[Federal Register Volume 62, Number 201 (Friday, October 17, 1997)]
[Notices]
[Pages 54043-54085]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27473]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-427-801, A-428-801, A-475-801, A-588-804, A-485-801, A-559-801, A-
401-801, A-412-801]
Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, Germany, Italy, Japan, Romania, Singapore,
Sweden and the United Kingdom; Final Results of Antidumping Duty
Administrative Reviews
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty administrative
reviews.
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SUMMARY: On June 10, 1997, the Department of Commerce (the Department)
published the preliminary results of administrative reviews of the
antidumping duty orders on antifriction bearings (other than tapered
roller bearings) and parts thereof from France, Germany, Italy, Japan,
Romania, Singapore, Sweden, and the United Kingdom. The classes or
kinds of merchandise covered by these orders are ball bearings and
parts thereof, cylindrical roller bearings and parts thereof, and
spherical plain bearings and parts thereof. The reviews cover 21
manufacturers/exporters. The period of review (POR) is May 1, 1995,
through April 30, 1996.
Based on our analysis of the comments received, we have made
changes, including corrections of certain
[[Page 54044]]
inadvertent programming and clerical errors, in the margin
calculations. Therefore, the final results differ from the preliminary
results. The final weighted-average dumping margins for the reviewed
firms are listed below in the section entitled ``Final Results of the
Reviews.''
EFFECTIVE DATE: October 17, 1997.
FOR FURTHER INFORMATION CONTACT: The appropriate case analyst, for the
various respondent firms listed below, of Import Administration,
International Trade Administration, U.S. Department of Commerce,
Washington, DC 20230; telephone: (202) 482-4733.
France
Chip Hayes (SKF), Lyn Johnson (SNFA), Michael Panfeld (SNR), Robin Gray
or Richard Rimlinger.
Germany
John Heires (Torrington Nadellager), J. David Dirstine (SKF), Suzanne
Flood (INA), Michael Panfeld (NTN Kugellagerfabrik), Thomas Schauer
(FAG), Robin Gray or Richard Rimlinger.
Italy
Chip Hayes (SKF), Mark Ross (FAG) or Richard Rimlinger.
Japan
J. David Dirstine (Koyo Seiko), Gregory Thompson (NTN), Kristie
Strecker (NPBS), Thomas Schauer (NSK Ltd., Nachi-Fujikoshi Corp.) or
Richard Rimlinger.
Romania
Kristie Strecker (Tehnoimportexport, S.A.) or Robin Gray.
Singapore
Lyn Johnson (NMB/Pelmec) or Richard Rimlinger.
Sweden
Mark Ross (SKF) or Richard Rimlinger.
United Kingdom
Hermes Pinilla (FAG, Barden, NSK/RHP) or Robin Gray.
SUPPLEMENTARY INFORMATION:
The Applicable Statute
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (the Tariff Act), are references to the provisions
effective January 1, 1995, the effective date of the amendments made to
the Tariff Act by the Uruguay Round Agreements Act (URAA). In addition,
unless otherwise indicated, all citations to the Department's
regulations are to 19 CFR Part 353 (1997).
Background
On June 10, 1997, the Department of Commerce (the Department)
published the preliminary results of administrative reviews of the
antidumping duty orders on antifriction bearings (other than tapered
roller bearings) and parts thereof (AFBs) from France, Germany, Italy,
Japan, Romania, Singapore, Sweden, and the United Kingdom (62 FR
31566). The reviews cover 21 manufacturers/exporters. The period of
review (the POR) is May 1, 1995, through April 30, 1996. We invited
parties to comment on our preliminary results of review. At the request
of certain interested parties, we held public hearings for General
Issues on July 8, 1997, and for Japan-specific issues on July 15, 1997.
The Department has conducted these administrative reviews in accordance
with section 751 of the Tariff Act.
Scope of Reviews
The products covered by these reviews are AFBs and constitute the
following classes or kinds of merchandise: Ball bearings and parts
thereof (BBs), cylindrical roller bearings and parts thereof (CRBs),
and spherical plain bearings and parts thereof (SPBs). For a detailed
description of the products covered under these classes of kinds of
merchandise, including a compilation of all pertinent scope
determinations, see the ``Scope Appendix,'' which is appended to this
notice of final results.
Use of Facts Available
For a discussion of our application of facts available, see the
``Facts Available'' section of the Issues Appendix.
Sales Below Cost in the Home Market
The Department disregarded home market (HM) sales below cost for
the following firms and classes or kinds of merchandise for these final
results of reviews:
----------------------------------------------------------------------------------------------------------------
Country Company Class or kind of merchandise
----------------------------------------------------------------------------------------------------------------
France................................... SKF......................... BBs
SNR......................... BBs
Germany.................................. NTN......................... BBs
FAG......................... BBs, CRBs, SPBs
INA......................... BBs, CRBs, SPBs
SKF......................... BBs, CRBs, SPBs
Italy.................................... FAG......................... BBs
SKF......................... BBs
Japan.................................... Koyo........................ BBs, CRBs
Nachi....................... BBs, CRBs
NSK......................... BBs, CRBs
NTN......................... BBs, CRBs, SPBs
NPBS........................ BBs
Singapore................................ NMB/Pelmec.................. BBs
Sweden................................... SKF......................... BBs
United Kingdom........................... NSK-RHP..................... BBs, CRBs
Barden...................... BBs
----------------------------------------------------------------------------------------------------------------
Duty Absorption
We have determined that duty absorption has occurred with respect
to the following firms and with respect to the following percentages of
sales which these firms made through their U.S. affiliated parties:
------------------------------------------------------------------------
Percentage
of U.S.
affiliate's
Name of Firm Class or kind sales with
dumping
margins
------------------------------------------------------------------------
France
------------------------------------------------------------------------
SKF.................................... BBs 23.24
SPBs 100.00
SNR.................................... BBs 36.22
CRBs 44.64
------------------------------------------------------------------------
Germany
------------------------------------------------------------------------
FAG.................................... BBs 54.57
CRBs 40.14
SPBs 21.10
INA.................................... BBs 64.47
CRBs 40.89
NTN.................................... BBs 36.44
SKF.................................... BBs 7.03
CRBs 53.78
SPBs 21.17
------------------------------------------------------------------------
Italy
------------------------------------------------------------------------
FAG.................................... BBs 20.43
SKF.................................... BBs 8.15
------------------------------------------------------------------------
Japan
------------------------------------------------------------------------
Koyo Seiko............................. BBs 49.49
CRBs 86.02
Nachi.................................. BBs 58.49
CRBs 31.87
NPBS................................... BBs 55.46
NSK.................................... BBs 24.23
CRBs 36.19
NTN.................................... BBs 37.50
CRBs 19.26
SPBs 73.03
------------------------------------------------------------------------
Singapore
------------------------------------------------------------------------
NM Singapore/Pelmec Inc................ BBs 8.51
------------------------------------------------------------------------
Sweden
------------------------------------------------------------------------
SKF.................................... BBs 45.26
United Kingdom
------------------------------------------------------------------------
NSK/RHP................................ BBs 27.76
CRBs 52.51
Barden................................. BBs 13.36
------------------------------------------------------------------------
[[Page 54045]]
For a discussion of our determination with respect to this matter,
see the ``Duty Absorption'' section of the Issues Appendix.
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. Any alleged programming or clerical errors with which we do
not agree are discussed in the relevant sections of the Issues
Appendix.
Analysis of Comments Received
All issues raised in the case and rebuttal briefs by parties to
these concurrent administrative reviews of AFBs are addressed in the
``Issues Appendix'' which is appended to this notice of final results.
Final Results of Reviews
We determine that the following percentage weighted-average margins
exist for the period May 1, 1995, through April 30, 1996:
------------------------------------------------------------------------
Company BBs CRBs SPBs
------------------------------------------------------------------------
France
------------------------------------------------------------------------
SKF.................................... 5.38 (\2\) 42.79
SNFA................................... 66.42 18.37 (\3\)
SNR.................................... 8.60 10.14 (\2\)
------------------------------------------------------------------------
Germany
------------------------------------------------------------------------
FAG.................................... 12.40 19.49 10.32
INA.................................... 49.62 20.08 28.62
NTN.................................... 9.44 (\2\) (\2\)
SKF.................................... 4.25 17.82 4.72
Torring- ton Nadellager................ (\3\) 76.27 (\3\)
------------------------------------------------------------------------
Italy
------------------------------------------------------------------------
FAG.................................... 1.76 (\1\) .........
SKF.................................... 3.59 (\3\) .........
------------------------------------------------------------------------
Japan
------------------------------------------------------------------------
Koyo Seiko............................. 14.20 15.38 (\1\)
NPBS................................... 16.70 (\2\) (\2\)
NSK.................................... 9.88 6.88 (\2\)
NTN.................................... 7.10 3.86 7.69
Nachi.................................. 12.89 3.15 (\2\)
------------------------------------------------------------------------
Romania
------------------------------------------------------------------------
TIE.................................... .20 ......... .........
------------------------------------------------------------------------
Singapore
------------------------------------------------------------------------
NMB Singapore/Pelmec Ind............... 2.10 ......... .........
------------------------------------------------------------------------
Sweden
------------------------------------------------------------------------
SKF.................................... 12.62 ......... .........
------------------------------------------------------------------------
United Kingdom
------------------------------------------------------------------------
NSK-RHP................................ 16.49 68.26 .........
Barden................................. 4.00 (\1\) .........
------------------------------------------------------------------------
\1\ No shipments or sales subject to this review. Rate is from the last
relevant segment of the proceeding in which the firm had shipments/
sales.
\2\ No shipments or sales subject to this review. The firm has no
individual rate from any segment of this proceeding.
\3\ No review.
Assessment Rates
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. Because sampling
and other simplification methods prevent entry-by-entry assessments, we
will calculate wherever possible an exporter/importer-specific
assessment rate for each class or kind of AFBs.
1. Export Price Sales
With respect to export price (EP) sales for these final results, we
divided the total dumping margins (calculated as the difference between
normal value (NV) and EP) for each importer/customer by the total
number of units sold to that importer/customer. We will direct Customs
to assess the resulting per-unit dollar amount against each unit of
merchandise in each of that importer's/customer's entries under the
relevant order during the review period. Although this will result in
assessing different percentage margins for individual entries, the
total antidumping duties collected for each importer/customer under
each order for the review period will be almost exactly equal to the
total dumping margins.
2. Constructed Export Price Sales
For constructed export price (CEP) sales (sampled and non-sampled),
we divided the total dumping margins for the reviewed sales by the
total entered value of those reviewed sales for each importer/customer.
We will direct Customs to assess the resulting percentage margin
against the entered Customs values for the subject merchandise on each
of that importer's/customer's entries under the relevant order during
the review period. While the Department is aware that the entered value
of sales during the POR is not necessarily equal to the entered value
of entries during the POR, use of entered value of sales as the basis
of the assessment rate permits the Department to collect a reasonable
approximation of the antidumping duties which would have been
determined if the Department had reviewed those sales of merchandise
actually entered during the POR.
Cash Deposit Requirements
To calculate the cash deposit rate for each exporter, we divided
the total dumping margins for each exporter by the total net value for
that exporter's sales for each relevant class or kind of merchandise to
the United States during the review period under each order.
In order to derive a single deposit rate for each class or kind of
merchandise for each respondent (i.e., each exporter or manufacturer
included in these reviews), we weight-averaged the EP and CEP deposit
rates (using the EP and CEP, respectively, as the weighting factors).
To accomplish this where we sampled CEP sales, we first calculated the
total dumping margins for all CEP sales during the review period by
multiplying the sample CEP margins by the ratio of total weeks in the
review period to sample weeks. We then calculated a total net value for
all CEP sales during the review period by multiplying the sample CEP
total net value by the same ratio. We then divided the combined total
dumping margins for both EP and CEP sales by the combined total value
for both EP and CEP sales to obtain the deposit rate.
We will direct Customs to collect the resulting percentage deposit
rate against the entered Customs value of each of the exporter's
entries of subject merchandise entered, or withdrawn from warehouse,
for consumption on or after the date of publication of this notice.
Entries of parts incorporated into finished bearings before sales
to an unaffiliated customer in the United States will receive the
exporter's deposit rate for the appropriate class or kind of
merchandise.
Furthermore, the following deposit requirements will be effective
upon publication of this notice of final results of administrative
reviews for all shipments of AFBs entered, or withdrawn from warehouse,
for consumption on or after the date of publication, as provided by
section 751(a)(1) of the Tariff Act: (1) The cash deposit rates for the
reviewed companies will be the rates shown
[[Page 54046]]
above except that, for firms whose weighted-average margins are less
than 0.5 percent and therefore de minimis, the Department shall require
a zero deposit of estimated antidumping duties; (2) for previously
reviewed or investigated companies not listed above, the cash deposit
rate will continue to be the company-specific rate published for the
most recent period; (3) if the exporter is not a firm covered in this
review, a prior review, or the original less-than-fair-value (LTFV)
investigation, but the manufacturer is, the cash deposit rate will be
the rate established for the most recent period for the manufacturer of
the merchandise; and (4) the cash deposit rate for all other
manufacturers or exporters will continue to be the ``All Others'' rate
for the relevant class or kind and country made effective by the final
results of review published on July 26, 1993 (see Final Results of
Antidumping Duty Administrative Reviews and Revocation in Part of an
Antidumping Duty Order, 58 FR 39729 (July 26, 1993) and, for BBs from
Italy, see Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al: Final Results of Antidumping Duty
Administrative Reviews, Partial Termination of Administrative Reviews,
and Revocation in Part of Antidumping Duty Orders, 61 FR 66472
(December 17, 1996)). These rates are the ``All Others'' rates from the
relevant LTFV investigations.
These deposit requirements shall remain in effect until publication
of the final results of the next administrative reviews.
This notice also serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the 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) or conversion
to judicial protective order is hereby requested. Failure to comply
with the regulations and terms of an APO is a violation which is
subject to sanction.
These administrative reviews and this notice are in accordance with
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR
353.22.
Dated: October 8, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
Scope Appendix Contents
A. Description of the Merchandise
B. Scope Determinations
Issues Appendix Contents
Abbreviations
Comments and Responses
1. Facts Available
2. Discounts, Rebates, and Price Adjustments
3. Circumstance-of-Sale Adjustments
A. Technical Services and Warranty Expenses
B. Credit
C. Indirect Selling Expenses
4. Level of Trade
5. Cost of Production and Constructed Value
A. Cost-Test Methodology
B. Research and Development
C. Profit for Constructed Value
D. Affiliated-Party Inputs
E. Abnormally High Profits
F. Credit and Inventory Costs
G. Other Issues
6. Further Manufacturing
7. Packing and Movement Expenses
8. Affiliated Parties
9. Sample Sales and Prototypes/Zero Price Transactions
10. Export Price and Constructed Export Price
11. Programming and Clerical Errors
12. Duty Absorption
13. Reimbursement
14. Tooling Revenue
15. Cash Deposit Financing
16. Romania-Specific Issues
17. Miscellaneous Issues
A. Ocean and Air Freight
B. Burden of Proof
C. HTS
D. Certification of Conformance to Past Practice
E. Pre-Existing Inventory
F. Inland Freight
G. Other Issues
Scope Appendix
A. Description of the Merchandise
The products covered by these orders, antifriction bearings (other
than tapered roller bearings), mounted or unmounted, and parts thereof
(AFBs), constitute the following classes or kinds of merchandise:
1. Ball Bearings and Parts Thereof: These products include all AFBs
that employ balls as the roller element. Imports of these products are
classified under the following categories: antifriction balls, ball
bearings with integral shafts, ball bearings (including radial ball
bearings) and parts thereof, and housed or mounted ball bearing units
and parts thereof. Imports of these products are classified under the
following Harmonized Tariff Schedule (HTS) subheadings: 3926.90.45,
4016.93.00, 4016.93.10, 4016.93.50, 6909.19.5010, 8431.20.00,
8431.39.0010, 8482.10.10, 8482.10.50, 8482.80.00, 8482.91.00,
8482.99.05, 8482.99.35, 8482.99.2580, 8482.99.6595, 8483.20.40,
8483.20.80, 8483.50.8040, 8483.50.90, 8483.90.20, 8483.90.30,
8483.90.70, 8708.50.50, 8708.60.50, 8708.60.80, 8708.70.6060,
8708.70.8050, 8708.93.30, 8708.93.5000, 8708.93.6000, 8708.93.75,
8708.99.06, 8708.99.31, 8708.99.4960, 8708.99.50, 8708.99.5800,
8708.99.8080, 8803.10.00, 8803.20.00, 8803.30.00, 8803.90.30, and
8803.90.90.
2. Cylindrical Roller Bearings, Mounted or Unmounted, and Parts
Thereof: These products include all AFBs that employ cylindrical
rollers as the rolling element. Imports of these products are
classified under the following categories: Antifriction rollers, all
cylindrical roller bearings (including split cylindrical roller
bearings) and parts thereof, housed or mounted cylindrical roller
bearing units and parts thereof.
Imports of these products are classified under the following HTS
subheadings: 3926.90.45, 4016.93.00, 4016.93.10, 4016.93.50,
6909.19.5010, 8431.20.00, 8431.39.0010, 8482.40.00, 8482.50.00,
8482.80.00, 8482.91.00, 8482.99.25, 8482.99.35, 8482.99.6530,
8482.99.6560, 8482.99.70, 8483.20.40, 8483.20.80, 8483.50.8040,
8483.90.20, 8483.90.30, 8483.90.70, 8708.50.50, 8708.60.50,
8708.93.5000, 8708.99.4000, 8708.99.4960, 8708.99.50, 8708.99.8080,
8803.10.00, 8803.20.00, 8803.30.00, 8803.90.30, and 8803.90.90.
3. Spherical Plain Bearings, Mounted or Unmounted, and Parts
Thereof: These products include all spherical plain bearings that
employ a spherically shaped sliding element, and include spherical
plain rod ends.
