[Federal Register Volume 62, Number 25 (Thursday, February 6, 1997)]
[Notices]
[Pages 5592-5612]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-2877]
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DEPARTMENT OF COMMERCE
[A-588-703]
Certain Internal-Combustion Industrial Forklift Trucks From
Japan; Final Results of Antidumping Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty administrative
review.
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SUMMARY: On August 2, 1996, the Department of Commerce published the
preliminary results of administrative review of the antidumping duty
order on certain internal-combustion industrial forklift trucks from
Japan. The review covers three manufacturers/exporters. The period of
review is June 1, 1994 through May 31, 1995.
Based on our analysis of the comments received, we have made
changes, including corrections of certain inadvertent programming and
clerical errors, in the margin calculation for Toyota Motor
Corporation. Therefore, the final results differ from the preliminary
results. The final weighted-average dumping margins for the reviewed
firms are listed below in the section entitled ``Final Results of the
Review.''
EFFECTIVE DATE: Febraury 6, 1997.
FOR FURTHER INFORMATION CONTACT: Thomas O. Barlow, Davina Hashmi or
Kris Campbell, at Import Administration, International Trade
Administration, U.S. Department of Commerce, Washington, D.C. 20230;
telephone: (202) 482-4733.
SUPPLEMENTARY INFORMATION:
The Applicable Statute
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (the Act), are references to the provisions effective
January 1, 1995, the effective date of the amendments made to the Act
by the Uruguay Round Agreements Act (URAA). In addition, unless
otherwise indicated, all citations to the Department's regulations are
to the current regulations, as amended by the interim regulations
published in the Federal Register on May 11, 1995 (60 FR 25130).
Background
On August 2, 1996, the Department of Commerce (the Department)
published the preliminary results of administrative review of the
antidumping duty order on certain internal-combustion industrial
forklift trucks from Japan (61 FR 40400)(Preliminary Results). The
review covers three manufacturers/exporters. The period of review (the
POR) is June 1, 1994, through May 31, 1995. We invited parties to
comment on our Preliminary Results. We received briefs and rebuttal
briefs on behalf of NACCO Materials Handling Group, Inc. (petitioners),
and Toyota Motor Corporation and Toyota Motor Sales, U.S.A., Inc.
(Toyota). At the request of Toyota, a hearing was scheduled but was
subsequently canceled at Toyota's request. The Department has conducted
this administrative review in accordance with section 751 of the Act.
Scope of Review
The products covered by this review are certain internal-
combustion, industrial forklift trucks, with lifting capacity of 2,000
to 15,000 pounds. The products covered by this review are further
described as follows: Assembled, not assembled, and less than complete,
finished and not finished, operator-riding forklift trucks powered by
gasoline, propane, or diesel fuel internal-combustion engines of off-
the-highway types used in factories, warehouses, or transportation
terminals for short-distance transport, towing, or handling of
articles. Less-than-complete forklift trucks are defined as imports
which include a frame by itself or a frame assembled with one or more
component parts. Component parts of the subject forklift trucks which
are not assembled with a frame are not covered by this order.
Imports of these products are classified under the following
Harmonized Tariff Schedules (HTS) subheadings: 8427.20.00, 8427.90.00,
and 8431.20.00. The HTS item numbers are provided for convenience and
Customs purposes. The written descriptions remain dispositive.
This review covers the following firms: Toyota, Nissan Motor
Company (Nissan), and Toyo Umpanki Company, Ltd. (Toyo).
Use of Facts Available
In accordance with section 776 of the Act, we have determined that
the use of facts available is appropriate for certain portions of our
analysis of Toyota's data. For a discussion of our application of facts
available, see Comments 1 through 3, below.
[[Page 5593]]
Changes Since the Preliminary Results
Based on our analysis of comments received, we have made certain
corrections that changed our results. We have corrected certain
programming and clerical errors in our Preliminary Results, where
applicable; they are discussed in the relevant comment sections below.
Analysis of Comments and Responses
Issues raised in the case and rebuttal briefs by parties to this
administrative review are addressed below.
Toyota's Comments
Comment 1
Toyota provided the following general comments regarding the
Department's use of the facts available in this review.1 Toyota
asserts that the Department's use of facts available for the
Preliminary Results is punitive and is disproportionate to any
perceived deficiencies at verification. Toyota suggests that the facts
available are not corroborated--and in fact are contradicted--by
available evidence, contrary to law and Department precedent.
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\1\ We address Toyota's specific comments regarding the use of
facts available with regard to certain selling expenses and home
market credit revenue in Comments 2 and 3, respectively.
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Toyota asserts that the Department's use of facts available is
governed by a two-step inquiry (citing Preliminary Results of
Antidumping Duty Administrative Review: Certain Welded Carbon Steel
Pipe and Tube From Turkey, 61 FR 35188, 35189 (1996), and Final
Determination of Sales at Less Than Fair Value: Certain Pasta from
Turkey, 61 FR 30309, 30312) (Pasta from Turkey)). First, Toyota states
that section 776(a)(2)(D) of the Act allows use of facts otherwise
available if an interested party provided information but it cannot be
verified and notes that the SAA directs that such facts available must
be ``reasonable to use under the circumstances'' (citing the SAA at
869). Second, Toyota states that section 776(b) provides that, in
selecting from facts available, adverse inferences may be drawn only if
the ``interested party has failed to cooperate by not acting to the
best of its ability to comply with a request for information * * *.''
Toyota argues that perceived deficiencies in the verification of its
reported information are not sufficient to allow the Department to
resort to disproportionately punitive adverse inferences, given that
Toyota's deficiencies are far from a general failure to cooperate with
requests for information.
Toyota asserts that it responded fully and timely to questionnaires
in this review, prepared a substantial amount of documentation for the
verification, and made every effort to provide requested documents.
Toyota asserts that the Department has no basis for concluding that
Toyota failed to cooperate and the Department should not use adverse
inferences and punitive facts available.
Toyota states that a comparison of the perceived deficiencies in
Toyota's responses with past occasions in which the Department has been
confronted with deficiencies, but did not draw adverse inferences,
illustrates that the use of adverse facts available against Toyota was
unwarranted (citing, among others, Chrome-Plated Lug Nuts From Taiwan;
Preliminary Results of Antidumping Duty Administrative Review and
Termination in Part, 61 FR 35724, 35725 (1996)).
Toyota further states that a comparison of the perceived
deficiencies in its response with past occasions where the Department
has drawn adverse inferences against interested parties also
illustrates that adverse inferences against Toyota in this case were
unwarranted. First, Toyota asserts that it did not fail to submit a
questionnaire response (citing adverse inferences drawn as a result of
failure to submit a response in, among others, Final Determination of
Sales at Less Than Fair Value: Large Newspaper Printing Presses and
Components Thereof, Whether Assembled or Unassembled, From Germany, 61
FR 38166, 38167 (1996) (LNPP from Germany)).
Second, Toyota notes that its response was not wholly unverifiable
(citing adverse inferences drawn as a result of the complete failure of
verification in Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From France, et al; Preliminary Results of
Antidumping Duty Administrative Reviews, Termination of Administrative
Reviews, and Partial Termination of Administrative Reviews, 61 FR
35713, 31716 (1996)).
Third, Toyota states that it has never refused to provide
information to the Department (citing adverse inferences drawn due to a
respondent's refusal to provide information in Pasta from Turkey, 61 FR
30309, 30312 (1996).
Toyota concludes that, given these facts and precedent, neither the
statute nor the Department's practice permit the use of adverse
inferences against Toyota; therefore, to the extent the Department uses
facts available, the Department must select facts which are reasonable
under the circumstances (citing LNPP from Germany, 61 FR at 38179, and
the SAA at 869).
Petitioners respond that the record indicates clearly that the
Department was unable to verify a substantial portion of Toyota's home
market sales questionnaire response. Petitioners assert that, by the
express terms of the statute, if the Department could not verify
Toyota's data, the Department was not permitted by law to rely on the
information to calculate Toyota's dumping margins (citing section 776
of the Act). Petitioners contend that the Department, therefore, must
base its determination on the facts otherwise available.
Petitioners argue that the cases Toyota cites as instances where
the Department applied adverse inferences do not support Toyota's claim
that the Department was overly punitive in this case. Petitioners
assert that, in those instances, the Department generally selected the
highest rate from another respondent or prior review; conversely, in
this case the Department did not completely reject Toyota's response
even though it could not verify a substantial portion of it.
Petitioners assert that, under these circumstances, the Department was
not making an adverse inference but instead was simply following the
requirements of the statute. Petitioners conclude that Toyota's claim
that the Department made an unnecessarily punitive adverse inference
when it relied on the facts otherwise available is not valid.
Department's Position
We disagree with Toyota with respect to its general comments
regarding the use of the facts available in this review. Our
determination in this regard is consistent with the statute and our
practice. We determined, in accordance with section 776(a) of the Act,
that the use of facts available for certain home market selling
expenses and home market credit revenue is appropriate for Toyota
because we were unable to verify the accuracy of the information Toyota
submitted. As our discussions in response to Comments 2 and 3, below,
make clear, despite our efforts at verification, we were unable to
verify the information in question sufficiently to accept it for our
analysis.
In addition, we have determined that, by not providing certain
basic verification documents that were essential to the establishment
of the accuracy of the data submitted (e.g., expense ledgers for
certain selling expenses and an affiliated company's (Toyota Finance
Corporation, ``TFC'') financial statements), Toyota did not cooperate
to the best of its ability to
[[Page 5594]]
comply with our requests for such information. Accordingly, our resort
to an adverse inference with respect to these items is appropriate and
fully in accord with law. See section 776(b) of the Act.
Contrary to Toyota's contention that this result is overly
punitive, we have used in our analysis all data submitted by the
company that we were able to verify. While we have determined that
Toyota has not cooperated to the best of its ability with respect to
the selling expense and credit revenue items, we find that the nature
and extent of the deficiencies in Toyota's information do not undermine
the credibility of other information that it submitted during this
review. Accordingly, we have calculated Toyota's dumping rate using all
data it submitted except for the specific information that we were
unable to verify.
The cases Toyota cites do not demonstrate that we have departed
from our practice in applying the facts available in this review. These
cases illustrate that, consistent with the SAA, we resolve such matters
on a case-by-case basis by examining the nature and extent of any
deficiencies and the level of cooperation by respondent (see SAA at
868-870). After such an examination we determine whether to apply
adverse inferences. Neither the statute nor our practice limits our use
of adverse inferences to completely unresponsive firms. Rather, we may
draw such inferences whenever a party fails to cooperate by not acting
to the best of its ability to comply with a request for information. As
discussed below, the information requests at issue were routine
verification requests that in no way constituted an unreasonable burden
on Toyota and, therefore, we determined that an adverse application of
facts available is appropriate for these items.
Comment 2
Toyota asserts that the Department's use of the facts available
with respect to the company's reported home market indirect selling
expenses, home market direct advertising, and U.S. direct selling
expenses incurred in Japan is inappropriately punitive. Toyota notes
that, with regard to home market indirect selling expenses and direct
advertising, Toyota prepared the necessary documentation in support of
the expenses, and the Department verified the expenses with no
discrepancies, but Toyota was simply unable to provide further details
requested on site. With regard to direct U.S. selling expenses incurred
in Japan, Toyota notes that it only had sufficient time to correct an
error it detected in preparing for verification and did not have
sufficient time to prepare the reconciliation between the actual
expenses and its financial statements.
Toyota claims that it has gone through two successful verifications
and states that it prepared for verification in this review in light of
the information and level of documentation examined at previous
verifications. Toyota contends that, when the Department requested
additional documentation not anticipated by Toyota, the company was not
always able to obtain the requested documents in the time permitted.
Toyota argues that, where a company prepares a substantial amount of
information for verification and acts to the best of its ability to
obtain documents requested at verification, but is unable to obtain
such in the limited time-frame of verification, it is not appropriate
to penalize the company through use of punitive facts available.
Toyota claims that its home market expenses are significant and
states that the Department's level-of-trade analysis confirms that the
company performs extensive selling functions and incurs significant
selling expenses in connection with sales in the home market. Toyota
asserts that the Department's analysis for the Preliminary Results
pretends these significant expenses do not exist only in those parts of
the analysis when it is detrimental to Toyota, while assuming they do
exist whenever such an assumption is detrimental to the company. Toyota
states that this resulted in the following significant punitive and
compounding adjustments: (1) By not adjusting normal value (NV)
downward by the amount of these expenses, dumping duties were increased
on each U.S. truck equivalent to these expenses; (2) by not including
these expenses in the calculation of the company-wide profit used in
the constructed export price (CEP) profit calculation, the resulting
CEP profit was increased; (3) by including these expenses in the
calculation of constructed value (CV) and then deducting from CV only
the much smaller amount of direct and indirect selling expenses in
deriving the adjusted CV for comparison to CEP, the CV was increased;
and (4) by deducting these expenses from the home market prices used in
the cost test, the number of sales found to be below cost increased.
Toyota contends that these calculations demonstrate that, without
regard to any reasonable determination about the accuracy of the
expenses, at various steps in its calculations the Department applied
whatever number was adverse to Toyota, effectively compounding the
penalty several times through internally inconsistent applications of
the adjustments. Toyota argues that this is an excessive and
duplicative penalty out of proportion with perceived deficiencies,
particularly since the Department reviewed substantial documents that
supported the reported expenses at verification.
Petitioners contend that the Department's decision to reject a
certain portion of Toyota's selling expenses was not punitive and notes
that Toyota has proposed no reasonable alternatives. Petitioners note
that the Department cannot accept Toyota's data simply because the
company attempted to comply with requests for information and, given
there were no other reasonable options to take, the Department
correctly rejected the claimed expenses.
Petitioners argue that the Department's reliance on the reported
expenses for purposes of conducting the cost test and calculating CV
was proper and that Toyota cannot expect to benefit from its inability
to pass verification. Furthermore, the alteration of Toyota's cost of
production (COP) data in a way to benefit Toyota as a result of a
failed verification would be grossly unfair and would contradict the
fundamental purpose of the verification provisions of the statute.
Department's Position
We disagree with Toyota. In light of Toyota's inability to
establish the accuracy of the data that it submitted regarding its home
market direct advertising and home market indirect selling expenses, we
were unable to include these reported expenses as adjustments to home
market price in determining the NV. However, we included these expenses
in our analysis for purposes of establishing the adjusted home market
price for use in the cost test and in the calculation of CV, and we
used Toyota's reported direct advertising expenses incurred on U.S.
sales in our calculation of CEP, because by not doing so we would have
rewarded Toyota for its failure to establish the accuracy of these
expenses at verification.
