the distinguishing feature
of ``bright bars'' is a bright, smooth finish and such bars are not
used in the manufacture of TRBs, as the high finish would be destroyed,
given the cutting and grinding involved in TRB production. Furthermore,
whereas Shanghai argues that the term ``bright'' in Indian subcategory
7228.30.01 does not denote bright, high-finish surfaces which would
indicate the product was further worked so as to fall outside that
category, Petitioner claims that Shanghai's only support for such
argument is to cite a definition in the U.S. HTS. Petitioner argues
that such a definition has no application or relevance to the Indian
schedules. Rather, Petitioner observes, the definition is listed among
``Additional U.S. Notes'' as opposed to the internationally accepted
``Notes'' to Chapter 72.
Petitioner also argues that Shanghai's assertion that category
7228.30.19 includes steel other than alloy tool steel is wrong,
contending that the ``other'' in category 7228.30.19 refers to ``other
than'' any other subheading under heading 7228. Petitioner states that,
by excluding not only category 7228.30.01 but any other specific eight-
digit categories which are known to not include bearing steel, i.e.,
``bright bars of other steel'' (7228.30.09), ``bars and rods of spring
steel'' (7228.30.12), and ``bars and rods of tool and die steel''
(7228.30.14), category 7228.30.19 remains the only category under
heading 7228 that would contain bearing steel.
Finally, Petitioner responds to Shanghai's argument that the steel
values included in category 7228.30.19 are aberrational and are not
representative of the cost of bearing-grade steel. Petitioner claims
that Shanghai is arguing, without any factual support, that the lowest
price in the basket category is for bearing steel and that anything
else is aberrational. Petitioner further states that Shanghai attempted
to support its argument that the value assigned to steel used to
manufacture cups and cones is too high in comparison with relevant
world steel prices, without attempting to define ``world steel prices''
or how Shanghai decided the comparison prices were appropriate.
Petitioner states that Chin Jun's argument that the value of steel
in category 7228.30.19 used in the preliminary results far exceeds the
value of steel used to manufacture TRBs is incorrect. Petitioner
suggests that the available information concerning actual prices of
bearing steel in India contradicts Chin Jun's statement (citing
Petitioner's February 21, 1995 submission containing worksheets for the
Results of Remand of Final Determination of Sales at Less Than Fair
Value: Tapered Roller Bearings From the People's Republic of China
(February 15, 1989), as well as data in the annual reports for SKF and
Asian Bearing). Based on such data, Petitioner claims that the
surrogate value of the steel used to manufacture cups and cones is too
low to be representative of bearing-steel prices in India. Petitioner
adds that the costs or prices in a market-economy country at a
comparable level of development to the PRC, i.e., India, are at issue--
not world prices.
Department Position
We agree 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 we do not agree with Petitioner
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 an
Indian import value for bearing-quality steel and, for the reasons
discussed below, the steel values in the Indian import data are not
reliable. See Drawer Slides at 54475-76; TRBs IV-VI at 65532.
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, 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 and 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. tariff
[[Page 6196]]
category 7228.20.30 (``bearing-quality steel''). We found that, for the
time period covered by the POR, the value of the Indian basket category
7228.30 was significantly higher than the bearing-quality steel
imported into the United States. It was also significantly higher in
comparison with E.U. import statistics.1 The Indian eight-digit
``others'' category recommended by Petitioner, valued higher than the
broad six-digit heading, was even more unreliable in comparison with
the value of bearing-quality steel.
---------------------------------------------------------------------------
\1\ Although the E.U. import data do not explicitly identify
``bearing quality steel,'' the relevant subheading (7228.30.40)
provides a narrative description that closely matches to the
chemical composition of the bar steel that the PRC respondents used
to produce cups and cones. See Memorandum from Analyst to File:
Factors of Production for the Final Results of the 1993-94
Administrative Review of TRBs from the PRC, February 3, 1997.
---------------------------------------------------------------------------
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 are 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 the Indian data, 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 this review, 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, and Lock Washers at 48835. Furthermore,
Indonesia has previously been used as a source of surrogate data in
cases involving the PRC. 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 disagree with Shanghai regarding the use of category
7228.30.01, bright bars of alloy tool steel. No party has suggested
that such steel is used for the production of bearings.
Although we acknowledge the clerical errors noted by Chin Jun in
our calculation of the value of steel used to manufacture cups and
cones, we have changed our surrogate source for the value of this steel
as explained above. Therefore, no recalculation is necessary.
Comment 4
Shanghai argues that the prices it actually pays for steel are
sufficiently market-driven to be used instead of surrogate values.
Shanghai states that the domestic steel producers from whom Shanghai
purchased steel compete against steel producers from market-economy
countries. Shanghai takes the position that the Department should not
employ surrogate methodology in NME cases when the producer is a
foreign-invested joint-venture company, adding that the Department's
current methodology does not recognize the special status accorded such
companies under PRC law. Shanghai also notes that there are no import
restrictions limiting its ability to purchase either domestic or
imported steel based on rational business decisions. Shanghai claims
that under PRC joint-venture law it has the legal right to purchase
steel from any suppliers in the world and states that the prices at
which it purchased steel from domestic suppliers during this POR were
consistent with world steel prices for comparable types of steel.
Shanghai argues that, where input prices and production costs of
merchandise under investigation are subject to free-market forces
sufficient enough to allow their use in determining FMV, the Department
should apply its normal methodology (citing S. Rep. No. 100-71, 100th
Cong., 1st Sess., at 108 (1987)). Shanghai claims that 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'' (quoting Ceiling Fans).
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 states that Shanghai has offered no basis for concluding
that either the PRC bearings industry or the PRC steel industry meet
the Department's criteria for being deemed a MOI. Petitioner adds that
the participation of a market-economy investor will not purge the PRC
inputs of the effects of state control.
Department's Position
We agree with Petitioner. Shanghai has provided no evidence to
support its contention that either the steel industry or the bearings
industry in the PRC is an MOI. To the extent that Shanghai is free to
source its steel either domestically or from imports, the fact that it
purchased only domestic steel confirms only that domestic steel was
consistently priced lower than steel available on the world market.
This does not support a claim that PRC steel is provided at market
prices. In Ceiling Fans, as in this case, we considered values of FOP
to be market-driven when sufficient evidence exists to demonstrate that
such factors were purchased from a market-economy supplier and paid for
with a convertible currency. Absent such evidence from Shanghai, we
have valued Shanghai's PRC-sourced steel inputs using surrogate values.
Comment 5
Petitioner notes that in the preliminary results the Department
valued scrap using the Indian tariff headings 7204.29 for alloy-steel
scrap and 7204.49 for non-alloy-steel scrap. Petitioner contends that
both headings are wrong and that the Department should use subheadings
7204.29.09 and 7204.41.00, respectively, as it did in the preliminary
results of the three previous reviews.
Petitioner claims that using the entire heading 7204.29 is wrong
because it includes ``waste and scrap of high speed steel'' under
subheading 7204.29.01 and such steel is not used to produce bearings.
Petitioner states that the category of 7204.29.09, ``waste and scrap of
other alloy steel,'' includes bearing steel.
Petitioner argues that heading 7204.49 is wrong because it excludes
``turnings, shavings, chips, milling waste, sawdust, filings, trimmings
and stampings, whether or not in bundles'' (heading 7204.41).
Petitioner claims that these excluded types of scrap are precisely the
[[Page 6197]]
types of scrap generated in bearing production. Furthermore, Petitioner
states, the category used by the Department in the preliminary results
is largely composed of ``defective sheet of iron and steel''
(subheading 7204.49.01). Petitioner argues that inclusion of
``defective sheet'' in cage production is inappropriate because scrap
generated during cage production is in the nature of stampings,
trimmings, shavings, chips, milling waste or filings. Finally,
Petitioner claims that inclusion of defective sheet is incorrect
because it leads to the result that the value obtained by the
Department for this non-alloy-steel scrap is somewhat higher in value
than the value found for alloy-steel scrap.
Guizhou Machinery et al. respond that Petitioner provides no
evidence to support its arguments. For instance, Guizhou Machinery et
al. claim, Petitioner provides no evidence to support its assertion
that ``high-speed'' steel is not used for bearings. Instead, Guizhou
Machinery et al. argue, inclusion of the high-speed steel is reasonable
given the fact that respondents use high-quality steel in the
production of bearings, cups and cones. In addition, Guizhou Machinery
et al. state that the U.S. HTS does not even segregate heading 7204.29
between high-speed and other alloy-steel scrap, suggesting that the
differences between the types of scrap are not significant.
With respect to category 7204.49, Guizhou Machinery et al. state
that Petitioner provides no evidence of its argument that this category
is inappropriate because it excludes turnings, shavings, chips, milling
waste, sawdust, filings, trimmings and stampings, whether or not in
bundles, which Petitioner claims are precisely the kinds of scrap
generated in bearing production--or that it includes defective sheet of
iron and steel. Guizhou Machinery et al. state that scrap types such as
sawdust, which are unrecoverable, do not enter into the calculation of
scrap credit. Rather, respondents contend the calculation is based on
scrap that was sold or reused. Furthermore, respondents claim that the
scrap for which the Department gave credit did include defective steel,
citing a verification report.
Department's Position
We used Indian import statistics to value the steel for cages and
rollers and, therefore, we have used Indian import statistics to value
scrap for these components. In the same manner, we used Indonesian
statistics to value both the steel and scrap for cups and cones. We
agree with Petitioner that, in order to determine the best category by
which to value scrap, it is appropriate to set aside those specific
categories that did not include bearing steel.
Consistent with our previous reviews, we agree with Petitioner
that, for the Indian scrap values, categories 7204.41.00 and 7204.29.09
best capture the types of residues generated as scrap. Category
7204.41.00 describes the types of scrap created during production of
cages, i.e., turnings, shavings, chips, trimmings, stampings, etc.
Similarly, category 7204.29.09 (Waste and Scrap of Other Alloy Steel)
includes bearing steel which is applicable to other bearing components.
Therefore, we used category 7204.41.00 from the Indian import
statistics to value scrap for cages and category 7204.29.09 from the
Indian import statistics to value scrap for rollers.
The Indonesian statistics do not provide a category comparable to
Indian category 7204.29.09 for which to value scrap. We have chosen a
comparable category, 7204.29.00 (Other Waste and Scrap), and used the
Indonesian import statistics from this HTS number to value scrap for
cups and cones (see our response to Comment 3).
Comment 6
Petitioner contends that the steel import prices the Department
used in the preliminary results do not reflect market-economy
transactions. (For certain steel inputs for certain respondents, the
Department used the actual values at which Chinese trading companies
imported the steel into the PRC and paid in convertible currencies.)
Petitioner notes that steel is a ``controlled commodity'' in the PRC
and that China Foreign Trade Development Companies, Inc., is generally
the PRC importer. Petitioner insists that, given this fact pattern
involving contracts for 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 Final Determination of
Sales at Less Than Fair Value: Oscillating Fans and Ceiling Fans From
the People's Republic of China, 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 that 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 in a market economy.
Petitioner suggests, in addition, that steel supplied by the China
Foreign Trade Development Companies to PRC producers might be part of,
or related to, broader deals between those producers and the trading
companies which, for reasons unrelated to the factors that would govern
normal purchases directly from a market-economy company, could affect
the prices paid by the producers for reasons unrelated to the factors
that would govern normal commercial transactions between market-
oriented companies.
Guizhou Machinery et al. respond that, consistent with section
773(c) of the Act and with 19 CFR 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 Coumarin at 66895). 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 a ``state trading company'' 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 PRC-based
producers from the PRC trading company might have been part of related
or broader deals is merely speculation with no support on the
administrative record. Guizhou Machinery et al. discuss Petitioner's
reference to Timken from Comment 2, stating that 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 CV 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. assert that Petitioner has not shown
[[Page 6198]]
that the use of market-oriented import prices combined with the use of
Indian import statistics for scrap yields distortive or inconsistent
results; in respondents'' view, both represent ``market-oriented''
prices. Guizhou Machinery et al. claim that the Department has used
different sources to obtain surrogate values for input materials in
many cases and that the Department should not abandon its use of
market-oriented import prices or alter its calculations in the final
results.
Department's Position
Although we agree with respondents that we do not need to value all
factors of production in a single surrogate country, we agree with
Petitioner that we should not use purchases of steel from PRC trading
companies in this review. 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.