Imports of these products are classified under the following HTS
subheadings: 3926.90.45, 4016.93.00, 4016.93.00, 4016.93.10,
4016.93.50, 6909.50,10, 8483.30.80, 8483.90.30, 8485.90.00,
8708.93.5000, 8708.99.50, 8803.10.00, 8803.10.00, 8803.20.00,
8803.30.00, and 8803.90.90.
The HTS item numbers are provided for convenience and customs
purposes. They are not determinative of the products subject to the
orders. The written description remains dispositive.
Size or precision grade of a bearing does not influence whether the
bearing is covered by the orders. These orders cover all the subject
bearings and parts thereof (inner race, outer race, cage, rollers,
balls, seals, shields, etc.)
[[Page 54047]]
outlined above with certain limitations. With regard to finished parts,
all such parts are included in the scope of these orders. For
unfinished parts, such parts are included if (1) they have been heat-
treated, or (2) heat treatment is not required to be performed on the
part. Thus, the only unfinished parts that are not covered by these
orders are those that will be subject to heat treatment after
importation.
The ultimate application of a bearing also does not influence
whether the bearing is covered by the orders. Bearings designed for
highly specialized applications are not excluded. Any of the subject
bearings, regardless of whether they may ultimately be utilized in
aircraft, automobiles, or other equipment, are within the scope of
these orders.
B. Scope Determinations
The Department has issued numerous clarifications of the scope of
the orders. The following is a compilation of the scope rulings and
determinations the Department has made:
Scope determinations made in the Final Determinations of Sales at
Less than Fair Value; Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof from the Federal Republic of Germany, 54 FR
19006, 19019 (May 3, 1989):
Products covered:
Rod end bearings and parts thereof.
AFBs used in aviation applications.
Aerospace engine bearings.
Split cylindrical roller bearings.
Wheel hub units.
Slewing rings and slewing bearings (slewing rings and
slewing bearings were subsequently excluded by the International Trade
Commission's negative injury determination (see International Trade
Commission: Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof from the Federal Republic of Germany, France, Italy,
Japan, Romania, Singapore, Sweden, Thailand and the United Kingdom, 54
FR 21488 (May 18, 1989)).
Wave generator bearings.
Bearings (including mounted or housed units and flanged or
enhanced bearings) ultimately utilized in textile machinery.
Products excluded:
Plain bearings other than spherical plain bearings.
Airframe components unrelated to the reduction of friction
Linear motion devices.
Split pillow block housings.
Nuts, bolts, and sleeves that are not integral parts of a
bearing or attached to a bearing under review.
Thermoplastic bearings.
Stainless steel hollow balls.
Textile machinery components that are substantially
advanced in function(s) or value.
Wheel hub units imported as part of front and rear axle
assemblies; wheel hub units that include tapered roller bearings; and
clutch release bearings that are already assembled as parts of
transmissions.
Scope rulings completed between April 1, 1990, and June 30, 1990
(see Scope Rulings, 55 FR 42750 (October 23, 1990)):
Products excluded:
Antifriction bearings, including integral shaft ball
bearings, used in textile machinery and imported with attachments and
augmentations sufficient to advance their function beyond load-bearing/
friction-reducing capability.
Scope rulings completed between July 1, 1990, and September 30,
1990 (see Scope Rulings, 55 FR 43020 (October 25, 1990)):
Products covered:
Rod ends.
Clutch release bearings.
Ball bearings used in the manufacture of helicopters.
Ball bearings used in the manufacture of disk drives.
Scope rulings published in Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof; Final Results of
Antidumping Administrative Review (AFBs I), 56 FR 31692, 31696 (July
11, 1991):
Products covered:
Load rollers and thrust rollers, also called mast guide
bearings.
Conveyor system trolley wheels and chain wheels.
Scope rulings completed between April 1, 1991, and June 30, 1991
(see Notice of Scope Rulings, 56 FR 36774 (August 1, 1991)):
Products excluded:
Textile machinery components including false twist
spindles, belt guide rollers, separator rollers, damping units, rotor
units, and tension pulleys.
Scope rulings completed between July 1, 1991, and September 30,
1991 (see Scope Rulings, 56 FR 57320 (November 8, 1991)):
Products covered:
Snap rings and wire races.
Bearings imported as spare parts.
Custom-made specialty bearings.
Products excluded: .
Certain rotor assembly textile machinery components.
Linear motion bearings.
Scope rulings completed between October 1, 1991, and December 31,
1991 (see Notice of Scope Rulings, 57 FR 4597 (February 6, 1992)):
Products covered:
Chain sheaves (forklift truck mast components).
Loose boss rollers used in textile drafting machinery,
also called top rollers.
Certain engine main shaft pilot bearings and engine crank
shaft bearings.
Scope rulings completed between January 1, 1992, and March 31, 1992
(see Scope Rulings, 57 FR 19602 (May 7, 1992)):
Products covered:
Ceramic bearings.
Roller turn rollers.
Clutch release systems that contain rolling elements.
Products excluded:
Clutch release systems that do not contain rolling
elements.
Chrome steel balls for use as check valves in hydraulic
valve systems.
Scope rulings completed between April 1, 1992, and June 30, 1992
(see Scope Rulings, 57 FR 32973 (July 24, 1992)):
Products excluded:
Finished, semiground stainless steel balls.
Stainless steel balls for non-bearing use (in an optical
polishing process).
Scope rulings completed between July 1, 1992, and September 30,
1992 (see Scope Rulings, 57 FR 57420 (December 4, 1992)):
Products covered:
Certain flexible roller bearings whose component rollers
have a length-to-diameter ratio of less than 4:1.
Model 15BM2110 bearings.
Products excluded:
Certain textile machinery components.
Scope rulings completed between October 1, 1992, and December 31,
1992 (see Scope Rulings, 58 FR 11209 (February 24, 1993)):
Products covered:
Certain cylindrical bearings with a length-to-diameter
ratio of less than 4:1.
Products excluded:
Certain cartridge assemblies comprised of a machine shaft,
a machined housing and two standard bearings.
Scope rulings completed between January 1, 1993, and March 31, 1993
(see Scope Rulings, 58 FR 27542 (May 10, 1993)):
Products covered:
Certain cylindrical bearings with a length-to-diameter
ratio of less than 4:1.
Scope rulings completed between April 1, 1993, and June 30, 1993
(see Scope Rulings, 58 FR 47124 (September 7, 1993)):
Products covered:
Certain series of INA bearings.
[[Page 54048]]
Products excluded:
SAR series of ball bearings.
Certain eccentric locking collars that are part of housed
bearing units.
Scope rulings completed between October 1, 1993, and December 31,
1993 (see Scope Rulings, 59 FR 8910 (February 24, 1994)):
Products excluded:
Certain textile machinery components.
Scope rulings completed between January 1, 1994, and March 31,
1994:
Products excluded:
Certain textile machinery components.
Scope rulings completed between October 1, 1994 and December 31,
1994 (see Scope Rulings, 60 FR 12196 (March 6, 1995)):
Products excluded:
Rotek and Kaydon--Rotek bearings, models M4 and L6, are
slewing rings outside the scope of the order.
Scope rulings completed between April 1, 1995 and June 30, 1995
(see Scope Rulings, 60 FR 36782 (July 18, 1995)):
Products covered:
Consolidated Saw Mill International (CSMI) Inc.--Cambio
bearings contained in CSMI's sawmill debarker are within the scope of
the order.
Nakanishi Manufacturing Corp.--Nakanishi's stamped steel
washer with a zinc phosphate and adhesive coating used in the
manufacture of a ball bearing is within the scope of the order.
Scope rulings completed between January 1, 1996 and March 31, 1996
(see Scope Rulings, 61 FR 18381 (April 25, 1996)):
Products covered:
Marquardt Switches--Medium carbon steel balls imported by
Marquardt are outside the scope of the order.
Scope rulings completed between April 1, 1996 and June 30, 1996
(see Scope Rulings, 61 FR 40194 (August 1, 1996)):
Products excluded:
Dana Corporation--Automotive component, known variously as
a center bracket assembly, center bearings assembly, support bracket,
or shaft support bearing, is outside the scope of the order.
Rockwell International Corporation--Automotive component,
known variously as a cushion suspension unit, cushion assembly unit, or
center bearing assembly, is outside the scope of the order.
Enkotec Company, Inc.--``Main bearings'' imported for
incorporation into Enkotec Rotary Nail Machines are slewing rings and,
therefore, are outside the scope of the order.
Issues Appendix
Company Abbreviations
Barden--Barden Corporation (U.K.) Ltd. and the Barden Corporation
FAG Germany--FAG Kugelfischer Georg Schaefer KGaA
FAG Italy--FAG Italia S.p.A.; FAG Bearings Corp.
FAG U.K.--FAG (U.K.) Ltd.
INA--INA Walzlager Schaeffler KG; INA Bearing Company, Inc.
Koyo--Koyo Seiko Co. Ltd.
Nachi--Nachi-Fujikoshi Corp., Nachi America Inc. and Nachi Technology,
Inc.
NMB/Pelmec--NMB Singapore Ltd.; Pelmec Industries (Pte.) Ltd.
NPBS--Nippon Pillow Block Manufacturing Co., Ltd.; Nippon Pillow Block
Sales Co., Ltd.; FYH Bearing Units USA, Inc.
NSK--Nippon Seiko K.K.; NSK Corporation
NSK-RHP--NSK Bearings Europe, Ltd.; RHP Bearings; RHP Bearings, Inc.
NTN Germany--NTN Kugellagerfabrik (Deutschland) GmbH
NTN Japan--NTN Corporation; NTN Bearing Corporation of America;
American NTN Bearing Manufacturing Corporation
SKF France--SKF Compagnie d'Applications Mecaniques, S.A. (Clamart);
ADR; SARMA
SKF Germany--SKF GmbH; SKF Service GmbH; Steyr Walzlager
SKF Italy--SKF Industrie; RIV-SKF Officina de Villar Perosa; SKF
Cuscinetti Speciali; SKF Cuscinetti; RFT
SKF Group--SKF-France; SKF-Germany; SKF-Italy; SKF-Sweden; SKF USA,
Inc.
SKF Sweden--SKF Sverige AB
SNFA--SNFA Bearings, Ltd.
SNR France--SNR Nouvelle Roulements
TIE--Tehnoimportexport
Torrington--The Torrington Company
Other Abbreviations
COP--Cost of Production
COM--Cost of Manufacturing
CV--Constructed Value
CEP--Constructed Export Price
NV--Normal Value
HM--Home Market
OEM--Original Equipment Manufacturer
POR--Period of Review
PSPA--Post-Sale Price Adjustment
SAA--Statement of Administrative Action
URAA--Uruguay Round Agreements Act
AFB Administrative Determinations
LTFV Investigation--Final Determinations of Sales at Less than Fair
Value; Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof from the Federal Republic of Germany, 54 FR 19006 (May 3,
1989).
AFBs I--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof from the Federal Republic of Germany; Final Results
of Antidumping Duty Administrative Review, 56 FR 31692 (July 11, 1991).
AFBs II--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al.; Final Results of Antidumping
Duty Administrative Reviews, 57 FR 28360 (June 24, 1992).
AFBs III--Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From France, et al.; Final Results of
Antidumping Duty Administrative Reviews and Revocation in Part of an
Antidumping Duty Order, 58 FR 39729 (July 26, 1993).
AFBs IV--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews, Partial Termination of Administrative Reviews,
and Revocation in Part of Antidumping Duty Orders, 60 FR 10900
(February 28, 1995).
AFBs V--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews and Partial Termination of Administrative
Reviews, 61 FR 66472 (December 17, 1996).
AFBs VI--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews and Partial Termination of Administrative
Reviews, 62 FR 2081 (January 15, 1997).
1. Facts Available
Comment: SKF France maintains that, with respect to its CRBs, the
Department had no basis upon which to make an adverse inference since
SKF companies did not sell French CRBs to the United States during this
review period and since in its questionnaire responses it stated that
SKF France did not make such sales. SKF France maintains that its
response demonstrates that only BBs and SPBs were subject to review
and, further, that SKF's reporting of HM and U.S. sales of SKF's French
AFBs has been verified consistently. Finally, SKF France argues that,
because the Department's use of facts available and an adverse
inference is inappropriate as to CRBs, it is also inappropriate as to
duty absorption by SKF with respect to CRBs.
[[Page 54049]]
Department's Position: We agree with SKF France. We sent a no-
shipment inquiry to U.S. Customs on March 24, 1997. Customs did not
indicate that there were any entries of CRBs from SKF France. Without
such entries during the review period, there is nothing upon which we
may assess any duties we determine in the course of the review.
Therefore, the issue of whether SKF France had any sales of CRBs is
moot.
In addition, we will continue to apply the ``all others'' rate,
which is the rate established in the LTFV investigation, to CRBs from
France for future entries of this merchandise. Because we are not
applying facts available to SKF France's CRBs, we have not applied
facts available in our duty-absorption determination on CRBs from SKF
France.
2. Discounts, Rebates, and Price Adjustments
We have accepted claims for discounts, rebates, and other billing
adjustments as direct adjustments to price if we determined that the
respondent, in reporting these adjustments, acted to the best of its
ability and that its reporting methodology was not unreasonably
distortive. We did not treat such adjustments as direct (or indirect)
selling expenses but, rather, as direct adjustments necessary to
identify the correct starting price. While we prefer that respondents
report these adjustments on a transaction-specific basis (or, where a
single adjustment was granted for a group of sales, as a fixed and
constant percentage of the value of those sales), we recognize that
this is not always feasible, particularly given the extremely large
volume of transactions involved in these AFBs reviews. It is
inappropriate to reject allocations that are not unreasonably
distortive in favor of facts otherwise available where a fully
cooperating respondent is unable to report the information in a more
specific manner. See section 776 of the Tariff Act. Accordingly, we
have accepted these adjustments when it was not feasible for a
respondent to report the adjustment on a more specific basis, provided
that the allocation method the respondent used does not cause
unreasonable inaccuracies or distortions.
In applying this standard, we have not rejected an allocation
method solely because the allocation includes adjustments granted on
merchandise that is not subject to these reviews (out-of-scope
merchandise). However, such allocations are not acceptable where we
have reason to believe that respondents did not grant such adjustments
in proportionate amounts with respect to sales of out-of-scope and in-
scope merchandise. We have made this determination by examining the
extent to which the out-of-scope merchandise included in the allocation
pool is different from the in-scope merchandise in terms of value,
physical characteristics, and the manner in which it is sold.
Significant differences in such areas may increase the likelihood that
respondents did not grant price adjustments in proportionate amounts
with respect to sales of in-scope and out-of-scope merchandise. While
we scrutinize any such differences carefully between in-scope and out-
of-scope sales in terms of their potential for distorting reported per-
unit adjustments on the sales involved in our analysis, it would not be
reasonable to require that respondents submit sale-specific adjustment
data on out-of-scope merchandise in order to prove that there is no
possibility for distortion. Such a requirement would defeat the purpose
of permitting the use of reasonable allocations by a respondent that
has cooperated to the best of its ability.
Where we have found that a company has not acted to the best of its
ability in reporting the adjustment in the most specific and non-
distortive manner feasible, 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. With respect to HM adjustments, in accordance
with the Court of Appeals for the Federal Circuit's (CAFC) decision in
The Torrington Company v. United States, 82 F.3d 1039, 1047-51 (CAFC
1996) (Torrington I) , we have not treated improperly allocated HM
price adjustments as if they were indirect selling expenses (ISEs), but
we have instead disallowed downward adjustments in their entirety.
However, we have included positive (upward) HM price adjustments (e.g.,
positive billing adjustments that increase the final sales price) in
our analysis of such companies. The treatment of positive HM 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. That is, if we were to disregard positive billing adjustments,
which would be upward adjustments to NV, respondents would have no
incentive to report these adjustments in the most specific and non-
distortive manner feasible. See AFBs V at 66498.
Comment 1: Torrington asserts that some respondents reported home-
market discounts, rebates, and post-sale price adjustments (PSPAs) by
allocating amounts across all sales or across all sales to a given
customer, even when some sales were not entitled to the adjustment.
Torrington cites the CAFC's decision in Torrington I (at 1047-51),
arguing that direct PSPAs must be reported on a sale-specific basis in
order for the Department to make a downward adjustment to NV and that
the Department may not make an adjustment for improperly allocated
direct expenses as if these were indirect expenses. Torrington contends
that the new statute retains the distinction between direct and
indirect selling expenses, citing sections 772(d)(1)(B) and (D) and
section 773(a)(7)(B) of the Tariff Act. Petitioner argues that, while
the discussion in the SAA at 823-824 demonstrates the intention to
continue the practice of allowing allocations when allocations were
non-distortive, this statement is no longer valid because it was
written in 1994, prior to Torrington I, when the Administration held
the belief that its practice was sustained by the courts. Therefore,
Torrington asserts, the Department should deny all rebates, discounts,
and PSPAs that respondents did not report on a transaction-specific
basis or which they did not allocate in such a manner as to be
tantamount to reporting on a transaction-specific basis.
FAG, Koyo, Nachi, NSK, and SKF argue that the Department should
make direct adjustments to price when the allocation of PSPAs is
reasonable and not distortive and that such practice conforms with the
SAA and the new regulations at 351.401(g)(1). Koyo, Nachi, NSK, and SKF
contend that, in Torrington I, the CAFC did not disallow an adjustment
merely because it involved an allocation. According to respondents, the
court stated that, regardless of the allocation method, the Department
could not treat direct price adjustments as indirect selling expenses,
but the court did not address the propriety of the allocation
methodology. Additionally, respondents claim, the allocation of these
expenses does not detract from their relation to particular
transactions, thereby making them direct expenses and deductible from
price.
NSK further argues that the Department need not disallow price
adjustments simply because the respondent is unable to report these
expenses on a sales-specific basis (citing Smith-Corona v. United
States, 713 F. 2d 1568, 1580 (CAFC 1983)). Additionally, Koyo argues
that the Department treated the PSPAs properly as direct adjustments to
gross price,
[[Page 54050]]
rather than as direct or indirect selling expenses, since they are
corrections to the sales price and do not arise as a result of
preparing the merchandise for sale or from selling activities.