This approach is consistent with the Department's practice in other
cases. For instance, in Antifriction Bearings (Other Than Tapered
Roller Bearings) and Parts Thereof From France, et al: Final Results of
Antidumping Duty Administrative Reviews, 62 FR 2081, 2090-2092 (January
15, 1997) (AFBs 6), we stated, ``Where we have found that a company has
not acted to the best of its ability in reporting the adjustment
[[Page 5595]]
* * *, we have made an adverse inference in using the facts available
with respect to this adjustment, pursuant to section 776(b) of the
Tariff Act * * *. The treatment of positive [home market] billing
adjustments as direct adjustments is appropriate because disallowing
such adjustments would provide an incentive to report positive billing
adjustments on an unacceptably broad basis in order to reduce NV and
margins.'' This approach is clearly sanctioned by the SAA at 870:
``Where a party has not cooperated, Commerce * * * may employ adverse
inferences about the missing information to ensure that the party does
not obtain a more favorable result by failing to cooperate than if it
had cooperated fully. In employing adverse inferences, one factor the
agencies will consider is the extent to which a party may benefit from
its own lack of cooperation.''
The same approach with respect to Toyota's selling expenses is
appropriate, given Toyota's failure to provide basic source
documentation at verification. The expenses at issue concern Toyota's
reported home market indirect selling expenses, home market direct
advertising and direct advertising expenses incurred in Japan
attributable to U.S. sales. The verification report states clearly
that, with regard to its claimed indirect selling expenses and direct
advertising expenses, Toyota could not go below the level of a semi-
annual detail report to support its claimed expenses (Verification of
Home Market and Certain U.S. Sales, August 12, 1996, at 2 (Report)).
With regard to its direct U.S. selling expenses incurred in Japan, the
report states ``Toyota could not provide supporting documentation as a
bridge between the * * * expenses * * * and its financial statements.''
Report at 2. It is standard Department practice to review source
documentation at a level of detail greater than a semi-annual report
and to require documentation that ties reported expenses to a company's
financial statements. Accordingly, we were unable to verify the
accuracy of these claimed expenses.
Our verification report reveals that, while Toyota succeeded in
providing detailed support documentation for other expenses, it was
unprepared to provide sufficient and necessary documentation to support
the expenses at issue. Our verification report also discusses Toyota's
lack of preparation which resulted in delays in completing certain
segments, even though we extended our verification in an attempt to
cover as many topics as possible. Report at 3.
Thus, as we made clear in the report, Toyota was unprepared to
provide support for certain claimed expenses. This is true despite
clear instructions in the Department's verification outline of the need
to be prepared to provide such documentation. Accordingly, we do not
find persuasive Toyota's statements that it prepared for verification
based on the information and level of documentation examined at
previous verifications and that the company was unfairly surprised by
the Department's information requests. Each review is a separate,
independent segment of the proceeding; what may or may not be required
at a particular verification does not override the verification outline
and does not govern what is expected of a respondent at a subsequent
verification. The verification outline we provided to Toyota for this
review made very clear that certain documents would be required (see
Sales Verification Outline, Toyota Motor Corporation, Toyota Motor
Sales, USA, Inc., May 1, 1996).
As noted in response to Comment 1, because we could not verify the
relevant information, the use of facts available for these expenses is
an appropriate measure in this review. In addition, in light of
Toyota's failure to provide basic source documentation regarding the
expenses at issue, along with the fact that the company was given
sufficient notice that such documentation would be required at
verification, we have determined that Toyota has failed to cooperate by
not acting to the best of its ability to comply with our requests for
information. Therefore, we have resorted to adverse facts available
with regard to these expenses. Because we have no other reasonable
options under these circumstances, we have maintained our treatment of
these expenses for purposes of the final results. Accordingly, we have
denied the relevant expenses as adjustments to NV and have used the
expenses as reported for purposes of establishing the adjusted home
market price used in the cost test and for the calculation of CV. In
addition, we have used the reported direct advertising expenses
incurred in Japan attributable to U.S. sales in our calculation of CEP.
Finally, because Toyota provided this information in this
administrative review and it is, therefore, not secondary information,
we are not required to corroborate this information (see section 776(c)
of the Act).
Comment 3
Toyota contends that the Department was wrong to impute to home
market sales, as facts available, an amount for credit revenue because
Toyota did not earn such revenue and because it cooperated to the best
of its ability at verification in establishing the absence of such
revenue. Toyota also contends that, even if the Department is justified
in imputing credit revenue, the amount imputed is excessive. (In the
Preliminary Results, the Department added, as facts available, the
total credit revenue earned on relevant U.S. sales to NV.)
Toyota states that materials and oral information presented to the
Department at verification support the fact that TFC, an affiliated
company, did not provide financing for the sale of subject merchandise
to Toyota's customers in Japan. Toyota claims that the verification
report indicates that TFC officials were unable, not unwilling, to
provide a copy of TFC's financial statements, which the Department
requested in order to verify the absence of credit revenue earned by
Toyota or its affiliates on home market sales. Toyota states that it
was not given any advance notice that TFC's financial statements would
have to be provided at verification but that these documents were
simply requested at verification. Toyota asserts that TFC is a separate
corporation, TFC has no involvement in the sales under consideration,
and TFC was unable to obtain necessary clearances to release these
confidential documents in the time available, but it was able to make
its officials and certain other documents available on short notice.
Consequently, the Department was wrong to penalize Toyota.
Toyota also argues that it is improper to impute any credit revenue
to home market sales, particularly since under the new law any profit
earned by Toyota Motor Sales U.S.A., Inc. (TMS) on its credit revenue
is deducted from CEP and, given that the new law already neutralizes to
a degree any impact of credit revenue earned in the United States,
there is no need for the Department to make any adjustments to NV to
accomplish this purpose.
Toyota suggests that, even if the Department insists on adjusting
home market prices upward, the adjustment is punitive to a degree that
is disproportionate to the inability to provide TFC's financial
statements. Toyota points out that the adjustment goes beyond simply
neutralizing the benefit of U.S. credit revenue because (i) the credit
total revenue on relevant U.S. sales was offset to a significant degree
by a credit expense, and (ii) because the Department calculated the
profit to deduct from CEP without regard to the substantial credit
expenses associated with the credit revenues, the
[[Page 5596]]
Department's approach resulted in additional duties.
Petitioners respond that there is no dispute that the Department
requested TFC's financial statements and did not receive them.
Petitioners cite the verification outline and their pre-verification
comments to support their claim that Toyota should have been well aware
that a document as basic as TFC's financial statements would be
required at verification. Petitioners claim that Toyota's apparent
inability to produce such a basic document cannot absolve it of facing
the consequences of this omission.
Petitioners dispute Toyota's contention that the Department
responded to Toyota's failure to produce the financial statements with
an adverse inference by claiming that if the Department was drawing an
adverse inference, it would have made an adjustment to NV based on the
largest credit revenue reported on any U.S. sale, which it did not do.
Petitioners also argue that the Department should not adjust the U.S.
gross revenue applied to relevant home market sales with an offsetting
adjustment for the associated U.S. credit expense because the
Department already made an adjustment for credit expense in the home
market in its analysis and such an adjustment would provide Toyota with
a double deduction.
Department's Position
We disagree with Toyota. Toyota reported that it did not earn
credit revenue on home market sales. Whether Toyota in fact earned such
revenue was a legitimate inquiry for us to pursue at verification. As
discussed further below, based on the verification outline,
petitioners' pre-verification comments, and our specific requests at
verification, Toyota should have been prepared to provide us with TFC's
financial statements, a basic source document necessary to explore this
issue. By not providing Department officials with the financial
statements, Toyota did not provide the Department with the opportunity
to ascertain for itself whether the financial statements contained
information relevant to our inquiry.
Where an interested party fails to cooperate by withholding
information that we have requested, we may resort to the use of the
facts available, drawing inferences adverse to the party. See sections
776(a)(2)(A) and 776(b) of the Act. Because Toyota failed to provide us
with TFC's financial statements, we have determined that Toyota failed
to act to the best of its ability with respect to this issue by
withholding information. Therefore, we have relied on an inference that
is adverse to the interests of Toyota. Accordingly, as facts available,
we applied the transaction-specific gross revenue earned by Toyota
Motor Credit Corporation (TMCC) on relevant U.S. sales (revenue without
the corresponding offsetting credit expense) to the weighted-average
home market price of matched sales.
Based on the record of this review, Toyota cannot reasonably claim
that it had no advance notice that we would not request an examination
of TFC's financial statements. The verification outline clearly
indicated that this type of document would be subject to review. Given
that TFC is a consolidated subsidiary of TMC, Toyota should have made
such a document available to Department officials for inspection. In
addition, petitioners' pre-verification comments included a request
that the Department review TFC's financial statements (see Petitioners'
Comments, May 9, 1996 at 10). While such pre-verification comments do
not direct the Department's inquiry at verification, the issue of TFC's
involvement in home market transactions has been a recurring one in
administrative reviews of this order, and petitioners' request provided
Toyota with additional notice that the issue was subject to inquiry.
We note that the information Toyota provided at verification did
not allow us to establish the accuracy of Toyota's claim that it did
not earn credit revenue on home market sales. The written material it
provided at verification, and to which Toyota refers in its comments,
is limited to ``a brochure given to dealers which describes the
activities provided by TFC to dealers.'' Report at 11. This brochure is
the only written material Toyota provided at verification. The TFC
officials we interviewed to discuss the relevant issue, as the
verification report indicates, ``were unable to provide us with TFC's
financial statements nor any other documentation to show the breakout
of activities engaged in by TFC.'' Report at 11. Therefore, the
interview was of limited value in establishing the accuracy of Toyota's
claim that TFC is not involved in the financing of merchandise in the
home market.
We further note that our purpose is not to neutralize the benefit
Toyota obtained on financing certain U.S. sales, but rather is a
response to Toyota's failure to comply with a specific request to
produce a document that would permit us to ascertain whether TFC was
involved in home market transactions. Toyota's arguments that the new
law accounts for profits earned and that it was required to report
revenue earned on U.S. sales are irrelevant, given our purpose for
applying adverse facts available. Finally, we agree with petitioners
that adjusting the U.S. gross revenue for the credit expense portion of
the U.S. sale would provide Toyota with two adjustments for credit
expense because we have a credit expense already in our calculation of
NV.
Comment 4
Toyota contends that the Department applied the cost test on an
overly narrow product basis by performing a separate 80-20
``substantial quantities'' test for each individual forklift sold in
the home market instead of performing it on the group or category of
products that are under consideration for the determination of normal
value. Toyota asserts that, as a result of this misapplication of the
80-20 test, if any single truck was found to be below cost, it was
automatically excluded from the database because 100 percent of the
home market sales of that truck were below cost. Toyota argues that
applying the test to each individual truck makes no sense and
effectively writes the ``substantial quantities'' provisions of section
773(b) out of the law.
Toyota claims that the law favors price-to-price comparisons over
CV. Toyota asserts that the Department's current practice is to apply
the test on a model-specific basis (citing the SAA at 832). Toyota
further asserts that the Department has defined ``model'' as the such
or similar merchandise as defined under section 771(16) of the Act, and
claims that this indicates that the Department should not treat each
truck as a unique model. Toyota notes that the Department applied the
cost test on a broader category in prior reviews. Toyota concludes that
the Department should apply the 80-20 test to all home market trucks
within each of the load-capacity categories defined by the
questionnaire because these are the categories from which similar
merchandise is selected as a basis for NV.
Petitioners respond that, based on its practice for the past
several years, the Department properly applied the 80-20 test not on
the basis of broad such or similar categories but on the basis of the
comparison products (i.e., the products that would actually be used to
calculate NV). Petitioners acknowledge that the Department applied the
test to a broader category of products in the 1989-90 administrative
review, but assert that it has since altered its approach and applies
the test on the basis of the comparison products even when there are
very few or even a single comparison model available (citing
[[Page 5597]]
Certain Cut-to-Length Steel Plate from Sweden; Final Results of
Antidumping Review of Antidumping Duty Order, 61 FR 15772, 15775 (April
9, 1996)). Petitioners conclude that, based on established practice,
the Department properly applied the 80-20 test to the comparison models
and assert that this practice should be maintained for the final
results.
Department's Position
We disagree with Toyota that we should apply the cost test to a
broader category of product than to each unique model for this
administrative review. While we recognize that, in the 1989-90 review,
we applied the cost test on a broader basis, upon reconsideration we
have determined that it is more appropriate to apply the cost test, as
set forth in section 773(b) of the Act, to each unique model sold in
the home market. This methodology is in accordance with our current
practice and the SAA (at 832) and with our practice of applying the
cost test to unique models regardless of the potential for a particular
model to be grouped in a ``family'' for calculation of NV. See
generally AFBs. The statute does not require that we employ a different
methodology where, as here, each of the reported home market sales
involved a unique product.
We note further that it would neither be appropriate to base the
test on all selected comparison models (all models identified in the
concordance) or each of the individual comparison groups selected in
accordance with section 771(16) of the Act for each U.S. model, as both
would encompass more than a single model. We disagree that we have
defined a ``model'' as those products selected for comparison under
section 771(16). In addition, basing the test on the individual
comparison groups could result in testing one model two or more times.
A given home market model could be an appropriate match to more than
one U.S. sale, in which case it would be included in more than one home
market comparison group on the concordance. In such cases administering
the cost test on a ``comparison group'' basis could result in the home
market model being excluded as below cost with respect to one U.S. sale
(if more than 20 percent of the relevant comparison group sales are
below cost) but included with respect to a different U.S. sale (if less
than 20 percent of the comparison group sales are below cost).
Therefore, in order to avoid such an anomolous result and in accordance
with our practice, we have applied the cost test to each unique model
sold in the home market.
Comment 5
Toyota asserts that, where the Department removed home market sales
that failed the below-cost test from the concordance, so that the
concordance contained no remaining matches to a given U.S. sale, the
Department improperly resorted to CV instead of attempting to find
other price-based matches within the contemporaneity period which
Toyota reported on the home market sales database. Toyota claims that
resorting to CV when acceptable above-cost sales exist in the home
market sales database and are available as a basis for establishing NV,
is contrary to the statute. Toyota argues that the concordance
contained the best, but not the only, NV candidates based on the
Department's matching method. Toyota concludes that the appropriate
solution is to apply the cost test to each foreign like product group,
as defined in the questionnaire, and to match to similar above-cost
sales as listed in the home market database before resorting to CV.
Petitioners respond that the law does not require that, where 100
percent of the comparison-model sales are below cost, the Department
must seek out less similar sales before resorting to CV. Rather,
petitioners claim, the law simply requires the Department to use any
above-cost sales that are most similar to the U.S. sale (citing Notice
of Proposed Rulemaking and Request for Public Comments, 61 FR 7308,
7338, 7339) (Proposed Regulations)). Petitioners conclude that, under
the old and new laws, when the Department rejects all of the most
similar home market sales because they were below cost, it is required
to rely on CV rather than seek a sale of a less similar model, a
practice that has been upheld by the CIT and should be maintained.