Therefore, where the manufacturer obtained the input from the trading
company--a PRC source rather than a market-economy source--and paid for
the input in PRC currency, we determine that the prices paid by the
producers for these inputs do not reflect market prices. In such
situations, the price paid by the trading company is not the relevant
inquiry. We note 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. See also TRBs IV-VI at 65533.
Comment 7
Shanghai argues that the Department should calculate all of
Shanghai's relevant steel costs on the basis of steel purchases
Shanghai made directly from market-economy countries during the POR.
For certain components Shanghai used PRC-sourced steel as well as steel
purchased from market-economy countries during the POR. Shanghai argues
that the Department's use of a weighted-average of PRC-sourced and
imported steel was improper and that the Department should have based
Shanghai's constructed steel values solely on the verified costs of
Shanghai's market-economy-sourced steel imports. Actual market costs
incurred during the POR for the exact type and grade of steel used for
the production of subject merchandise are, Shanghai contends, the best
evidence of the market cost of steel. Shanghai cites S. Rep. No. 93-
1298, 93d Cong., 2d Sess. 174 (1974), in support of its view that
surrogate values are meant to be applied only when market-based values
are unavailable. Shanghai claims that the surrogate methodology is
meant as a way to ascertain what the prices or costs of an NME producer
would be if set by the market.
Citing Ceiling Fans (at 55274), Shanghai states that its actual
cost for the imported steel are the most reliable and accurate data for
determining the value of steel inputs. Not using these verified costs
would, Shanghai argues, defeat the statutory intent and undermine the
accuracy, fairness and predictability of the FMV calculations.
Petitioner argues that, contrary to Shanghai's assertion, the
Department should disregard import prices because those prices are
subject to state-controlled influences and, therefore, are unreliable.
Petitioner suggests that the Department should rely on the Indian
prices to value all of Shanghai's steel usage. Petitioner argues that
steel is not traded freely in China and most bearing producers must
purchase their imported inputs through state-controlled trading
companies. Petitioner claims these imports are incorporated directly
into the state-controlled system and, because they are
indistinguishable from other Chinese domestic prices and are inherently
suspect, they must be disregarded in the final results.
Whereas Shanghai argues that import prices should be used for all
its steel inputs, Petitioner, citing 19 CFR 353.52, says that such
argument disregards the statutory requirement that, when normal
valuation cannot be used because of state-controlled-economy
influences, the Department is to base the value on its FOP methodology,
deriving values for each factor from prices or costs in a surrogate
country. Petitioner contends that the Department should use, for the
final results, prices of imported steel only for acquisitions that are
shown to be free of state-controlled influences. Petitioner further
contends that, in this review, no such acquisitions exist and,
therefore, the Department should use Indian surrogate values to value
all steel inputs in this review.
Department's Position
We agree with Shanghai with respect to steel sourced directly from
market-economy suppliers. Accuracy is enhanced when the NME producer's
actual costs can be used. We verified that a portion of Shanghai's
steel inputs during the POR were sourced from market-economy countries
and were paid for in a market-economy currency. Shanghai's imports were
purchased directly from the market-economy supplier and did not involve
PRC-based trading companies. See Verification Report at 4. Therefore,
we have not calculated weighted-average steel costs based on PRC-
sourced and imported steel for Shanghai for these final results.
Comment 8
Petitioner claims that, if the Department uses the value of steel
imported into the PRC, there are no available scrap values directly
related to respondents' 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 claims that the courts have ruled this practice
to be unsupported, citing Timken. Petitioner notes that the Department
addressed the issue on remand by using a single source to value both
materials and scrap, a flat ratio of scrap equal to 20 percent of the
value of the steel input. Petitioner states that the same principle
should apply to this review, i.e., in order to avoid inherent
distortions where the Department values steel and scrap using different
sources, the Indian scrap value should be applied as a percentage
rather than as an absolute amount.
Guizhou Machinery et al. contend that, contrary to Petitioner's
argument, the CIT and the CAFC did not rule in Timken that the
Department cannot use different sources to obtain surrogate values for
the various CV components but, rather, that the Department cannot use
surrogate value data which yield distorted 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 with the use of Indian import statistics for scrap
credit yields distorted results or that it is inconsistent with other
information on the administrative record for this review. Guizhou
Machinery et al also contest Petitioner's claim that the use of two
different sources to value steel and scrap is ``inherently distorted''
and point out that in many cases the Department has used different
sources to value input materials and scrap.
Shanghai states that the Department may exercise its discretion to
identify the best available information even if derived from different
sources and that the Department's ``mix-and-match'' methodology is
supported by the statute, citing Lasko Metal Products Inc. v. United
States, No. 93-1242 (Fed. Cir.
[[Page 6199]]
Dec. 29, 1994). Shanghai suggests that Petitioner objects to the use of
steel values based on PRC imports and scrap values based on Indian
imports as another attack on the use of steel values based on PRC
imports.
Department's Position
We agree with respondents. Because Shanghai purchased inputs from a
market-economy supplier and paid in a convertible currency, we valued
those inputs using respondent's actual costs. The absence of a direct
scrap-offset value should not prohibit us from using the actual market-
economy price paid in convertible currency by an NME manufacturer.
In the Final Determination of Sales at Less Than Fair Value:
Circular Welded Non-Alloy Steel Pipe From Romania, 61 FR 24274, 24277
(May 14, 1996), we calculated a ratio of scrap value to steel value as
suggested by Petitioner. However, in that instance, we had no public
information by which to arrive at a scrap/steel ratio for our first-
choice surrogate country. Therefore, we calculated the ratio using
scrap values and steel values from the second-choice surrogate country
and applied the ratio to the surrogate steel values from the first-
choice surrogate country to determine a value for scrap.
In this case, where producers have used PRC-sourced steel inputs,
we have valued those inputs based on Indonesian import statistics for
steel used to manufacture cups and cones and based on Indian import
statistics for steel used to manufacture rollers and cages (see our
response to Comment 5). In other words, we have valued saleable scrap
for each component using the same respective source by applying
Indonesian scrap values to cups and cones and Indian scrap values to
rollers and cages. Because Shanghai used imported steel it purchased
directly from a market-economy supplier and paid for with a market-
economy currency, we have valued Shanghai's steel inputs using the
company's actual costs. In the absence of a corresponding scrap price,
we valued the volume of scrap actually produced in Shanghai's
production with cups and cones using Indonesian scrap values and valued
the volume of scrap actually generated in Shanghai's production of
rollers and cages using Indian scrap values.
Petitioner's contention that using a steel value from one source
and scrap credit value based on a different source is inherently
distortive is unfounded. Petitioner has provided no evidence to
indicate that the value of scrap is in any way tied to the cost of raw
steel. Furthermore, this approach allows us to use the actual amounts
of scrap generated by the Chinese production processes rather than the
scrap ratios associated with Indian factories, which may be less
accurate. Because we are using the same source to value scrap for all
respondents, we do not agree that we should change our methodology
simply because Shanghai's steel bar was valued using Shanghai's actual
costs for its market-economy purchases. Accordingly, where steel inputs
were based on actual costs of steel purchased directly from market-
economy sources, we have continued to value scrap using the surrogate
sources noted above.
Comment 9
Petitioner states that the Department's analysis memoranda for some
respondents show a ``scrap input value'' included in valuing certain
materials. Petitioner asserts that, to the extent raw materials from
which certain TRBs or parts were manufactured were assigned a scrap
value, the value of those materials was understated. In terms of
acquisition cost, Petitioner contends, new material remains new
throughout the production process. Petitioner contends that the only
time a scrap value has any significance is when there is a
demonstration that scrap from production was recovered and sold and
notes that respondents do not deny that they paid full price for the
raw materials they characterize as scrap inputs. Petitioner explains
that the per-kilogram value of the raw-material input piece is the same
whether the companies produce one or two finished pieces from the input
piece and the only difference when two pieces are produced from a
single input piece is that the amount of scrap at the end of the
operation is less than if only one of the two pieces had been produced
from the input. Petitioner claims that, by increasing the yield from
the raw material input and reducing scrap, these producers have
achieved economy of production.
Petitioner asserts that the Department should revert to its
position in the 1989-90 review, in which it did not value scrap steel
input reused by one respondent at the cost of steel scrap (citing
Tapered Roller Bearings from the People's Republic of China, 56 FR
87590, 87596 (December 31, 1991) (TRBs)). At that time, Petitioner
argues, the Department noted that the respondent had failed to raise
the issue early enough to permit consideration of alternatives with
which to value the reused steel input. Since then, Petitioner adds,
respondents have not presented alternatives for taking account of their
production of two pieces from one bar. Petitioner states that the
reused steel retains its value in the production process fully as much
as a new-steel bar. Petitioner claims that the fact that it may be sold
as scrap is irrelevant because respondents did not sell it and paid
full price when it was acquired.
Guizhou Machinery et al. respond that, although the above-
referenced analysis memoranda suggest that ``scrap input'' was
separately and differently valued from ``new'' steel input, the
calculations show that the Department valued scrap input the same as
new-steel input. Guizhou Machinery et al. assert that the Department
should have valued scrap input at scrap values, not the same as new
steel.
Guizhou Machinery et al. state that some respondents accumulate
scrap pieces, store them in their warehouse on site, and use large
scrap pieces to manufacture smaller bearings. Guizhou Machinery et al.
argue that, because scrap is actually used to manufacture these
bearings, the input materials costs should appropriately account for
the scrap value.
Guizhou Machinery et al. claim that Petitioner's argument suggests
that, even though scrap material was actually used to manufacture
certain bearings, the Department should ignore this fact and
essentially ``impute'' the material cost of new steel instead. Guizhou
Machinery et al. state that, as evidenced by the record in this review,
TRBs are manufactured from different steel inputs (i.e., type, grade,
and quality) and that Petitioner's argument that new-steel costs should
be used to value scrap input ignores the fact that different inputs are
used in the manufacturing process and would be comparable to
substituting the value of steel bar for steel sheet. Guizhou Machinery
et al. claim that Petitioner's argument ignores the differences between
steel bar and scrap because steel bar is a high-quality material which
can be used as is, whereas scrap consists of leftover pieces which have
already been ``stressed'' once. Guizhou Machinery et al. claim that
Petitioner's argument should be rejected because its methodology would
artificially inflate respondent's material costs and because steel
scrap has a substantially lesser value than new steel bar, as evidenced
by its sales prices in the marketplace. To avoid aberrational results
for the TRB models using scrap input, Guizhou Machinery et al.
recommend that the Department follow the methodology it used in the
calculations for the preliminary results of the 1990-93 administrative
reviews, which most accurately reflects the value of the actual inputs
used for each particular model.
[[Page 6200]]
Department's Position
We agree with Petitioner. The scrap input respondents used to
produce certain TRBs was not purchased as scrap. Respondents paid the
full purchase price for these inputs. Sales of bearings produced from
scrap are indistinguishable from those produced from new steel in
respondents' reported sales listing. Valuation of the input as scrap
instead of as new steel would result, therefore, in an undervaluation
of respondents'' FOP. Furthermore, for the final results in all
previous reviews we valued scrap steel inputs as new steel. See TRBs
IV-VI at 65533. Accordingly, we have valued the scrap-steel input as
new steel for the final results.
Comment 10
Petitioner argues that the direct-labor surrogate value should be
based on the average for all industrial workers or, alternatively, on
the average of skilled and unskilled labor rates in India. Petitioner
notes that, although the Department had available wage rates for all
industrial workers and for skilled, semi-skilled and unskilled labor in
India, it only used the average of unskilled and semi-skilled labor.
Petitioner claims this selection is arbitrary and is in direct conflict
with the information provided by respondents on the record. Petitioner
states that most respondents reported that the PRC manufacturers used
skilled and unskilled labor as production workers, referring to the
Public Questionnaire Responses of February 7, 1995. Petitioner argues
that a reasonable use of the Department's source would be to select the
average ``industrial worker'' wage or the average of the wage ranges
for unskilled and skilled workers.
Guizhou Machinery et al. argue that, although some respondents may
have reported that they employ some skilled workers, the record clearly
demonstrates that the manufacture of TRBs largely involves
unsophisticated processes and unskilled labor and, thus, the
Department's preliminary results are reasonable and should not be
revised. Guizhou Machinery et al. claim that Petitioner's suggested
calculation revisions are not supported by record evidence and would
artificially inflate the surrogate-value labor rate. Additionally,
Guizhou Machinery et al. argue that use of Petitioner's suggestion
would value skilled labor to the same degree as unskilled labor, not
taking into account the low-tech nature of the manufacturing process.