NTN contends it reported such adjustments on a transaction-specific
basis. Therefore, NTN claims that Torrington's arguments do not apply
to its response.
Department's Position: We agree with FAG, Koyo, Nachi, NSK, SKF,
and NTN. As we discussed in the introductory remarks to this section,
our practice is not to reject an allocation of price adjustments when
it was not feasible for a respondent to report the adjustments on a
more specific basis, provided that the allocation method the respondent
used does not cause unreasonable inaccuracies or distortions.
We see no conflict between Torrington I and our acceptance of
allocated price adjustments subject to the above conditions because the
CAFC did not address the propriety of the allocation methods
respondents used in reporting the price adjustments in question.
Although the CAFC appeared to question whether price adjustments
constituted expenses at all (see Torrington I at n.15), it held that,
assuming the adjustments were expenses, they had to be treated as
direct selling expenses and could not be used to offset the deduction
of U.S. indirect selling expenses. The CAFC did not find that such
price adjustments could not be based on allocations. In fact, such a
holding would have been inconsistent with the CAFC's prior holding in
Smith-Corona Group v. United States, 713 F. 2d 1568, 1580-81 (CAFC
1983), which the Torrington I court did not question.
Comment 2: Torrington asserts that, if the Department accepts
allocated PSPAs as a direct adjustment to NV in these reviews, it
should not follow the method it used in the 1994/95 administrative
reviews to determine whether the allocations are distortive. Rather,
Torrington argues, the Department should judge all allocations using
product-specific sales information. Torrington notes that different
classes or kinds of AFBs cannot be deemed similar for purposes of
expense allocations because the Department found in the original less-
than-fair-value proceeding that there are several ``classes or kinds''
of bearings, each requiring a separate proceeding. Torrington explains
that the physical characteristics of non-subject merchandise should not
be considered similar to those of subject merchandise for purposes of
expense allocations. Torrington argues that, if the physical
characteristics of an out-of-scope bearing are considered similar to
those of an in-scope bearing for purposes of allocating price
adjustments, then the former should be included within the scope of the
order.
FAG, Koyo, NSK, and SKF assert that the Department's 1994/95 review
methodology used to determine the distortiveness of the allocation of
PSPAs is sufficient. These respondents contend that the Department has
reviewed the propriety of their allocation methodologies correctly by
considering those products receiving allocated expenses according to
the value and physical characteristics of the products and the manner
in which they were sold. FAG, Koyo, NSK, and SKF contend that there is
no evidence that the Department's methodology allowed disproportionate
allocations of PSPAs across subject and non-subject merchandise and
conclude that the Department should continue their use.
NTN asserts that Torrington's argument concerning the Department's
methodology for determining distortiveness of allocations does not
apply to it because it reported discounts on a product-specific basis.
Department's Position: We agree with FAG, Koyo, NSK, NTN, and SKF.
As stated above in the introductory remarks to this section, in
determining the propriety of respondents' allocation methodologies for
price adjustments, we have not rejected an allocation method solely
because the allocation includes adjustments granted on merchandise that
is not subject to these reviews (out-of-scope merchandise). However, we
did not accept such allocations where we had reason to believe that a
respondent granted such adjustments in disproportionate amounts with
respect to sales of out-of-scope and in-scope merchandise. We have made
this determination by examining the extent to which the out-of-scope
merchandise included in the allocation pool is different from the in-
scope merchandise in terms of value, physical characteristics, and the
manner in which it was sold. Significant differences in such areas may
increase the likelihood that respondents granted price adjustments in
disproportionate amounts with respect to sales of in-scope and out-of-
scope merchandise.
Comment 3: Torrington contends that the Department should disallow
certain discounts NTN Japan reported. Torrington argues that, based on
documentation the Department obtained at verification which relates to
the negotiation of certain discounts, NTN Japan's reported discounts
were not granted on a customer-and product-specific basis and were not
limited to subject merchandise. In addition, Torrington asserts that
evidence on record indicates that these adjustments may not be
discounts but, rather, may be claims for a different kind of adjustment
for which, Torrington asserts, NTN has not met the Departmental
standard.
NTN Japan maintains that negotiating discounts is a part of its
normal business activity and that the Department verified its reported
discounts in detail and found that they were granted on a customer-and
product-specific basis. NTN asserts that Torrington's argument is based
improperly on limited documentation included on the record and it fails
to consider the overall verification by the Department officials, which
included the examination of numerous documents relevant to these
discounts which were not entered on the record. NTN notes that the
Department is not required to enter all documents examined during
verification on the record.
Department's Position: We disagree with the petitioner. We verified
this discount and found that NTN granted it ``by product for each
customer.'' In addition, it meets the Department's standard for a
discount. We reached this conclusion after reviewing numerous documents
at verification, although we did not include all reviewed information
was included in the record as a verification exhibit. (See Verification
Report dated May 8, 1997, at 5.) Therefore, petitioner's argument
regarding whether the discount should be treated as something other
than a discount is incorrect.
Comment 4: Koyo contends that the Department correctly accepted one
of its billing adjustment claims (designated BILADJ1H in the response)
but inexplicably failed to accept the other billing adjustment claim
(designated BILADJ2H in the response). Koyo contends that both billing
adjustments have been accepted in past AFB and tapered roller bearing
(TRB) administrative reviews and that there have been no changes in its
reporting methodology since the completion of those reviews.
Torrington argues that both of Koyo's billing adjustments, which it
reported on a customer-specific basis, should be rejected. Torrington
contends that BILADJ1H, which it claims was granted on a model-specific
basis but was reported on a customer-specific basis, and BILADJ2H,
which it claims was granted on a lump-sum basis, should both be
rejected as both reporting methods result in the application of
[[Page 54051]]
price adjustments to transactions which were not subject to these
adjustments.
Department's Position: With respect to BILADJ1H, Koyo granted the
adjustment amount on a customer- and model-specific basis. Koyo then
totaled the price adjustments granted and sales of subject merchandise
sold to each customer to calculate an overall adjustment factor per
customer in order to allocate the adjustment over subject merchandise
sales to the respective customer. Our examination of the record leads
us to conclude that, while Koyo has paper records of the adjustment, it
is not feasible for Koyo to retrieve the information electronically or
to allocate this adjustment more specifically, given the large volume
of transactions involved, the level of detail contained in Koyo's
normal accounting records, and the time constraints imposed by the
statutory deadlines under which all parties must operate. Therefore, we
have accepted Koyo's reporting methodology for these billing
adjustments.
With respect to BILADJ2H, Koyo granted both lump-sum adjustments
which it negotiated with its customers without reference to model-
specific selling prices and some adjustments which it granted on a
model-specific basis but which Koyo reported on a customer-specific
basis. Koyo allocated BILADJ2H to subject merchandise on the basis of
sales value.
We have reconsidered our disallowance of BILADJ2H for the
preliminary results and now agree with Koyo that we should allow its
lump-sum billing adjustments as a direct adjustments to NV. We
determine that Koyo acted to the best of its ability in reporting this
information using customer-specific allocations. Given the fact that
Koyo's records do not readily identify a discrete group of sales to
which each billing adjustment pertains and the extremely large number
of POR sales Koyo made, it is not feasible for Koyo to report this
adjustment on a more specific basis. Moreover, we are satisfied that
Koyo's allocation methodology across subject merchandise by sales value
was not distortive.
Comment 5: Torrington argues that FAG Germany reported HM rebates
improperly. Torrington notes that, while some rebates were payable only
in connection with purchases of certain types of products, FAG reported
these rebates on a customer-specific basis, creating the likelihood
that some rebates were reported on sales when no rebates were actually
paid. For this reason, Torrington asserts that the Department should
deny the claimed adjustment.
FAG argues that it reported all rebates properly so that no rebates
were reported where they did not apply. For customer-specific rebates,
FAG claims it reported instances where the rebate was applicable to
only certain products and factored the rebate only over sales of those
products.
Department's Position: We disagree with Torrington. As Exhibit B-6
of FAG's questionnaire response dated September 9, 1996 demonstrates,
FAG allocated its rebates on a customer-specific basis over sales only
of those products that actually received rebates. Therefore, we
determine that FAG's methodology for reporting rebates is reasonable
and not distortive, and, in accordance with our policy, we have
accepted FAG's HM rebates as reported.
Comment 6: Torrington argues that the Department should disallow
certain post-sale price adjustments which SKF Germany reported in an
inaccurate manner. Torrington contends that SKF Germany reported
support rebates to distributors in a manner different from the manner
in which the rebate was actually granted and, therefore, the Department
should reject the adjustment to price. Torrington purports that,
whereas SKF determines eligibility by comparing SKF Germany's invoice
price to the reseller's invoice price, the reporting methodology
allocates the rebate across all sales to the reseller, thereby
reporting rebates on sales where none actually occurred.
Additionally, Torrington argues that the Department should reject
SKF Germany's billing adjustment 2 in the HM, as it was not reported in
an accurate manner. Petitioner contends that customer-specific
reporting of the adjustment is not accurate unless the adjustment
applies equally to all sales to that customer. Torrington also asserts
that SKF did not report the timing of such billing adjustments
accurately. Furthermore, Torrington points out that SKF was able to
report such billing adjustments on a transaction-specific basis for
U.S. sales but did not explain why it was unable to report the same
adjustment on a transaction-specific basis for HM sales.
Finally, Torrington claims that it should not be responsible for
demonstrating the distortive nature of such allocations because it does
not have access to information which would allow such demonstration.
Torrington maintains that it is SKF Germany's responsibility to produce
evidence to demonstrate that its methodology is not distortive.
Torrington concludes that, while the Department requested additional
information for purposes of determining the distortiveness of such
allocations, SKF Germany responded in a general, non-specific manner,
precluding such a judgment by the Department.
SKF Germany argues that the Department was correct in accepting
support rebates and billing adjustment 2 as adjustments to HM price.
SKF Germany contends that Torrington is incorrect in arguing that SKF's
reporting methodology regarding support rebates is likely to result in
rebates on sales where none actually occurred. SKF Germany notes that,
for each customer for whom SKF reported a support rebate, it actually
granted a rebate to that customer and the actual amount granted does
relate to the totality of sales to that customer. SKF Germany argues
that the allocation of the rebate on aggregate sales to that customer
is proper since the amount is based on sales of the customer, not sales
of SKF Germany to the customer. As such, SKF states that it reported
the rebate in exactly the manner in which it was incurred.
SKF Germany also disagrees with Torrington concerning billing
adjustment 2, arguing that this billing adjustment applies only in
instances where transaction-specific attribution was not possible. SKF
disagrees further with Torrington's argument that SKF USA's ability to
report billing adjustments on a transaction-specific manner supports
Torrington's contention that the adjustment should be disallowed in the
HM. Rather, SKF contends this difference in reporting methodology
supports the allowance of SKF Germany's billing adjustment 2 because it
demonstrates the two types of billing adjustments the two companies
made. SKF USA only grants transaction-specific billing adjustments
(billing adjustment 1), while SKF Germany grants rebates associated
with a specific transaction (billing adjustment 1) and those that are
not linked with a particular transaction (billing adjustment 2).
Department's Position: We agree with SKF Germany regarding our
treatment of support rebates and billing adjustment 2. We find that SKF
Germany's allocation methodologies are not unreasonably distortive. Due
to the nature of the support rebates, transaction-specific reporting is
not appropriate. SKF Germany grants these rebates to distributors/
dealers to ensure that they obtain a minimum profit level on sales to
select customers. Hence, because SKF Germany does not issue these
rebates based on specific sales to the distributor/dealers but rather
on the sales of the distributors/dealers, SKF Germany cannot report
transaction-
[[Page 54052]]
specific rebate amounts. Rather, SKF Germany has allocated the rebates
it granted to a specific customer over all sales to that customer. SKF
Germany's allocation methodology is not unreasonably distortive, as we
are satisfied that each adjustment was granted in proportionate amounts
with respect to the value of sales of in-scope and out-of-scope
merchandise.
With respect to billing adjustment 2, SKF Germany reported billing
adjustments not associated with a specific transaction. SKF Germany
could not tie these adjustments to a specific transaction because the
billing adjustments it reported in this field were part of credit or
debit notes, issued to the customer, that related to multiple invoices,
products, or invoice lines. In these cases, the most feasible reporting
methodology that SKF Germany could use was a customer-specific
allocation, given the large volume of transactions involved in these
AFB reviews and the time constraints imposed by the statutory
deadlines. Furthermore, we found that the products which received the
adjustment were similar in terms of value, physical characteristics,
and the manner in which they were sold. For these reasons, we find that
this methodology is not unreasonably distortive.
We agree with Torrington that it should not be responsible for
demonstrating the distortive nature of this allocation; rather it is
the responsibility of the respondent to demonstrate that its
methodology is not unreasonably inaccurate or distortive. SKF Germany
has satisfied this responsibility with regard to the reporting of its
support rebates and billing adjustment 2 with adequate explanation in
its response. SKF Germany demonstrated that its allocation methodology
was reasonable and that the AFB products over which it allocated a PSPA
were similar in terms of value, physical characteristics and the method
in which they were sold.
Comment 7: INA argues that the Department did not transfer negative
billing adjustments from the HM sales database submitted by INA to the
HM sales file used for the preliminary results, since the Department
did not include in its preliminary results calculations the negative
billing adjustments INA reported in the Department's preliminary
results calculations. INA claims that this is a clerical error and that
this error should be corrected in the final results.
In rebuttal, Torrington contends that the Department should
disallow all of INA's claimed downward billing adjustments in
calculating NV because INA provided only a brief description of its HM
billing adjustments which did not indicate whether the adjustments were
limited to in-scope merchandise. Torrington argues that the CAFC held
that direct PSPAs must be reported on a sale-specific basis before the
Department can make a downward adjustment in calculating NV.
Department's Position: We disagree with INA. We do not view the
omission of downward HM billing adjustments as a clerical error and
have disallowed this adjustment for the final results. As we discussed
in the introductory remarks to this section, our practice is to accept
claims for discounts, rebates, and other billing adjustments as direct
adjustments to price if we determined that the respondent, in reporting
these adjustments, acted to the best of its ability and that its
reporting methodology was not unreasonably distortive (see section 776
of the Tariff Act).
In our supplemental questionnaire dated January 23, 1997, we
requested specifically that INA provide additional information to
explain and demonstrate the nature of its reported billing adjustments
and how they were incurred and recorded in INA's accounting system, as
well as to demonstrate that the allocations were not unreasonably
distortive. In INA's February 12, 1997 supplemental questionnaire
response at page 16, the firm provided only a brief description of its
HM billing adjustments by stating that all were made strictly on a
transaction-specific basis and were made in cases in which INA Germany
had to correct billing errors and in cases where the prices were
definitely agreed upon with the customers after the shipments. However,
INA did not provide sufficient evidence to demonstrate that the
allocations of downward billing adjustments were limited to in-scope
merchandise or were not otherwise unreasonably distortive. Because
there is nothing on the record to support the accuracy of INA's claim,
we have denied the adjustment.
As we mentioned in the introductory remarks at the beginning of
this section, when we reject a respondent's allocation of price
adjustments, we only reject the downward adjustments to NV. Therefore
for these final results, we have included INA's upward billing
adjustments in our analysis.
3. Circumstance-of-Sale Adjustments
3.A. Technical Services and Warranty Expenses
Comment 1: Torrington argues that the Department should treat
certain of NTN's U.S. technical service expenses as direct rather than
indirect selling expenses. Torrington asserts that NTN's supplemental
questionnaire response did not meet the burden of demonstrating the
indirect nature of the technical service expenses and, therefore,
maintains that the Department should treat such expenses as direct
selling expenses.
NTN argues that it responded adequately to the Department's
supplemental inquiries regarding NTN's reported U.S. technical service
expenses and notes that Torrington misread the question the Department
posed in its supplemental questionnaire. NTN argues further that, if
the Department determined that the technical service information
provided in its responses did not demonstrate the indirect nature of
such expenses, the Department would have requested NTN to submit
additional information. NTN maintains that the manner in which it
reported the expense in these reviews is based on the same methodology
with which it reported the expense in the 94/95 administrative reviews
and states that, in those reviews, the Department accepted NTN's
methodology of reporting this expense.
Department's Position: We disagree with Torrington. In its
supplemental response, NTN explained that the expenses are fixed
expenses and do not vary with sales volumes. Therefore, because we are
satisfied with NTN's responses to our questions, we have treated these
expenses as indirect in nature.
Comment 2: Torrington asserts that SKF Germany under-reported its
direct warranty expenses with regard to U.S. sales and that the
Department should recalculate the direct adjustment to U.S. prices for
warranty claims, including a facts-available amount for additional
expenses which SKF Germany did not report properly. Torrington explains
that, while SKF Germany reported the cost of replacement bearings as a
direct warranty expense in the U.S. market, elsewhere in its response
SKF Germany describes that in its warranty activities it incurs
expenses associated with ``customer contact, processing warranty
claims, testing of bearings, and directing the shipment of defective
and replacement bearings.'' Therefore, petitioner claims, SKF Germany
incurs direct expenses other than merely the replacement cost of
bearings and the
[[Page 54053]]
Department must account for these expenses in its calculations.
SKF Germany disagrees with Torrington's contention that direct
warranty expenses for SKF USA were under-reported and that the
Department should apply facts available, arguing that certain expenses
which Torrington considers to be direct are indirect expenses and were
reported properly as such.
Department's Position: We disagree with Torrington. Based on our
analysis of the information SKF Germany submitted in these reviews, we
agree with SKF Germany that it referred to fixed types of expense
activities correctly, such as salary expenses for customer service
representatives and salesmen who make customer contacts and process
warranty claims as well as salary expenses for application engineers
who test bearings and other internal testing expenses, as indirect
expenses. Because these are fixed expenses, it was proper to report
them as indirect expenses. Because there are no other issues with
respect to SKF Germany's reporting of its U.S. direct warranty
expenses, we have accepted SKF Germany's U.S. direct warranty expenses
as reported for these final results.