Department's Position
We disagree with Toyota. In those situations where we disregarded
all of the most similar matches, as identified on the concordance file,
as below-cost sales, we properly resorted to CV without attempting to
find other, less appropriate, matches remaining in the home market
database.
Due to the nature of this product, which involves unique models,
and the resulting complexity of determining appropriate home market and
U.S. matches, we have developed a detailed set of instructions in our
reviews of this order regarding the development of the concordance
file. These instructions ensure the accurate reporting of information
while minimizing, to the extent possible, the reporting burdens on the
parties. We developed the product-matching criteria with input from
parties, including Toyota, in prior segments of this proceeding. In our
questionnaire in this review, we permitted Toyota to limit its
concordance matches to the most similar home market sales made in the
closest month in the contemporaneity window as that of each U.S. sale.
We did not require Toyota to provide further matches in the
contemporaneous period. Otherwise, the matching analysis that Toyota
would have had to perform would constitute a significant burden on the
company without substantially increasing the accuracy of our analysis
since, relative to total U.S. sales, the number of U.S. sales for which
we resorted to CV (because we had disregarded the selected model as
below cost) was extremely small. Such an approach clearly assisted
Toyota in preparing its response. Toyota in fact acknowledges in its
comments in this review, that analyzing large databases can be costly
and inefficient. For these reasons, we have maintained our approach for
the final results.
Comment 6
Toyota contends that, because the Department improperly disregarded
certain sales as below cost by applying the 20-percent ``substantial
quantity'' threshold on an overly narrow product basis, the CV-profit
calculation, which includes only sales that did not fail the cost test,
is also flawed. Toyota claims that the Department should include in the
CV-profit calculation sales that it improperly disregarded as below
cost.
Petitioners respond that the Department properly applied the cost
test and that the SAA specifically provides that CV profit should be
based only on the amount incurred in connection with sales in the
ordinary course of trade. Therefore, petitioners conclude, in keeping
with the SAA the Department properly excluded all below-cost sales when
calculating CV profit.
Department's Position
We disagree with Toyota. Our application of the 20-percent
``substantial quantities'' threshold portion of the cost test was in
accordance with law and our practice. Based on our application of this
test, we disregarded certain home market sales as below-cost sales,
which the statute considers to be outside the ordinary course of trade.
See section 771(15) of the Act. Therefore, because we must calculate CV
profit using only sales made within the ordinary course of trade, in
accordance with section
[[Page 5598]]
773(e)(2)(A) of the Act, we excluded sales that failed the cost test
from our calculation of CV profit.
Comment 7
Toyota contends that the Department should base CV profit on sales
of large trucks (over 7,000-pound load capacity) only and should
exclude small trucks from its CV-profit analysis. Toyota asserts that
profit and selling expenses calculated for CV should not be based on
the entire universe of home market sales, i.e., ``class or kind'', but
on a subset of this universe--the class of products in the home market
that is most similar to the U.S. sale, i.e., ``foreign like product''
under the new law or ``such or similar'' of the pre-1995 law (citing
section 773(e)(2)(A) of the Act). Toyota states that the Department did
not follow this provision for the preliminary results when it
calculated profit and selling expenses for CV using all home market
merchandise regardless of whether the merchandise was ``like'' the
merchandise sold in the United States.
Toyota asserts that it sold only large trucks in the United States
and that, while it sold large trucks in the home market, it sold many
more small trucks in that market. Therefore, Toyota argues, because the
profit on small trucks differs from the profit on large trucks, the CV
profit was unfairly inflated.
Petitioners respond that the Department has addressed the issue
raised by Toyota in its proposed regulations (citing Proposed
Regulations at 61 FR 7335). Petitioners assert that it is the
Department's practice to use aggregate figures to calculate profit and
SG&A, based on an average of the profits of foreign like products sold
in the ordinary course of trade. Therefore, petitioners contend, the
Department properly calculated profit based on the profits of all like
products sold in the ordinary course of trade in the home market and
should maintain this methodology for purposes of the final results.
Department's Position
We disagree with Toyota. The foreign like product in this case
consists of all potential matches to U.S. sales. That is, for purposes
of calculating profit (and SG&A) for CV, we generally use, as we have
here, aggregate data that encompasses all foreign like products under
consideration for determining NV. During the POR, Toyota sold both
small and large trucks in the United States. While only a small
quantity of small trucks were sold in the United States, home market
sales of trucks in this category are nonetheless potential matches.
Accordingly, both small and large trucks are a foreign like product.
Therefore, we have included the small capacity trucks in the
calculation of CV profit for the final results.
Comment 8
Toyota contends that, contrary to the directives of the statute,
the Department calculated a CEP profit amount that is
disproportionately based on profit on home market, not U.S., sales.
Toyota acknowledges that the Department applied the CEP-profit formula
in section 772(f) of the Act literally, but argues that, where the
application of the formula to a particular set of facts leads to an
absurd result directly at odds with the stated goal of the statute, the
Department should exercise its discretion by limiting the CEP profit to
the actual profit for U.S. sales.
Toyota argues in the alternative that, in the event that the
Department continues to calculate profit as it did in the preliminary
results, it should exercise its well-established authority under
section 773(6)(iii) of the Act to make adjustments to NV for other
differences in circumstances of sale. Toyota states that the difference
in circumstance of sale would be the profit differential between the
United States and home market. Toyota notes that, under the pre-URAA
law, the Department used its discretionary authority to avoid unfair
results in the context of the creation and application of the
exporter's sales price (ESP) offset and asserts that a similar
adjustment should be made in this review (citing Brother Industries,
Ltd. v. United States, 3 CIT 125, 540 F.Supp. 1341 (1982), aff'd 713
F.2d 1568 (Fed.Cir. 1983), cert. denied, 465 U.S. 1022 (1984)
(Brother)).
Petitioners respond that Toyota admits the plain language of the
statute requires the Department to base CEP profit on total actual
profit, which includes the profit on both home market and U.S. sales.
Therefore, petitioners argue, the Department does not have the
discretion Toyota proposes and the Department applied the explicit
requirements of the statute properly when calculating CEP profit.
Petitioners further assert that Toyota is incorrect in suggesting
in the alternative that, based on Brother, the Department should make a
circumstances of sale (COS) adjustment to NV to account for differences
between U.S. and home market profit. Petitioners contend that, in so
doing, the Department would first be calculating CEP profit using the
methodology required by the statute, then nullifying the explicit
statutory requirement by making an offsetting adjustment to NV.
Petitioners assert that the Department cannot implement a procedure
that would lead to a result in conflict with the requirements of the
statute. Petitioners add that Toyota's analogy to the ESP offset is
incorrect because, unlike Toyota's recommendations regarding CEP
profit, the ESP offset was designed to correct a perceived omission in
the statute.
Department's Position
We agree with petitioners. Section 772(d)(3) of the Act directs us
to deduct an amount of allocated profit in deriving the CEP. Section
772(f) describes in detail the methodology for calculating the profit,
which Toyota acknowledges we followed. In particular, the statute
explicitly directs us to calculate a ``total actual profit'' amount,
where possible, based on both sales of the foreign like product in the
comparison market and on U.S. sales. See sections 772(f)(2) (C) and
(D). The statute then directs us to allocate a portion of this total
actual profit to CEP sales based on the level of U.S. selling and
further-processing expenses. Toyota's proposal to calculate profit in a
different manner would be in clear conflict with this provision of the
statute.
We also decline to make a COS adjustment in the manner suggested by
Toyota to account for the allegedly disproportionate influence of home
market profits on the total actual profit calculation. As noted above,
the CEP-profit provision in the statute provides a detailed methodology
for the calculation of total actual profit. Given the detailed nature
of this provision, it is not appropriate to impute a ``disproportionate
home market profit'' standard on the calculation of total actual
profit, such that we must make an adjustment to account for such
alleged disproportionality. Moreover, differences in profits are not
differences in the circumstances of sale. Profit differentials, if any,
are what remain after different circumstances of sale have been
accounted for. Therefore, we have not changed our CEP-profit
calculation for the final results.
Comment 9
Toyota argues that the Department should calculate CEP profit based
on the prices and expenses of large trucks (over 7,000-pound load
capacity) only, not large and small trucks, because large trucks were
the only merchandise Toyota sold in the United States during the POR.
Toyota contends that section 772(d) of the Act requires that total
actual profit be calculated based on sales of subject merchandise sold
in the United States and the foreign like
[[Page 5599]]
product sold in the exporting country. Toyota cites to the statutory
definition of foreign like product in section 771(16) of the statute in
arguing that ``foreign like product'' corresponds to the ``such or
similar'' category of the pre-URAA law and not to the broader ``class
or kind'' of merchandise category. Toyota argues that the foreign like
product in this case is limited to large trucks because, with the
exception of a de minimis number of small trucks, it sold only large
trucks to the United States. (Toyota states that its request in this
Comment pertains only to the profit calculation for U.S. sales of large
trucks and does not pertain to the profit calculated on the de minimis
U.S. sales of small trucks.) Toyota argues that, because the profit on
smaller trucks is greater than the profit on large trucks and because
many more small trucks than large trucks were sold in the home market,
significant distortions in the calculation are created by including the
smaller trucks.
Toyota argues that, while the Department recently denied a
respondent's request to calculate profit derived from ``different rates
for different pools of products within the foreign like product''
(citing Notice of Final Determination of Sales at Less Than Fair Value:
Large Newspaper Printing Presses and Components Thereof, Whether
Assembled or Unassembled, from Japan, 61 FR 38139, 38146 (1996) (LNPP
from Japan)), in this case it is proper to calculate profit based upon
the foreign like product as defined by load capacity because: (1) The
Department has conducted its entire review on the premise that foreign
like product was defined by several load capacity ranges, and (2)
Toyota has not asked the Department to change its determination of
foreign like product, as respondent did in LNPP from Japan.
Petitioners respond that, in keeping with the explicit requirements
of the statute, the Department properly based CEP profit on the total
actual profit realized on all of Toyota's sales of the subject
merchandise, which includes large and small trucks.
Department's Position
We disagree with Toyota. In accordance with our practice as
described in the Proposed Regulations (at 7382), we have used the
aggregate of expenses and profit for all subject merchandise sold in
the United States and all foreign like products sold in the exporting
country. During the POR, Toyota sold both small and large trucks in the
United States. While only a small quantity of small trucks were sold in
the United States, home market sales of trucks of these categories are
nonetheless potential matches. Accordingly, the foreign like product in
this review encompasses both small and large trucks. Therefore, we have
included the small capacity trucks in the calculation of CEP profit for
the final results.
The statute does not require separate CEP-profit calculation based
on the narrow interpretation of the term ``foreign like product''
advanced by Toyota. As we noted in AFBs 6, ``[n]either the statute nor
the SAA require us to calculate CEP profit on a basis more specific
than the subject merchandise as a whole. Indeed, while we cannot at
this time rule out the possibility that the facts of a particular case
may require division of CEP profit, the statute and SAA, by referring
to `the' profit, `total actual profit' and `total expenses,' imply that
we should prefer calculating a single profit figure.'' AFBs 6 at 2125-
2126. Further, such a subdivision as Toyota proposes would be more
susceptible to manipulation of the profit rate, a particular concern
noted by Congress. See Id. and S. Rep. 103-412, 103d Cong., 2d Sess. at
66-67.
Comment 10
Toyota asserts that, notwithstanding the methodological CEP-profit
calculation issues it has already addressed, the Department incorrectly
calculated the CEP-profit amount by: (1) Including all home market
sales revenue while excluding certain home market selling expenses, and
(2) calculating the total actual profit without regard to imputed
expenses while allocating a portion of this amount to CEP sales using a
U.S. selling expense pool that includes imputed expenses.
With respect to the first issue, Toyota claims that the home market
values for the CEP-profit calculation incorrectly excludes the home
market selling expenses the Department disallowed as an adjustment to
NV because of perceived difficulties at verification. Toyota states
that this results in a higher home market profit, which becomes part of
the total actual profit, a portion of which, in turn, is allocated as
CEP profit and deducted from the starting price used to derive the CEP.
With respect to the second issue, Toyota asserts that it is
mathematically incorrect to apply an ``actual cost'' profit ratio to a
U.S. selling expense pool that includes actual plus imputed costs
because this methodology allocates substantially more profit to U.S.
sales than exists, particularly with respect to transactions with
significant imputed credit and inventory carrying costs.
Petitioners respond that the Department correctly included imputed
credit and inventory carrying costs in the U.S. selling expense pool
used to calculate CEP profit for individual U.S. sales. Petitioners
note that the Department calculated total profit for Toyota's sales
based on the difference between the total revenues and total expenses
and that the Department omitted imputed credit and inventory carrying
costs from the total profit amount because the expense amounts the
Department used in the total actual profit calculation include an
amount for actual interest expenses. Petitioners assert that, if the
Department included imputed expenses in the total actual profit
calculation, the result would double-count Toyota's interest costs.
Petitioners further note that CEP selling expenses do not include an
amount for actual interest expense and, thus, if the Department does
not include imputed credit and inventory carrying costs in the formula
it uses to calculate CEP profit for Toyota's individual U.S. sales, the
CEP-profit figure would not account for the profit attributable to the
expenses Toyota incurred to carry forklifts in inventory in the United
States or to extend credit to its U.S. customers. Therefore,
petitioners argue, the Department should continue to include imputed
credit and inventory carrying expenses in the CEP selling expenses used
to calculate CEP profit for Toyota's U.S. sales.
Department's Position
We disagree with Toyota. With respect to Toyota's argument that the
home market values for the CEP-profit calculation improperly exclude
selling expenses we disallowed due to problems encountered at
verification, as we stated in its response to Comment 2, we properly
employed an adverse inference regarding information with respect to
which Toyota failed to act to the best of its ability to provide. This
ensures that Toyota does not obtain a more favorable result by failing
to cooperate fully. See SAA at 870.
Regarding Toyota's claim that we treated imputed expenses
inconsistently in calculating CEP profit, we addressed this issue in
detail in AFBs 6 at 2126-2127 as follows:
Sections 772(f)(1) and 772(f)(2)(D) of the Act state that the
per-unit profit amount shall be an amount determined by multiplying
the actual profit by the applicable percentage (ratio of total U.S.
expenses to total expenses) and that the total actual profit means
the total profit earned by the foreign producer, exporter, and
affiliated parties. In accordance with the statute, we base the
calculation of the total actual profit used in calculating the
[[Page 5600]]
per-unit profit amount for CEP sales on actual revenues and expenses
recognized by the company. In calculating the per-unit cost of the
U.S. sales, we have included net interest expense. Therefore, we do
not need to include imputed interest expenses in the ``total actual
profit'' calculation since we have already accounted for actual
interest in computing this amount under 772(f)(1). When we allocated
a portion of the actual profit to each CEP sale, we have included
imputed credit and inventory carrying costs as part of the total
U.S. expense allocation factor. This methodology is consistent with
section 772(f)(1) of the statute which defines ``total United States
Expense'' as the total expenses described under section 772(d)(1)
and (2). Such expenses include both imputed credit and inventory
carrying costs. See Certain Stainless Wire Rods from France, 61 FR
47874, 47882 (September 11, 1996).