Guizhou Machinery et al. state that Petitioner has not provided any
evidence which shows that respondents have equal numbers of skilled and
unskilled workers in the manufacturing process.
Department's Position
We agree with Petitioner in part. We reject Petitioner's
recommendation, however, that we use an average ``industrial worker''
wage rate, because it does not take into account unskilled labor.
During the course of this review, we visited several TRB factories
while verifying various companies and confirmed that the primary source
of labor consists of unskilled personnel in the production process.
See, e.g., Memorandum for the File From Case Analyst: Verification
Report for Yantai CMC Bearing, Ltd. (September 21, 1995) and Memorandum
for the File From Case Analyst: Verification Report for Shanghai
General Bearing Co., Ltd. (September 21, 1995). The average
``industrial worker'' wage rate does not indicate if, or to what
extent, unskilled labor is included. The lowest wage rate in the
average ``industrial worker'' category is at the level of the highest
wage rate among the average wage rates for unskilled labor. Therefore,
use of the ``industrial worker'' wage rate could distort significantly
the wage-rate factor.
We agree with Petitioner's alternative recommendation, however,
that we calculate a wage rate between ``skilled'' and ``unskilled''
labor rates. Respondents reported that during the production process
they employed certain amounts of both skilled and unskilled direct
labor. Because we have average wage rates for both skilled and
unskilled labor, we can more accurately value direct labor according to
each respondent's own experience. Accordingly, we have calculated, for
these final results, an average wage rate for skilled labor and an
average wage rate for unskilled labor. We applied these rates to each
respondent, weighted according to the reported amounts of skilled labor
and unskilled labor.
Comment 11
Petitioner argues that the Department should make allowance for
vacation, sick leave and casual leave when calculating the number of
weeks per month actually worked. Petitioner states that the Department
calculated the hourly wage rate on the basis of 4.333 working weeks per
month, based on a full 52-week year, which assumes that workers never
get sick, take vacations or have other days off. Petitioner observes
that IL&T India shows that mandatory benefits include one day of paid
vacation for every 20 days worked, sick leave of seven days a year with
full pay, and seven to ten days of casual leave. Petitioner claims that
respondents have not allocated any portion of vacation or sick leave to
the labor hours they reported as their factors of production.
Petitioner states that the goal is to determine the cost to an employer
of each hour that an employee is on the job and the denominator must
include only time on the job. Petitioner suggests that the number of
weeks per month should be recalculated to take into account at least
the minimum benefits and derives a figure of 3.94 working weeks per
month using this approach. Petitioner further suggests that it would be
more reasonable to use the usual vacation time of 30 days as stated in
the IL&T India data which the Department used, thus deriving a figure
of 3.72 working weeks per month.
Guizhou Machinery et al. state that the Department should reject
the Petitioner's argument to adjust the calculated labor rate for
vacation, sick leave and casual leave which the Department used in the
preliminary results. Guizhou Machinery et al. claim that Petitioner
provides no support for the statement that hourly labor costs should
reflect only the expenses accrued to an employer for the time the
employee is on the job. Guizhou Machinery et al. state that the real
hourly cost to the employer reflects many factors, including fringe
benefits such as paid vacation, sick leave, etc. Guizhou Machinery et
al. suggest that the Department's calculations should include the cost
of fringe benefits such as vacation and sick leave in the numerator
and, because the numerator includes costs for fringe benefits, the
denominator should likewise reflect these fringe benefits.
Department's Position
We disagree with Petitioner. In our preliminary results we valued
direct labor using rates reported in IL&T India, which states that
fringe benefits normally add between 40 percent and 50 percent to base
pay. See Memorandum to the file from Case Analyst: Factors of
Production Values Used for the Seventh Antidumping Duty Administrative
Review (Memorandum), September 1, 1995, attachment 5. Accordingly, we
multiplied base pay by 1.45 in order to incorporate fringe benefits.
Memorandum at 3-4.
Whereas petitioner suggests we calculate a wage rate based only on
time spent on the job, we find that paid holidays, vacation, sick
leave, etc., belong in the calculation because the employer incurs the
same expenses as if the employee were on the job. By adjusting the base
pay to include such fringe benefits as vacation, sick leave, casual
leave, etc., we calculated a direct-
[[Page 6201]]
labor rate which more accurately represents the actual direct-labor
cost to the manufacturer.
Comment 12
Petitioner claims that indirect labor is not reflected in the SG&A
and overhead rates used in the preliminary results, notwithstanding the
fact that, at 49575, the Preliminary Results state that ``indirect
labor is reflected in the selling, general and administrative and
overhead rates.'' Petitioner claims 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 CV.
Petitioner contends further that the indirect-labor amounts
supplied by respondents, reported as a percentage of direct-labor
costs, are generally unsupported by explanation, calculations or
documentation, and that the Department apparently made no attempt to
verify the information. Petitioner suggests that the Department should
use, as BIA, respondents' own indirect-labor rates--as was done in the
1989-90 review--or, alternatively, the highest indirect-labor rate on
the record in this review.
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 of CV. 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. point out that
the SKF report includes, under the category ``expenses for manufacture
administration and selling,'' items designated as ``repairs to
buildings'' and ``repairs to machinery.'' Guizhou Machinery et al.
assert that the Department can reasonably conclude that the repair
expenses indicated are inclusive of the labor associated with such
activities. Respondents argue that, as such, the Department should not
alter the SG&A and overhead portions of its calculations for the final
results.
Department's Position
We agree with Petitioner that we did not include indirect labor
attributable to overhead and labor attributable to SG&A in the CV
calculations in the preliminary results. For these final results, we
calculated overhead and SG&A expenses using the line items in the SKF
report which pertained to these expenses. The results of these
calculations from the SKF report (see also our response to Comment 13)
yielded an SG&A rate that exceeded the statutory minimum; therefore, we
did not use the statutory minimum. We did not include any item from the
SKF report specifically representing indirect-labor costs in
calculating the overhead and SG&A expenses. We also did not include the
item ``payments to and provisions for employees'' because this item
does not allocate amounts between direct and indirect labor. Further,
contrary to the suggestion by Guizhou Machinery et al., there is no
evidence in the SKF report indicating that the line items we used to
calculate these expenses were inclusive of indirect labor costs.
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 information we obtained at 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 labor
attributable to overhead and SG&A labor using the ratios of each as
reported in the responses.
Comment 13
Petitioner states that the Department did not include interest
expenses incurred by SKF in the CV calculation. Petitioner contends
that interest expenses and other financing charges are ordinarily
incurred in market economies where companies rely on debt as well as
equity as a source of capital. Petitioner states it should be included
in the CV 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 CV calculations.
Guizhou Machinery et al. state that Petitioner's argument should be
rejected because the Department used the 10-percent statutory minimum
SG&A. Guizhou Machinery et al. argue that Petitioner does not cite to
any authority for adjusting the statutory 10-percent-minimum SG&A. In
fact, Guizhou Machinery et al. argue, the statutory minimum SG&A
includes an amount for financing charges, and any additional amount for
this charge would result in double-counting. Respondents contend that
Petitioner only cites legal authority for the proposition that SG&A
should include an amount for interest expenses, which is already
included within the statutory minimum for SG&A, such that Petitioner's
claim as to this point is moot. Moreover, Guizhou Machinery et al.
assert that Petitioner does not specify which charges from SKF's annual
report should be included in the calculations.
Shanghai responds that inventory financing costs are subsumed
within the statutory minimum for SG&A as interest charges and to add a
separate charge to CV would result in unacceptable double-counting of
these charges.
Chin Jun states that, whereas Petitioner argues that finance
charges should be added, there is no record evidence regarding SKF's
interest expenses which pertain exclusively to sales. Chin Jun argues
that Petitioner fails to point out what surrogate finance costs should
be applied and provides no evidence that SKF India, part of a huge
multinational organization, would have financing charges representative
of a normal Indian producer. Due to the foregoing, Chin Jun argues, the
overhead rate should be reduced, not increased.
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, in the general expenses for these final
results, interest expenses as listed in SKF's report.
As noted in our response to Comment 12, we calculated the SG&A
expenses by adding each line item from the SKF report that pertained to
such expenses. The line items we used in the preliminary results did
not include interest expense. The recalculation of SG&A to include
interest and the items discussed in Comment 12 exceeded the statutory
minimum; therefore, the argument of Guizhou Machinery et al. and
Shanghai regarding double-counting is moot.
Concerning the comment by Guizhou Machinery et al. that Petitioner
has not sufficiently demonstrated the representativeness of SKF's
interest expense and Chin Jun's comment that no document demonstrates
that SKF's interest expenses pertain exclusively to sales, 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. See TRBs IV-VI at 65534.
[[Page 6202]]
Comment 14
Petitioner argues that direct and indirect selling expenses
incurred in the United States must be deducted from exporter's-sales-
price (ESP) transactions. Petitioner argues that section 772(e)(2) of
the Act requires that expenses incurred ``by or on behalf of'' an
``exporter'' in selling the subject merchandise in the United States
must be deducted from ESP. Petitioner states that such expenses may not
instead be added to CV or included in a consolidated SG&A expense,
which is itself reported as an item of the FOP (citing Zenith
Electronics Corp. v. United States, 10 CIT 268, 276, 633 F. Supp. 1382,
1389 (1986)). Instead, Petitioner argues, expenses incurred with
respect to the selling activities of affiliated importers must be
separately identified and deducted from the ESP.
Petitioner adds that the Department lacks the discretion to create
an exception for selling expenses incurred by U.S. subsidiaries of
companies in NME countries (citing Zenith Electronics Corp. v. United
States, 988 F.2d 1573 (Fed. Cir. 1993), and Ad Hoc Comm. v. United
States, 13 F.3d 398, 401 (Fed. Cir. 1994)), arguing that a major reason
for the creation of the ``ESP offset'' at 19 CFR 353.56(b)(2) was the
recognition that ESP, unlike purchase price, required the deduction of
all direct and indirect selling expenses incurred on U.S. sales (citing
Smith-Corona Group, SCM Corp. v. United States, 713 F2d 1568, 1578
(Fed. Cir. 1983)). Petitioner argues that section 772 has never been
amended to distinguish U.S. prices 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(c).
Petitioner claims that Congress never intended that a different formula
for ESP would be applied to related-party transactions in NME cases.
Petitioner recognizes that the Department has declined to make ESP
adjustments 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). However, Petitioner claims that there
are two major distinctions which render the precedent set in Ceiling
Fans inapposite to this review.
First, Petitioner argues that the U.S. importers of TRBs function
at a different level of trade from that derived in the Department's CV
calculations, i.e., that the U.S. importers are resellers that function
as distributor, whereas the CV does not include any SG&A expenses which
represent expenses associated with reselling. Petitioner adds that, in
the preliminary results, the Department relied on the statutory minimum
SG&A expenses, in which case the minimum activities of the manufacturer
are represented in the CV and, as such, there is no basis to conclude
that CV requires any deduction similar to the statutory deduction
required from ESP.
Petitioner further distinguishes the current review from Ceiling
Fans by arguing that the SKF report provides sufficient evidence to
calculate the ESP-offset adjustment to FMV, 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 CV 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 CV and that these expenses cannot
therefore be deducted from the surrogate or statutory minimum SG&A
expenses used in CV. Finally, Petitioner asserts, if the Department
does choose to make 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.
Shanghai states that the Department can make no adjustments to ESP
because there is no information to distinguish between foreign direct
and indirect selling expenses which would enable the Department to make
corresponding adjustments to FMV and that the SKF report does not
present any breakdown of selling expenses such as would be necessary to
make the required adjustments.
Shanghai claims that the Department has recognized that section
772(e) of the statute does not require, nor does it anticipate, the
unfair adjustment of U.S. price (USP) in ESP transactions without a
corresponding adjustment to FMV (citing Ceiling Fans). Rather, Shanghai
argues, the statute requires the Department to make fair comparisons
between USP and FMV (citing The Budd Company v. United States, 746 F.