3.B. Credit
Comment 1: Torrington contends that the adjusted price SKF Germany
used to calculate credit expenses in the HM differed in its adjustments
from the adjusted price used to calculate credit expenses in the U.S.
market. According to Torrington, the adjusted price SKF Germany used in
the U.S. market calculation included a deduction of cash discounts from
the gross unit price incorrectly, though the HM adjusted price did not
reflect such a deduction. Torrington contends that, because the
calculation in the U.S. market was therefore lower, the result is an
under-reporting of U.S. credit expenses. Because SKF Germany reported
cash discounts in both the United States and the HM, Torrington asserts
that the Department should recalculate reported credit expenses using
fully adjusted prices in the calculation or apply facts-available
information.
SKF Germany argues that it has not changed its methodology of
calculating credit expense from that it used in prior reviews and notes
that the Department has accepted it in prior reviews.
Department's Position: We agree with Torrington. SKF Germany
calculated U.S. credit expense based on prices net of cash discounts
but did not include deductions for reported cash discounts in the
adjustment of prices SKF Germany used for calculation of HM credit
expense. We have recalculated SKF Germany's HM credit expenses based on
adjusted prices net of discounts for these final results.
Comment 2: Torrington contends that the Department should
recalculate NTN's U.S. credit expense because NTN reported a customer-
specific average credit expense rather than a transaction-specific
credit expense. Torrington argues that reporting credit expense on an
average basis may be distortive in cases where not all U.S. sales are
dumped. Torrington points out that NTN has provided the necessary
information on the record to recalculate a transaction-specific credit
expense.
NTN rebuts Torrington's argument that its credit expense should be
recalculated and points out that the Department has accepted NTN's
methodology of reporting an average credit expense in all previous AFB
administrative reviews. NTN argues that the only argument raised by
Torrington, that reporting credit expense on an average basis may yield
distortive results, is a statement applicable to dumping in general and
is not specific to NTN's calculation of NTN's reported credit expense.
Department's Position: We agree with Torrington with regard to CEP
sales. We have data on the record which allows us to calculate
transaction-specific credit expense for CEP sales. Therefore, we have
recalculated NTN's credit expense using the dates of payment which NTN
reported. However, Torrington is incorrect in asserting that NTN
reported transaction-specific payment dates for EP sales. NTN does not
maintain its payment records in a manner which allows it to provide us
with transaction-specific payment dates for EP sales to the United
States (see NTN's September 9, 1996 submission at C-15). Therefore, in
these reviews, as in past reviews, we are allowing NTN to calculate its
U.S. credit expense for EP sales for each customer on the basis of the
average number of days that receivables are outstanding. See AFBs VI at
201.
3.C. Indirect Selling Expenses
Comment 1: Torrington acknowledges that section 351.402(b) of the
Department's new regulations directs the Department to deduct only
those indirect expenses associated with sales to the unaffiliated
customer in the United States and not those expenses which relate to
the sale by the exporting company to the affiliated sales company in
the United States. However, because SKF Germany has not provided
adequate descriptions that would allow the Department to determine
whether the expenses are associated with the sale to the affiliated
company in the United States or with the subsequent resale to the
unaffiliated U.S. customer, Torrington contends that the Department
should deduct all indirect expenses incurred in Germany from CEP.
Torrington argues that, because Koyo attributed certain indirect
selling expenses to its sales through its U.S. subsidiary, these
expenses are related to sales to unaffiliated customers in the United
States and the Department should deduct such expenses from CEP.
With regard to NSK, Torrington argues that the Department should
deduct indirect selling expenses NSK incurred in Japan from CEP if they
are associated with sales to the unaffiliated customer in the United
States because NSK has not provided adequate descriptions which would
allow the Department to determine with certainty whether indirect
expenses incurred in Japan were associated with the sale to NSK's U.S.
affiliate or with the subsequent resale to the unaffiliated U.S.
customer. Citing NSK's chart of selling functions, Torrington asserts
that it appears from the record that all of these expenses are related
to U.S. resales, rather than sales to the U.S. affiliate, and argues
that the Department should deduct all of these indirect expenses from
CEP. Torrington argues that, at a minimum, the Department should regard
the advertising component of NSK's indirect selling expenses incurred
in Japan as associated with the resale to the unaffiliated U.S.
customer and deduct the amount therefor from CEP.
Torrington argues that FAG has not demonstrated that certain
expenses are associated with its sales to the U.S. affiliate rather
than to the unaffiliated customers. Torrington contends that certain
printing costs could be incurred in connection with sales to
unaffiliated customers and, as such, the Department should deduct such
expenses from CEP.
SKF Germany argues that the Department should not deduct these
expenses from CEP because SKF Gleitlager and SKF GmbH incur the
expenses with respect to their sales to SKF USA, not with respect to
SKF USA's sales to the unaffiliated U.S. customer. SKF claims that the
Department may only make such a deduction when these expenses are
incurred in Germany with respect to sales in the United States to the
unaffiliated customer.
Koyo states that Torrington has mischaracterized Koyo's commercial
structure, which it states has remained unchanged from prior reviews.
Koyo
[[Page 54054]]
further contends that the Department has verified that Koyo produces
the subject merchandise and ships it to its U.S. affiliate, not the
ultimate customer in the United States, and that its U.S. affiliate
inventories the product and ultimately negotiates with and sells the
merchandise to the unaffiliated U.S. customer. Thus, Koyo argues, its
expenses attributable to U.S. sales are almost exclusively incurred in
its transactions with its U.S. affiliate, not in that affiliate's
transactions with the unaffiliated customers.
NSK argues that the indirect selling expenses to which Torrington
refers were all associated with NSK's sales to its U.S. affiliate. NSK
notes that Torrington asked the Department to request more information
regarding these expenses in a supplemental questionnaire and asserts
that, because the Department did not ask NSK any questions regarding
these expenses, the Department must have been satisfied with NSK's
explanation. With regard to advertising expenses, NSK asserts that this
expense is general international advertising which the foreign parent
incurred and is not related to NSK's sales to unaffiliated customers
and, therefore, the Department should not make such a deduction from
CEP.
FAG argues that there is nothing on the record to support
Torrington's assertion that certain selling expenses could be incurred
with regard to sales to unaffiliated customers. FAG argues that it
reported these expenses properly for the following reasons: (1) They
are exclusively related to the sales relationship between FAG Germany
and FAG US; (2) they are not a direct advertising cost of FAG US
incurred by FAG Germany; (3) they are in no way related to economic
activity occurring in the United States and are therefore not
deductible from CEP.
Department's Position: As we stated in AFBs VI at 2124, we will
deduct only those expenses associated with economic activities in the
United States which occurred with respect to sales to the unaffiliated
U.S. customer. We found no information on the record for this review
period to indicate that the indirect selling expenses SKF Germany,
Koyo, NSK, or FAG incurred in their respective HMs were incurred on
sales to the unaffiliated customer in the United States. Regarding NSK,
the evidence on the record does not suggest that NSK incurred these
expenses, including advertising expenses, on its U.S. affiliate's sales
to unaffiliated customers in the United States. Rather, the U.S.
affiliate does its own advertising in the United States which we have
deducted from CEP as a direct expense. Furthermore, NSK has cooperated
with all of our requests for information with regard to indirect
selling expenses. Deducting these expenses from CEP on the basis of
Torrington's speculation that there is a possibility that respondents
may have incurred them on the U.S. affiliates' resales would be
inappropriate. Therefore, because indirect selling expenses respondents
incurred in the foreign countries were not related specifically to
commercial activity in the United States, we did not deduct them from
CEP.
Comment 2: FAG claims the Department treated certain other HM
direct selling expenses improperly as indirect selling expenses. FAG
argues that, while it incurs an indirect expense regardless of whether
a particular sale takes place, the other expenses were related directly
to the distributor's sale of a particular bearing to an unrelated
original equipment manufacturer (OEM) at the behest of FAG. FAG asserts
that it explained in its questionnaire response that the direct credit
to this distributor is functionally equivalent to a commission because
it is a payment to the distributor on account of its sale to FAG's OEM
customer. FAG contends that the Department should not consider this
expense as an indirect selling expense since it incurred the expense
with respect to a particular customer. Furthermore, FAG claims that
allocation of a direct expense on a customer-specific basis is
reasonable and proper when transaction-specific reporting is not
possible, citing the SAA at 823-824.
Torrington counters that the selling expenses under contention
should not be classified as direct selling expenses as FAG requests
because FAG has not demonstrated how these are tied to a specific
transaction. Torrington points out that the Department requested
information from FAG which could demonstrate how the distributor's sale
to its customer was tied directly to FAG's sale to the distributor and
that FAG answered that there was no direct tie between the two sales.
Since FAG did not link these payments directly to sales it made to the
distributor, Torrington asks that the Department continue to treat
these payments as indirect expenses.
Department's Position: We disagree with FAG. As Torrington
observes, we asked FAG in a supplemental questionnaire ``[i]f there is
a direct * * * tie between your sales and the customer's sales for
which this expense is incurred, please explain the tie and submit
documentary evidence to support your claim,'' to which FAG responded
``[t]here is no direct tie between FAG's reported sales to the
distributor and the sales of the distributor that generate the payment
or credit.'' See FAG KGS Section A-D Supplemental Response dated
December 10, 1996 at 30. FAG acknowledges in its case brief that this
expense is ``directly related to the distributor's sale of a particular
bearing to an unrelated OEM at the behest of FAG.'' See FAG's German
Case Brief dated June 30, 1997. Because the expense is related directly
to the distributor's sale, FAG would have to demonstrate that there is
a direct tie between its sales to the distributor and the distributor's
sale that generates the payment for us to regard this as a direct
expense. As noted above, FAG did not demonstrate such a tie.
FAG argues that this expense is functionally equivalent to a
commission. We note, however, that ``[g]enerally speaking, a commission
is a payment to a sales representative for engaging in sales activity,
normally on behalf of the seller but occasionally on behalf of the
customer'' and that ``the key question * * * is whether there was one
transaction between [the respondent] and the ultimate purchaser in
which the trading companies acted as [the respondent's] sales
representatives for a commission `` or `` whether there were two
transactions, one in which the trading companies bought from [the
respondent] and received a [payment or credit] for that initial sale
and the ultimate purchaser then bought from the trading companies.''
See Certain Cold-Rolled Carbon Steel Flat Products From Germany; Final
Results of Antidumping Duty Administrative Review, 60 FR 65264 at
65278. In the instant situation, there are two transactions, one from
FAG to the distributor and one from the distributor to the downstream
customer (e.g., sales to the unaffiliated third party). Thus, these
expenses cannot be considered a commission. Finally, we note that FAG
did not demonstrate that these payments were contemplated at the time
of sale to the distributor. Therefore, because this expense is related
to a downstream sale and not to the sales which FAG reported, this
expense is an indirect selling expense, not a direct selling expense or
a commission.
Finally, we did not treat these selling expenses as indirect
because they were allocated on a customer-specific basis. Had we
concluded that the expense was direct in nature but that FAG had failed
to report it to the best of its ability or that its allocation was
unreasonable, we would have denied the adjustment entirely. The fact
that FAG allocated this expense did not enter into our
[[Page 54055]]
decision to treat it as an indirect expense. As stated above, we
treated these selling expenses as indirect expenses because FAG did not
demonstrate that there is a direct tie between its sales to the
distributor and the distributor's sale that generates the payment.
Comment 3: Torrington contends that NTN excluded certain expenses
improperly from the category of reported U.S. indirect selling expenses
and states that, for the purpose of the final results, the Department
should deduct these expenses from CEP.
NTN argues that the Department has rejected Torrington's claim
previously that the expenses to which Torrington refers were excluded
from the category of reported U.S. indirect selling expenses
improperly. NTN points out that, in the 1994/95 administrative reviews,
the Department found that NTN's reporting of such expenses was not
unreasonably distortive. NTN asserts that it has used the same
methodology to report this category of expenses in the current reviews
and, therefore, Torrington's argument is baseless.
Department Position: We agree with NTN. Having verified these
expenses in past reviews and found the adjustments to be reasonable, we
accepted them in the 1994/95 administrative reviews. See AFBs VI at
2105. For these reviews, after examining the record, we asked
supplemental questions which NTN answered appropriately. Inasmuch as
the record in these reviews indicates no reason that a different
methodology should be used, we have accepted NTN's adjustments to its
reported U.S. indirect selling expenses.
Comment 4: NTN Japan contends that the Department should
recalculate NTN Japan's U.S. selling expenses to reflect its reported
indirect-selling-expenses level-of-trade allocations. NTN Japan argues
that the Department intended to calculate NTN Japan's U.S. selling
expenses based on the reported levels of trade but did not do so in its
preliminary calculations. NTN Japan maintains further that, in the
1992/93 TRB administrative review in which NTN Japan was involved, the
Department accepted NTN Japan's level-of-trade-based U.S. selling
expenses because it concluded that it prevents distortions.
Torrington contends that the Department should reject NTN Japan's
reported selling expense allocations based on level of trade.
Torrington states that, for the preliminary results, the Department
recalculated NTN Japan's U.S. selling expenses without regard to level
of trade correctly. Torrington states further that, in AFBs VI, the
Department rejected NTN Japan's allocation methodology because it was
distortive and unsubstantiated. Finally, Torrington states that NTN
Japan's cite to the TRB case is misplaced because, in that case, the
Department recalculated NTN Japan's U.S. selling expense allocations
based on level of trade as a result of other problems inherent in NTN
Japan's response.
Department's Position: We agree with Torrington. In AFBs III (and
subsequently in AFBs IV at 10940, AFBs V at 66489, and AFBs VI at
2105), we determined that NTN Japan's indirect-selling-expense
allocation methodology based on levels of trade bears no relationship
to the manner in which it actually incurs these U.S. selling expenses,
which ultimately results in distorted allocations. The CIT upheld this
decision in NTN Bearing Corp. v. United States, 905 F. Supp. 1083 at
1094-95 (1995)(NTN III). NTN Japan did not provide record evidence to
substantiate its claim that its indirect selling expenses are
attributable to and vary by its reported levels of trade. Therefore,
for these final results, we have maintained the recalculation of NTN
Japan's U.S. indirect selling expenses we made for the preliminary
results to represent such selling expenses for all U.S. sales.
4. Level of Trade
As set forth in section 773(a)(7) of the Tariff Act and in the SAA
at 829-831, to the extent practicable, we have determined NV based on
sales at the same level of trade as the level of trade of the EP or
CEP. When we were unable to find comparison sales at the same level of
trade as the EP or CEP, we compared the U.S. sales to sales at a
different level of trade in the comparison market.
We determined the level of trade of EP on the basis of the starting
prices of sales to the United States. We based the level of trade of
CEP on the price in the United States after making the CEP deductions
under section 772(d) but before making the deductions under section
772(c). Where HM prices served as the basis for NV, we determined the
NV level of trade based on starting prices in the NV market. Where NV
was based on constructed value (CV), we determined the NV level of
trade based on the level of trade of the sales from which we derived
selling, general and administrative expenses (SG&A) and profit for CV.
In order to determine the level of trade of U.S. sales and
comparison sales, we reviewed and compared distribution systems,
including selling functions, class of customer, and the extent and
level of selling expenses for each claimed level of trade. Customer
categories such as distributor, original equipment manufacturer (OEM),
or wholesaler are commonly used by respondents to describe levels of
trade but are insufficient to establish a level of trade. Different
levels of trade necessarily involve differences in selling functions,
but differences in selling functions, even substantial ones, are not
alone sufficient to establish a difference in the levels of trade.
Different levels of trade are characterized by purchasers at different
stages in the chain of distribution and sellers performing
qualitatively or quantitatively different functions in selling to them.
See AFBs VI at 2105.
As in the preliminary results, where we established that the
comparison sales were made at a different level of trade than the sales
to the United States, we made a level-of-trade adjustment if we were
able to determine that the differences in levels of trade affected
price comparability. We determined the effect on price comparability by
examining sales at different levels of trade in the comparison market.
Any price effect must be manifested in a pattern of consistent price
differences between foreign market sales used for comparison and
foreign market sales at the level of trade of the export transaction.
To quantify the price differences, we calculated the difference in the
average of the net prices of the same models sold at different levels
of trade. We used the average difference in net prices to adjust NV
when NV is based on a level of trade different from that of the export
sale. If there was a pattern of no price differences, the differences
in levels of trade did not have a price effect and, therefore, no
adjustment was necessary.
We were able to quantify such price differences and make a level-
of-trade adjustment for certain comparisons involving EP sales, in
accordance with section 773(a)(7)(A). For such sales, the same level of
trade as that of the U.S. sales existed in the comparison market but we
could only match the U.S. sale to comparison-market sales at a
different level of trade because there were no usable sales of the
foreign like product at the same level of trade. Therefore, we
determined whether there was a pattern of consistent price differences
between these different levels of trade in the HM. We made this
determination by comparing, for each model sold at both levels, the
average net price of sales made in the ordinary course of trade at the
two levels of trade. If the average prices were higher at one of the
levels
[[Page 54056]]
of trade for a preponderance of the models, we considered this to
demonstrate a pattern of consistent price differences. We also
considered whether the average prices were higher at one of the levels
of trade for a preponderance of sales, based on the quantities of each
model sold, in making this determination. We applied the average
percentage difference to the adjusted NV as the level-of-trade
adjustment.
We were unable to quantify price differences in other instances
involving comparisons of sales made at different levels of trade.
First, with respect to CEP sales, the same level of trade as that of
the CEP for merchandise under review did not exist in the comparison
market for any respondent except NMB/Pelmec. We also did not find the
same level of trade in the comparison market for some EP sales of
merchandise under review. Therefore, for comparisons involving these
sales, we could not determine whether there was a pattern of consistent
price differences between the levels of trade based on respondents' HM
sales of merchandise under review.