As this statement of our practice makes clear, our calculation of CEP
profit is in accordance with the statute and the SAA. Therefore, we
have maintained our treatment for the final results.
Comment 11
Toyota argues that the Department should exclude certain ``used''
forklifts sold in the United States from its analysis or, in the
alternative, the Department should adjust its calculations to avoid the
distortions created by the comparison of these used trucks with new
trucks sold in the home market. Toyota asserts that there were a small
number of U.S. sales of used merchandise, sold out of the ordinary
course of trade at significant discounts and under ``fire sale''
conditions due to their use as demonstration units. Toyota asserts that
all of the trucks were imported new but were in ``used'' condition when
sold to the first unaffiliated purchaser in the United States. Toyota
asserts that, in the less-than-fair-value (LTFV) investigation,
petitioners explicitly excluded imports of used trucks from the
investigation and argues that the principle that a used truck is
excluded should not change because the truck was used not in Japan, but
in the United States, before being sold.
Toyota argues in the alternative that the Department should adjust
the margin calculation to avoid the distortions created by the
comparison of the used trucks with new trucks sold in the home market.
Toyota asserts that, otherwise, the comparison is unreasonable and
amounts to an undeserved adverse inference against Toyota (citing,
among others, Porcelain-on-Steel Cooking Ware From Mexico; Final
Results of Antidumping Duty Administrative Review, 58 FR 43327, 43328
(1993) (Cookware)). Toyota asserts that, because there are no sales of
similarly used trucks in the home market, the Department should look to
facts otherwise available in making an adjustment that will allow for
reasonable comparisons and proposes several ways to make such an
adjustment.
Petitioners respond that Toyota's claim should be rejected for a
variety of reasons. First, Toyota has admitted the trucks were new when
imported and the scope of the order excludes only trucks that were used
at the time of entry. Petitioners add that the exact nature and
disposition of the trucks is unclear from Toyota's questionnaire
responses. Petitioners note that, in Toyota's initial questionnaire
response, it reported that some of the trucks were used, others were
damaged, and others were mistakenly ordered with unsalable
specifications, while in its brief Toyota only discusses used trucks.
Therefore, petitioners assert, even if the Department decided to
exclude ``used'' trucks as opposed to other ``off-spec'' trucks, the
Department would be unable to do so because Toyota failed to
distinguish between used trucks and off-spec trucks in its sales
listing.
Second, petitioners assert that the Department has made clear that
it will not exclude any U.S. sales that involve a transfer of ownership
even if the sales are aberrational and states that the age or condition
of a truck is not relevant to whether the product has been dumped
(citing Polyethylene Terephthalate Film, Sheet, and Strip from the
Republic of Korea: Final Results of Antidumping Duty Administrative
Review, 60 FR 42835 (Aug. 17, 1995), comment 29).
With respect to Toyota's alternative argument that the Department
should make an adjustment to the margin calculation if it includes such
``used'' trucks in the dumping analysis, petitioners assert that the
cases Toyota cited to support such an adjustment are factually distinct
from the situation in this case because, unlike those cases, the
merchandise at issue is not scrap, seconds or substandard. Petitioners
add that in the cited cases the Department did not make an adjustment
to account for differences in quality but instead sought to match U.S.
sales of inferior quality to merchandise of similar quality in the home
market (citing Cookware at 43328). Petitioners argue that, if
merchandise with similar specifications had been sold in the home
market, the model-match methodology would have resulted in a match of
similar off-spec trucks. Furthermore, petitioners assert, Toyota never
specifically identified whether any home market sales were similarly
off-spec and could have been matched and conclude that any deficiency
in matching is solely Toyota's fault.
Department's Position
We agree with petitioners. The scope of the order only excludes
trucks that were ``used'' at the time of entry. The order does not
exclude trucks that are damaged, ``off-spec,'' or used after
importation. We noted in our Preliminary Results analysis memorandum
that ``trucks imported new and used by the importer prior to sale'' are
not excluded from the scope of the order. Memo, July 26, 1996, at 6. In
the LTFV investigation we determined that a forklift could be
considered ``used'' and excluded from the order if, at the time of
entry into the United States, the importer can demonstrate to the
satisfaction of the U.S. Customs Service that the forklift was
manufactured in a calendar year at least three years prior to the year
of entry into the United States. Final Determination of Sales at Less
Than Fair Value; Certain Internal-Combustion Industrial Forklift Trucks
From Japan, 53 FR 12552 (April 15, 1988). Toyota admits the relevant
trucks were imported new. Therefore, they are properly subject to
review and we cannot exclude them from our analysis based on this
exclusion.
Moreover, Toyota has not established the trucks were used to an
extent that an adjustment is warranted nor provided information that
would permit us to quantify and make such an adjustment. Therefore, our
treatment of these trucks remains unchanged from the preliminary
results.
Comment 12
Toyota claims that the Department incorrectly classified the
reported indirect selling expenses that Toyota's U.S. affiliate, TMCC,
incurred in financing sales of subject merchandise as direct expenses.
Toyota asserts that the selling expenses are indirect because they are
fixed and are incurred regardless of whether a particular sale is made.
Petitioners respond that, while they do not believe the Department
should make any adjustment for credit revenue TMCC earned, if the
Department decides credit revenue is related directly to the sale, it
must also recognize that expenses TMCC incurred may also be related
directly to the sale. Petitioners assert that Toyota did not meet its
burden of proof that these expenses are not directly related to the
sales (citing 19 CFR 353.54). Petitioners suggest that, although Toyota
now alleges that these expenses are fixed and are incurred by TMCC
regardless of
[[Page 5601]]
whether a sale is made, there is nothing in Toyota's questionnaire
response to support such a claim. Petitioners conclude that Toyota's
description of these expenses is not sufficiently detailed to allow the
Department to determine the exact nature of the expenses and,
accordingly, the Department should treat these expenses as direct
selling expenses for the final results.
Department's Position
We agree with Toyota and have treated these expenses as indirect
expenses for the final results. In reporting sales where payment was
made through TMCC, Toyota reported a sale-specific credit revenue and a
sale-specific credit expense. Toyota also allocated a portion of TMCC's
overhead to the sales as indirect selling expenses. With respect to
direct U.S. selling expenses that TMCC incurred, Toyota stated that
TMCC ``does not pay commissions to its employees related to financing,
and does not incur variable expenses for credit investigations or for
preparing and processing documents.'' Supplemental Sales Questionnaire
at 58-60. In addition, Toyota disclosed that TMCC incurred a filing fee
for a number of transactions which the Department treated as direct in
the Preliminary Results. Because the record reveals that the relevant
expenses are fixed expenses (not variable) and because it is clear that
Toyota reported those expenses that were variable and associated with
sales of subject merchandise, we have treated TMCC's reported expenses
as indirect expenses for the final results.
Comment 13
Toyota asserts that the Department's proposed method for assessing
duties will result in the calculation and assessment of duties on lease
transactions, despite the Department's determination that Toyota's
operating leases are not subject to review. Toyota notes that the
Preliminary Results indicate that the Department calculated an
importer-specific ad valorem duty assessment rate, based on the ratio
of the total amount of duties calculated for the examined sales during
the POR to the total customs value of the sales used to calculate the
duties, which the Customs Service will assess uniformly on all entries
during the POR. Toyota asserts that the Department should calculate an
assessment rate with respect to all merchandise reported by taking the
total antidumping duties for sold and leased trucks (which will be zero
for the latter) divided by the total customs value of the sold and
leased trucks, which Customs should then apply to all forklift trucks
entered during the POR.
Petitioners assert that Toyota misconstrues the purpose of the
proposed assessment method, which is to eliminate the problems caused
by assessing duties on individual entries through the creation of a
``master list.'' Petitioners assert that lowering overall duties on
subject trucks would defeat the purpose of the antidumping law to
assess duties to offset the unfair trade practice with respect to sales
subject to the order, which would not be accomplished if the Department
decreased the assessment on products covered while imposing duties on
merchandise not covered by the order. Petitioners contend that lowering
the assessment duty rate would allow a respondent to manipulate the
prices of entries that would never be subject to analysis so as to lead
to a total lower assessment of antidumping duties.
Petitioners assert that the solution to any perceived problem is to
ensure that the Department only assesses duties on trucks subject to
review and Toyota is aware of which trucks were sold and which were
leased. Petitioners contend that the Department could eliminate the
total entered value of leased trucks from the total entered value of
all trucks to arrive at the total entered value for trucks subject to
the order in its calculation of the appraisement rate, which Customs
can then apply to the total entered value for trucks subject to the
order. Petitioners further assert that, regardless of the method the
Department uses to accomplish the task, it should make no change in its
calculation of the cash deposit rate.
Department's Position
We agree with petitioners that, by using an assessment-rate
methodology, we are able to eliminate the problems caused by assessing
duties on individual entries through the creation of master lists.
However, we agree with Toyota that, short of creating a master list,
its proposal is reasonable and in accordance with our practice. In
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,
From Japan and Tapered Roller Bearings, Four Inches or Less in Outside
Diameter, and Components Thereof, From Japan; Final Results of
Antidumping Duty Administrative Reviews and Revocation in Part of an
Antidumping Finding (61 FR 57629 (November 7, 1996) (TRBs)), we were
confronted with the issue of establishing an assessment rate for
bearings where some bearings were not subject to assessment under the
principles formulated in Roller Chain Other Than Bicycle From Japan, 48
FR 51804 (November 14, 1983). Given that leased trucks are potentially
subject to assessment of antidumping duties upon entry, a similar
treatment is appropriate here. In TRBs we determined that the
assessment rate should take into account the value of ``Roller Chain''
merchandise. Accordingly, we included the value of the ``Roller Chain''
merchandise in the denominator when we calculated an assessment rate.
Likewise, in this case, we have included the customs value of the
leased trucks in the denominator. While this will have the effect of
reducing the percentage assessment relative to the rate that we would
calculate by excluding these values, this lower assessment rate, when
applied against all POR entries, will allow Customs to collect the
appropriate amount of antidumping duties due and will effectively
exclude the lease trucks from assessment. Finally, we agree with
petitioners that a change in the calculation of the cash deposit rate
is not appropriate.
Petitioners' Comments
Comment 1
Petitioners assert that the Department is required by statute to
verify all of the information it relies on in reaching its final
results and, therefore, the Department should have verified Toyota's
cost data, difference-in-merchandise data (difmer), U.S. sales data,
and U.S. value-added data. Petitioners assert that, while the
Department may not be required to verify every item of data submitted,
it cannot simply eliminate whole sections of a questionnaire response
when conducting verification.
Petitioners add that, beyond the statutory requirement for a
complete verification, the following two reasons make verification of
the above items essential: (1) The Department found major problems with
Toyota's home market sales data, and (2) the record reveals glaring
deficiencies with Toyota's cost data, which have never been verified,
and its U.S. sales data.
With regard to Toyota's cost data, petitioners allege the following
problems with Toyota's data which warrant complete verification: In
reporting difmer data, Toyota used different costs for its home market
than for its U.S. merchandise; there are differences between Toyota's
difmer data and its COP data; Toyota failed to demonstrate adequately
that its transactions with affiliated suppliers were at arm's length;
and Toyota gave
[[Page 5602]]
only a cursory explanation of its method for accruing costs.
Toyota responds that the Department fulfilled its obligation under
section 782(i) of the Act to verify respondent's factual information.
Toyota argues that petitioners'' position that the Department is
required to verify every single piece of information submitted, and not
just the factual information it deems relevant and sufficient, is
untenable and would place the Department in an impossible situation.
Toyota concludes such a construction of the law is unrealistic and
unworkable.
Citing Secs. 353.36(a)(2) and 353.36(c), Toyota asserts that the
Department's regulations are clear that, it is not necessary for the
Department to verify every piece of data. Toyota concludes that the law
required verification of Toyota's response and the Department fulfilled
this requirement, using its judgment as to the adequate level of
examination.
Toyota further asserts that petitioners'' claim that there is
``contradictory and incomplete information'' in Toyota's cost and U.S.
sales data are untrue. Toyota notes that its costs were verified
thoroughly in the first administrative review. Toyota asserts that, as
it explained in a prior submission to the Department, its material
costs will differ for forklifts in Japan and the United States because:
(1) They are built to different specifications (e.g., the parts used
may conform to different specifications, such as a UL-Listing), and (2)
the criteria used by the Department for its 21-point comparison do not
define all aspects and features of all forklifts.
Toyota asserts that petitioners'' comments concerning the accuracy
of Toyota's data, particularly Toyota's difmer and cost data, are
unfounded and, as the Department conducted the required verification,
there is no basis for asserting the verification was legally
inadequate.
Department's Position
We disagree with petitioners. We have fulfilled the statutory
requirement of a verification of Toyota's data in this review. Because
we had not verified Toyota's data during the two immediately preceding
reviews, we were required to conduct a verification of Toyota in this
administrative review. See section 782(i) of the Act. Our verification
concerned Toyota's home market sales response and portions of its U.S.
sales response. Such a verification fulfills the statutory requirement
regarding verification and, as noted below, is in conformity with our
regulations and past practice. This practice reflects the reality that
it is administratively impossible for the Department to verify at every
site and on every topic.
The Department's regulations provide for significant flexibility in
conducting verifications by permitting the verification of a sample of
respondents in a review and providing for the review of documents and
personnel the Department considers relevant to factual information
submitted. 19 CFR 353.36(a)(2) and (c). In addition, the CIT has long
recognized the Department's discretion regarding the topics to be
selected for verification. See, e.g., Monsanto Co. v. United States, 12
CIT 937, 698 F.Supp. 275, 280 (citing Hercules, Inc. v. United States,
11 CIT 710, 673 F.Supp. 454,469 (1987)) (``Verification is a spot check
and is not intended to be an exhaustive examination of the respondent's
business. ITA has considerable latitude in picking and choosing which
items it will examine in detail.'); Bomont Industries, v. United
States, 14 CIT 208, 209, 733 F. Supp. 1507 (1990) (``Of course,
verification is like an audit, the purpose of which is to test
information provided by a party for accuracy and completeness.
Normally, an audit entails selective examination rather than testing of
an entire universe.``).