Supp. 1093, 1098 (CIT 1990)). Shanghai asserts that such a fair
comparison cannot be made if available information does not permit the
corresponding 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
problems, those deductions cannot be made in NME cases because there is
no equivalent market-based value for indirect selling expenses on the
FMV side of the equation.
Guizhou Machinery et al. cite Ceiling Fans as the Department's best
explanation of the calculation problem and of why, traditionally, the
Department has declined to make adjustments for U.S. selling expenses
to either USP or FMV in an NME case. Guizhou Machinery et al. state
that, while Petitioner acknowledges the Department's decision in
Ceiling Fans, Petitioner fails to recognize that there is a direct
precedent for the Department's treatment of selling expenses in this
case (citing TRBs at 67591).
Guizhou Machinery et al. take issue with Petitioner's argument that
this case differs from Ceiling Fans because in this case the U.S.
importers are ``resellers'' and operate at a different level of trade
from that the Department derived for CV. Guizhou Machinery et al. state
that the U.S. importers in Ceiling Fans, as in virtually every ESP
case, were resellers and that this review cannot be distinguished from
Ceiling Fans on that basis. In all such cases, Guizhou Machinery et al.
argue, the Department has determined that respondents are entitled to
an ESP offset; if none can be made, the Department does not deduct
selling expenses from USP. Guizhou Machinery et al. note further that,
for the preliminary results, the Department used the statutory minimum
as a surrogate value. Guizhou Machinery et al. argue that the statutory
minimum includes all selling expenses, including indirect selling
expenses normally deducted from FMV with an ESP offset, but which
cannot be separately identified. Guizhou Machinery et al. claim that
Petitioner's argument does not deal with this element of the
calculation.
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. contend that Petitioner's suggestion that the
Department use SKF India's indirect selling expense as a surrogate ESP
offset demonstrates the very reason why the Department avoids ESP
offsets in NME cases. Guizhou Machinery et al. assert that the
information in the SKF report does not provide a reasonable method
[[Page 6203]]
for determining a surrogate ESP-offset amount. Guizhou Machinery et al.
refute Petitioner's argument as being incompatible with the
Department's use of the 10-percent statutory minimum SG&A, which
includes direct and indirect selling expenses. To adjust the 10-percent
minimum SG&A expense by using an unsubstantiated surrogate value for an
indirect ESP-offset amount would, Guizhou Machinery et al. claim,
result in an apples-to-oranges comparison.
Department's Position
We agree with Petitioner. We have re-evaluated 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 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 Final
Determination of Sales at Less Than Fair Value: Bicycles from the PRC,
61 FR 19026, 19031 (April 30, 1996) (Bicycles), 2 and TRBs IV-VI
at 65535. The statute provides no exceptions for cases involving NME
countries. Therefore, we have subtracted direct and indirect selling
expenses incurred by such U.S. affiliates in deriving the USP.
---------------------------------------------------------------------------
\2\ 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 of the provision explicitly require the deduction of
expenses generally incurred by or for the account of the exporter in
the United States.
---------------------------------------------------------------------------
We have made an ESP offset to FMV which, in conformity 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 15
Petitioner claims that the Department incorrectly calculated
freight rates by multiplying the surrogate freight rate by the net
weight of each bearing rather than by the gross weight of the bearing
as packaged for shipment. Petitioner states that a reasonable allowance
for the weight of packaging materials should be made in calculating
both ocean freight and inland freight expenses, arguing that packaging
does not travel free of charge. Petitioner suggests that the Department
could use, as a PI source on the record for this review, a packing list
of CMC Guizhou, submitted by DSL Distribution Services, Ltd., on
September 27, 1995. Petitioner states that the packing list shows both
gross and net weights of pallets of several common TRB models and that
the average weight difference is about eight percent. Therefore,
Petitioner asserts, the Department should multiply the net weights by
1.08 to reflect the weight of packaging.
Guizhou Machinery et al. state that the Department's freight
calculations based on net weight are entirely consistent with the
methodology it used in the prior administrative reviews of this case
and Petitioner has not proved any legal citation or support for its
claim that the Department should use gross weight. Guizhou Machinery et
al. argue further that there is no evidence in the sources the
Department used to value ocean freight and inland freight which would
indicate that the rates are based on gross weights.
Guizhou Machinery et al. also state that the Department did not
instruct the respondents to report freight expenses on a gross-weight
basis. Guizhou Machinery et al. argue that the Department should not
use, as Petitioner suggests, a public packing list of CMC Guizhou
submitted on September 27, 1995, because, first, they are not aware of
such a document being submitted on September 27, 1995, and second, even
if it was submitted, it cannot be considered because it would have been
untimely as this date is after the publication of the preliminary
results.
Department's Position
We agree with Petitioner that a cost is incurred with respect to
shipment of packing materials. Upon reviewing the packing list of CMC
Guizhou, we have determined that the packing document DSL Distribution
Services submitted in the 1994-95 review is an independent and reliable
source for such information. We have therefore added this public
document to the record of this review. Accordingly, for the final
results, we have calculated ocean-freight expenses by multiplying the
net weight by 1.08 to reflect the gross weight.
Comment 16
Petitioner states that the Department calculated ocean-freight
rates based on freight rates per ton provided by the Federal Maritime
Commission for shipments from Shanghai to Cincinnati via the U.S. West
Coast and that, to calculate the distance, the Department added the
distance between Shanghai and San Francisco in nautical miles with the
overland distance between San Francisco and Cincinnati. Petitioner
argues that one of the two distances should be converted into the other
in order to obtain a consistent basis for the distance calculation.
Petitioner also notes that, in the sample calculations in the Factors
of Production Memorandum, the Department states that it obtained a
freight rate per kilogram per kilometer, but the sample calculation
does not demonstrate the conversion from miles to kilometers.
Petitioner states that the Department made the same errors in the
calculation of the insurance rate based on distance and should correct
these errors.
Guizhou Machinery et al. respond that, while Petitioner's argument
appears to be correct, the Department should correct another clerical
error regarding the conversion of miles to kilometers in its ocean-
freight calculation. Guizhou Machinery et al. claim that, although the
Department's Factors of Production Memorandum states that it obtained a
``per kilogram per kilometer'' ocean-freight rate, the calculation
reveals that the Department obtained a ``kilogram per mile'' rate but
neglected to convert the distance stated in kilometers into miles.
Department's Position:
We agree that we made the clerical errors noted by Petitioner and
by Guizhou Machinery et al. However, the issue is moot because we have
changed the methodology for calculating ocean freight for the final
results. We have calculated ocean-freight rates based on quotes from
Maersk Inc., a U.S. shipping company. We prefer information from Maersk
because it was able to provide port-specific information regarding
shipping rates from the PRC to the United States. For these final
results, we calculated average shipping rates for shipments to the east
coast of the United States and west coast of the United States. We note
that the differences among the east-coast ports and west-coast ports
are minimal. Maersk provided the basic rates for both 20-foot and 40-
foot containers, destination surcharges, FAF fuel surcharge, and
region-specific surcharges. Maersk reported that the maximum payloads
[[Page 6204]]
allowed for the 20-foot and the 40-foot containers were 48,000 pounds
and 60,000 pounds, respectively. We converted the pounds to kilograms
and divided the total cost of shipping the fully loaded container by
the maximum payload weight in kilograms to derive a per-kilogram
freight rate. We multiplied that rate by the net bearing weight in
order to value ocean freight expenses.
Comment 17
Petitioner states that the Department erroneously used the Indian
wholesale-price index (WPI) to adjust for inflation of ocean-freight
cost. As the ocean-freight costs were based on U.S. rates in U.S.
dollars, Petitioner contends that any adjustment for inflation should
be based on dollar inflation. Petitioner suggests that the Department
adjust ocean-freight costs using the U.S. producer-price index for
finished goods, the U.S. equivalent of a WPI, from the same source used
to derive the Indian WPI.
Department's Position
We agree with Petitioner that we should adjust ocean-freight costs
using the U.S. producer-price index because ocean-freight costs are
based on U.S. rates in U.S. dollars. For the final results, we deflated
the July 1996 ocean-freight-rate quotes from Maersk Inc. using the U.S.
producer-price index to reflect the POR costs.
Comment 18
Petitioner contends that the Department has understated the marine-
insurance expense by applying an insurance rate per ton applicable to
sulfur dyes from India. Petitioner argues that, absent any evidence
that one ton of sulfur dyes would have a value even close to the value
of one ton of bearings, there is no rational basis for the Department's
approach, i.e., applying insurance on the basis of weight rather than
of value. Petitioner asserts that, if a container of bearings were lost
at sea, there is no basis to suppose that payment for the loss of one
ton of sulfur dyes would have any relationship to the value of the
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.
Petitioner contends further that to correct the ocean-freight
distance upon which it based the marine-insurance rate, the Department
should recalculate marine insurance. However, Petitioner notes that the
source the Department used deleted the destination in the public
version and, therefore, the only information on the record is that the
insurance covered shipments from somewhere in China to somewhere in the
United States, which provides no basis for differentiating among
shipments on the basis of distance.
Guizhou Machinery et al. respond that it is not reasonable to
assume that the difference in Indian marine-insurance rates applicable
to sulfur dyes and TRBs can be measured accurately simply by comparing
the difference in product values. Guizhou Machinery et al. assert
further that Petitioner's argument is based on customs values obtained
from the Sulfur Dyes petition, information which has not been
previously submitted on the record for the current review (citing 19
CFR 353.31). Guizhou Machinery et al. state that the Department's
approach of using the marine-insurance rates from the sulfur-dyes
investigation is consistent with its calculations in other NME cases,
citing Coumarin, Sebacic Acid and Saccharin. Finally, Guizhou Machinery
et al. argue that the Department did not understate but, rather,
overstated the marine-insurance expenses due to ministerial errors in
the Department's calculation. Guizhou Machinery et al. claim that the
errors made by the Department include the failure to convert nautical
miles into statute miles and then to kilometers in calculating per-unit
marine-insurance rate and the failure to convert the per-unit amounts
from rupees into U.S. dollars before deducting the marine-insurance
expense from USP. Respondents urge the Department to reject
Petitioner's request to make an upward adjustment to the marine-
insurance calculations and to correct the conversion errors.
Department's Position
We disagree with Petitioner with respect to our use of the sulfur
dyes data. We have relied on the public information on marine insurance
for sulfur dyes that we used for the preliminary results, and we have
used the same rate repeatedly for other PRC analyses. See Final Results
of Administrative Review: Certain Helical Spring Lock Washers from the
PRC, 61 FR 41994 (August 13, 1996) (Lock Washers), and TRBs IV-VI at
65537.
We agree with Petitioner that there is no basis for differentiating
among shipments based on distance. The source we used for valuing
marine insurance provides only a cost per ton. For the final results,
we have applied marine insurance based on net weight, without making
any allowance for distance shipped. Therefore, we are not correcting
the clerical error alleged by Guizhou Machinery et al. with respect to
the failure to convert nautical miles into statute miles and then into
kilometers. We do agree, however, that we failed to convert marine
insurance from rupees into dollars before deducting the expense from
USP. For the final results, we converted the marine insurance into
dollars using the exchange rate in effect on the date of sale.
Comment 19
Petitioner states that Shanghai's bearing weights and scrap weights
were unverifiable and that the 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 in 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 20
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 this company. 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
[[Page 6205]]
should be adjusted to account for trained employees.
Shanghai claims that Petitioner has misinterpreted the verification
report. Rather than stating that the number of employees assigned to
TRB production was unverifiable, Shanghai contends that 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, stating that it
did not refuse to provide 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 this
administrative review in order to verify the number of employees
assigned to the production of subject merchandise. However, based on
company records we examined at verification, we determined that
Shanghai reported the number of employees assigned to the production of
TRBs accurately.
We were able to verify the direct-labor hours from Shanghai's
internal record-keeping 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 21
Petitioner asserts that the Department should apply BIA ocean-
freight and marine-insurance rates to all of Henan's U.S. sales through
Central Equimpex because the record includes an invoice which shows
that Henan made a sale on a CIF basis, although it stated in the
submission that the terms of sale were not CIF.
Henan claims that Petitioner's assertion is based on a
misunderstanding of the transaction which was the subject of the
invoice. Further, Henan states that the invoice does not relate to
Henan's ESP sales through Central Equimpex but relates to one of
Henan's direct purchase-price sales. Thus, Henan asserts, the
Department can trace the sales quantity and price directly to Henan's
purchase-price sales listing.