In such cases, we looked to alternative sources of information in
accordance with the SAA. The SAA provides that ``if information on the
same product and company is not available, the level-of-trade
adjustment may also be based on sales of other products by the same
company. In the absence of any sales, including those in recent time
periods, to different levels of trade by the exporter or producer under
investigation, Commerce may further consider the selling expenses of
other producers in the foreign market for the same product or other
products.'' See SAA at 830. Accordingly, where necessary, we attempted
to examine the alternative methods for calculating a level-of-trade
adjustment. In these reviews, however, we did not have information that
would allow us to apply these alternative methods for companies that,
unlike NMB/Pelmec, did not have a HM level of trade equivalent to the
level of the CEP.
The only company for which we made a level-of-trade adjustment for
CEP sales in these final results was NMB/Pelmec. See the discussion at
Comment 7, below. However, we concluded that it would be inappropriate
to apply the level-of-trade adjustment we calculated for NMB/Pelmec to
any of the other respondents. The SAA at 160 states that ``if
information on the same product and company is not available, the
adjustment may also be based on sales of other products by the same
company. In the absence of any sales, including those in recent time
periods, to different levels of trade by the exporter or producer under
investigation, Commerce may consider the selling experience of other
producers in the foreign market for the same product in other
products.'' Because no respondent reported sales in the same market as
NMB/Pelmec (i.e., Singapore), we have not used NMB/Pelmec's data as the
basis of a level-of-trade adjustment for any other respondents.
In those situations where the U.S. sales were EP sales and we were
unable to quantify a level-of-trade adjustment based on a pattern of
consistent price differences, the statute requires no further
adjustments. However, with respect to CEP sales for which we were
unable to quantify a level-of-trade adjustment, we granted a CEP offset
where the HM sales were at a more advanced level of trade than the
sales to the United States, in accordance with section 773(a)(7)(B) of
the Tariff Act.
Comment 1: Koyo, NMB/Pelmec, NTN Germany, SNR France, NSK, and NSK/
RHP contend that the Department's practice with regard to level of
trade effectively precludes a level-of-trade adjustment to NV for CEP
sales and is thus contrary to law and Congressional intent.
NMB, NSK, and NSK/RHP contend that there is no statutory
requirement that a level-of-trade adjustment be based on the full
difference in prices between the HM comparison level of trade and the
HM level of trade equivalent to CEP and suggest that a partial level-
of-trade adjustment is contemplated by the statute. NMB/Pelmec argues
that neither the URAA nor the SAA specifies which two levels of trade
must be the basis for the adjustment. NSK and NSK/RHP contend that the
plain reading of the statute requires that the Department must adjust
NV for CEP sales for the difference between price levels at the two
levels of trade which do exist in the HM. NSK and NSK/RHP argue further
that the Department should at least make such a level-of-trade
adjustment when comparing CEP to HM aftermarket (AM) sales which, they
contend, is more advanced than HM OEM sales because prices are higher
at the HM AM level of trade than at the HM OEM level of trade. Finally,
NSK and NSK/RHP contend that CEP sales should be matched to HM OEM
sales before they are matched to HM AM sales.
Koyo asserts that it and other respondents have proposed to the
Department alternative methods by which the Department could construct
an appropriate HM level of trade by deducting from NV those HM expenses
that correspond to the expenses that are deducted from CEP, but that
the Department has failed to provide a reasonable explanation for
rejecting the proposals.
SNR France contends that its claim for a level-of-trade adjustment
is based on information on the record that demonstrates a consistent
pattern of price differences between OEM and distributor customers.
Moreover, SNR France claims that its OEM sales are made at a level
similar to the CEP level of trade. It suggests that if the CEP and OEM
level of trade were identical (i.e., if selling functions and
activities performed were the same) price differences between OEM and
distributor customers would be even greater. Thus, SNR France asserts,
its claimed adjustment is understated and it is entitled to this
conservative adjustment when CEP sales are compared to HM sales at the
distributor level of trade.
Torrington contends that an analysis of patterns of consistent
price differences between sales at different levels of trade in the HM
cannot be performed absent a HM level of trade equivalent to the level
of trade of the U.S. sale. Torrington also argues that the Department's
requirement that price differences be due to HM level-of-trade
differences before price-based adjustments are allowed is logical since
many factors, not all of which pertain to level of trade, determine
price. Torrington contends further that the balance achieved by the
Department in selecting the appropriate sales to compare in the two
markets on the basis of level of trade would be disturbed if the
Department allowed a level-of-trade adjustment to eliminate a whole set
of price determinants in one market while not removing them in the
other market. Thus, Torrington concludes, the respondents' suggested
level-of-trade adjustment would result in unfair comparisons. Finally,
Torrington argues that Koyo's position concerning alternative methods
is without supporting authority.
Department's Position: We disagree with respondents. Our
methodology does not preclude level-of-trade adjustments to NV for CEP
sales; we made such an adjustment in the case of NMB/Pelmec. Rather, we
did not make a level-of-trade adjustment to NV for CEP sales where the
facts of the case did not warrant such an adjustment.
Based upon our examination of the information on the record, with
the exception of NMB/Pelmec, we found that no respondent in these
reviews had a HM level equivalent to the level of the CEP. Furthermore,
we find no provision in the statute for making a ``partial''
[[Page 54057]]
level-of-trade adjustment. We may make level-of-trade adjustments when
there is ``any difference * * * between the export price or constructed
export price and the [NV] that is shown to be wholly or partly due to a
difference in level of trade between the export price or constructed
export price and the normal value.'' See section 773(a)(7)(A) of the
statute. While respondents seize on the phrase ``wholly or partly'' to
justify a partial level-of-trade adjustment, we interpret this phrase
to mean that we may make a level-of-trade adjustment if only part of
the differences in prices between two levels of trade is attributable
to a difference in levels of trade. In other words, we need not
demonstrate that no factor other than level of trade influenced a
pattern of price differences. Thus, we do not read into this language
of the statute the authority to make a level-of-trade adjustment
between two HM levels of trade where neither level is equivalent to the
level of the U.S. sale.
With regard to SNR's claim that its OEM sales are made at a level
of trade similar to the CEP level of trade and that SNR should be
granted a level-of-trade adjustment when comparing CEP sales to
distributor sales, we found that all of SNR's HM sales are made at a
different level of trade than the level of the CEP. Therefore, for the
reasons enumerated above, it is inappropriate to grant a level-of-trade
adjustment to SNR for its CEP sales.
We disagree with Koyo that we should adopt proposed alternative
methods by which to construct HM levels of trade. We base HM levels of
trade on the respondent's actual experience in selling in the HM. There
is no statutory basis for us to ``construct'' levels in the HM or
elsewhere. Therefore, we have not used Koyo's claimed constructed NV
levels of trade in order to calculate a level-of-trade adjustment for
Koyo's CEP-sales comparisons.
Finally, we disagree with NSK and NSK/RHP that these companies' CEP
sales should be matched to HM OEM sales before they are matched to HM
AM sales. Based upon our examination of the information on the record,
we found that no HM level of trade for either NSK or NSK/RHP had
conclusively more selling functions than another HM level. Rather, the
HM levels of trade each involved different degrees of various selling
functions. We conclude that, for these companies, and for respondents
generally, while the reported HM levels of trade are different from one
another, no HM level of trade is more advanced than any other based
upon the evidence on the record. We also disagree with NSK's and NSK/
RHP's assertion that, because their OEM prices are generally lower than
their AM prices, their OEM levels of trade is less advanced than the
distributor/aftermarket levels of trade. We determine whether one level
of trade is more advanced than another on the basis of the selling
functions performed by a respondent with respect to the two levels of
trade. NSK and NSK/RHP's HM OEM and AM sales are more advanced than the
level of trade of the CEP because comparatively fewer selling functions
are associated with the CEP than are performed for sales to either of
the other levels of trade. Therefore, we have not altered our matching
methodology.
Comment 2: Torrington contends that SKF Germany and SKF Sweden did
not provide adequate information to support their claims for a CEP
offset and requests that the Department deny this adjustment.
Torrington asserts that respondents' explanation of differences in
selling functions between the CEP level of trade and the two HM levels
do not support an offset because an examination of these selling
functions reveals that they are either duplicative, de minimis, equally
applicable to sales to U.S. affiliate and HM sales, or the Department
adjusts for them otherwise. Torrington concludes that the information
respondents provided regarding differences in selling activities is
insufficient for the Department to determine whether respondents' CEP
is less remote than the level of trade of HM OEM sales.
SKF Germany and SKF Sweden assert that the Department determined
correctly that they are entitled to a CEP offset based on differences
in selling activities and functions between the HM levels of trade and
the CEP level of trade. Respondents contend that they substantiated
their CEP-offset claims fully in submissions to the Department,
including the differences in selling functions between HM levels of
trade and the CEP level of trade. SKF Germany contends further that
these claimed differences are ``identical in all material respects'' to
the information the Department verified in the 1994/95 reviews. SKF
Sweden notes that during the current segment of these proceedings the
Department verified the information it provided concerning selling
activities and functions for each level of trade. Respondents assert
that the preliminary results are in accordance with section
773(a)(7)(B) of the Tariff Act and entirely supported by the record. On
this basis, respondents request that the Department reject Torrington's
arguments and continue to grant the CEP offset in the final results.
Department's Position: We disagree with Torrington and determine
that respondents provided adequate factual information to support their
claims that the HM levels of trade are in fact more advanced than the
CEP level of trade. It appears that Torrington may have misinterpreted
the data presented in respondents' submissions. We conducted a thorough
analysis of the information SKF Sweden and SKF Germany submitted on the
record and determined that after deducting respondents' expenses from
CEP pursuant to section 772(d) there exists adequate factual
information to conclude that fewer selling functions are associated
with the CEP than are performed on sales at their HM levels of trade.
Thus, for both respondents, we considered the CEP level of trade to be
different from either HM level of trade and a less advanced stage of
distribution. See Memorandum to Laurie Parkhill, Level of Trade, March
24, 1997, in Import Administration's Central Records Unit (Room B-099
of the main Commerce building (hereafter, B-099)).
For the final results, because we could neither match the CEP level
of trade to sales at the same level of trade in the HM nor determine a
level-of-trade adjustment based on these respondents' HM sales, to the
extent possible we determined NV at the same level of trade as the U.S.
sale to the unaffiliated customer and made a CEP offset in accordance
with section 773(a)(7)(B) of the Tariff Act (see AFBs VI at 2105).
Comment 3: Torrington claims that the Department's pattern-of-
prices analysis does not support a downward level-of-trade adjustment
to NV for differences between SKF France's EP sales matched to HM sales
at the distributor level of trade.
SKF France disagrees with Torrington, arguing that the Department's
adjustment methodology is correct. SKF France asserts that a clerical
error in the Department's analysis memorandum, which reverses the
relative price levels of the two HM levels, misled Torrington into
thinking that the downward adjustment is inappropriate. SKF France
cites to the results of the Department's level-of-trade adjustment
calculations to support that a downward adjustment to NV is appropriate
when matching its EP sales to HM sales at the distributor level.
Department's Position: We disagree with Torrington. We did not err
in making a downward level-of-trade adjustment for SKF France's EP
sales which we matched to HM distributor sales. Torrington's
contentions are based upon a typographical error in the SKF
[[Page 54058]]
France preliminary results analysis memorandum which reversed the price
levels of the HM levels of trade. Therefore, respondent's downward
level-of-trade adjustment was proper.
Comment 4: NTN Japan and NTN Germany state that the Department
should make a price-based level-of-trade adjustment for CEP sales made
at a different level of trade in the United States than the comparison
home market sales. Respondents suggest that using the transaction to
the first unaffiliated U.S. customer prior to the deduction of expenses
pursuant to section 772(d) would be consistent with the use of those
levels of trade in matching U.S. CEP and HM sales and with evidence
demonstrating that different selling activities are performed at each
level of trade that affect price comparability.
Torrington argues that the Department's requirement that price
differences be due to HM level-of-trade differences before price-based
adjustments are allowed is logical since many factors, not all of which
pertain to level of trade, determine price.
Department's Position: We disagree with NTN Japan and NTN Germany.
The statutory definition of ``constructed export price'' contained at
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'' EP.
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 associated selling functions) that we
deduct pursuant to this sub-section. With regard to respondents'
characterization of our matching methodology, we generally matched CEP
sales to HM sales on the basis of the level of trade of the resale by
the U.S. affiliate only where all HM levels of trade were more remote
than the level of the CEP. The purpose of this methodology is to use
the CEP offset to deduct indirect selling expenses from NV similar to
those deducted from the U.S. starting price. For example, we were able
to determine the CEP offset ``cap'' for HM OEM sales on the basis of
indirect selling expenses incurred on OEM sales in the United States.
Therefore, because no HM levels of trade reported by NTN Germany or NTN
Japan were equivalent to the level of trade of these respondents' CEP
sales, we were unable to make a level-of-trade adjustment for such
sales.
Comment 5: Torrington argues that the record does not support NSK/
RHP's claim for a CEP offset. Torrington contends that the Department
improperly found that several selling functions associated with the CEP
level of trade are substantially different from the sales functions
associated with the comparison sales in the HM. For instance,
Torrington states that the Department claimed erroneously that, at the
CEP level of trade, little or no advertising was involved. Torrington
states further that the Department determined incorrectly that certain
selling functions (e.g., technical support and strategic and economic
planning) did not apply to the CEP level of trade. With respect to
repacking expenses, Torrington contends that this function is not
involved in the selling process and therefore should not justify a CEP
offset. Citing Certain Corrosion Resistant Carbon Steel Flat Products,
62 FR 18,452 (April 15, 1997), Torrington argues that differences in
selling functions, even substantial ones, may not be enough to warrant
finding different levels of trade. Torrington suggests that the
Department continue to compare prices within the broad comparison
patterns but reject NSK/RHP's claim for a CEP offset based on these
reasons.
NSK/RHP asserts that Torrington compares incorrectly the activities
in which an international distributor engages when selling to a U.S.
national distributor with activities of a U.K. national distributor
selling to customers. Moreover, NSK/RHP contends that, after the
initial error, Torrington then compares a category of expense (e.g.,
advertising) at different points in the chain of distribution and
suggests that the same function is performed by each national
distributor. NSK/RHP contends further that, for CEP sales, it did not
report advertising for its end-user customers because the Department
deducts expenses for the function of advertising to unaffiliated U.S.
customers in the calculation of CEP pursuant to section 772(d) of the
Tariff Act. NSK/RHP notes that it agrees with Torrington that repacking
is not a selling expense within the scope of section 772(d) of the
statute. NSK/RHP therefore suggests that the Department remove
repacking from the CEP-selling-function variable in the final results.
NSK/RHP asserts that the Department should follow the statute as
written and grant a level-of-trade adjustment for CEP matches or, at a
minimum, grant a level-of-trade adjustment for CEP sales matched to HM
aftermarket sales.
Department's Position: We disagree with Torrington. Torrington
compares erroneously activities of an international distributor when
selling to a U.S. affiliate with activities of a U.K. national
distributor selling to customers. As we stated in our March 24, 1997
Memorandum (Id.), we could not determine whether these sales (i.e.,
sales from the international distributor to the U.K. national
distributor) were made at arm's length. Therefore, we did not use these
sales to determine NV or as the basis of any level-of-trade
adjustments. As a result of this determination, we compared sales made
by the U.K. national distributor to customers in the HM with sales made
at the CEP level of trade (i.e., sales made by the international
distributor to the U.S. affiliate). See NSK/RHP's February 6, 1997,
supplemental questionnaire response (Exhibit S-2). Based on our
analysis, we found that, for CEP sales, NSK/RHP did not engage in any
of these selling activities (e.g., freight and delivery arrangement,
inventory maintenance, repacking, pre-sale warehousing and sales
calls). However, we found that, at the HM levels of trade, NSK/RHP
participated in these activities and therefore the HM levels of trade
were substantially dissimilar from the CEP level of trade. Accordingly,
as we explain in our level-of-trade memorandum, we considered the HM
sales to be at different levels of trade and at a more advanced stage
of distribution than CEP.
We agree with Torrington that differences in selling functions may
not be enough in themselves to warrant finding different levels of
trade. However, consistent with our practice in AFB VI, we consider the
class of customer as one factor, along with selling functions and the
selling expenses associated with these functions, in determining the
stage of marketing, i.e., the level of trade associated with the sales
in question. See AFB VI at 2107.
With respect to expenses associated with repacking, please see our
discussion in comment 1 of section 7 of this notice for an explanation
of our treatment of repacking expenses.
Comment 6: Torrington argues, with respect to Barden's HM sales to
government users, that the Department should not have determined that
government users are at a different level of trade than OEM sales.
Torrington asserts that there is no evidence on the record to support
Barden's claim that
[[Page 54059]]
government sales should be treated separately. In addition, Torrington
contends that Barden's assertion that AM sales to airlines and repair
contractors should be treated separately is also unsupported.
Torrington states that Barden has not submitted adequate evidence to
support its claim that AM sales should be treated separately from
distributor sales. Moreover, Torrington claims that Barden's narrative
explanations for certain selling functions (e.g., computer, legal and
accounting, personnel training, advertising, and strategic and economic
planning) do not support the level-of-trade chart found in Exhibit A-4
of Barden's July 23, 1996, Section A Response. Therefore, according to
Torrington, the Department should treat AM sales as being at the same
level as distributor sales.
Barden states that it agrees with Torrington that the Department's
redesignation of its HM level-of-trade categories was in error. Barden
contends that neither the record nor commercial reality supports the
inclusion of these two very distinct and separate channels of
distribution (airline and repair AM contractors and government
customers) under one level of trade. Therefore, according to Barden,
the Department should use the customer category designations Barden
submitted originally in its responses for these final results. Barden
also contends that the Department should designate sales to its EP
customers (e.g., network distribution customers) as Barden originally
identified on the record. Barden asserts that the Department unlawfully
applied a facts-available level-of-trade adjustment to these sales
because Barden allegedly failed to include them in their proper
channels of distribution. Barden contends that it disclosed the types
of selling activities and functions it incurred on its EP sales fully
in its response to the Department's questionnaire.
Department's Position: We disagree with Torrington and Barden.