Contrary to petitioners' assertions, the problems we encountered at
the home market verification with regard to certain portions of
Toyota's response do not establish the necessity for a verification of
additional portions of the response. Toyota did not fail its
verification in this review; rather, it was unable to demonstrate the
reliability of certain selling expenses and was unable to establish
that it did not gain credit revenue on its home market sales. As a
result, pursuant to our established practice regarding our verification
findings, we have disallowed the adjustments in question and have
calculated a home market credit revenue amount using the facts
available. This is an appropriately tailored response to the problems
we encountered at verification. Because we found that, other than the
items cited above, the data submitted by Toyota was accurate, we have
no reason to disregard the other portions of its response (e.g.,
Toyota's data regarding its material costs or its product liability
expenses).
Comment 2
Petitioners assert that Toyota's variable cost of manufacture
(VCOM) difmer data, as reported on the U.S. and home market sales
listings, are not acceptable because: (1) They are not consistent with
Toyota's COP/CV data, and (2) they are based on costs for certain
components and on price or market value for other components.
Therefore, petitioners argue, the Department should reject Toyota's
difmer data and use the VCOM amounts reported in the COP and CV data to
make difmer adjustments for the final results.
Petitioners claim that case precedent indicates that VCOM amounts
reported for the difmer adjustment and for COP/CV should not differ
(citing Notice of Final Determination of Sales at Less Than Fair Value:
Stainless Steel Bar from Spain, 59 FR 66,931, 66938 (December 28,
1994)). Petitioners further assert that the antidumping questionnaire
and the SAA (at 828) indicate that any claimed difference-in-
merchandise adjustment should be limited to differences in variable
costs, without regard to prices. Petitioners note that Toyota
acknowledges the data are inconsistent.
Petitioners state that allowing a respondent to report different
VCOM amounts for purposes of the difmer adjustment and for COP/CV
allows for the possibility of manipulation of the dumping analysis. For
instance, if a respondent reports a higher home market VCOM for the
difmer adjustment than for its COP reporting, adjustments to foreign
market value will generally be downward, thereby providing respondent
with a favorable adjustment when comparing home market sales to U.S.
sales. Therefore, petitioners argue the Department should reject
Toyota's difmer data and use the variable cost of manufacture data in
Toyota's COP and CV database to determine the difmer adjustment.
Toyota responds that petitioners' arguments are groundless. Toyota
asserts that the Department specifically approved of Toyota's method of
reporting difmer data in the original investigation and in the first
and second administrative reviews. Toyota states that it reported
difmer data consistent with its reporting in prior segments of the
proceedings.
Toyota states that the record is clear that, given its accounting
system, it could submit the data in a form slightly different from that
which the Department requested by including the invoice prices of
certain options and attachments instead of their variable costs of
production. Toyota asserts that 19 CFR 353.57 supports its approach as
it states the Department ``normally will consider differences in the
cost of production but, where appropriate, may also consider
differences in the market value.'' Toyota indicates that, because the
prices of the attachments are based
[[Page 5603]]
on uniform price lists, the differences in such prices represent
differences in market value. Toyota disputes petitioners' assertion
that such an approach is subject to manipulation and points out that
the prices are published in Toyota's price list.
Finally, Toyota notes that it used its difmer data to generate the
concordance on which the Department relied for product matching and
suggests that to change the values now would require Toyota to rematch
its sales and revise the concordance. Toyota argues that, given that
the difmer values are appropriate and accurate and reflect a
methodology acceptable in prior reviews in selecting similar home
market sales and adjusting those sales, there is no compelling reason
to change these data now.
Department's Position
We agree with petitioners, in part, and have utilized Toyota's
reported cost information (COP and CV) to calculate the difmer
adjustment for the final results. However, we do not agree with
petitioners that it was inappropriate for Toyota to submit its difmer
data, based in part on invoice prices, at the time of its original
questionnaire submission, and we have used this data for matching
purposes.
When we issued the questionnaire, we had not yet initiated a cost
investigation of Toyota. Therefore, based on prior experience with
Toyota in the investigation and administrative reviews, in which we
recognized the difficulties in collecting variable cost information for
small attachments, we determined that it was acceptable for Toyota to
derive and present its difmer data as it had presented the information
in prior segments of this proceeding. However, unlike prior segments of
this proceeding, in this review we initiated a cost investigation of
Toyota's sales and obtained complete cost information, including costs
for the attachments for which Toyota was previously only able to give
prices.
The VCOM data from the sales listing, which Toyota used to develop
the concordance according to our instructions, is sufficiently precise
to allow us to determine which U.S. and comparison-market merchandise
``may reasonably be compared.'' See section 771(16)(C)(iii) of the Act.
Further, Toyota calculated the VCOMs that we compared in making this
determination using the same methodology for both markets, i.e., VCOMs
that are generally cost-based with the exception of certain attachments
that Toyota valued using invoice prices to its customers. Therefore, we
have used the concordance Toyota submitted for sales-matching purposes
and do not find it necessary to revise the concordance in order to take
into account the COP/CV information.
However, as a result of our cost investigation, we have more
precise VCOM data, because Toyota provided cost-based values for its
attachments. Accordingly, we have used the COP/CV data to make the
difmer adjustment in our calculations. The difmer adjustment to NV is
mandated by the statute to account for differences between the U.S. and
home market products under comparison. See section 773(a)(6)(C) of the
Act. Given that the more precise, cost-based information is on the
record of this review, it is more appropriate to use the COP/CV data
for the actual adjustment where sales of non-identical merchandise are
compared. Therefore, in the final results we have used Toyota's
reported VCOM data as reported in the COP and CV databases to adjust
for physical differences in the merchandise.
Comment 3
Petitioners claim that, in providing its cost data, Toyota failed
to supply complete information that would demonstrate that its
transactions with affiliated suppliers are at arm's length. Rather,
petitioners claim, Toyota submitted costs for a single
``representative'' model. Petitioners contend this is insufficient to
demonstrate that Toyota's transactions with these affiliated suppliers
are all at arm's length and cite to Hyster Co. v. United States, 848
F.Supp. 178, 187 (CIT 1994) (Hyster).
Petitioners assert that Toyota's claim that its transactions with
affiliated suppliers are always at arm's length and that Toyota cannot
obtain access to its supplier's cost data is directly contradicted by
information the Department gathered in the investigation of New
Minivans from Japan (Initiation of Antidumping Duty Investigation: New
Minivans from Japan, 56 FR 29221 (June 26, 1991) (Minivans)). Citing
the record in Minivans, petitioners state that Keiretsu have group
members known to exchange information and to price transfers at below-
market levels to maximize profit. Thus, petitioners contend, Toyota's
unsupported claims are in conflict with information the Department
already possesses. Petitioner argues that, other than rejecting
Toyota's questionnaire response, the Department must request
supplemental information concerning its transfer prices and then verify
the data.
Toyota maintains that the information it submitted demonstrates
that transactions between Toyoda Automatic Loom Works Ltd. (TAL) and
its affiliated suppliers are at arm's length and that TAL engages in
competitive bidding and negotiation processes with its suppliers.
Toyota asserts that the statute does not mandate that evidence of an
arm's-length transaction be derived exclusively from a respondent's
suppliers' cost data and argues that Toyota has met its burden of
demonstrating that TAL's transactions with its affiliated suppliers are
at arm's length by providing detailed information on its competitive
bidding and negotiation processes. Toyota contends that it properly
based its COP calculations on prices TAL paid instead of on TAL's
suppliers' COP. Toyota claims that TAL did not generally purchase
identical parts during the same period from different suppliers and,
because it engages in arm's-length negotiations with suppliers, it does
not have access to information on sales or prices of identical parts by
its suppliers to other parties or the suppliers' COP. Toyota describes
the bidding process TAL used to source parts and provides examples of
situations where it decided to source such components from unaffiliated
suppliers instead of established affiliated suppliers after engaging in
such competitive bidding.
Toyota states that, despite its detailed explanation of why it
cannot obtain its suppliers' cost data, petitioners continue to rely on
a memorandum in the record of the Minivans investigation which,
contrary to petitioners' assertions, does not contradict Toyota's
statements that it cannot obtain access to its suppliers' cost data.
Toyota further states that the memorandum is largely irrelevant to this
administrative review of forklift trucks. Toyota concludes that, while
TAL may be able to persuade these suppliers in which it holds majority
ownership to provide cost information in a limited fashion for limited
uses, TAL is not able to force its other related suppliers to provide
such costs for any purpose.
Department's Position
We do not agree with petitioners that Toyota failed to establish
that TAL's transactions with its affiliated suppliers were at arm's-
length prices. With respect to major inputs, Toyota provided the
transfer prices and cost information for each such input it used in the
production of the trucks sold in the United States and home market. The
information Toyota provided with regard to TAL's suppliers of major
inputs is sufficient to determine that the
[[Page 5604]]
amount represented as the value of such input is not less than the cost
of production of such input, as required by section 773(f)(3) of the
Act. In addition, because these are unique inputs, there were no
comparable purchases from unaffiliated suppliers. Accordingly, we have
relied on Toyota's reported cost information based on transfer prices
for the major inputs in our cost calculations.
We have also determined that Toyota has established the arm's-
length nature of other (non-major) inputs supplied by TAL's affiliated
suppliers. Section 773(f)(2) of the Act states that ``[a] transaction
directly or indirectly between affiliated persons may be disregarded
if, in the case of any element of value required to be considered, the
amount representing that element does not fairly reflect the amount
usually reflected in sales of merchandise under consideration in the
market under consideration.'' For its affiliated suppliers of minor
inputs, Toyota responded that it could not provide market-value sales
prices between affiliated suppliers and third parties, or between TAL
and unaffiliated parties of the same inputs because the information was
not obtainable or such transactions did not exist. Toyota did, however,
supply cost information for a number of minor inputs supplied by
affiliated parties. It is the Department's practice to permit limited
reporting in appropriate circumstances, such as a case like this where
there are scores of parts used in the production of a forklift truck,
there are no third-party transactions on which to rely, and the
respondent is unable to obtain cost information or prices to other
purchasers from its suppliers. We disagree with petitioner that Hyster
requires the Department to obtain more complete cost information.
Unlike Hyster, there is no information on the record that prompts the
Department to make further inquiry. The court in Hyster did not appear
to rule out completely our reliance on a representative sample of
information. Id. at 187. In addition, to support its position that TAL
deals with its suppliers at arm's length and, therefore, that the
amount for the relevant input ``fairly reflect[s] the amount[s] usually
reflected in sales of merchandise under consideration in the market
under consideration,'' TAL provided internal documents that evidence
competitive bidding practices on the part of its affiliated and
unaffiliated suppliers. The documents establish that Toyota selects its
suppliers using a competitive bidding process and that Toyota is not
averse to switching from an affiliated supplier to an unaffiliated
supplier based on price. This is further evidence that Toyota deals
with suppliers, both affiliated and unaffiliated, at arm's length. We
are satisfied that the information on inputs Toyota provided supports
its claim that it deals with affiliated suppliers on an arm's-length
basis.
Finally, we agree with Toyota that the Minivans memorandum
petitioners cite is not relevant to this proceeding. That dealt with a
different case with a different record. The record in this review does
not suggest that we draw any conclusions based on such observations.
Comment 4
Petitioners allege that Toyota improperly reported its affiliated
parties for purposes of the CV and COP calculations. Petitioners state
that, as section 773(f)(2) of the Act makes clear, indirect
affiliations as well as direct relationships may cause the Department
to disregard transactions that are not at arm's length. Petitioners
assert that, in identifying its affiliated suppliers, Toyota only
identified the manufacturer's (TAL) affiliated suppliers and did not
identify its indirect affiliation with suppliers through TMC.
Petitioners argue that the interrelationship between TMC and TAL cannot
be questioned and that any suppliers under the control of or affiliated
with TMC should be considered affiliated with TAL.
Toyota responds that it has complied with section 771(33) of the
Act and Department practice with respect to providing information on
suppliers who meet one of the statutory affiliation criteria with
respect to TAL.
Department's Position
We disagree with petitioners. Section 773(f)(2) states that, in
calculating COP or CV, the Department may disregard ``a transaction
directly or indirectly between affiliated persons.'' Thus, contrary to
petitioners' argument, the direct/indirect language refers to the
nature of the transaction, not the affiliation. Toyota has stated in
this review that it applied the affiliated-party definition contained
at section 771(33) of the Act, as requested in our questionnaire.
During the home market verification, we examined Toyota's corporate
structure and did not find any deficiencies in its reporting. Further,
petitioners have not provided any information regarding other,
unreported, affiliated parties. Accordingly, we have accepted Toyota's
reporting of its affiliated parties for the final results.
Comment 5
Petitioners claim that the Department should not include the
interest income Toyota Motor Credit Corporation (TMCC), a separately
incorporated U.S. affiliate of TMS, received for loans it made to
dealers that purchased Toyota forklift trucks as an offset to the
credit expense TMS incurred in selling trucks in the United States.
Petitioners argue that the loan a customer obtained constitutes a
separate transaction from the negotiation process related to the sale
of a forklift truck and, therefore, under the express terms of the
statute and the Department's longstanding practice, income earned or
expenses incurred that are not related to the sales negotiation process
cannot be taken into consideration in the dumping analysis.
Petitioners provide a number of examples in Toyota's questionnaire
response to support their position that payment terms are separate and
have no impact on the sales negotiation process between TMS and the
dealer. Petitioners also refer to certain business proprietary passages
from TMS's financial statements which, they argue, conflict with
Toyota's position that TMCC simply operates as an arm of TMS.
Petitioners assert that the notes to the financial statements raise
serious questions as to the accuracy of Toyota's calculation of the
expense, given the possibility of prepayments and credit losses which
may not have been factored into its calculations. For all the above
stated reasons, therefore, the Department should reject Toyota's claim
for an adjustment for interest income TMCC received.
Toyota argues, first, that it is the Department's longstanding
practice to include credit revenues and to deduct credit expenses in
its calculation of CEP. Second, Toyota argues that it is nonsensical
and irrelevant to claim that financing does not affect the selling
price of a truck because the customer pays a price that includes credit
revenue which TMCC earns. Toyota points to the record evidence that, in
the relevant transactions, TMCC receives the payment from the first
unrelated customer, which is a price that includes credit revenue, and
TMS receives only an intra-party transfer from TMCC, a payment that can
not serve as the basis for CEP under section 772(b) of the Act. Toyota
states that the ``separate nature'' of the financing transaction is
belied by the facts in Toyota's questionnaire response.
Toyota maintains that it is irrelevant that TMCC is separately
incorporated and uses its income for various purposes and, therefore,
the
[[Page 5605]]
Department's determination to treat TMCC and TMS as a single entity was
correct. Toyota further maintains that petitioners' argument that TMS
and TMCC are ``separate legal entities'' is contradicted by the reality
of the relationship, given that they are 100-percent affiliated
entities, share a common address, and share certain operational
structures. Toyota also claims its method of applying assets and income
has no relevance at all to whether credit revenue Toyota received is
properly part of CEP. Toyota adds, in conclusion, that petitioners'
speculation that Toyota's credit revenue might not be accurate, based
on broad statements in TMCC's financial statements, is unfounded.