Department's Position
We agree with respondent in part. The fact that the sale was a
purchase-price transaction is not relevant to the deduction of ocean-
freight expenses from USP but, rather, whether ocean-freight expenses
are included in the price. The record evidence is that ocean-freight
expenses were included in the sale price. Moreover, because the sale in
question is a purchase-price transaction and, therefore, is not related
to sales made through Central Equimpex, there is no justification for
applying BIA to all sales made through Central Equimpex. Furthermore,
there is no evidence to support Petitioner's assertion that Henan's ESP
sales listing does not reflect its transactions accurately. We have
examined documentation related to the sale in question and have
determined that ocean freight and marine insurance were provided by
PRC-based companies. Accordingly, we have applied the surrogate ocean-
freight and insurance rates for this transaction.
Comment 22
Shanghai argues that the Department must recalculate the estimated
ocean-freight charges on its ESP transactions. Shanghai contends that
the Department's estimated ocean-freight charges improperly included
charges for U.S. inland freight and brokerage & handling which the
Department deducted elsewhere from ESP. Specifically, Shanghai claims
that charges for ``destination delivery charge'' included in the ocean
freight rates the Department used were presumably for the costs of off-
loading and transporting the merchandise from the port of entry to the
warehouse in the United States. Shanghai states that it reported such
costs as U.S. inland freight and/or brokerage & handling charges and
the Department deducted them from ESP accordingly.
Petitioner responds that Shanghai misunderstood the Department's
ocean-freight methodology. Petitioner contends that, notwithstanding
other problems, the Department did not include expenses twice in its
calculation of ocean freight. Petitioner argues that an examination of
the component parts of the ocean-freight charge shows that the
destination-delivery charge clearly covered the overland portion of the
shipment, i.e., from Long Beach to Cincinnati, because all other
portions of the charge are related to the ocean part of the voyage.
Department's Position
Because we have changed our methodology to calculate ocean freight
(see our response to Comment 16), this issue is moot.
Comment 23
Shanghai argues that the Department erroneously added a surrogate-
based inland-freight charge to its purchases of steel imported from
market-economy countries, improperly inflating the imported-steel
values by double-counting freight costs. Thus, Shanghai argues, the
Department should delete the surrogate-based freight charge from the
costs of the imported steel.
Department's Position
We agree with Shanghai that we double-counted freight costs when we
added surrogate-based freight charges to respondent's imported-steel
values. Because Shanghai incurred no inland-freight charges, these
should not have been added. Furthermore, because we determined that it
is more accurate to value all of Shanghai's hot-rolled-steel bar using
the imported steel value (see our response to Comment 7), we have, for
these final results, not included the surrogate-based freight cost in
valuing Shanghai's hot-rolled-steel-bar material inputs.
Comment 24
Shanghai states that the Department should not base the overhead
rate on information contained in the SKF report because it is excessive
and unrepresentative of Chinese producers. Shanghai and Chin Jun argue
that, if the Department does use the SKF report to value overhead for
the final results, it must recalculate the rate in order to correct
several errors. In addition, Shanghai claims that the overhead rate the
Department used in the preliminary results is based on Petitioner's
analysis of the SKF report, an analysis which Shanghai claims contains
several errors.
Shanghai and Chin Jun argue the rate the Department used in the
preliminary results improperly allocates the full amount of the
depreciation expense to overhead and, as a result, the Department did
not consider that certain depreciation expenses should be allocated
instead to SG&A. Shanghai notes that, for the final results of the
[[Page 6206]]
1989-90 administrative review, the Department allocated a portion of
depreciation to SG&A. Shanghai and Chin Jun argue that depreciation on
office buildings, furniture, fixtures and office equipment, and
vehicles should be allocated to SG&A. Shanghai calculates that,
according to the SKF report, 7.3 percent of total depreciation pertains
to SG&A assets. Shanghai argues that total current depreciation should
be decreased by 7.3 percent for SG&A, thereby reducing the amount of
depreciation allocable to overhead.
Second, Shanghai notes that the SKF report does not identify to
which items rent and lease expenses were applied. Shanghai points out
that the line item for lease rental payments was not included under the
same category as ``expenses for manufacture, administration and
selling.'' Shanghai notes references to residential rental properties
in the SKF report, adding that office space and housing for executives
should be charged to SG&A and that these lease and rental payments,
therefore, should be allocated to SG&A and not to overhead. Chin Jun
adds that a portion of insurance should be applied to SG&A, as there is
no evidence that these expenses are manufacturing expenses.
Third, Shanghai and Chin Jun argue that, consistent with the final
results of the 1989-90 review, the Department should apply the ``rates
and taxes'' line item to SG&A. Shanghai states that it is not
reasonable to allocate the total amount for ``rates and taxes'' to
overhead, as they are not characterized as such in the SKF report.
Chin Jun argues further that the overhead rate based on the SKF
report is inappropriate because it is typical of neither China nor
India. Chin Jun maintains that the Department has previously held that
companies in less-developed countries, which normally use less-
sophisticated technology, have lower overhead rates than companies
located in developed countries (citing the investigation for this case,
52 FR 19748, 19749 (May 27, 1987)). Chin Jun and Shanghai both suggest
that the Department use record evidence contained in a November 18,
1994, submission by Chin Jun, which contains data compiled by the
Reserve Bank of India (RBI) as a representative surrogate-overhead
figure.
Finally, Shanghai argues that, if the Department continues to use
the SKF report to value overhead, the Department should adjust those
rates so that they are more representative of overhead expenses of
Chinese producers. Shanghai proposes that the Department adjust the
overhead rate to include only those items included in Shanghai's
overhead cost.
Petitioner counters that depreciation is one of the items the
statute intended to be included among factors of production, before
non-factor-of-production items, such as SG&A and profit, were added
(citing sections 773(e)(1) and (c)(3) of the Act). The only
alternative, Petitioner claims, would be to add depreciation as a
separate percentage, which would not alter the calculation.
Furthermore, Petitioner argues, even if the Department decided to
allocate a portion of depreciation and other expenses to SG&A, any such
allocation would be arbitrary.
Petitioner dismisses Shanghai's and Chin Jun's proposed alternative
source--the RBI data--as covering an incredibly broad range of
industries, of which the bearings industry would represent only a small
part. Petitioner asserts that the SKF report provides information for a
bearing producer in India and to reject it in favor of the RBI data
would be unreasonable. Likewise, Petitioner rebuts Chin Jun's argument
that SKF represents a modern company such as is found in developed
countries, pointing out that the Department did not use data relevant
to SKF Sweden nor consolidated data from the SKF Group but data from
SKF India, which reflects the operating conditions of a bearings
producer in India.
Finally, Petitioner rejects Shanghai's suggestion that the SKF
report be adjusted to include only those items included in Shanghai's
overhead. Given the non-market nature of PRC-based companies,
Petitioner asserts that those companies may not incur, itemize or
segregate all of the expenses recognized in a market-economy producer's
financial statement. Nevertheless, Petitioner insists, expenses of the
type generally incurred in the production or sale of the merchandise,
even if not itemized by the NME company, would have to be added into
the CV calculation somewhere.
Department's Response
We disagree with Shanghai and Chin Jun that we should use the RBI
information instead of the SKF report for the calculation of the SG&A
and the overhead rates. The information in this case published by RBI
represents more than 600 companies in India from various industries.
Because the extent to which companies incur overhead and SG&A expenses
can differ so greatly between industries, we have based our overhead
and SG&A surrogate values on the industry-specific experience closest
to that of the merchandise under review, when appropriate industry-
specific data are available. See Final Determination of Sales at Less
Than Fair Value; Polyvinyl Alcohol From the People's Republic of China
(Polyvinyl Alcohol), 61 FR 14057, 14059 (March 29, 1996). We have
overhead and SG&A information from SKF India, a producer of subject
merchandise. Accordingly, for the final results, we have continued to
calculate overhead and SG&A based on the information in the SKF report.
We agree with Chin Jun and Shanghai, however, that certain
adjustments to the calculation of overhead and SG&A are appropriate.
For instance, we agree that it is improper to include all of SKF's
depreciation in overhead because depreciation associated with office
buildings and office equipment should be apportioned to SG&A expenses.
Therefore, for the final results we have allocated depreciation costs
to overhead and SG&A according to the function and value of the assets
by including in overhead only the depreciation expenses allocated to
manufacturing. We obtained the information pertaining to the function
and value of SKF's assets from the SKF report.
We also agree with Chin Jun and Shanghai that we should allocate
``rates and taxes'' 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, e.g., TRBs IV-VI at 65540).
With respect to lease rental expenses, we agree with Shanghai that
the SKF report does not identify the nature of those expenses. However,
we do not agree with Shanghai's contention that all of the lease rental
expenses are for SG&A, as 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).
Comment 25
Shanghai, assuming that the Department disclosed all observations
with calculated margins, requests clarification as to how the reported
margin for each observation correlates with the total margin the
Department calculated. Shanghai asserts that, because the value for
total dumping duties due exceeds the sum of the transaction-specific
dumping margins, some error in the Department's calculations of the
total dumping duties due has occurred.
Department's Position
Shanghai is incorrect in assuming that all observations with
calculated margins
[[Page 6207]]
were in the printouts we released after the preliminary results. In
this case, where complete printouts are likely to be voluminous, we
generally release printouts with a portion of respondent's
transactions. Because a printout showing the margin calculations for
all of Shanghai's sales would have been voluminous, we provided
Shanghai with a printout showing the calculations for 50 percent of its
sales during the POR. Upon review, other errors or corrections noted
elsewhere notwithstanding, we have determined that our calculation of
Shanghai's total margin is correct and reflects our analysis of
Shanghai's data.
Comment 26
Jilin states that the Department calculated a margin for one of
Jilin's models based on an erroneous net weight which affected the
calculation of ocean freight and marine insurance. The error appears to
be due to a misplaced decimal point, Jilin explains, which incorrectly
resulted in a reported net weight which is 10 times the actual weight.
Jilin states that the error is obvious when compared to other
information on the record. Jilin notes that it included the correct net
weight in its FOP data as reported by the manufacturer.
Jilin argues, first, that the size of the deduction to its USP for
ocean-freight and marine-insurance expenses for that model is
inconsistent with that of other respondents who sold the same model.
Next, Jilin claims that a comparison of the net weight reported for
that model by other respondents shows that the net-weight figure in
Jilin's USP calculation is aberrational. Jilin refers to the same model
number and the associated net weights reported by other respondents and
points out that those net weights are consistent with each other, as
well as with that reported in Jilin's FOP data. Jilin requests that the
Department correct its calculations by using the net weight as reported
in its sales listing but adjust the location of the decimal point to
reflect the correct net weight.
Petitioner points out that Department used the exact weights
reported and affirmed by Jilin in its responses. Petitioner further
notes that adjusting the decimal point backward one space does not
result in the net weight in Jilin's reported U.S. sales list matching
that which was in Jilin's reported FOP data, which Jilin argues is the
correct net weight. Petitioner contends that Jilin's claim of an
alleged clerical error is an attempt to submit new information after
the preliminary results and to amend its response.
Department's Position
In light of a decision by the CAFC, we have reevaluated our policy
for correcting clerical errors of respondents. See NTN Bearing Corp. v.
United States, Slip Op. 94-1186 (Fed. Cir. 1995) (NTN). As a result of
the NTN decision, we now accept corrections of such clerical errors
under the following conditions: (1) The error in question must be
demonstrated to be a clerical error, not a methodological error, an
error in judgement, or a substantive error; (2) we must be satisfied
that the corrective documentation provided in support of the clerical
error allegation is reliable; (3) the respondent must have availed
itself of the earliest reasonable opportunity to correct the error; (4)
the clerical-error allegation, and any corrective documentation, must
be submitted to the Department no later than the due date for the
respondent's administrative case brief; (5) the clerical error must not
entail a substantial revision of the response; and (6) the respondent's
corrective documentation must not contradict information previously
determined to be accurate at verification. See Certain Fresh Cut
Flowers From Colombia; Final Results of Antidumping Duty Administrative
Reviews, 61 FR 42833, 42834 (August 19, 1996) (Colombian Flowers).