While we acknowledge that Barden did not provide sufficient evidence to
warrant a distinction for government sales, we disagree with Torrington
that we should treat these sales as OEM sales. Torrington has provided
no evidence nor any references to information on the record that
supports its conclusion. Moreover, there is no evidence on the record
that would suggest that government sales are similar to OEM sales. In
addition, with respect to Barden's assertion that government sales
differ substantially from any of the other level-of-trade categories,
we determined that Barden's narrative explanation does not provide
sufficient information to support its conclusion. Therefore, we have
not changed our analysis from that in our preliminary results with
respect to this issue.
We also disagree with Torrington's contention that we should treat
AM sales as being at the same level as distributor sales. As we
explained in our March 24, 1997 Memorandum (Id.), we found that the
selling activities for level two (e.g., distributors network) differed
from those of level three (e.g., airlines repair contractors (AM sales)
and government customers) in after-sales services and warranties,
advertising, administrative support and personnel training. While we
agree with Torrington's assertion that there are certain discrepancies
between Barden's narrative explanations and its level-of-trade chart,
we have determined that such inconsistencies were not substantial.
Thus, we have not made any changes with respect to this issue.
Finally, we have reexamined our facts-available determination with
respect to Barden's EP sales. Upon further consideration, we determined
that Barden did provide sufficient information concerning the nature of
its customers and the selling functions it performed with respect to
these sales. Therefore, we have accepted Barden's information and have
not applied facts available to these sales for the final results.
Comment 7: Torrington claims that NMB/Pelmec failed to demonstrate
entitlement to either a level-of-trade adjustment or a CEP offset to
its HM prices and that the Department should not make either adjustment
to NV in the final results.
Torrington notes that, in the preliminary results for NMB/Pelmec,
the Department adjusted NV downward in the amount of the CEP offset.
Torrington also notes that NMB admits that its distributor sales in the
HM are at the same level of trade as the CEP level of trade in the
United States. Torrington concludes that, because NMB/Pelmec reported
no distributor sales in the HM during the POR, NMB is entitled to an
adjustment in the form of a CEP offset only if it demonstrated that OEM
sales in the HM were at a more advanced level of trade than the CEP
level of trade. Torrington argues that this is not the case. It notes
that NMB/Pelmec admits that selling expenses, such as after-sales
service/warranties, technical advice and engineering services, and
direct advertising, were all negligible or non-existent and, therefore,
NMB/Pelmec omitted them from the computer-database fields. Torrington
continues that, because these expenses were not reported, NMB/Pelmec
made no visits to customers for these functions. Therefore, Torrington
argues, these functions do not support NMB/Pelmec's claim for a CEP
offset. Torrington notes further that indirect expenses with regard to
solicitation of customer orders were also admittedly negligible. Thus,
Torrington argues, there is no other information on the record to
support NMB/Pelmec's claim that this function is more active in the
case of sales to OEM customers.
Finally, Torrington alleges that NMB/Pelmec reports substantial
activity at the CEP level of trade, which, at a minimum, undermines
NMB/Pelmec's claim that a downward adjustment to NV is needed when
comparison sales are to OEMs. Torrington points to a description in
NMB/Pelmec's financial report of its U.S. affiliate as evidence.
NMB/Pelmec claims that Torrington's characterizations of its sales
are incorrect. It argues that the Department should find that NMB/
Pelmec is entitled to a level-of-trade adjustment and, at a minimum, a
CEP offset whenever CEP sales are not compared to HM distributor sales.
NMB/Pelmec contends that Torrington's claim that it did not report any
distributor sales in the HM during the period is incorrect. NMB/Pelmec
notes that the Department's preliminary findings that NMB/Pelmec did
not report such sales were also incorrect. NMB/Pelmec points out that
the record in this administrative review demonstrates clearly that it
made substantial sales to distributors. Thus, NMB/Pelmec argues that
the Department should have compared CEP sales to HM distributor sales.
NMB/Pelmec asks that the Department correct its findings in the final
results.
In addition, NMB/Pelmec contests Torrington's argument that NMB/
Pelmec has not demonstrated that its HM OEM sales were at a more
advanced level than the CEP level of trade. NMB/Pelmec replies that it
provided detailed descriptions of selling functions for HM OEMs in its
initial and supplemental responses, explaining that most of these
functions were not performed for distributors, in addition to providing
detailed sample support documentation. NMB/Pelmec states that, during
the Department's verification of the 1994/95 administrative review, the
Department verified NMB/Pelmec's claim that it performed more advanced
selling functions for OEMs. NMB/Pelmec alleges that Torrington's claim
appears to be based on confusion regarding the difference between
direct and indirect selling expenses and on its failure to review the
correction regarding selling
[[Page 54060]]
functions NMB/Pelmec made in its supplemental response. NMB/Pelmec
contends that Torrington ignored the supplemental corrections and based
its claims on obvious errors.
Finally, NMB/Pelmec argues that Torrington failed to support its
claim that NMB/Pelmec reported substantial activity at the CEP level of
trade. It notes that the activities to which Torrington refers in NMB/
Pelmec's consolidated financial statement were between NMB/Pelmec's
parent company and its U.S. affiliate, not between NMB/Pelmec and its
U.S. affiliate. Thus, NMB/Pelmec concludes, these activities do not
support Torrington's claim. NMB/Pelmec also notes that the record shows
that its parent company provides the same types of activities to its
other subsidiaries and affiliates.
Department's Position: NMB/Pelmec reported distributor sales for
the POR. We stated incorrectly in our analysis memorandum for NMB/
Pelmec that it only made sales to OEM/trading companies during the
period. This statement was a result of our mis-coding the customer
categories NMB/Pelmec reported when applying our methodology for
identifying the proper level of trade. We have now made the appropriate
changes to calculate NMB/Pelmec's margins properly for these final
results.
We agree with NMB/Pelmec that it is entitled to a level-of-trade
adjustment whenever CEP sales are not compared to HM distributor sales.
We re-examined NMB/Pelmec's response and determined that NMB/Pelmec's
HM distributor sales are equivalent to the CEP level of trade. The
evidence on the record suggests, contrary to Torrington's assertion,
that NMB/Pelmec performs comparatively few selling activities either
for sales to its U.S. affiliate or for HM sales to distributors.
Furthermore, we determined that NMB/Pelmec's HM sales to OEMs are made
at the same level of trade as its HM sales to trading companies but
that these sales are made at a different level of trade than its HM
distributor sales. Accordingly, we attempted to match CEP sales to HM
distributor sales first and we matched CEP sales to OEM/trading company
sales when no HM distributor sales existed. When we matched CEP sales
to HM distributor sales, we made no level-of-trade adjustment or CEP
offset because the sales are made at the same level of trade. When we
matched CEP sales to HM OEM/trading company sales, we made a level-of-
trade adjustment because we found that there was a pattern of
consistent price differences between the two HM levels of trade. See
NMB/Pelmec Final Results Analysis Memorandum dated September 22, 1997.
Finally, because we made a level-of-trade adjustment for
comparisons involving HM OEM/trading company sales, we did not make a
CEP offset for any comparisons of NMB/Pelmec's sales.
Comment 8: Torrington contends that NTN failed to provide record
evidence demonstrating its entitlement to either a level-of-trade
adjustment to NV for CEP sales or a CEP offset for those sales. With
respect to NTN's identification of comparative selling activities,
Torrington argues that, primarily, NTN identifies selling activities
associated with CEP-resale transactions and states that NTN failed to
provide a complete and accurate list of selling activities. In
addition, Torrington contends that NTN did not provide a comprehensive
description of its distribution and selling processes. Torrington also
maintains that the quantification information that NTN provided in its
response lacks the necessary detail to support a level-of-trade
adjustment. Torrington concludes that, for the purpose of the final
results, the Department should not grant NTN either a level-of-trade
adjustment or a CEP offset to NV.
NTN contends that Torrington misreads the Department's questions
and misinterprets NTN's data. NTN argues that, in its response, it
identified distinct selling functions related to the different LOTs in
the United States for both EP and CEP sales. NTN maintains that it
provided responses to the Department's requests for information related
to the selling functions and sales processes performed for, and the
services offered to, each class of customer in both the United States
and HM. NTN argues that it based its responses to the Department's
level-of-trade and channel-of-distribution inquiries on its responses
in the 1994/95 administrative reviews and states that, in those
reviews, the Department accepted NTN Japan's responses.
Department's Position: We disagree with Torrington. NTN Japan
provided adequate factual information to support its claims that its HM
levels of trade are in fact more remote than the CEP level of trade. We
conducted a thorough analysis of the information NTN Japan submitted on
the record and determined that after deducting NTN Japan's expenses
from CEP pursuant to section 772(d) there exists adequate factual
information to conclude that fewer selling functions are associated
with the CEP than are performed on sales at its HM levels of trade.
Thus, for NTN Japan we considered the CEP level of trade different from
all HM levels of trade and at a less-advanced stage of distribution.
For the final results, because we could neither match the CEP level
of trade to sales at the same level of trade in the HM nor determine a
level-of-trade adjustment based on NTN's HM sales, to the extent
possible we determined NV at the same level of trade as the U.S. sale
to the unaffiliated customer and made a CEP offset in accordance with
section 773(a)(7)(B) of the Tariff Act. See our position in response to
comment 4, above.
Comment 9: Torrington contends that, with respect to the customers
to which NTN made EP sales, the Department should not make a level-of-
trade adjustment to NV based on the record evidence developed in the
instant reviews. Torrington asserts that the record contains little
information pertaining to such sales. In addition, Torrington argues
that the information that is on the record is inadequate to warrant a
level-of-trade adjustment.
NTN argues that it has not changed the facts related to these sales
from those of the 1994/95 administrative reviews and states that, in
those reviews, the Department made a level-of-trade adjustment for such
sales. NTN also points out that the Department verified, in detail,
NTN's response as it relates to its claimed levels of trade and found
no discrepancies. NTN asserts that, because the Department made no
further requests for information, the Department has, in essence,
accepted NTN's responses as sufficient to warrant a level-of-trade
adjustment with respect to EP sales it made to both customers.
Department Position: We disagree with Torrington. NTN Japan
provided adequate factual information to support its claims with regard
to the differences and similarities of its HM levels of trade and the
EP level of trade. Therefore, where possible, we matched EP sales to
sales at the same level of trade in the HM and made no level-of-trade
adjustment. Where we matched EP sales to HM sales made at a different
level of trade, in accordance with section 773(a)(7)(A) of the Tariff
Act, we first determined whether there was a pattern of consistent
price differences between these different levels of trade in the HM
and, if so, made a level-of-trade adjustment accordingly.
5. Cost of Production and Constructed Value
5.A. Cost-Test Methodology
Comment 1: INA claims that the Department used CV for NV rather
than seeking to make a family-match comparison where identical HM
[[Page 54061]]
matches existed but were disregarded because they were below cost. INA
contends that this approach is in error because it gives priority to
the use of CV over price-based NV. Citing section 773(a)(4) of the
Tariff Act, INA contends that the Department is to use CV only when it
determines that the NV of the merchandise cannot be determined by
comparison with sales of the foreign like product. INA asserts further
that section 773(b)(1) reinforces this conclusion by stating that, when
below-cost sales are disregarded, ``normal value shall be based on the
remaining sales of the foreign like product in the ordinary course of
trade. If no sales made in the ordinary course of trade remain, the NV
shall be based on the constructed value of the merchandise.'' INA
contends that the Department has defined potential ``foreign like
products'' in terms of bearing families. INA concludes that, where
there are remaining HM sales in the same family, the Department should
base NV on those sales rather than on CV.
INA notes that, in AFBs VI, the Department defended its methodology
on the ground that it makes the ``foreign like product'' determination
under the criteria of section 771(16) only once and that the result of
the cost test is not a criterion in determining the foreign like
product under section 771(16). INA contends that the Department's
automatic reliance on CV when all identical matches are disregarded as
below cost is inconsistent with its approach with regard to
contemporaneity because the Department applies the contemporaneity rule
as a criterion for comparability even though that rule is not included
in the section 771(16) definition.
Torrington argues that the Department should follow its decision in
AFBs VI and continue to resort to CV rather than HM family sales when
all sales of identical bearings are disregarded pursuant to the cost
test.
Department's Position: We disagree with INA. Section 771(16) of the
Tariff Act directs us to select the foreign like product ``in the
first'' of several categories: identical in physical characteristics,
similar in physical characteristics and commercial value, or of the
same general class or kind that can be reasonably compared. The
Department interprets the reference in section 773(b)(1) of the Tariff
Act that it base NV ``on the remaining sales of the foreign like
product in the ordinary course of trade'' to mean the selected foreign
like product, not a succession of foreign like products. Therefore, we
have resorted directly to CV where we have disregarded all
contemporaneous identical HM sales as below cost instead of determining
whether contemporaneous sales of a less similar model would survive the
cost test and remain available as comparators. We explained this
practice in detail in AFBs V at 66490-91 and AFBs VI at 2111-2112.
We disagree with INA's suggestion that our practice of using CV
when all identical matches are disregarded is inconsistent with our
policy with regard to choosing contemporaneous matches. We conduct a
search for sales of the best model for comparison within a
contemporaneity window pursuant to section 773(a)(1)(A) of the statute,
which directs that ``[t]he NV of the subject merchandise shall be the
price described in subparagraph (B), at a time reasonably corresponding
to the time of the sale used to determine the export price or
constructed export price'' (emphasis added). We have a longstanding
practice of considering sales within 90 days before and 60 days after
the month of the U.S. sale to be acceptable as potential comparators
(see Certain Small Business Telephone Systems and Subassemblies Thereof
from Korea: Final Results of Antidumping Administrative Review, 57 FR
8300 (March 9, 1993); Certain Circular Welded Carbon Steel Pipes and
Tubes from Thailand: Final Results of Antidumping Administrative
Review, 61 FR 1332 (January 19, 1996); AFBs III at 39735). Thus, our
determination of which merchandise will be considered the foreign like
product is based on (1) the product categories set forth in 771(16) and
(2) the ability to review contemporaneous sales as contemplated in
773(a)(1)(A).
5.B. Research and Development
Comment: Torrington notes that the SKF Group companies, i.e., SKF
France, SKF Germany, SKF Italy, and SKF Sweden, allocated the general
research and development (R&D) expenses incurred by their European
Research Center (ERC) based on proportionate share holdings in the
facility. Torrington contends that, if the Department accepts this
methodology, the Department must account for expenses attributable to
the share holding in the ERC by the SKF Group's parent company, AB SKF.
Respondents argue that their allocation methodology is proper and
consistent with determinations in prior segments of this proceeding.
Regarding Torrington's allegation of under-reporting, respondents
explain that their parent company holds shares in the ERC on behalf of
SKF Sweden and that SKF Sweden has reported the general R&D expenses
attributable to these shares.
Department's Position: We agree with respondents. In section A of
SKF Sweden's questionnaire response, respondent identifies the shares
to which Torrington refers as SKF Sweden's share in the ERC. SKF Sweden
reported the R&D expenses attributable to these shares as part of its
general and administrative expenses. Thus, based on record evidence we
are satisfied that respondents allocated the ERC expenses properly.
Accordingly, for the final results, we did not adjust the R&D expenses
reported by these respondents.
5.C. Profit for Constructed Value
Comment 1: NSK, INA, FAG Germany, FAG Italy, SNR France, and Barden
argue that the methodology the Department used in the calculation of CV
profit is unlawful. According to respondents, section 773(e)(2) of the
Tariff Act authorizes the Department to make this calculation using one
of four methods, depending on the information on the record.
Respondents contend that, while in the preliminary results the
Department calculated a CV-profit ratio for each level of trade within
each class or kind of product sold in the HM in the ordinary course of
trade, this method is not authorized by section 773(e)(2)(A) of the
Tariff Act. Citing to this provision, respondents claim that the profit
calculation must be equivalent to the sum of profits ``in connection
with the production and sale of a foreign like product.'' Respondents
argue that ``foreign like product'' is a statutorily defined term of
art equivalent to the first of three enumerated categories of
merchandise as defined by section 771(16) of the Tariff Act and that
these three categories are narrower than ``class or kind''.
FAG Germany, FAG Italy and SNR France disagree with the
Department's assertion that the use of the phrase ``a foreign like
product'' rather than ``the foreign like product'' allows it to
aggregate total profits across each class or kind of merchandise and
that the meaning of ``foreign like product'' remains the same in both
cases, as defined in the statute regardless of the preceding article,
citing the Notice of Proposed Rulemaking, 61 FR at 7335. Thus,
respondents argue, although Congress knew the meaning of ``foreign like
product,'' it adopted this term intentionally in place of ``class or
kind.'' Respondents also contend that, in accordance with section
771(16) of the Tariff Act, the foreign like product must be produced in
the same country by the same person, disallowing the
[[Page 54062]]
Department's method of including sales of merchandise they sold that
other manufacturers produced. Respondents contend further that the SAA
at 840 clears any ambiguity regarding the term ``foreign like product''
in section 773(e)(2)(A) of the Tariff Act by recommending the
alternative methods of 773(e)(2)(B) in instances where 773(e)(2)(A)
cannot be used either because there are no HM sales of the foreign like
product or because all such sales are at below-cost prices.