Department's Position
We disagree with petitioners that we should reject Toyota's claimed
adjustment for credit revenue. We have addressed this issue in prior
reviews and in our October 9, 1996, Final Results of Redetermination
Pursuant To Court Remand, NACCO Materials Handling Group, Inc., v.
United States, Slip Op. 96-99 (June 18, 1996) (NACCO), which we have
put on the record of this review.
In NACCO, we explained that, in our antidumping analysis, ``we
examine thoroughly the corporate structure of respondents in order to
capture all expenses and revenues incurred by related companies that
pertain to sales of subject merchandise. In (NACCO), Toyota's revenue
and expense pertain directly to the particular sales in question,
whether deemed part of the same transaction or not, and must be
included in our dumping analysis.'' Id. at 23-24. We further stated
that ``[t]he inclusion of TMCC's credit expense and credit revenue in
the dumping analysis is not dependent on whether or not ostensibly
separate transactions are combined. Such inclusion is required because,
otherwise, the Department would be unable to fulfill its statutory
mandate to capture all U.S. selling expenses in its analysis, as
required by section 772(d) of the Act.'' Id. at 26. The essential
mechanics of the relevant transactions in this review do not differ
materially from those in NACCO. Petitioners' arguments concerning the
separateness of the transactions and the corporate separateness of the
entities are irrelevant, given that ``the expenses and revenues that
derive from the financing arrangement are related to the sales in
question and are relevant, therefore, to the calculation'' of CEP. Id.
at 31.
References by petitioners to Toyota's description of the process
(i.e., where a dealer may decide separately how it will pay, is not
obligated to use payment terms offered by TMCC, etc.) do not alter the
conclusion that, for purposes of section 772 of the Act, the revenues
and expenses pertain directly to the particular sales in question and
are appropriately part of our dumping analysis. As we concluded in
NACCO, ``TMC, TMS, and TMCC together constitute the exporter and have
provided financing services in selling the subject merchandise * * *,
it is necessary to focus on the expenses that relate to sales of
subject merchandise, regardless of which related entity incurs the
expenses, in the interest of accuracy and in order to prevent the
manipulation of the dumping analysis through shifting expenses to
subsidiaries.'' Id. at 29. Although the statutory definition of
``exporter'' applied in that remand has been repealed, TMC, TMS and
TMCC are ``affiliated persons'' within the meaning of the new
definition at section 771(33) of the Act. Therefore, we consider our
analysis and conclusions in NACCO to be directly relevant to the facts
of this review and petitioners have not advanced any argument that
would alter this conclusion.
Petitioners' arguments based on portions of TMS' financial
statements are also not persuasive. As explained above, arguments
concerning the corporate separateness based on certain descriptions of
ostensibly independent activities in which the entities engage are not
relevant and, therefore, whether TMCC simply operates as an arm of
Toyota does not alter our analysis.
Furthermore, petitioners' suggestion that, based on Toyota's
financial statements, Toyota's reported credit revenue might not be
accurate, because of the possibility of prepayment of leases and
because Toyota might not have accounted for credit losses, constitutes
unfounded speculation. Moreover, this speculation is irrelevant to
petitioners' position that credit revenue should not be recognized
because the transactions are separate. Nonetheless, with regard to
whether it factored credit losses into its calculations, Toyota refers
to a prior submission wherein it stated ``TMCC has an account for bad
debts on its financing, which, if included in the indirect expenses of
TMCC, increases these expenses slightly.'' February 29, 1996,
submission at 8. Toyota later included this item in its calculations.
In addition, nothing in the record contradicts Toyota's statement that
prepayments are not relevant to forklift financing. In a February 8,
1996, submission in the 1993-94 administrative review of this order,
Toyota stated (at 4) that ``the referenced comment in Toyota's
financial statements applies primarily to automobile installment
contracts and leases, and not to forklift leases, which are rarely paid
off early.'' This explanation supports our conclusion to accept
Toyota's claimed adjustment for credit revenue.
Comment 6
Petitioners claim that the payment terms for loans and leases can
range from one to five years and thus constitute long-term, not short-
term, financing. Therefore, petitioners contend, the Department should
consider the credit expense Toyota incurred as long-term debt and
should not base the calculation on the short-term borrowing rate Toyota
reported. Petitioners argue that, in the absence of information from
Toyota on long-term interest rates, the Department should rely on facts
otherwise available.
Toyota argues that the Department has a well-established practice
of using short-term interest rates to calculate credit expense and
believes that the Department should adhere to this practice.
Department's Position
We agree with Toyota. Maintaining our approach is reasonable and we
have not altered our practice of using a company's short-term borrowing
rate to calculate imputed credit expense. The Department's position is
buttressed by the fact that ``TMCC's issuance of short-term commercial
paper contributes to the pool of funds used to finance all
transactions, regardless of credit term'' and that ``there are only ten
occasions in which reported credit terms exceed one year'' (see
Toyota's Submission, February 29, 1996, at 9). Therefore, we have not
adjusted Toyota's reported credit expenses by using a long-term
interest rate as petitioners propose.
Comment 7
Petitioners maintain that it is the Department's consistent
practice to use the date of the final results as the date of payment
for U.S. sales where there is no reported date of payment (citing
Certain Stainless Steel Wire Rods from France; Final Results of
Antidumping Duty Administrative Review (September 3, 1996)).
Petitioners suggest that, whenever Toyota has reported a payment date
of March 31, 1996, the Department should instead use the date of the
final results to calculate Toyota's credit expense.
Toyota explains that, for certain U.S. sales for which it had not
yet received payment by the time it was preparing its
[[Page 5606]]
supplemental questionnaire for filing on May 3, 1996, it reported a
payment date of March 31, 1996, the closing date for the data in the
supplemental response. Toyota asserts that the relevant transactions
consist of sales with extended payment terms that include credit
revenue. Toyota argues that, if the Department changes the reported
date of payment to the date of the final results to recalculate the
credit expense, the Department would likewise have to revise the
calculation of credit revenue. Toyota contends that, because credit
revenue is not calculated but is based on actual payments received,
Toyota would have to submit these amounts to the Department. Toyota
states that, although it has no objection in principle to revising both
credit expense and revenue (given that Toyota would gain more in credit
revenue than it loses in credit expense), due to the complications of
resubmitting new information at this late stage of review, the company
requests that the Department maintain the current ``default'' payment
date.
Department's Position
We disagree with petitioners. Use of the date of the final results
to calculate credit expense and credit revenue for those sales for
which payment has not yet been received is not appropriate because
there is no evidence to suggest that this date will provide greater
accuracy in the calculation of either credit expense or credit revenue.
Due to the nature of the credit expense and credit revenue at issue, it
is not possible to derive exact expense and revenue amounts for certain
transactions within the time permitted for responding to our
information requests. In addition, because Toyota calculated its credit
expense and credit revenue using the same period, any adjustment to one
will require a corresponding adjustment to the other. Accordingly, we
have not adopted petitioners' proposal for the final results.
Comment 8
Petitioners state that Toyota never stated for the record that all
of its U.S. technical services were actually indirect expenses.
Petitioners claim that Toyota reported the expenses as indirect
expenses because Toyota was unable to segregate them from other
expenses, and petitioners argue that Toyota cannot be allowed to
benefit from its alleged inability to isolate these expenses.
Petitioners assert that Toyota bears the burden of demonstrating that
these expenses are indirect pursuant to 19 CFR 353.54 and argue that
the Department should treat the expenses as direct selling expenses.
Toyota disputes petitioners' assertion that it classified technical
service expenses as ``indirect'' because the expenses could not be
separately quantified. Toyota asserts that the record is clear that
these expenses are all fixed and do not relate to specific sales.
Department's Position
We disagree with petitioners. In Toyota's initial questionnaire
response, the company reported that its ``[t]echnical services in the
United States were allocated and included in selling expenses.'' Toyota
also explained that ``[t]hese are not recorded separately in TMS's
records, and, therefore, cannot be isolated.'' October 16, 1995
Questionnaire Response at C-51. In response to our request that Toyota
state whether any of the technical services it performed could be tied
to specific sales and to report variable technical service expenses
separately from fixed expenses, Toyota stated that its technical
service expenses are all fixed expenses and do not relate to specific
sales. Questionnaire Response at C-65-66. Based on the record of this
review, we find no reason to dispute Toyota's characterization of its
reported technical service expenses as indirect. The fact that Toyota
is unable to break out a particular expense does not suggest that this
characterization is inaccurate. Accordingly, we have maintained our
treatment of these expenses as indirect selling expenses in the final
results.
Comment 9
Petitioners maintain that the Department's treatment of Toyota's
U.S. servicing commissions as indirect selling expenses is not
consistent with the statute or with the Department's practice in the
1987-89 administrative review. Petitioners contend that these expenses
are in fact value-added expenses. Petitioners state that section 772 of
the Act provides that the Department will derive CEP by reducing the
starting price by the cost of any further manufacture or assembly, but
section 772 does not provide that U.S. value-added expenses be included
in the pool of U.S. indirect selling expenses which, in turn,
establishes the limit of the CEP offset. Petitioners claim further
that, in the 1987-89 review, the Department included Toyota's servicing
commission payments in U.S. value-added costs. Petitioners note that,
in that review, the Department determined that Toyota's servicing
``commissions'' are payments to a third party, the dealer, and
considered them as a cost of further manufacturing because the expenses
involved preparing, servicing, and delivering a forklift truck to the
customer, all of which are operations that add value to the forklift.
Toyota responds that these commissions are different from a direct
payment to subcontracted value-added activities. Toyota asserts that
the law and regulations describe how commissions are to be treated and
that commissions are always paid to third parties to compensate for
some service or activity. Toyota argues that the fact that some of
these activities may involve certain servicing obligations does not
render them value-added expenses.
Department's Position
We agree with Toyota. Based on the record of this review, we do not
consider these payments to be for specific further-manufacturing
activity. Based on Toyota's description of the purpose of these
payments, while they may potentially involve such activity or
obligations, they are more akin to payments that we treat as
commissions. In its sales questionnaire response Toyota stated that
``these commissions are paid to unaffiliated forklift dealers for
National Account transactions in their territories . * * *'' October
16, 1995 Questionnaire Response at C-40. In a January 30, 1996,
submission to the Department, Toyota stated (at 11) that ``these
commissions may or may not be related to modifying the truck--in fact,
most are not-- and in any case do not relate to any activities
performed by Toyota.'' Toyota's description of these payments indicates
that they are generally not for further-manufacturing activities, but
rather are primarily intended to compensate dealers for servicing
obligations they may be called upon to provide.
We have previously considered similar payments to be commissions.
In TRBs (at 57638), respondent ``explained in its response that, as a
means of compensating (its U.S. affiliate) for expenses it incurred
with respect to services it provided for certain of (respondent's)
purchase price sales, (respondent) made ``commission'' payments to (its
U.S. affiliate).'' While the ``commission'' concerned payments to a
related party on purchase price sales and were ultimately decided to
not have been at arm's length, the case stands for the proposition that
the Department will consider such payments to be commissions.
There is nothing on the record to support petitioners'' position
that these commissions were related directly to specific further-
manufacturing
[[Page 5607]]
activities. Therefore, for purposes of the final results, we have
maintained our treatment of Toyota's servicing commissions as
``commissions.''
Comment 10
Petitioners note that, at verification, Toyota informed the
Department that it miscalculated inland freight and proposed an
alternate methodology to calculate the freight cost on the basis of
units shipped rather than on the basis of weight. Petitioners assert
that such a methodology is improper because it understates the amount
of inland freight expense for larger trucks while allocating a
disproportionately greater expense to smaller trucks. Petitioners
propose an alternate methodology using the total weight of individual
trucks and the freight factor Toyota provided in its May 3, 1996
supplemental response.
Toyota responds that petitioners misunderstand the issue because
Toyota's yen/kg inland freight factor itself is incorrect. Toyota
states that, contrary to its initial belief, there is no way to
calculate a yen/kg inland freight factor because its records only
permit the calculation of a per-unit amount for inland freight based on
the total units shipped and the total payments made. Toyota asserts
that this is an accurate way of allocating the expense because Toyota
is charged by the truckload regardless of the number of trucks shipped.
Department's Position
We agree with Toyota. Petitioners'' proposed methodology would be
based on a freight factor that Toyota determined, in preparing for
verification, was flawed. We verified that the original methodology was
flawed. Toyota apprised the Department of this error prior to
verification and calculated a per-unit expense by taking the total
expense for the POR and allocating it over the total units it shipped.
We verified the bases of Toyota's proposed methodology.
This methodology is the most feasible manner in which Toyota can
report this expense based on its records, which only permit the
calculation of per-unit amounts using the total units shipped and total
payments made. Further, we consider this to be an accurate and
reasonable method of allocating the expense, given that Toyota is
charged by the truckload, not by the weight. Accordingly, we have
accepted Toyota's methodology for the final results.
Comment 11
Petitioners assert that Toyota failed to provide verification
documents to support its home market warranty payments, yet the
Department inadvertently allowed Toyota an adjustment for home market
warranty expense in the Preliminary Results. Petitioners argue that
there is no basis to allow Toyota an adjustment for home market
warranty expense given that Toyota failed to demonstrate that it made
the warranty payments and, therefore, failed verification of this
expense. Petitioners conclude that the Department should disallow an
adjustment for Toyota's home market warranty expense for the final
results.
Toyota responds that petitioners are incorrect in recommending that
the Department deny Toyota's home market warranty expense. Toyota notes
that the Department's verification report and verification exhibits
related to Toyota's claimed warranty expense show clearly that the
verification of this expense, including traces to numerous documents
supporting the fact that Toyota incurred and paid the reported
warranties. Toyota claims that the only document it could not provide
was one showing that it made a specific warranty payment to a dealer, a
document that Toyota's accounting system does not produce. Toyota
asserts that all of the documentation that Toyota does have, and which
the Department examined, supports the fact that it made these payments.
Therefore, Toyota contends, the Department was justified in determining
the expenses were real. Toyota argues that any decision to deny this
expense would be an inappropriate use of adverse facts available.
Department's Position
We disagree with petitioners. We do not accept petitioners'
assertions that we could not verify Toyota's reported home market
warranty expense and that we inadvertently overlooked Toyota's failure
to verify this expense in the Preliminary Results.
While it is true that Toyota was unable to demonstrate that it made
these warranty payments through the use of specific documents, e.g., a
bank-funds transfer statement, the verification of this expense
included the review of numerous other documents that supported the
expense. See Report at 17-18. Unlike Toyota's failure to respond to the
Department's requests with regard to the verification of certain
selling expenses, Toyota was able to provide numerous interrelated
documents to support the reported warranty expense. Therefore, we have
allowed Toyota's home market warranty claim for the final results.