The error in question, the incorrect placement of a decimal point,
is clearly clerical in nature. We have analyzed this error using the
criteria set forth as a result of the NTN decision and have determined
that it meets the conditions under which we will accept corrections. We
reviewed the responses submitted by other PRC-based bearing
manufacturers, as well as information from Jilin's FOP data. The net
weight for the same model number reported by other suppliers is about
one tenth of the amount in Jilin's U.S. sales list. We note further
that the FOP data were provided by the manufacturer, Jilin's supplier,
not by Jilin itself, and that the FOP data were consistent with
information provided by other manufacturers of the same model. Thus, we
determined that the FOP data provided by Jilin's supplier were
reliable. Furthermore, Jilin availed itself of the earliest opportunity
to correct the error and submitted the request for this correction no
later than the time of the case brief. Finally, correction of this
clerical error does not entail a substantive revision of the response.
Because we did not verify Jilin's response in this review, the last
criterion does not apply.
After adjusting the location of the decimal point, the net weight
in Jilin's sales list is higher than that in its FOP data, and we have
calculated adjustments to USP based on the higher figure from the sales
list.
Comment 27
Respondents Liaoning, Wafangdian, Guizhou Machinery, and Henan
allege errors regarding model comparisons in the Department's margin
calculations, arguing that in some instances the Department compared
the price of a component to the CV of an assembled set, while in other
instances it applied BIA to U.S. sales for which both sales and FOP
data were available.
Liaoning states that the Department compared sales of a cone (inner
ring) to the CV of a cone assembly (inner ring, rollers and cage).
Liaoning explains that the Department reduced the total CV for a
complete set--consisting of a cone assembly and a cup (outer ring)--by
excluding the cost for the cup, then compared the resulting cost of the
cone assembly to the sale of a cone. Liaoning notes that the ``IR''
attached to the model number in its U.S. sales listing indicates
``inner ring'' and argues that the Department should, for the final
results, compare the sale of the model in question to the CV for the
single designated component.
Similarly, Wafangdian claims that the Department compared the U.S.
sale of a cone assembly to the CV of a complete TRB set. Wafangdian
states that the net weight of the model sold in the United States is
consistent with the net weight reported in its February 6, 1994 FOP
questionnaire response for a cone assembly.
Guizhou Machinery and Henan claim that, for sales of certain
models, the Department was not able to match the related sales and cost
data because the model codes they reported contained a clerical error
in the code prefixes. Guizhou Machinery and Henan explain that the
model codes they reported in the sales and FOP responses are often used
interchangeably in the industry, where the numerical codes remain the
same but purchasers sometimes refer to the numerical code with a
slightly different prefix attached. Guizhou Machinery and Henan state
that, the difference in prefixes notwithstanding, the identical
numerical codes indicate that the models are identical and argue that
the sales and cost data of such models should be compared in the final
results. Guizhou Machinery and Henan suggest that other respondents'
data on the record indicate that the net weights are consistent between
model numbers with identical numerical codes, supporting their
contention that the models themselves are identical.
[[Page 6208]]
Petitioner responds that these arguments are based on new facts not
previously on the record and that only Wafangdian's argument warrants
consideration by the Department.
Petitioner notes that, whereas Guizhou Machinery and Henan argue
that the prefix is meaningless regarding identification of certain
models, Liaoning contends that the ``IR'' prefix denotes that the
numerical code following it refers only to a cone and is of the utmost
importance. Petitioner asserts that the argument that a prefix is
unimportant and, therefore, to be ignored or, conversely, that a prefix
is of utmost importance constitutes factual information too late to be
considered. Petitioner argues that neither it nor the Department has
been able to consider or evaluate this information through reference to
other public factual data placed on the record. In any event,
Petitioner argues the error in the CV the Department used is the fault
of the individual respondent and not a clerical error on the part of
the Department.
Petitioner states that the same rates the Department used in the
preliminary results should apply for the final results, except that,
where BIA is used, it should represent the highest transaction rate.
Department's Position
We disagree with Petitioner as to our ability to consider clerical
errors of respondents after preliminary results. See NTN and Colombian
Flowers. We have evaluated the respondents' clerical errors against the
criteria set forth in our response to Comment 26, and we have
determined that these errors meet the conditions under which we accept
corrections. We note that, with the exception of Wafangdian, all of the
respondents who experienced these model-matching problems were
exporters. In this case, we received identifying model numbers from
both the factory, which reports the FOP data, and the exporter, which
reports the U.S. sale. Conceivably, the two attach different prefixes
to the common numeric code.
We compared record evidence among different companies as well as
between respondents' FOP data and sales lists. We agree with
respondents' contention that these data allow us to compare sales of
specific models with corresponding CV figures. For sales of component
parts, we have sufficient data on the record to apply CV for the
corresponding part, and we have made the proper adjustments for the
final results.
Comment 28
CMC argues that the Department assigned the antidumping margin
calculated for CMC incorrectly to a company identified as ``China
National Machinery & Equipment Import & Export Corporation'' (CMEC).
CMC notes that, in all documentation it submitted, the company referred
to itself as CMC. CMC also contends that the administrative record
shows that the 0.13-percent margin the Department calculated in the
preliminary results was based on the sales and cost data CMC submitted
and that, in its verification report and analysis memorandum in
reference to this respondent, the Department identified the company as
CMC. Therefore, for the final results, CMC requests the Department
correct its error.
Department's Position
We agree with CMC. We incorrectly identified this respondent in the
Preliminary Results due to a clerical error. We verified data CMC
submitted during this review. The 0.13-percent preliminary margin we
calculated pertained to sales by CMC. For these final results of
review, the final margin for CMC is 0.00 percent and the non-
cooperative BIA rate assigned to CMEC and all other non-responding
companies is 25.56 percent.
Comment 29
Guizhou Machinery et al. note that, for the preliminary results,
the Department assigned to non-responsive companies a margin of 57.86
percent. Respondents contend that such a margin is incorrect because it
does not conform to the Department's two-tiered BIA formula as
articulated in the Preliminary Results. Because the Department
calculated a higher rate for Wafangdian, respondents contend, the
Department effectively assigned a lower rate to non-responsive
companies than it assigned to cooperative respondents, undermining the
purpose of the two-tiered policy. Guizhou Machinery et al. request
that, for the final results, the Department assign to any uncooperative
respondents the highest margin calculated for any respondent in this
review or any prior segment of the proceeding.
Department's Position
As a result of changes to our calculations, Wafangdian's rate is
1.28 percent. As noted in our response to Comment 28, above, the
uncooperative BIA rate is 25.56 percent, which is the highest rate ever
determined in this proceeding.
Comment 30
Premier contends that the Department based its dumping margin
inappropriately on cooperative BIA for the period of review. Premier
also states that the specific rate the Department assigned to Premier
was 75.87 percent, while the Department assigned 57.86 percent to
uncooperative respondents. Premier claims that, although the Department
stated it was applying ``cooperative BIA'' to Premier, the practical
effect of the preliminary results is to treat Premier as an
uncooperative respondent. Premier notes that the Department stated two
reasons for resorting to BIA: (1) Premier's inability to provide FOP
data, and (2) errors in Premier's sales data. Premier claims that the
verification errors were minor and contends that the Department itself
did not consider these reasons supportive of an uncooperative finding.
Premier states that it was unable to provide certain FOP
information to the Department because such information resides with
unrelated suppliers that compete with Premier. Respondent asserts that
the Department's application of BIA under these circumstances
constitutes an abuse of discretion since it amounts to penalizing a
company for failing to provide information it does not have. 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.
Premier states that, while the verification report notes certain
discrepancies in Premier's data, the report does not state that the
discrepancies were so significant to warrant complete rejection of
Premier's data. Premier adds that some of the issues the Department
cited as reasons for BIA were the result of Premier's inability to
provide data related to its suppliers, e.g., that it was unable to
identify the producers of the bearings it sold to the United States.
For the same reasons related to its inability to provide FOP data,
Premier claims that it should not be penalized. Premier states that it
often does not deal with the factory but, rather, with a PRC trading
company. Under these circumstances, Premier argues, the Department's
decision to treat Premier as if it were an ``uncooperative'' respondent
is unwarranted. Premier claims that it responded to every questionnaire
and provided the requested information that was available to it.
[[Page 6209]]
Premier states that, in numerous cases, the courts have held that
the Department cannot penalize a company for failing to provide
information it does not have, citing Olympic Adhesives v. United
States, 899 F.2d 1565 (Fed. Cir. 1990) (Olympic Adhesives), and Allied-
Signal Aerospace Company v. United States, 996 F.2d 1185 (Fed. Cir.
1993) (Allied-Signal). Premier notes that in Allied-Signal (page cite
omitted) the court reversed the Department's application of a punitive
BIA to a respondent who had ``supplied as much of the information as it
could.'' While Premier acknowledges that the issue before the court in
Allied-Signal was the Department's characterization of a respondent as
uncooperative, Premier argues that the court's criticism of the
Department's decision to apply punitive BIA is applicable to the
circumstances in this review, in which Premier cooperated to the extent
that it could. Premier contends that subsequent court decisions have
followed the Olympic Adhesives rationale, ruling that the Department
cannot apply adverse BIA when deficiencies in a respondent's data are
due to factors outside its control (citing Usinor Sacilor v. United
States, 872 F. Supp. 1000 (CIT 1994) (Usinor Sacilor), Zenith v. United
States, Slip Op. 94-146 (September 19, 1994), and Hyster v. United
States, 848 F. Supp. 178, 188 (CIT 1994)).
Premier asserts further that the Department's BIA policy is not
binding in all cases and that the Department has retreated from its
policy when the facts warranted doing so. Premier argues that the
Department has recognized that there are situations in which strict
application of its BIA policy leads to results which are inconsistent
with the purpose of the policy, i.e., to treat cooperative respondents
less harshly than uncooperative respondents. 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 notes that, in Manifattura Emmepi S.p.A. v.
United States, Slip Op. 93-183 (September 15, 1993), the court upheld
the Department's decision to apply BIA based on the highest calculated
rate in the immediately preceding review, when following its
traditional two-tiered BIA approach would have resulted in a de minimis
margin. Instead, Premier notes that the Department selected an
alternative rate which was ``adverse enough.'' Premier claims that
selecting a rate for a cooperative respondent that is the same as that
for an uncooperative one will not serve the Department's BIA policy, as
it would discourage cooperation.
Premier suggests that, in this case, the Department could
reasonably use alternatives to its two-tiered methodology. Premier
proposes that, consistent with the Department's preference to consider
a respondent's own prior rates when selecting BIA for a ``cooperative''
respondent, the Department could apply, as BIA, the highest rate
calculated for Premier in any prior segment of the proceeding, 0.97
percent from the 1987-88 and 1988-89 reviews, as well as the rate from
the LTFV investigation. Premier suggests, alternatively, that the
Department could select a rate which distinguishes properly between
uncooperative and cooperative respondents, such that the BIA margin
selected for ``cooperative'' respondents should not be the same as that
for ``uncooperative'' respondents.
Chin Jun states that the Department's application of punitive BIA
to some of its sales is contrary to legal precedent. Chin Jun claims
that, in accordance with section 773(e)(2) of the Act, the Department
may use an adverse inference if it finds that a party has failed to
cooperate by not acting to the best of its ability to comply with a
request for information. Chin Jun argues that it has cooperated to the
best of its ability and, despite its cooperation, the Department has
drawn an adverse inference and applied punitive BIA. Chin Jun claims
that, while the Department's preliminary results did not state that the
BIA rate imposed against Chin Jun was punitive, it clearly was. Chin
Jun states that the court reaffirmed that, `` in order for the agency's
application of the best information rule to be properly characterized
as ``punitive,'' the agency would have had to reject low margin
information in favor of high margin information that was demonstrably
less probative of current conditions,'' citing Allied-Signal (page cite
omitted). Chin Jun claims that this is precisely the case here, in
which the Department rejected low-margin information available in favor
of high-margin BIA.
Chin Jun notes that, while the Department has discretion as to the
choice of BIA, this discretion must be exercised reasonably (citing
Holmes Products Corp. v. United States, 795 F. Supp. 1205, 1207 (CIT
1992)) (Holmes Products). Respondent contends that the Department is
not permitted to take an overly sweeping view of the authority it is
granted under section 773(e)(2), citing Olympic Adhesives.