Torrington counters that the Department need not change its policy
with regard to the CV-profit calculation, claiming that ``foreign like
product'' refers to the entire class of merchandise that meets the
definitions of section 771(16) and not just the identical part number
or family. It notes that such a similar reference is made to foreign
like product with respect to statutory passages concerning the
viability test at section 773(a)(1)(C). Torrington adds that the
interpretation of ``foreign like product'' as a family would
necessarily create a gap in the statutory scheme. As an example,
petitioner describes a situation where, if family-specific profit could
not be calculated, the use of profits on the ``same general category''
would never be considered because ``foreign like product'' is too
narrow to constitute ``the same general category'' as directed in
section 773(e)(2)(B) of the Tariff Act. Torrington continues by arguing
that the use of the indefinite article ``a'' rather than the definite
article ``the'' in section 773(e)(2)(A) of the Tariff Act is
significant and is meant to refer to ``any'' foreign like product, as
in more than one foreign like product. In addition, Torrington
disagrees with respondents' argument that Congress replaced the term
``class or kind of merchandise'' deliberately in order to restrict the
calculation of profit only to the foreign like product corresponding to
a U.S. sale. Torrington contends that the removal of the term was
simply to conform the terminology of the U.S. antidumping law to the
international Antidumping Code. Finally, Torrington contends that the
respondents' suggested methodology would resort to the application of
alternative methodologies too soon in the hierarchy of preferable
methods. Petitioner argues that section 773(e)(2)(B) of the Tariff Act
outlines alternative profit methodologies for use only when the method
described in section 773(e)(2)(A) of the Tariff Act cannot be used, as
in instances where there are no HM sales of the foreign like product or
all such sales are below cost.
Department's Position: We disagree with the respondents. As we
stated in AFBs VI, respondents' definition of the term ``foreign like
product'' is overly narrow with respect to its use in the CV-profit
provisions. In applying the ``preferred'' method for calculating profit
(as well as SG&A) under section 773(e)(2)(A) of the Tariff Act, the use
of aggregate data that encompasses all foreign like products under
consideration for NV results in a practical measure of profit that we
can apply consistently in each case. By contrast, an interpretation of
section 773(e)(2)(A) of the Tariff Act that would result in a method
based on varied groupings of foreign like products, each defined by a
minimum set of matching criteria shared with a particular model of the
subject merchandise, would add an additional layer of complexity and
uncertainty to antidumping proceedings without generating more accurate
results. It would also make the statutorily preferred CV-profit
methodology inapplicable to most cases involving CV. We discussed in
the preamble to our final regulations that, although we recognize that
there are other methods available for computing profit for CV under
section 773(e)(2)(A) of the Tariff Act, we continue to believe that our
method represents a reasonable interpretation of the statute. See Final
Rule, 62 FR at 27359. We also note that this approach is consistent
with our method of computing SG&A and profit under the pre-URAA version
of the statute, and, despite the fact that the URAA revised certain
aspects of the SG&A and profit calculations, we do not believe that
Congress intended to change this particular aspect of our practice.
Therefore, we have not changed our methodology for the final results.
See also Notice of Proposed Rulemaking, 61 FR at 7335 (discussing the
Department's practice for calculating profit (and SG&A) using aggregate
figures).
Comment 2: FAG Italy, FAG Germany, SNR France, and Barden contend
that the Department's CV-profit methodology of calculating profit on an
aggregate basis for all foreign like products is most similar to the
first alternative CV-profit methodology described in 773(e)(2)(B)(i) of
the Tariff Act because it aggregates profits encompassing sales from
multiple foreign like products. However, respondents contend, contrary
to the Department's methodology, section 773(e)(2)(B)(i) does not limit
the CV-profit calculation to sales in the ordinary course of trade.
Citing the SAA at 841, respondents argue that the absence of any
language in section 773(e)(2)(B)(i) of the Tariff Act referring to
sales in the ordinary course of trade and the presence of this precise
limitation in descriptions of the other profit methodologies
necessitates the inclusion of sales outside the ordinary course of
trade in methodologies using all sales of the same class or kind.
SKF argues that below-cost sales should be included in the
calculation of CV profit when grouping products of the same general
category (citing section 773(e)(2)(B)(i) of the Tariff Act). Because
the Department has chosen to calculate profit on a class-or-kind basis
rather than for each family (foreign like product), these respondents
contend that the Department is without authority to exclude sales
outside the ordinary course of trade such as below-cost sales.
SKF argues that, if the Department continues to exclude below-cost
sales from the calculation of total profits for each class or kind of
merchandise, it should include the COP for below-cost sales when
calculating the profit ratio for each class or kind of merchandise.
Before dividing total profits by the total COP of all sales producing
those profits, respondents argue that the Department should add the COP
for below-cost sales back into the total costs of production for each
respective group of sales. Respondents argue that this would allow the
Department to determine the profit rate per sale more accurately.
Torrington asserts that respondents' arguments with respect to the
inclusion of below-cost sales in the calculation of CV profit under
section 773(e)(2)(B) of the Tariff Act is inconsistent logically with
their argument concerning section 773(e)(2)(A) of the Tariff Act.
Torrington contends that under respondents' methodology, before
calculating an overall aggregate profit under section 773(e)(2)(B) of
the Tariff Act, the Department would first have to test all sales of
identical and similar models to determine whether any sales were made
in the ``ordinary course of trade.'' Torrington contends further that
below-cost sales would first be excluded under section 773(e)(2)(A)
before resorting to aggregate profit data under section 773(e)(2)(B).
Torrington argues that below-cost sales must be excluded for
purposes of calculating CV profit and should not be included in the
average-profit calculation as so-called zero-profit sales. Citing
section 771(15) of the Tariff Act and the SAA, Torrington contends that
inclusion of sales outside the ``ordinary course'' are not a proper
basis for determining profit under section 773(e)(2)(A) of the Tariff
Act. Torrington argues that the SAA also establishes that ``only''
ordinary-course-of-trade sales will be the basis for the profit
calculation and, therefore, the
[[Page 54063]]
Department should not include the full costs of sales at a loss in the
denominator of the profit-ratio calculation as this would make these
part of the profit calculation.
Department's Position: We disagree with respondents that our CV-
profit methodology is most similar to the first alternative CV-profit
methodology described in 773(e)(2)(B)(i) of the Tariff Act based on our
interpretation of ``foreign like product.'' We agree with Torrington
that we should not include sales that failed the below-cost test in the
calculation of profit for CV because these sales fall outside the
ordinary course of trade. As we stated in the preliminary results, we
have calculated CV profit using the profit methodology as stated in
section 773(e)(2)(A) of the Tariff Act. This provision requires that we
base profit on sales made in the ordinary course of trade which, in
turn, do not include sales that we disregarded as a result of the
below-cost test. See section 771(15) of the Tariff Act. Furthermore, we
do not believe that we should retain the full costs of disregarded
sales while setting those sales' profits to zero. The use of partial
information from the sales would distort the profit rate for sales in
the ordinary course of trade and frustrate the intent of the statute.
Comment 3: NSK and NSK/RHP argue that the Department erred when it
calculated CV profit based upon the HM database. Respondents contend
that the HM database consists of sample-week sales and is not
representative of its HM profit experiences with respect to the class
or kind of merchandise. NSK and NSK/RHP maintain that the SAA intended
the Department to use Financial Statement profit when determining CV
profit and that the Department must apply the preferred profit
methodology at the model-specific or family-specific level or it must
resort to one of the alternative profit methodologies.
Torrington rebuts that respondents offer no evidentiary or rational
basis for concluding that the HM database is not representative of the
profit experiences in the HM when sample week sales are reported.
Department's Position: We disagree with NSK and NSK/RHP. We
rejected this argument in AFBs VI, stating that HM sales and cost data
provided by respondents on a sampled basis does not render such data
inappropriate for purposes of calculating CV profit. Pursuant to the
statutory authority provided at section 777A of the Tariff Act, we
routinely use data in our analysis that has been reported on a sampled
basis. Thus, the statute does not explicitly provide for such an
automatic elimination of these profit methodologies in such cases. See
our response to Comment 1 of section 6.C of AFBs VI, 62 FR at 2112, for
a more comprehensive discussion on this topic.
Comment 4: SNR France argues that the CV profit the Department
calculated for CRBs is based on U.S. sales rather than on HM sales.
Moreover, SNR France asserts that this calculation is unlawful because
it is not based on the actual profit that SNR France earns on HM sales
of the foreign like product made in the ordinary course of trade.
Specifically, SNR France contends that the Department based its profit
calculation on costs taken from SNR France's U.S. CV database which,
SNR France argues, is a mere microcosm when compared to its total HM
sales. SNR France suggests that the Department should instead calculate
a profit ratio based on its financial statements.
Torrington points to the fact that the Department did not request
COP data from SNR France for CRBs. Torrington states that, while SNR
France suggests that financial-statement data would be a more
appropriate proxy for the entire profit calculation, Torrington
contends that SNR France failed to propose appropriate ratios based on
the financial statements. Moreover, Torrington asserts that this data
would necessarily include non-scope products.
Department's Position: We disagree with SNR-France. We must balance
the need to calculate an accurate margin with the need to reduce the
burden on respondents. Because we did not request complete COP data for
SNR-France's sales of CRBs, we were unable to calculate CV profit under
the ``preferred methodology'' of section 773(e)(2)(A). Instead, we
calculated CV profit based on the following methodology.
We subtracted the home market COP from the home market sales value.
Home market COP consists of three costs: COM, interest expenses, and
G&A expenses. First, we aggregated the expenses reported in the CV
dataset. Then, we calculated the ratio of variable COM to total COM
based on data contained in the CV dataset. We applied this ratio to the
variable COM reported in the home market sales dataset. Thus, we
created a reasonable proxy for home market total COM. Likewise, we
calculated a ratio of G&A and interest expenses to the total COM
reported in the CV dataset. We multiplied each of these ratios by the
home market total COM. Finally, we summed these amounts to arrive at
total home market COP.
This methodology results in a reasonable estimation of COP, since
the major element in COP, the variable COM, is an actual amount and the
proxy is limited to fixed costs, G&A, and interest expenses. Thus, this
is a reasonable methodology allowed under section 773(e)(2)(B)(iii).
We agree with Torrington that SNR-France's financial statements
would contain data for non-scope merchandise. Thus, SNR's suggested
methodology would be a proxy as well. The record does not support the
conclusion that SNR-France's financial statements would form a more
appropriate proxy nor has SNR-France established that the Department's
current methodology is distortive. Therefore, we have not changed the
methodology we used in our preliminary results.
Comment 5: NPBS contends that the Department calculated a level-of-
trade-specific profit mistakenly for purposes of calculating CV. NPBS
asserts that profit for CV should not be calculated by level of trade,
particularly when there is no match between HM and U.S. levels of
trade. NPBS argues further that calculating CV profit by level of trade
is contrary to law. Citing section 733(e) of the Tariff Act, NPBS
asserts that the statute says nothing about level of trade in
describing how to calculate CV. NPBS also asserts that the SAA says
nothing about calculating profit for CV on a level-of-trade basis. To
the contrary, citing the SAA at 839-841, NPBS asserts that Congress
intended the Department to calculate profit for CV on a company-wide
basis. NPBS concludes that it would be bad policy to calculate CV
profit by level of trade because it would make dumping calculations
unpredictable.
Torrington requests that the Department reject NPBS's arguments.
Torrington asserts that the lack of explicit instructions in the law
does not prevent the Department from calculating profit for CV on a
level-of-trade basis. In support of this argument, Torrington cites
Mobile Communications Corp. of America v. F.C.C., 77 F.3d 1399, 1404-05
(D.C. Cir. 1996). Torrington concludes that the methodology represents
a reasonable interpretation of the statute's requirements.
Department's Position: We agree with petitioner. Profit for CV
should be calculated on a level-of-trade basis because the level-of-
trade-specific profit calculation recognizes that profit levels may
differ depending on the level of trade. Thus, in the final results we
calculated NPBS's profit for CV on a level-of-trade-specific basis for
each class or kind of merchandise. See our response to Comment 1 of
section 6.C of
[[Page 54064]]
AFBs VI, 62 FR 2081 at 2112, for more information on our methodology
for the calculation of profit for CV.
5.D. Affiliated-Party Inputs.
Comment 1: NSK contends that the Department has no reasonable basis
for requiring the submission of cost information on inputs from
affiliated suppliers and should therefore accept the transfer prices of
such products as NSK reported.
Torrington argues that the Department should reject NSK's argument
for the reasons the Department set forth in detail in AFBs VI.
Department's Position: We disagree with NSK. NSK made an identical
argument in the prior review with respect to this issue, which we
rejected, and NSK offers no new arguments for altering our position.
Pursuant to section 773(f)(2) of the Tariff Act, we generally use the
transfer price of inputs purchased from an affiliated supplier in
determining COP and CV, provided that the transaction occurred at an
arm's-length price. In determining whether a transaction occurred at an
arm's-length price, we generally compare the transfer price between the
affiliated parties to the price of similar merchandise between two
unaffiliated parties. If transactions of similar merchandise between
two unaffiliated parties are not available, we may use the affiliated
supplier's COP for that input as the information available as to what
the amount would have been if the transaction had occurred between
unaffiliated parties. In the case of a transaction between affiliated
persons involving a major input, we use the highest of the transfer
price between the affiliated parties, the market price between
unaffiliated parties, and the affiliated supplier's cost of producing
the major input. See AFBs VI at 2115. Therefore, we have not altered
our methodology for these final results.
Comment 2: NSK argues that the Department should recognize the
unique situation pertaining to a certain affiliated supplier of inputs
and determine that purchases from this supplier were made at arm's-
length prices.
Torrington argues that the situation pertaining to this supplier
does not demonstrate that purchases from the supplier were necessarily
made at arm's-length prices.
Department's Position: We disagree with NSK. NSK made an identical
argument in the prior review with respect to an affiliated supplier,
which we rejected, and offers no new arguments to convince us to alter
our position. See AFBs VI at 2115. There is no evidence on the record
that indicates that purchases from this supplier were necessarily made
at arm's-length prices. Therefore, we have made no change in our
treatment of this supplier for the final results.
Comment 3: NSK argues that the Department should not regard a
certain type of input as a major input because this type of input does
not meet the statutory definition of major inputs.
Torrington argues that NSK does not dispute that this type of input
is an essential component of many types of bearings and that NSK's
reported data demonstrates that this type of input can account for a
significant percentage of the cost of manufacture.
Department's Position: We disagree with NSK. NSK made an identical
argument in the prior review with respect to this type of input, which
we rejected, and offers no new arguments for altering our position. See
AFBs VI at 2116. Therefore, we have made no change in our treatment of
this type of input for the final results.
Comment 4: Nachi contends that the Department should not reject its
reported cost of affiliated-party inputs. Nachi asserts that the
Department misunderstood its characterization of its methodology for
reporting such costs and the underlying reasons for using this
methodology. Nachi explains that its affiliated suppliers were small,
captive producers that lacked the capability to provide product-
specific cost information. Nachi contends that, if the affiliate is
profitable during the POR, the transfer price must necessarily be above
the affiliate's cost of producing the input. By contrast, if an
affiliate had operated at a loss during the POR, Nachi asserts that it
would have reported the COP for the input. Nachi notes that it reported
the transfer price for purchases from all affiliates because all of its
affiliates were profitable during the POR. Nachi also asserts that the
Department accepted this methodology in every prior review in which
Nachi participated.
Torrington argues that the overall profitability of an affiliated
supplier is not determinative as to whether the transfer prices of
particular inputs are above cost or reflect arm's-length prices.
Torrington notes that Nachi did not provide prices of similar inputs it
obtained from unaffiliated suppliers. Torrington further contends that
the Department's preliminary determination to reject Nachi's reported
cost of affiliated-party inputs is in accordance with the precedent the
Department set in AFBs VI at 2115.
Department's Position: We disagree with Nachi. We require costs to
be reported on a product-specific basis. Though Nachi's affiliated
suppliers may have been captive to Nachi during the POR and though
these suppliers may have all been profitable, the fact remains that
some inputs may have been sold at transfer prices which were below the
affiliate's cost of producing the input during the POR. Finally, we
note that each review stands alone and the fact that we accepted
Nachi's methodology in prior reviews is not determinative of which
methodology we use in this review. Because Nachi did not report its
data in such a way that we could determine whether all affiliated-party
inputs were sold at a transfer price which was below the affiliate's
cost of producing the input on a product-specific basis, for these
final results we have used the facts available as described in our
preliminary analysis memorandum for Nachi dated March 28, 1997.
Comment 5: Torrington contends that NMB/Pelmec reported COP and CV
for all models using transfer prices for inputs purchased from
affiliated parties. Torrington asserts that the transfer price of the
input material did not exceed the COP of that material in all cases.
Torrington argues that, in conformance with the policy the Department
enunciated in AFBs VI, the Department should use the higher of the
transfer price, cost, or market value for major inputs NMB/Pelmec
obtained from its affiliated companies.
NMB/Pelmec rebuts that the Department is not strictly required to
use COP in every instance, especially in the case where transfer price
exceeds COP for the vast majority of inputs. Citing the preamble of
Antidumping Duties; Countervailing Duties Final Rule, 62 FR 27296,
27362 (May 19, 1997), NMB/Pelmec contends that the Department has the
discretion to use transfer prices after considering the specific facts
of each case. NMB/Pelmec also notes that, in other comparable aspects
of the antidumping margin calculation, such as the below-cost test for
HM sales, the Department does not automatically exclude all below-cost
prices as long as the vast majority are above cost.
Department's Position: We agree with Torrington that we should have
used COP in cases where COP exceeded transfer price for the value of
affiliated-party major inputs for NMB/Pelmec. We have made this change
for the final results. See our response to comment 1 of section 6.D of
AFBs VI at 2115 for a comprehensive discussion of our practice with
regard to affiliated-party inputs.
[[Page 54065]]
Comment 6: Torrington argues that NTN Japan purchased components
from an affiliated supplier at prices below the cost of producing such
items. Torrington states that it based its examination on a submission
made by NTN Japan's affiliated party for the record of these reviews.
Torrington argues that the Department should restate NTN Japan's
reported COP to reflect arm's-length values for those models in which
NTN Japan purchased components from this affiliated party. Torrington
also maintains that the Department should request all necessary
information from NTN Japan to restate such values or apply facts
available if NTN Japan is unable to provide such information.
NTN Japan argues that, while it received a public version of the
argument regarding transfer prices from NTN Japan's affiliated
supplier, it did not receive the full argument because Torrington had
deleted the proprietary information. NTN Japan objects to its denial of
access through its counsel to this information and notes that NTN
Japan's affiliated party permitted such access to the original
submission from which Torrington conducted its analysis.