Comment 12
Petitioners state that the Department has provided no justification
for a departure from its standard practice for determining whether
transactions with affiliated parties are at arm's length based on its
99.5 percent test. Petitioners claim that they performed an affiliated-
party test and, given that the evidence of record indicates that
Toyota's prices to its affiliated dealers are not at arm's length, the
Department must require Toyota to submit complete home market sales
data.
Petitioners note that the Department confirmed at verification that
TMC's price list makes no distinction between prices charged to
affiliated and unaffiliated dealers, but argues that price lists alone
cannot determine whether sales are at arm's length because certain
affiliated dealers might receive higher rebates, better payment terms,
or any other number of benefits that result in a lower net price than
that which unaffiliated dealers pay.
Toyota responds that the Department should not require Toyota to
submit sales information on sales by affiliated dealers to unrelated
end-users because all of its sales are at arm's length. Toyota adds
that petitioners' own analysis demonstrates that sales to affiliated
dealers are at arm's length, since this analysis reveals that
affiliated dealers paid prices slightly above and slightly below the
average price to unaffiliated dealers. Toyota states that this very
narrow range of deviation from the average does not suggest that prices
to affiliated dealers are not at arm's length and adds that the small
deviation is created solely by a deficiency in petitioners' method of
analysis, whereby petitioners adjusted the prices by the costs of the
attachments and options. Toyota provides three examples indicating that
differences in prices are attributable to differences in the number of
options/attachments, credits for removal of certain equipment, and
differences in the types of attachments. Toyota states that petitioners
wrongly tried to compensate for the different attachments through cost
adjustments; petitioners should have used the prices for the
attachments which the Department verified were identical to affiliated
and unaffiliated dealers. Toyota states that the Department has
recognized in each of its prior reviews that Toyota's sales are all at
arm's length and neither Toyota's business practices nor the law have
changed and, therefore, there is no basis for the Department to alter
its analysis for this review.
[[Page 5608]]
Department's Position
We disagree with petitioners. As we stated in our verification
report, Toyota's sales prices to affiliated and unaffiliated dealers in
the home market, for the basic truck and parts, were based on published
price lists. See Report at 11. At verification, we noted no deviation
from the price lists for sales to affiliated or unaffiliated dealers
for either the basic truck or parts.
In addition, while petitioners claim that the arm's-length test
they conducted appears to indicate that Toyota's sales to affiliated
dealers fail our 99.5% arms-length-test, we note that, due the unique
nature of this product, where differences between products beyond the
basic truck (options, attachments, etc.) can be significant and where
these differences are not always individually distinguished in the
submitted data, an arm's-length test is not always feasible.
Petitioners'' methodology in their arm's-length test for calculating
average variances for options does not adequately account for all such
differences. Therefore, based on the verified fact that both affiliated
and unaffiliated dealers purchased trucks and parts based on the same
price lists, we have determined that Toyota's sales to affiliated
dealers in the home market form a proper basis for consideration and
the calculation of NV.
Comment 13
Petitioners argue that the Department's level-of-trade analysis is
incorrect. Petitioners claim that, rather than examining the actual
level of trade at which Toyota's sales to unaffiliated purchasers in
the United States occurred, the Department began its level-of-trade
analysis with a price reduced of expenses which Toyota's U.S. affiliate
incurred. Petitioners assert that, by excluding these expenses, the
Department failed to recognize that the CEP sales were at a more
advanced level than Toyota's home market sales and, therefore, that an
upward adjustment to NV was warranted.
Petitioners assert that there is no legal justification for
adjusting CEP prior to determining the level of trade of the U.S. sale.
Petitioners claim that the statute requires the Department to make a
comparison of CEP with NV at the same level of trade. Petitioners
assert that nothing in the statute nor the SAA requires the Department
to compare the level of trade of a CEP with an unadjusted home market
price and that, in doing so, the Department has misinterpreted the law.
Petitioners point to the Department's longstanding practice of
comparing sales in the relevant markets at a common point in the chain
of commerce (citing, among others, Cookware at 43330).
Petitioners claim that the flaw in the Department's analysis is
indicated by the results it reached in this case. Petitioners assert
that the U.S. sales are accompanied by similar and more extensive
selling activities than those in the home market, yet the Department
created distinct and commercially unrealistic levels of trade in the
two markets with its adjustments to CEP. Petitioners refer to other
cases where the Department's analysis yielded anomalous results and
artificial differences in levels of trade between markets (citing
Stainless Steel Wire Rod from France, 61 FR 8915, 8916 (1996), and LNPP
from Japan, at 38142).
Petitioners conclude that the Department should begin its level-of-
trade analysis with an unadjusted CEP starting price. Once the
Department does that it becomes apparent that Toyota's U.S. sales are
at a more advanced level of trade than its home market sales and that
an upward adjustment to NV for the difference in levels of trade is
warranted.
Toyota responds that petitioners'' argument that the Department
should compare unadjusted prices is incorrect, contradicted by the
statute, and premised upon a fundamental misperception of CEP. Toyota
asserts that there is no such thing as an unadjusted CEP; CEP is by
definition an adjusted price, while ``normal value'' is an unadjusted
price. Toyota further asserts that the level-of-trade provision refers
only to a comparison of NV with a CEP. Toyota concludes that use of an
unadjusted CEP in determining the level of trade of the U.S. sale is
contradicted by the definition of CEP at section 772(b), the definition
of normal value at section 773(a)(1), and the level-of-trade provision
at section 773(a)(7)(A) of the Act.
Toyota notes that its U.S. sales are indisputably CEP sales. Toyota
claims that the U.S. level of trade is a single, very-little-advanced
level, from an exclusive distributor (TMC) to an affiliated purchaser
in the United States (TMS). In contrast, all of its sales in Japan are
at a more remote level, that of a distributor (TMC) to dealers.
Consequently, there is no level of trade in Japan comparable to that of
the U.S. sales and no information available in Japan on which to make
the price-based level-of-trade adjustment anticipated by section
773(a)(7)(A) of the Act. Therefore, the Department correctly made a
CEP-offset adjustment as permitted by section 773(a)(7)(B) of the Act.
Toyota adds that, since its home market level of trade is more remote,
there is no justification for adjusting home market prices upwards.
Toyota notes, in conclusion, that the Department refuted arguments
identical to petitioners'' suggestions in its proposed regulations (at
7347).
Department's Position
We disagree with petitioners that our level-of-trade analysis must
begin with the unadjusted price of the U.S. sales. We base the level of
trade of CEP sales on the CEP, i.e., the price in the United States,
net of the deductions required by the statute. It is that price, not
the starting price, that is compared to the normal value. Petitioners'
position is contrary to the SAA, the statute, and our practice under
the URAA.
We agree with Toyota that the statute is clear that the CEP by
definition is an adjusted price while normal value in a level-of-trade
analysis is based on an unadjusted price. Section 772(b) of the Act
states that ``constructed export price'' means the price at which the
subject merchandise is first sold * * *, as adjusted under subsections
(c) and (d)'' (emphasis added). Normal value is defined as ``the price
at which the foreign like product is first sold * * * for consumption
in the exporting country * * * at the same level of trade as the * * *
constructed export price.'' Section 773(a)(1)(B)(i) of the Act. The SAA
similarly specifies that normal value will be calculated, to the extent
practicable, at the same level of trade as the CEP. SAA at 827. Section
773(7)(A) of the Act further indicates that ``[t]he price described in
paragraph (1)(B) shall be increased or decreased to make due allowance
for any difference (or lack thereof) between the * * * constructed
export price and the price described in paragraph (1)(B) * * * that is
shown to be wholly or partly due to a difference in level of trade
between the * * * constructed export price and normal value * * *'' It
is clear that the statute speaks of an adjusted price for CEP and an
unadjusted price for NV.
Our practice, in examining level of trade, has been to use an
adjusted starting price (i.e., the CEP) in accordance with the statute.
In LNPP from Japan, we stated ``[i]n those cases where [a level-of-
trade] comparison is warranted and possible, then for CEP sales the
level of trade will be evaluated based on the price after adjustments
are made under section 772(d) of the Act. As stated in Aramid Fiber
``the level of trade of the U.S. sales is determined by the adjusted
CEP rather than the starting price.'' ' LNPP from Japan at 38143
(emphasis added).
[[Page 5609]]
More recently, in AFBs 6, we stated:
[t]he statutory definition of `constructed export price' contained
in section 772(d) of the Tariff Act indicates clearly that we are to
base CEP on the U.S. resale price as adjusted for U.S. selling
expenses and profit. As such, the CEP reflects a price exclusive of
all selling expenses and profit associated with economic activities
occurring in the United States. See SAA at 823. These adjustments
are necessary in order to arrive at, as the term CEP makes clear, a
`constructed' export price. The adjustments we make to the starting
price, specifically those made pursuant to section 772(d) of the
Tariff Act (``Additional Adjustments for Constructed Export
Price''), normally change the level of trade. Accordingly, we must
determine the level of trade of CEP sales exclusive of the expenses
(and concomitant selling functions) that we deduct pursuant to this
subsection.
AFBs 6 at 2107.
Because the statute, the SAA, and our practice support our use of
an adjusted CEP to determine level of trade, petitioners' comparisons
between the activities provided for Toyota's home market sales and
those provided for its U.S. sales to unaffiliated customers are not
relevant. We consider the appropriate comparison of selling functions,
selling expenses, and class of customer between markets to be sales
determined by the adjusted starting price (constructed export price)
for U.S. sales and the unadjusted starting price for home market sales
(normal value) i.e., Toyota's sales to its U.S. affiliate and its home
market sales to affiliated and unaffiliated dealers.
Comment 14
Petitioners assert that, even if the Department begins the level-
of-trade analysis with an adjusted CEP, the evidence of record does not
establish that different levels of trade exist in the home and U.S.
markets. Petitioners claim that the selling functions provided on U.S.
sales by TMC and TAL (exclusive of those provided by TMS) are
sufficiently similar to the verified selling functions incurred on home
market sales by TMC and TAL to consider the sales at the same level of
trade.
Petitioners note that the home market expenses the Department
examined at verification included inland freight and insurance,
rebates, discounts, warranties, direct advertising, credit, product
liability, TAL home market indirect expenses (quality assurance) and
TMC home market indirect expenses (incentives, indirect selling,
indirect advertising, wage and salary and G&A and inventory carrying
costs). Petitioners argue that rebates, discounts and incentives do not
reflect selling activities and cannot serve as the basis for
distinguishing levels of trade. Petitioners claim that the Department
was unable to verify either home market direct or indirect advertising,
part of the indirect selling expense claims, and Toyota's warranty
claims and argue that, given this inability, the Department should
neither adjust for, nor consider, these to be distinct functions in its
level-of-trade analysis.
Petitioners assert that other expenses applying to home market
sales appear to be applicable to U.S. sales. In particular, petitioners
claim that Toyota has focused only on selling functions TMC provided
with respect to U.S. sales and has ignored those TAL provided (citing
as examples TAL's quality assurance, engineering services and technical
advice). Petitioners note that Toyota admits TAL incurs expenses
related to the selling functions provided with respect to U.S. sales.
Petitioners assert that the statute does not limit the selling
functions to be examined to those provided by the exporter and notes
that, while the degree of the particular service may vary on a given
group of sales, the statute merely looks to whether the function
provided is the same. Petitioners conclude that there are no verified
bona fide selling expenses that were incurred in the home market that
were not also incurred with respect to U.S. sales and, therefore, there
is no rational basis for differentiating between levels of trade in
this case.
Toyota responds that petitioners ignore evidence of record
establishing different levels of trade and maintains that the
Department's disallowance of certain expenses was unwarranted. Toyota
argues that, even if the Department's disallowance of these expenses
was lawful, it does not follow that the selling functions which gave
rise to the expenses should be eliminated from the level-of-trade
analysis because the Department was able to verify the selling
functions, if not the precise expense amounts. Toyota notes that the
Department stated unequivocally in the preliminary results that it
verified the presence of home market selling functions and that the
home market level of trade constituted a more advanced stage of
distribution than the level of the CEP.
Toyota further asserts that petitioners' implication that TAL's
provision of selling functions requires a finding that there are no
differences in selling functions is not valid since: (1) The
differences in TMC's selling functions in the two markets is sufficient
to satisfy the Department's level-of-trade analysis, (2) the record
states in several places that, while there was some overlap in the
functions TAL performed in the two markets, there were nevertheless
quantitative and qualitative differences in the functions performed,
and (3) the Proposed Rules state that ``overlap between functions is
not necessarily determinative of whether two levels of trade are
distinct.'' Notice of Proposed Rulemaking and Request for Public
Comments, 61 FR 7308, 7347 (February 27, 1996), citing SAA at 830.
Toyota argues that the substantial differences in the degree of the
performance of a similar function in the two markets constitute ``the
performance of different selling activities'' pursuant to section
773(a)(7)(A)(i) of the Act.
Department's Position
We disagree with petitioners. In the course of this review, we
obtained information concerning the selling functions Toyota performed
for its respective markets. In addition, in the process of verifying
this information, we interviewed company officials concerning the
functions performed for the various markets. Based on our analysis of
this information, we determined that TMC's and TAL's selling activities
directed at the home market level of trade were more extensive. See
Preliminary Results Analysis Memo, July 26, 1996, at 2-5; see also
Report at 9-10. Our determination for the final results remains
unchanged.
We disagree with petitioners that rebates, discounts and incentives
do not reflect selling activities and do not serve as a basis for
distinguishing levels of trade. Contrary to petitioners' assertion,
these expenses may involve selling functions that are appropriate for
us to consider in our level-of-trade analysis and contribute to our
level-of-trade determination. We further disagree with petitioners that
we were unable to verify Toyota's claimed home market warranty expense
(see comment 11).
We also disagree with petitioners that Toyota failed to provide
information on selling functions TAL performed with respect to sales to
the respective markets. As we stated in our Preliminary Results
Analysis Memo at 3-4, ``[i]n addition, the functions performed on
behalf of U.S. sales by TAL, while similar in some instances to those
provided in the home market, are much less extensive and limited to
quality assurance, engineering services and technical advice.''
Finally, we disagree with petitioners that our inability to
substantiate certain selling expenses, by tracing reported amounts to
the level of detail required for a successful verification of a topic,
precludes us from recognizing that Toyota provided the functions for
sales
[[Page 5610]]
to the particular markets. We obtained confirmation that these
functions were performed in other ways, e.g., through interviews with
company officials and review of organizational charts. See, e.g.,
Report at 9-10.