Chin Jun also claims that the regulations allow the Department to
consider the degree of a particular respondent's cooperation in the
administrative review as a factor in determining what constitutes the
best information available. Chin Jun insists that it did not refuse to
provide information nor did it significantly impede the review, but
that it was simply unable to obtain certain FOP information from all of
its unrelated suppliers. Chin Jun states that the court has ruled that,
when deficiencies are beyond a respondent's control, the application of
punitive BIA is improper, citing Usinor Sacilor.
Chin Jun claims that, in Holmes Products, the Department improperly
rejected the use of weighted-average information from the respondent
and applied an adverse BIA rate. The court required the Department to
use certain data supplied by the respondent, as that respondent had
substantially complied with the Department's request and could not
control the conduct of an uncooperative affiliate. Chin Jun adds that
the court pointed out that use of averaged data for substantially
complying parties has been approved and applied in other contexts.
Chin Jun claims that its circumstances are even more compelling
than those found in Usinor Sacilor and in Holmes Products. Chin Jun
states that, in this case, the alleged lack of FMV data was a result of
unrelated third parties'' failure to provide a response to the factors
questionnaires. Chin Jun asserts that, in Usinor Sacilor and Holmes
Products, the courts held that the Department cannot punish a
respondent when a related, yet uncooperative, affiliate did not supply
requested information and argues that it is even more inexcusable for
the Department to punish Chin Jun when unrelated, uncooperative parties
failed to provide certain information.
Chin Jun states that it is important to view the Department's
actions in the context of generally accepted litigation parameters such
as those set forth in the Federal Rules of Civil Procedure. Chin Jun
claims that Federal Rule of Civil Procedure 45 governing subpoenas only
directs production of ``designated books, documents, or tangible things
in the possession, custody or control of that person.'' While the
Department may lack ``subpoena power'' in an antidumping duty review,
Chin Jun argues, it is unreasonable for the Department to interpret its
statutory
[[Page 6210]]
authority as extending beyond the bounds of authority granted by the
Federal Rules of Civil Procedure. Chin Jun asserts that the Department
is attempting to do what the courts cannot--punish parties for not
providing information which is beyond their ``possession, custody or
control.'' Therefore, Chin Jun reasons, the Department should not apply
punitive BIA but should opt for a reasonable method to determine BIA.
Chin Jun states that, for certain of its transactions, as BIA, the
Department based FMV on the highest dumping margin found in the entire
review. Chin Jun asserts that the law is well settled, as set out in
its previous arguments, that the Department cannot apply an adverse BIA
rate against Chin Jun because it cooperated to the best of its ability.
Consistent with cited case precedence, Chin Jun states that the
Department should apply a less-adverse BIA when there is a gap in the
data or when the missing data are beyond the control of the respondent.
Chin Jun suggests several options. Chin Jun recommends that the
Department (1) apply a weighted-average margin based on all calculated
rates for the other companies, (2) calculate margins for those Chin Jun
sales using FMV based on data supplied by other respondents, or (3) use
the weighted-average margin calculated on Chin Jun's sales for which
FMV data were available. Chin Jun states that these alternatives are in
accordance with case-law precedent and that the Department must employ
a methodology that is reasonable, neutral, and non-adverse.
Petitioner responds that the BIA rate the Department 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 argues that, in the event that cooperative and non-
cooperative BIA rates are different for the final results, the
Department should apply a punitive, non-cooperative BIA rate to Premier
based on the deficiencies within Premier's own submitted data.
Petitioner claims that, whereas Chin Jun characterizes as
``punitive'' the use of other respondents' margins in the period as
BIA, this is an option in the non-punitive approach to BIA.
Petitioner agrees that changes are necessary in applying BIA in the
final results but, contrary to Chin Jun's suggestions, Petitioner
argues that the Department should apply, as partial BIA, the highest
margin of any individual transaction. Given a failure to respond to the
questionnaire or the submission of an unusable response, Petitioner
asserts that the Department should assume that the dumping margin for
all relevant transactions is at least as high as the highest dumping
margin on any other transaction. To do otherwise, Petitioner claims,
would eliminate or reduce the incentive to comply with the agency's
requests. Petitioner states that if the highest transaction margin is
not applied as BIA, respondents are encouraged to selectively withhold
relevant data, transaction-by-transaction, whenever doing so could
cause the Department to select a lower ``best information'' margin.
Thus, Petitioner states, only when Chin Jun's margin on any individual
transaction is the highest margin for any company should Chin Jun's own
margins be used as BIA.
Department's Position
We are using a total BIA rate for Premier due to multiple failures
on its part to supply information, including the failure to provide, at
verification, certain information which was within Premier's control.
In addition to its failure to provide factors information on a
transaction-specific basis, Premier was unable to identify its
suppliers accurately or provide the quantities of merchandise supplied
to the company during the period of review. See Memorandum from
Analysts to File: Verification Report for Premier Bearing and
Equipment, Ltd. (October 31, 1995). Premier did not supply information
necessary to connect its transaction-specific U.S. sales reporting with
the appropriate FOP data necessary to establish FMV. However, we
consider Premier to be a cooperative respondent in this review. We note
that Premier provided timely responses to our initial and supplemental
questionnaires and participated in a complete verification of all data
that it submitted in this review. Therefore, we applied to all U.S.
sales, as cooperative total BIA, the highest calculated rate in this
review period.
The Allied-Signal case Premier cites does not support its claim
that the Department's choice of a BIA rate for Premier is improperly
adverse. The Allied-Signal court noted in its opinion that the critical
difference between first-tier (uncooperative) and second-tier
(cooperative) BIA treatment lay in the range of LTFV margins subject to
consideration for BIA purposes in the determination underlying the
version of the two-tiered approach upheld in that case (see 996 F.2d at
1191). Allied-Signal clearly permits a second-tier margin to be based
on the highest margin for any respondent in the current review, even if
a first-tier margin is also based on the same value.
As indicated in our response to Comment 29, the fact that non-
responsive firms received a lower margin than Premier in the
Preliminary Results was due to a clerical error. Non-responsive firms
have not received a lower margin than the second-tier margin we have
assigned to Premier in these final results.
Chin Jun provided most of the information we requested but failed
to provide FOP information with respect to certain models. We did not
have publicly available FOP data which we could use for the models for
which Chin Jun failed to supply such data. We do not accept Chin Jun's
argument that, for these models, we should use factors data from a
different PRC-based producer, as such data constitute business
proprietary information. Further, using data from another producer
might encourage respondents to withhold data on less-efficiently
produced models in the expectation that the missing data would be
provided based on the experience of more efficient producers of the
same models. Therefore, we have determined that the it is appropriate
to use BIA to establish the dumping margins for the U.S. sales affected
by the lack of FOP data.
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, the Department can use BIA
not only when a party ``refuses'' but also when a party is ``unable''
to provide information.
Under our BIA methodology, there are two general types of BIA,
i.e., ``total BIA'' and ``partial BIA.'' We use ``total BIA'' for a
respondent whose reporting or verification failure is so extensive as
to make its entire response unreliable; in this situation, we determine
the respondent's entire dumping margin on the basis of BIA. We use
partial BIA, as we have here for Chin Jun, when a party's responses are
deficient in limited respects yet they are still reliable in most other
respects. In a ``total BIA'' situation, the choice of a particular BIA
rate is dependent on whether we consider the respondent to have been
``cooperative'' or ``uncooperative'' during the review. In a ``partial
BIA'' situation, in contrast, we regard the respondent as being
cooperative and the flaws are not so significant or extensive that the
response as a whole is unusable.
[[Page 6211]]
Instead, the level of partial BIA depends on the size and nature of the
deficiency and the degree to which the deficiency affects the rest of
the response.
Regardless of the particular type of BIA we use, we do not apply a
neutral figure as BIA, except where there is an inadvertent gap in the
record or where a minor or insignificant adjustment is involved. None
of these situations applies to Chin Jun in this case. BIA is intended
to be adverse, even in a ``partial BIA'' situation, because one purpose
of the BIA provision of the statute is to induce respondents to provide
timely, complete and accurate information. Chin Jun's claim that we may
use an adverse inference only if we have found that a party ``has
failed to cooperate by not acting to the best of its ability to comply
with a request for information'' (citing section 773(e)(2)) does not
apply to this review because this review is being conducted under the
Act as it stood on December 31, 1994, which did not contain this
provision. Chin Jun's recourse to Allied-Signal is likewise misplaced.
Although the Department's choice of BIA rejects the low-margin
information Chin Jun proposes over higher-margin BIA, Chin Jun has not
shown that the higher-margin information is ``demonstrably less
probative of current conditions,'' as required by Allied-Signal.
Because Chin Jun did not provide FOP information which would allow us
to calculate margins for certain models, there are no data on record
showing the actual rates for these models to be less than 25.56
percent, which is the highest rate determined in this review.
Therefore, as BIA, we have applied this rate to those U.S. sales
affected by the missing FOP information.
Comment 31
Chin Jun states that, for the preliminary results, the dumping
margins and sales value for Wafangdian and Jilin are aberrational. Chin
Jun notes that the number of sales that these two companies had
compared to the total sales that the Department reviewed for this
administrative review is small and that the highest rate calculated for
any other exporter in the preliminary results for this review is 12.06
percent while Wafangdian received a rate of 75.87 percent and Jilin
received a rate of 60.91 percent. Moreover, Chin Jun presumes that it
is probable that all companies, except Wafangdian and Jilin, will have
final antidumping rates of less than 12 percent. As such, Chin Jun
contends that Wafangdian's and Jilin's dumping margins are aberrational
in all respects and should not be used as the basis for BIA for any of
Chin Jun's transactions.
Department's Position
As a result of corrections and changes noted elsewhere, we have
recalculated respondents' margins for these final results. The highest
rate for this review period is 25.56 percent. As we explained in our
response to Comment 30, this is an appropriate cooperative-BIA rate for
those U.S. sales for which Chin Jun was unable to supply factors data.
Comment 32
Chin Jun claims that the Department applied BIA to certain sales of
models for which it had provided FOP data. Therefore, Chin Jun argues,
the Department should not use BIA to establish FMV for these models.
Department's Position
We agree with Chin Jun. As discussed in our response to Comment 26,
we have corrected clerical errors in the identifying model numbers.
This allows us to compare sales data for the models in question with
the corresponding factors data.
Comment 33
Chin Jun notes that the Department used a profit rate of 10.85
percent based on information contained in the SKF report. Chin Jun
points out that SKF India is related to SKF Sweden and, therefore, the
transfer prices and other related-party transactions between parent and
subsidiary could radically affect profit margins. Thus, Chin Jun
argues, the Department should use the statutory minimum of eight
percent to establish a surrogate value for profit.
Petitioner responds that it is not clear what Chin Jun's comments
regarding SKF India's relationship to SKF Sweden are supposed to mean
nor what results would obtain if the claim were true. In any event,
Petitioner asserts, Chin Jun did not provide any evidence that related-
party transactions occurred or, if they did, that they affected SKF
India's profits or other results in any way. Petitioner argues that the
Department should use SKF India's actual profit in the final results,
recalculated to reflect the changes to overhead and SG&A as asserted in
Comment 2
Department's Position
We agree with Petitioner. While calculating the profit ratio using
the data provided in the SKF report, we noted that SKF India is related
to SKF Sweden. Chin Jun did not provide any information to support its
statement that the transactions between SKF India and its Swedish
parent could radically affect profit margins. Therefore, for the final
results, we have applied the calculated profit ratio based on the SKF
India's Annual Report as the surrogate value for profit.
Comment 34
Transcom Inc. (Transcom) and L&S Bearing Company (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 the review is unlawful.
Transcom and L&S state that, for this review, there were various
companies from which they purchased subject merchandise, none of which
received a questionnaire or was 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.
In particular, Transcom says that it purchased bearings from Gold
Hill International Trading and Services Company (Gold Hill), a Hong
Kong-based company. Transcom contends that Gold Hill did not request a
review, was not named in the notice of initiation for this review, and
did not receive a questionnaire or any other request for information or
participation in this review. Transcom claims that the Department
appears to have imposed punitive assessment and deposit rates on Gold
Hill by including Gold Hill's exports under the BIA rates for ``all
other'' PRC exporters 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 deposit
rate on the 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 CFR 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
[[Page 6212]]
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 1993) (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''
rate is not in accordance with law (citing Federal Mogul Corp. v.