Comment 15
Petitioners argue that Toyota should be denied a CEP-offset
adjustment to NV because it failed to provide information on a level-
of-trade adjustment (citing LNPP from Japan at 38142). Petitioners
assert that Toyota has made no effort to quantify a level-of-trade
adjustment but has assumed it is entitled automatically to a CEP
offset. Petitioners assert that the SAA (at 830) provides that, where
information on different levels of trade by the same company and same
product is unavailable for the POR, the level-of-trade adjustment may
be based on (i) sales of other products by the same company, (ii) the
experience of other producers, or (iii) sales of the same product by
the same company in different time periods. Petitioners claim that
Toyota has not attempted to provide such information, given its
assumption a CEP offset is automatic. Petitioners further assert that
the Department found the information Toyota provided to quantify the
CEP offset to be deficient and not verifiable.
Toyota responds that, in the preliminary results, the Department
properly determined that Toyota's sales in the home market were at a
different, more advanced level of trade than its sales in the United
States. Toyota claims that the wide range of selling activities to the
home market level has an obvious and substantial effect on price
comparability with the U.S. level of trade. Toyota asserts that,
because it sells at only one level in the home market, it cannot
demonstrate a ``consistent pattern of differences between levels of
trade'' (citing Certain Stainless Steel Wire Rods From France;
Preliminary Results of Antidumping Duty Administrative Review, 61 FR
8915, 8916 (March 6, 1996)). Toyota claims that it provided all of the
information necessary for the Department to calculate the CEP offset,
and states that, in the preliminary results of review, the Department
properly adjusted Toyota's home market prices due to differences in
levels of trade through a CEP offset. Toyota asserts that the
Department properly resorted to the CEP offset after analyzing other
statutorily directed alternatives to account for the necessary
adjustment for differences in levels of trade. Toyota states that
petitioners' citation to LNPP from Japan is misleading because, in that
case, the Department denied a CEP offset because a respondent provided
no level-of-trade information.
Department's Position
We disagree with petitioners. We agree that a respondent must
establish entitlement to a level-of-trade adjustment. However, where
the data necessary to calculate an adjustment is unavailable, the CEP
offset is warranted. With respect to the quantification necessary for a
level-of-trade adjustment, in this case the respondent sells to only
one level in the home market and this level is at a more advanced stage
of distribution than the level of the CEP. Therefore, neither we nor
Toyota can quantify such an adjustment and there is no further
requirement to establish entitlement to a CEP-offset adjustment.
Comment 16
Petitioners claim that the Department's failure to deduct from CEP
Toyota's indirect selling expenses incurred in the country of
manufacture to sell the product to the United States, and Toyota's
inventory carrying costs incurred from the time of production in the
foreign country through the time of entry into the United States, was a
direct violation of the statute and should be corrected in the final
results.
Petitioners contend that the plain meaning of section 772(d) of the
Act indicates that the Department cannot limit adjustments to CEP based
on the geographical area in which such expenses are incurred and that,
when Congress amended the statute in the URAA, it did not change the
operative language of section 772(e) by limiting the selling expenses
the Department is to deduct. Petitioners further contend that, under
prior law, the Department was required to deduct selling expenses from
Exporter's Sales Price (ESP) regardless of where incurred
geographically and, citing Silver Reed America, Inc. v. United States,
683 F. Supp. 1393 (CIT 1988) (Silver Reed), state that the relevant
question is whether the selling expenses relate to U.S. sales.
Petitioners further state that the court recognized the loophole that
would be created if expenses incurred abroad for U.S. sales were not
deducted from ESP (the predecessor to CEP).
Petitioners maintain that the Department should deduct these
expenses from CEP because the record establishes that they relate
explicitly to the U.S. economic activity. Petitioners cite in support
of their position LNPP from Germany (at 38173-74), and Notice of Final
Determination of Sales at Less Than Fair Value: Certain Pasta from
Italy, 61 FR 30326, 30352 (June 14, 1996) (Pasta from Italy).
Toyota answers that the petitioners would have the Department
calculate a distorted CEP that is not the equivalent of what the export
price would have been if the affiliated foreign seller and U.S.
reseller were unaffiliated. Moreover, petitioners claim that the
Department limited CEP deductions based on where they occurred is
factually in error as the Department deducted from CEP direct
advertising TMC incurred in Japan. Citing the Notice of Proposed
Rulemaking and Request for Public Comments, 61 FR 7308, 7331 (February
27, 1996), Toyota maintains the Department properly limited deductions
by whether such expenses were selling expenses associated with economic
activities in the United States, as required by the statute. Regarding
the indirect selling expenses referred to by petitioners, these were
not deducted because they are general in nature, do not relate
specifically to U.S. commercial activity, and are incurred, if at all,
with respect to the sale by an affiliated purchaser. To support its
position, Toyota cites Calcium Aluminate Flux From France; Preliminary
Results of Antidumping Duty Administrative Review, 61 FR 40396, 40397
(August 2, 1996) (Calcium Aluminate Flux), and argues that the relevant
expenses relate to commercial activity in Japan, not U.S. commercial
activity and, therefore, the Department properly did not deduct them in
calculating CEP.
Department's Position
We disagree with petitioners. In accordance with the SAA, we
deducted from CEP only those expenses associated with economic
activities in the United States. The SAA indicates that ``constructed
export price is now calculated to be, as closely as possible, a price
corresponding to an export price between non-affiliated exporters and
importers.'' SAA at 823. Therefore, we did not deduct either of the
expenses referred to by petitioners from CEP. We have only deducted
expenses associated with commercial activities in the United States in
our calculation of CEP. Our proposed regulations reflect this logic at
351.402(b): ``(t)he Secretary will make adjustments to constructed
export price under 772(d) for expenses associated with commercial
activities in the United States, no matter where incurred.'' Id. at
179.
With regard to the TMC and TAL export selling expenses Toyota
allocated to U.S. sales, we consider these expenses not to be
specifically related to economic activities in the United States.
[[Page 5611]]
As these figures cover salaries and fixed expenses, which expenses are
general in nature and are not related specifically to commercial
activity in the United States, they are not properly part of the
calculation of CEP. In Calcium Aluminate Flux, at 40397, we declined to
deduct indirect selling expenses (i.e., administrative expenses,
inventory carrying costs, personnel costs for technicians) incurred in
the country of manufacture because we deemed such expenses not to be
specifically related to commercial activity in the United States. While
these expenses arguably may be similar to those we deducted in LNPP
from Germany, we have determined subsequently, as indicated by our
position in Calcium Aluminate Flux, that such expenses are not
specifically associated with commercial activities in the United
States.
Regarding petitioners' assertion that we should deduct Toyota's
inventory carrying costs incurred in the country of manufacture, such
inventory carrying costs are not associated with economic activities in
the United States. See AFBs 6 at 2125. Therefore, we have not deducted
either of these expenses for purposes of the final results because
neither of the expenses is specifically associated with economic
activities in the United States and, therefore, is not an appropriate
deduction in calculating CEP.
Comment 17
Petitioners argue that the Department's verification report and
Toyota's supplemental questionnaire response indicate that Toyota
misreported the date of sale for both its U.S. and home market sales.
Petitioners note that Toyota explained in its supplemental
questionnaire response that a dealer may modify an order by changing
the configuration of the truck between 10-15 percent of the time, but
that the Department determined at verification the frequency instead
ranged from 4.3 to 7.5 percent. Petitioners assert that the low
frequency of changes fails to justify Toyota's decision to base date of
sale on date of shipment when the majority of sales are established on
the order date; further, the changes to certain attachments do not
alter the essential terms of sale between Toyota and its customer.
Petitioners state that it is likely there would be a set price for the
particular attachments or changes in configuration of the truck and,
although a purchaser may request different attachments, the basic truck
and negotiated price would not be altered after the order is placed.
Toyota responds that the date the basic terms of the contract are
agreed to is the date of shipment, which is generally on or about the
date of invoice. Toyota notes that, under the Department's proposed
regulations, the invoice date is considered the date of sale. Toyota
contends that customers can request modifications in payment terms,
configuration, and price up to the date of shipment. Toyota states,
further, that the date of order is not a date of sale in Toyota's
records, is not significant enough to record on a systematic basis and,
even where recorded, the order may or may not describe the merchandise
actually shipped. Toyota notes that this is not a case in which the
date of sale is substantively significant to the final results, given
that Toyota's sales are relatively even over the period and there are
no factors such as hyperinflation that would cause the date of sale to
affect the analysis. Consequently a different date of sale would shift
the universe of reported sales slightly and not change the outcome
particularly since the Department plans to assess duties on all trucks
entered during the POR.
Department's Position
We agree with Toyota. The date of shipment is the appropriate date
of sale for home market sales in this case for the following reasons.
First, the reported date of sale, which is based on shipment date,
closely corresponds to invoice date in this case and is in accord with
our current practice and with the date-of-sale methodology in our
proposed regulations, where invoice date is considered the appropriate
date of sale. Second, we verified that certain basic sales terms (such
as configuration and price) can change up to the date of shipment.
While Toyota initially reported that orders were changed 10-15 percent
of the time and we determined at verification that the frequency of
changes instead ranged from 4.3 to 7.5 percent, the potential for
configurations and prices to change for the reported sales supports a
sale date based on the shipment date. Third, Toyota records the date of
shipment as the date of sale for financial reporting and internal
purposes, and it records the sales transaction as complete upon
shipment (e.g., payment is due from a dealers based on this date--see
Report at 11-12, Sale Date, and 19, Credit Expense).
Comment 18
Petitioners contend that the Department failed to deduct Toyota's
U.S. inventory carrying costs (calculated from the date of entry to the
date of shipment from the distribution facility in the United States)
from CEP. Petitioners assert that these expenses are related to
commercial activities in the United States and therefore, should be
deducted.
Toyota argues that the Department properly considered inventory
carrying costs incurred in connection with Japanese exports to the
United States to be general export expenses broadly attributable to the
sale to the unaffiliated purchaser, which should not be deducted from
CEP. Toyota notes, however, that to the extent the Department deducts
any inventory carrying expenses from CEP, the expenses should also be
included in U.S. indirect selling expenses and the Department should
deduct corresponding home market inventory carrying costs from NV.
Department's Position
We agree with petitioners. The inventory carrying costs Toyota
incurred in the United States are an indirect expense related to
commercial activity in the United States and, therefore, are
appropriately deducted from the CEP starting price. Therefore, we have
deducted the reported expense from the starting price and included it
in U.S. indirect selling expenses for purposes of the final results.
Comment 19
Petitioners note that, in the preliminary results, the Department
treated Toyota's repacking costs as a circumstance-of-sale (COS)
adjustment and added the sum of packing and repacking to NV in dollars.
Petitioners argue that the statute directs the Department to adjust NV
for costs and expenses incident to placing the subject merchandise in
condition packed ready for shipment to the United States and,
therefore, the Department should not include repacking costs in the
adjustment for differences in packing, but rather should subtract them
from Toyota's starting price as an adjustment to CEP (citing section
772(d) and Federal-Mogul Corporation v. United States, Slip Op. 96-68
at 25 (April 19, 1996)).
Toyota asserts that section 772(c)(1)(A) provides that the
Department should increase CEP by an amount for ``packing,'' and notes
that this provision does not limit this term to home market packing.
Toyota maintains, therefore, that the Department's approach was
reasonable.
Department's Position
We agree with petitioners. As noted in our response to comment 16,
we deduct expenses related to economic activities in the United States
in calculating CEP.
[[Page 5612]]
Because U.S. repacking costs are clearly related to such activities, we
have deducted these expenses from the starting price to calculate CEP
for the final results.
Comment 20
Petitioners claim that the Department uniformly reduced Toyota's
home market sales prices by reported inland freight expenses, which is
inappropriate because Toyota's reported home market prices were
exclusive of inland freight for certain sales. Petitioners assert that
deducting these amounts resulted in an understatement of NV for those
sales for which the price did not include delivery.
Toyota responds that it reported, and the Department verified,
inland freight amounts only where the prices were inclusive of inland
freight. Toyota asserts that the Department's Preliminary Results
accomplish exactly what petitioners claim is proper.
Department's Position
We agree with petitioners. Toyota reported that its reported home
market gross unit price ``includes inland freight only where the sales
term is c.&f.'' (October 16, 1995 response at B-22) and indicated that
for a particular sale ``the sales term is FOB, that is, it does not
include charges for inland freight'' (May 3, 1996 supplemental response
at Supp. 29). We have ensured that our calculations reflect the
information Toyota provided in its response concerning this expense.
Final Results of Review
We determine that the following weighted-average margins exist for
the period June 1, 1994, through May 31, 1995:
------------------------------------------------------------------------
Margin
Manufacturer/exporter (percent)
------------------------------------------------------------------------
Toyota..................................................... 50.34
Nissan..................................................... \1\ 7.36
Toyo....................................................... \1\ 4.48
------------------------------------------------------------------------
\1\ No shipments or sales subject to this review. Rate is from the last
relevant segment of the proceeding in which the firm had shipments/
sales.
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. We have
calculated an exporter/importer-specific assessment rate for Toyota.
For Toyota's CEP sales we divided the total dumping margins for the
reviewed sales by the total entered value of those reviewed sales and
the entered value of leased trucks not subject to review (see our
response to Toyota comment 10). We will direct Customs to assess the
resulting percentage margin against the entered Customs values for the
subject merchandise on each of Toyota's entries during the review
period. While the Department is aware that the entered value of sales
during the POR is not necessarily equal to the entered value of entries
during the POR, use of entered value of sales as the basis of the
assessment rate permits the Department to collect a reasonable
approximation of the antidumping duties which would have been
determined if the Department had reviewed those sales of merchandise
actually entered during the POR.
Furthermore, the following deposit requirements will be effective
upon publication of this notice of final results of administrative
review for all shipments of forklift trucks entered, or withdrawn from
warehouse, for consumption on or after the date of publication, as
provided by section 751(a)(1) of the Act: (1) The cash deposit rates
for the reviewed companies will be the rates shown above; (2) for
previously reviewed or investigated companies not listed above, the
cash deposit rate will continue to be the company-specific rate
published for the most recent period; (3) if the exporter is not a firm
covered in this review, a prior review, or the LTFV investigation, but
the manufacturer is, the cash deposit rate will be the rate established
for the most recent period for the manufacturer of the merchandise; and
(4) the cash deposit rate for all other manufacturers or exporters will
be the ``All Others'' rate of 39.45 percent made effective by the final
results of review in Certain Internal-Combustion Industrial Forklift
Trucks From Japan; Final Results of Antidumping Duty Administrative
Review, 59 FR 1374,1384 (January 10, 1994).
These deposit requirements shall remain in effect until publication
of the final results of the next administrative review.
This notice also serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as the only reminder to parties subject to
administrative protective orders (APO) of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with 19 CFR 353.34(d). Failure to
comply is a violation of the APO.
This administrative review and this notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.
Dated: January 29, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-2877 Filed 2-5-97; 8:45 am]
BILLING CODE 3510-DS-P