United States, 862 F. Supp. 384 (CIT 1994), and UCF America, Inc. v.
United States, 870 F. Supp. 1120, 1127-28 (CIT 1994) (UCF America)).
Based on these 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 argues that the Department's statement that all exporters
of subject merchandise are ``conditionally covered by this review''
(Initiation of Antidumping Duty Administrative Reviews and Request for
Revocation in Part (Initiation Notice), 59 FR 43537, 43539 (August 24,
1994)) is inadequate in that it fails to explain under what
``conditions'' exporters are covered and whether such ``conditions''
were met. If the statement is meant to include unconditionally all
unnamed exporters, Transcom asserts that it is contrary to the
regulatory requirement at 19 CFR 353.22(a)(1) that the review cover
``specified individual producers or resellers covered by an order.''
Because Gold Hill was never served notice that it was subject,
conditionally or otherwise, to review, Transcom claims that the
Department is precluded from applying a punitive rate to the company's
exports.
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 at 1574 and citing Mitsui & Co.,
Ltd. v. United States, 18 CIT 185 (March 11, 1994), and Usinor).
Transcom states that, if the Department assigns the unreviewed
exporters the ``all other'' BIA rate, the Department should not apply
this rate to exports of TRBs by Gold Hill, a private trading company
located in Hong Kong. Transcom contends that there is no basis for
assessing it with the punitive Chinese ``all other'' rate on the
premise that it failed to demonstrate independence from the central
Chinese government; as a Hong Kong company, it necessarily cannot be
subject to such control.
L&S requests that the Department liquidate the company's imports
which came from companies that were not specifically reviewed at the
entered rate rather than the punitive ``PRC-wide'' rate. L&S states
that the prospective deposit rate for these unreviewed companies should
be 2.96 percent--the ``all others'' rate in the initial investigation.
Petitioner notes that the Preliminary Results state at 49576 that,
``for other non-PRC exporters of subject merchandise from the PRC, the
cash deposit rate will be the one applicable to the PRC supplier of
that exporter.'' Petitioner claims that this situation clearly includes
Gold Hill. Petitioner also states that it is its intention that all
exporters are covered by this review and points out that the
Department's notice of initiation at 43539 specified that all ``other
exporters . . . are conditionally covered.'' Therefore, Petitioner
argues, Gold Hill and all other suppliers of Transcom not entitled to a
separate rate should be expressly listed in the final results as among
those to which the ``PRC rate'' applies.
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 that enterprise a single
rate, except for those exporters which demonstrate an absence of
government control, both in law and in fact, with respect to exports.
We discussed our guidelines concerning the de jure and de facto
separate-rates analyses, as well as the company-specific separate-rates
determinations, in the Preliminary Results at 49572-49573. We have
determined that companies in the government-controlled enterprise
failed to respond to our requests for information and, accordingly, we
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'). 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 I, and 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 states specifically
that interested parties must list the ``specified individual
producers'' to be covered by the review (see 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 II at 788 (``(i)n 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
[[Page 6213]]
become the new cash deposit rate for that company'')).
In these reviews, numerous companies named in the notice of
initiation did not respond to our questionnaires. On July 26, 1994, we
sent a letter to the PRC embassy in Washington and to the Ministry of
Foreign Trade and Economic Cooperation (MOFTEC) in Beijing, requesting
the identification of TRB producers and manufacturer, as well as
information on the production of TRBs in the PRC and the sale of TRBs
to the United States. 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. On August 31, 1994
we sent a copy of our letter and the questionnaire directly to the
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 POR.
Because we did not receive information concerning many of the
companies named in the notice 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 assign a ``PRC rate'' to that enterprise. As 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 this review as well as the cash deposit rate
for future entries.
We acknowledge a recent CIT decision cited by Transcom and by L&S,
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.
Section 751(a) requires the Department to determine individual dumping
margins for each known exporter or producer. As discussed above, in NME
cases, all producers and exporters which have not demonstrated their
independence are deemed to comprise a single exporter. 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 for PRC exporters is unnecessary.
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 this review 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 the assertion by Transcom and L&S 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. The company 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.
Furthermore, Transcom's argument that the BIA-based PRC-wide rate
cannot be applied to exports by Gold Hill because Gold Hill is a Hong
Kong company rather than a PRC company are also unfounded. Because Gold
Hill's Chinese suppliers did not respond to the Department's
questionnaire, we were unable to determine, with respect to sales by
Gold Hill, whether Gold Hill or the Chinese suppliers were the first
sellers in the chain of distribution to know that the merchandise they
sold was destined for the United States. See Yue Pak, Ltd. v. United
States, Slip Op. 96-65, at 6 (CIT April 18, 1996)(citing section
773(f)). When resellers choose to use uncooperative suppliers that are
under a dumping order, they must bear the consequences. See Yue Pak at
16. Otherwise, uncooperative PRC producers would be free to hide behind
and continue exporting through low-rate Hong Kong exporters.
Comment 35
Petitioner opposes revocation of the order with respect to
Shanghai, claiming: (1) That it is unlikely the final results in the
three reviews at issue would demonstrate consecutive periods of de
minimis margins for Shanghai; (2) under the other circumstances of this
case, it is likely that those persons will in future sell subject
merchandise at less than FMV; and (3) Shanghai's three years of no
dumping would be too remote in time to serve as a basis for revocation.
Petitioner claims that the preliminary de minimis margin for
Shanghai was based on results that contain serious and obvious errors.
Petitioner contends that as a result of corrections and changes made
due to such errors, which have been noted elsewhere, the final results
will likely yield increased dumping margins.
Petitioner also argues that, although a joint-venture company with
a producer in a market-economy country, Shanghai is still mostly owned
by the PRC-based partner and, thus, all of the people of the PRC.
Therefore, Petitioner asserts, it would be irrational to ignore
Shanghai's relationship to other producers and exporters for purposes
of revocation. Petitioner notes that, in those instances in which the
Department has revoked orders in NME cases, it has always done so in
toto, citing Titanium Sponge From Georgia, Revocation of the
Antidumping Finding, 60 FR 57219 (November 14, 1995), and Ceiling Fans
From the People's Republic of China: Final Results of Changed
Circumstances Review and Revocation of Antidumping Duty Order, 60 FR
14420 (March 17, 1995). Petitioner argues that the Department has never
revoked an order applicable to an NME country with respect to an
individual company previously found to have dumped merchandise in the
United States.
Furthermore, Petitioner claims, the Department cannot reasonably
predict that Shanghai is unlikely to make sales at less than FMV in the
future. Because of recent legislative changes under the Uruguay Round
Agreements, Petitioner argues, ESP adjustments (discussed in Comment 14
above) will be mandated in
[[Page 6214]]
reviews subsequent to this review. Petitioner asserts that, even if the
Department holds to the position taken in the preliminary results and
makes no such adjustment in this review, mandatory adjustments in
subsequent reviews are likely to result in higher margins.
Finally, Petitioner insists that congressional intent is that the
Department should always use the most up-to-date information available
(citing Freeport Minerals, 776 F.2d at 1032, Al Tech Specialty Steel
Corp. v. United States, 745 F.2d 632, 640, and H.R. Rep. No. 317, 96th
Cong., 1st Sess. 77 (1979)). Given that the three reviews in question
are behind schedule, Petitioner argues that a decision on revocation
should not be made until after the final results of the 1994-95 review
are known and have been verified.
Shanghai replies that the Department has, pursuant to its
regulations, the discretion to revoke the order with respect to
producers in NME countries and that Petitioner is asking the Department
to ignore the plain language of 19 CFR 353.25(a)(2)(i)-(iii). Shanghai
adds that nothing in the Department's regulations authorizes the
exclusion of NME producers from the scope of the revocation procedures.
Shanghai argues that all available evidence establishes that sales
at less than FMV are not likely in the future, asserting that, instead,
there is a clear pattern of sales at not less than FMV. Shanghai points
out that it has submitted written certification of its agreement to
immediate reinstatement in the future if the Department concludes that
Shanghai is engaged in sales at less than FMV. Shanghai also refutes
Petitioner's argument that the nature of its ``relationship'' to all
other PRC producers and exporters makes revocation of the order with
respect to Shanghai irrational. Shanghai states that, where Petitioner
assumes central planning and collaboration, the Department has found
none, hence, its granting of separate rates to Shanghai and others.
Finally, Shanghai argues, if the Department determines to revoke
the order with respect to Shanghai, the decision will be based on the
results of the three most recent reviews. Shanghai states that there is
no more timely information on which to base this decision than the
current and the two preceding reviews.
Department's Position
We agree with Shanghai. The regulations do not distinguish between
market-economy companies'' and NME companies'' eligibility for
revocation. We have determined that Shanghai is entitled to a rate
separate from other PRC producers and exporters. Further, Shanghai has
complied with sections 353.25(b) and 353.25(a)(2)(iii) of the
Department's regulations.
Finally, although the three reviews in question have been delayed,
it was not due to any fault on the part of Shanghai. Additionally,
these reviews do represent the most up-to-date information on which to
base this decision.
Final Results of Review
As a result of our analysis of the comments we received, we
determine the following weighted-average margins to exist:
------------------------------------------------------------------------
Margin
Manufacturer/exporter (percent)
------------------------------------------------------------------------
Premier Bearing and Equipment, Limited 1..................... 25.56
Guizhou Machinery Import and Export Corporation.............. 1.22
Henan Machinery and Equipment Import and Export Corp......... 0.16
Luoyang Bearing Factory...................................... 0.00
Shanghai General Bearing Company, Ltd........................ 0.04
Jilin Machinery Import and Export Corporation................ 25.56
Chin Jun Industrial Ltd...................................... 4.28
Wafangdian Bearing Factory................................... 1.28
Liaoning Machinery Import and Export Corp.................... 4.01
China National Machinery Import and Export Corp.............. 0.00
China Nat'l Automotive Industry Import and Export Corp....... 0.46
Tianshui Hailin Import and Export Corp....................... 0.00
Zhejiang Machinery Import and Export Corp.................... 4.32
PRC Rate 2................................................... 25.56
------------------------------------------------------------------------
\1\ As cooperative BIA, we assigned 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 that
supplied an adequate response in this review.
\2\ Parties that were named in the initiation but are not listed above
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 the firms that
received the PRC rate.
We determine that, for the period June 1, 1993 through May 31,
1994, Shanghai had a weighted-average antidumping duty margin of 0.04
percent. We further determine that Shanghai has sold subject
merchandise at not less than FMV for three consecutive review periods,
including this review period, and Shanghai has made the appropriate
certification. Therefore, the Department is revoking the order with
respect to subject merchandise produced and exported by Shanghai in
accordance with section 751(c) of the Act and 19 CFR 353.25.
This revocation applies to all entries of subject merchandise
entered, or withdrawn from warehouse, for consumption on or after June
1, 1994. The Department will order the suspension of liquidation ended
for all such entries and will instruct the Customs Service to release
any cash deposit or bonds. The Department will further instruct the
Customs Service to refund, with interest, any cash deposits on post-
June 1, 1994 Shanghai entries. In addition, the Department will
terminate the review covering subject merchandise with respect to
Shanghai's sales during the period June 1, 1994 through May 31, 1995,
which was initiated August 16, 1995 (60 FR 42500). The Department will
also terminate the review covering subject merchandise with respect to
Shanghai's sales during the period June 1, 1995 through May 31, 1996
which was initiated August 8, 1996 (61 FR 41373).
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 Machinery,
Henan, Jilin, Luoyang, Liaoning, Chin Jun, Tianshui, Zhejiang, CMC,
China National Automotive Industry Import and Export Guizhou, and
Wafangdian), the cash deposit rates will be the rates for these firms
established in these final results of review; (2) for Xiangfan
International Trade Corporation, which we determine to be entitled to a
separate rate, the rate will continue be that which currently applies
(8.83 percent); (3) for all remaining PRC exporters, all of which were
found not to be entitled to separate rates, the cash deposit will be
25.56 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.
[[Page 6215]]
This notice serves as a reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as a reminder to parties subject to APOs of
their responsibility concerning disposition of proprietary information
disclosed under APO in accordance with 19 CFR 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.
This administrative review, revocation, and notice are in
accordance with section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and
19 CFR 353.22 and 353.25.
Dated: February 3, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-3356 Filed 2-10-97; 8:45 am]
BILLING CODE 3510-DS-P