Department Position: We agree with Torrington in part. After re-
examining the record, we determine that NTN Japan's costs should be
restated because the transfer prices from some affiliated parties were
below the affiliate's COP. However, since it is unclear from the record
for which models NTN Japan uses the purchased components, we are unable
to restate NTN's costs on a model-specific basis. Therefore, we are
applying facts available to NTN Japan's costs. Because of the
proprietary nature of the information we are using, we cannot discuss
the facts available we are applying in this public notice. See NTN
Japan's final results analysis memorandum dated September 22, 1997 for
a complete discussion of the facts available we are using to restate
NTN Japan's costs. Finally, while we note NTN Japan's objection to
being denied access to the proprietary version of Torrington's
arguments, we could not redress the situation due to the circumstances
surrounding the treatment of proprietary information in this case. For
a complete discussion of these circumstances, see Memorandum from Greg
Thompson to the File dated September 22, 1997.
5.E Abnormally High Profits
Comment 1: Torrington argues that no respondent has shown
adequately that profits it earned on certain sales were aberrational or
abnormal or otherwise should be disregarded for purposes of calculating
CV profit. Torrington notes that the statute does not address abnormal
profits but provides that sales which are outside the ordinary course
of trade should be excluded from the calculation of NV and likewise the
calculation of CV profit. Torrington states that, once the Department
has excluded sales outside the ordinary course of trade from the
calculation of NV, the Department has already ensured that it will use
no sales with abnormally high profits in its CV-profit calculation.
Torrington therefore concludes that it is illogical for the Department
to re-examine the remaining sales for abnormally high profits before
calculating a CV-profit rate.
Similarly, Torrington contends that, if a respondent fails to
submit adequate information to establish that particular sales were
outside the ordinary course of trade, the Department need not re-
examine the same sales to determine whether some sales involved
abnormally high profits. Torrington concludes that, because it is
rational to maximize profits, evidence that maximum profits were
extracted on some subset of total sales is not alone sufficient to
indicate that profits were abnormal and that there is no profit margin
that is abnormally high simply by reference to the costs or prices in
the abstract.
Citing section 773(a)(1)(B) of the Tariff Act, INA, NSK, NSK/RHP,
NTN, and SKF argue that the Department, in determining NV, must
disregard sales which have ``abnormally high'' profits outside the
ordinary course of trade. NTN, NSK, and NSK/RHP claim that the
Department's new regulations at 351.102(b) and the SAA at 164 give the
Department clear instruction to exclude sales made with abnormally high
profits and sales made at aberrational prices as outside the ordinary
course of trade. INA and NTN argue that sales with abnormally high
profits are a category of transactions whose inclusion in the profit
calculations would result in unrepresentative price comparisons and
distortive results, citing the SAA and IPSCO v. United States, 714 F.
Supp. 1211, 1217 (1989). INA, NTN, and SKF assert that Torrington is
incorrect in arguing that, once the Department has eliminated some
sales which are outside the ordinary course of trade, it does not need
to reexamine the remaining sales to determine if they may have
abnormally high profits and are therefore also outside the ordinary
course of trade. Rather, respondents contend, the presence of
abnormally high profits supports the conclusion that such sales are
outside the ordinary course of trade and, therefore, must be excluded
from the calculation of NV. NSK and NSK/RHP assert that the benchmark
for concluding that sales are outside the ordinary course of trade due
to the presence of abnormally high profits is not abnormally high
profits per se but rather an analysis of the characteristics of the
transaction in the context of the specific market.
FAG responds that abnormal profit ratios and inflated CVs resulted
from the Department's unlawful calculation of CV profit on a class-or-
kind basis rather than on a foreign-like-product basis (discussed at
Comment 1 of section 5.C. (Profit for CV), above). Therefore, FAG
argues, the Department has calculated abnormally high profit rates
unlawfully beyond a reasonable degree of normality. FAG maintains that
the URAA requires the Department to first calculate profit earned in
connection with the production and sale of a foreign like product,
citing section 773(e)(2)(A) of the Tariff Act. FAG argues that, despite
the Department's purported use of this ``foreign like product''
methodology, the Department actually determines profit by reference to
total revenue and total cost of all class-or-kind sales which pass the
cost test. FAG argues that, because the Department determined profit
rates on a class-or-kind basis according to section 773(e)(2)(B)(i), it
should not exclude from the calculation of profit those sales made
below cost while including sales with abnormally high profits. By
eliminating sales in this manner, FAG contends, the Department has
created profit rates which do not reflect ordinary experience. FAG
argues that determination of profit rates on a category of sales more
general than the foreign like product requires inclusion of all sales
regardless of whether they were made in the ordinary course of trade.
FAG requests that the Department recalculate profit rates based on all
sales of the product group without regard to whether those sales were
made in the ordinary course of trade.
Department's Position: We agree with Torrington that no respondent
has adequately shown that profits earned were aberrational or abnormal
or otherwise outside the ordinary course of trade. As in past reviews,
the fact that a respondent identifies sales as having abnormally high
profits does not necessarily render such sales outside the ordinary
course of trade. Profits are not automatically abnormally high and such
sales are not automatically outside the ordinary course of trade for
purposes of computing CV profit simply because certain HM sales had
profits higher than those of other sales. In Large
[[Page 54066]]
Newspaper Printing Presses and Components Thereof, Whether Assembled or
Unassembled, From Germany (61 FR 38166, July 23, 1996), we stated that,
in order to determine that profits are abnormally high, there must be
certain unique or unusual characteristics related to the sales in
question. Verification of the designation of certain sales as having
abnormally high profits merely proves that the respondent identified
sales as having abnormally high profits in its own records. This
evidence does not indicate that such sales were made outside the
ordinary course of trade for purposes of calculating NV in these
reviews. Accordingly, we excluded no HM sales from the CV-profit
calculation on the basis of finding abnormally high profits.
We disagree with FAG's contention that abnormal profit ratios and
inflated CVs resulted from our unlawful calculation of CV profit on a
class-or-kind basis rather than on a foreign-like-product basis. See
our position with respect to ``Profit for Constructed Value'' above.
With respect to FAG's argument that we should not have eliminated sales
below cost from our analysis while including those sales it believes to
have been made with abnormally high profits, we note that we have
followed the requirements set forth in section 773(e)(2)(A) of the
Tariff Act. By calculating the profit earned in connection with the
sale of the foreign like product, we have examined HM sales properly to
determine if they were made within the ordinary course of trade. Upon
examining these sales, we have eliminated from our consideration all
below-cost sales disregarded under section 773(b) of the Act, as these
fall outside the ordinary course of trade. As stated above, respondents
have not provided adequate evidence to support the conclusion that any
sales which resulted in abnormally high profits were outside the
ordinary course of trade. No unique or unusual characteristics related
to these sales were demonstrated by any respondent. For these reasons,
we have not excluded HM sales on the basis of abnormally high profits.
Once we have eliminated sales outside the ordinary course of trade from
the HM database, our profit methodology reflects the profit experience
fully of the companies for those sales made within the ordinary course
of trade and is, therefore, reasonable.
Comment 2: INA claims that there was one specific sale in the HM in
the INA-FRG HM sales list that by any measure was made at an
aberrational price with an abnormally high profit. INA argues that this
is a sufficient basis for concluding that the sale was outside the
ordinary course of trade and should be excluded from the Department's
final margin calculations. INA cites section 773(a)(1)(B) of the Tariff
Act, believing that it provides examples of this type of transaction
that may be considered to be outside the ordinary course of trade. INA
also points to Large Newspaper Printing Presses and Components Thereof,
Whether Assembled or Unassembled, From Germany (61 FR 38166, July 23,
1996), where the Department rejected arguments that sales with
abnormally high profit margins should be excluded from NV, saying that
``numerical profit amounts'' alone were not enough to show that the
profits were abnormally high and that ``there must be certain unique or
unusual characteristics related to the sales in question'' (at 38178).
However, INA asserts that that case should not be read to exclude the
possibility that in a particular case ``numerical profit amounts''
alone would be sufficient, since the SAA at 164 specifically identifies
abnormally high profit, without more, as a circumstance which would
qualify as making a sale outside the ordinary course of trade. In sum,
INA asserts that the use of this sale in the calculation of NV would
result in irrational and unrepresentative results which is what the
``ordinary course of trade'' requirement of the statute is intended to
prevent. Accordingly, INA contends, the Department should exclude the
transaction from its final calculations.
In rebuttal, Torrington argues that the Department should not
exclude any HM sales allegedly made at aberrational prices or with
abnormal profits. Torrington also refers back to its argument that no
respondent has shown adequately that profits each earned on certain
sales were ``aberrational'' or ``abnormal'' or otherwise should be
disregarded for purposes of calculating CV-profit rates for these
reviews.
Department's Position: We disagree with INA. The presence of
profits higher than those of numerous other sales does not necessarily
place the sale outside the ordinary course of trade for purposes of
computing CV profit. In order to determine that a sale is outside the
ordinary course of trade due to abnormally high profits, there must be
certain unique and unusual characteristics related to the sale in
question. However, the respondents have provided no information other
than the numerical profit amounts to support their contention that
certain HM sales had abnormally high profits. Accordingly, we have not
excluded INA's specific sale from the CV-profit calculation.
5.F. Credit and Inventory Costs
Comment 1:
NSK and NSK-RHP claim that the Department made a clerical error in
its calculation of imputed credit and inventory carrying costs for CV.
Respondents contend that this clerical error understates imputed credit
and inventory carrying costs since the ratios the Department used to
calculate these adjustments are based on a price denominator that
includes movement charges while the values to which the Department
applied the ratios are net of movement charges. They request that the
Department correct this error by either removing movement charges from
the price denominator used in the ratio calculation or adding movement
charges to the values to which the Department applies these ratios.
SKF France, SKF Germany, SKF Italy, SKF Sweden, and Torrington
agree that the Department committed a clerical error in its calculation
of imputed credit and inventory carrying costs for CV. These parties
also agree with NSK's and NSK-RHP's suggested methodology for
correcting the error.
Department's Position: We disagree with the interested parties'
assertion that the methodology we applied for the preliminary results
was a clerical error since it was intentional. However, upon
considering all comments on our methodology, we have decided to make a
change to our methodology since it understates the imputed credit and
inventory carrying costs we calculated for CV. To correct the problem,
we deducted movement charges from the denominator of the ratio
calculations we used to derive imputed credit and inventory carrying
costs for CV. This ensures that the ratios, and values to which we
apply them, are comparable.
Comment 2: SNR France asserts that the Department used a price-
based denominator, i.e., total HM price, erroneously in the calculation
of ratios used to derive imputed credit and inventory carrying costs
for CV. SNR France contends that since the Department applies these
ratios on a cost basis it must also calculate the ratios on a cost
basis by using HM total COP in the denominator. SNR France notes that
the Department made this change for the Amended Final Results of
Antidumping Duty Administrative Reviews, 62 FR 34201 (June 25, 1997) in
AFBs VI.
Department's Position: As we explained in response to Comment 1 of
this section, a change in the denominator of the ratio calculation is
necessary for the sake of comparability. However, we do not agree with
the
[[Page 54067]]
change SNR France requested. To derive imputed credit and inventory
carrying costs for CV, which is a surrogate for HM price, we apply the
ratios to a CV that includes the COP, direct selling expenses, indirect
selling expenses, commissions, profit, and packing. Thus, the CV we use
is essentially on the same basis as the price in the denominator of the
ratio calculation because both include and exclude the same expenses
(except movement expenses, an error we corrected for these final
results pursuant to Comment 1 of this section). Furthermore, we believe
that an allocation based on price is more appropriate than one based on
cost because we calculate imputed expenses by applying an expense
factor to the price, not the cost, of transactions.
5.G. Other Issues
Comment 1: Torrington argues that, in the instant review, NTN
allocated its reported COP and CV selling expenses on the basis of
levels of trade. Torrington contends that, in the 1994/95 review, with
respect to U.S. indirect selling expenses, the Department did not
accept this allocation method because NTN could not demonstrate how
these expenses were attributable to different levels of trade.
Torrington asserts that, for these final results, the Department should
reach the same conclusion as it did in the AFBs VI review and
recalculate NTN's COP and CV selling expenses.
NTN argues that, although the Department did not accept NTN's
selling expenses based on level of trade in AFBs VI, the Department did
permit such level-of-trade-based selling expenses in previous reviews.
NTN also argues that, in the most recently completed TRB review in
which it was involved, the Department accepted its level-of-trade-based
selling expenses and even stated that they ``prevent distortion''
(citing Tapered Roller Bearings, Finished and Unfinished from Japan;
Final Results of Administrative Review, 61 FR 57629, 57636 (November 7,
1996)). NTN points out that the Department did not make any changes in
the preliminary results of review to NTN's reported level-of-trade-
based HM selling expenses and states that the Department normally uses
such selling expenses in its CV calculations. Further, NTN argues that,
absent Torrington raising the argument that NTN's HM selling expenses
be denied, the Department should accept NTN's reported level-of-trade-
based selling expenses.
Department Position: We agree with Torrington that these expenses
should not be allocated based on level of trade. The CIT remanded this
issue to the Department in The Timken Company v. United States on May
31, 1996 (see Slip Op. 96-86 for the 1990/92 reviews of the order on
TRBs over four inches from Japan). The remand directed us to
recalculate NTN's indirect selling expenses without regard to level of
trade or explain our reasons why we thought the expenses were allocated
correctly. In our remand, we explained that, because we could not
determine on the basis of the information provided by NTN whether
expenses varied according to level of trade, we recalculated the
expense information without regard to level of trade. On July 3, 1997,
the CIT affirmed our remand (see Slip Op. 97-87). Consistent with our
remand determination in the TRB case, because NTN has not provided us
with the necessary information for this review period to determine
whether the expenses varied according to level of trade, we have
recalculated its expenses so that they do not reflect levels of trade
(see Analysis Memo dated September 22, 1997).
6. Further Manufacturing
Comment: Although SKF does not challenge the Department's
methodology in applying the special rule of section 772(e) in these
reviews, it suggests that the methodology for determining whether there
are sufficient quantities of sales of non-further-processed subject
merchandise for calculating a margin may not be an appropriate test
under all circumstances.
Torrington rebuts that, since SKF does not contest the Department's
preliminary results and SKF's comment is not based on the current
record, the Department need not address the issue.
Department's Position: Since there is no information or argument on
the record demonstrating that our methodology in this case is
unreasonable, we have not changed our methodology for these final
results. However, as a general matter, we note that the statute has
left to our discretion how to determine whether a sufficient quantity
of sales exists. We intend to develop our practice in this area on a
case-by-case basis.
7. Packing and Movement Expenses
Comment 1: NSK argues that expenses associated with repacking in
the United States are not selling expenses and thus should not be
included in the selling expenses the Department uses to calculate CEP
profit. Citing the statute at sections 772(c) and (d), NSK contends
that repacking expenses are deducted pursuant to section 772(c)(2)(A)
of the statute and thus should not be included in the CEP-profit
calculation. In addition, NSK alleges that the Department has stated
this implicitly by asking for packing and repacking expenses in a part
of its questionnaire which is separate from selling expense.
Torrington argues that the Department treated repacking expenses as
selling expenses correctly for the purposes of calculating CEP profit.
Torrington notes that NSK reported that it normally does not perform
repacking for U.S. sales but that it does some repacking to accommodate
orders for smaller distributors. Torrington contends that this
characterization is consistent with the Department's treatment of
repacking as a selling expense.
Department's Position: We disagree with NSK. As NSK notes, section
772(c)(2)(A) of the Tariff Act covers ``transportation and other
expenses, including warehousing expenses, incurred in bringing the
subject merchandise from the original place of shipment in the
exporting country to the place of delivery in the United States.'' See
SAA at 153. We do not view repacking expenses as movement expenses. The
repacking of subject merchandise in the United States bears no
relationship to moving the merchandise from one point to another. The
fact that repacking is not necessary to move merchandise is borne out
by the fact that the merchandise was moved from the exporting country
to the United States prior to repacking. Rather, we view repacking
expenses as direct selling expenses respondents incur on behalf of
certain sales which we deduct pursuant to section 772(d)(1)(B) of the
statute. Section 772(d)(1)(B) of the statute directs that CEP shall be
reduced by ``expenses that result from, and bear a direct relationship
to, the sale, such as credit expenses, guarantees, and warranties.'' We
regard repacking expense as a direct selling expense because it was
performed on individual products in order to sell the merchandise to
the unaffiliated customer in the United States. Presumably, if a
respondent could have sold the merchandise without repacking it, the
respondent would have done so. Thus, it is an expense associated with
selling the merchandise.
Section 772(d)(1)(B) of the Tariff Act does not limit direct
selling expenses deducted from CEP to credit expenses, guarantees or
warranties. Furthermore, as noted in the SAA, under section 772(d), CEP
will be calculated by reducing the price of the first sale to an
unaffiliated customer in the United States by the amount of any selling
expenses which result from, and bear a
[[Page 54068]]
direct relationship to, selling activities in the United States.
Finally, the format of our questionnaire is not germane to our analysis
in determining how we treat reported expenses. Accordingly, we have
continued to include repacking in the pool of selling expenses we use
to calculate CEP profit.
Comment 2: Torrington asserts that NTN's reported HM packing
expense is overstated based on a comparison it made between the
information NTN and several other Japanese respondents provided.
Torrington determined these rates by dividing the reported packing
expenses by the reported gross unit prices. Torrington also asserts
that NTN included expenses other than packing in its reported packing
expense. In addition, Torrington alleges that NTN did not provide all
of the worksheets necessary to support the manner in which NTN
calculates its reported packing expense and states that, given this
information, it cannot determine whether exports were included in the
reported expense. Torrington maintains that, if exports were included
in the calculation of NTN's packing expense, this expense may be based,
in part, on transfer prices which could yield distortive figures.
Further, Torrington asserts that NTN did not allocate its packing
expense accurately. Torrington maintains that NTN did not adhere to the
Department's requirement, as specified in its questionnaire, to report
the expense based on identifiable costs. Torrington suggests that, for
the above-mentioned reasons, the Department should either recalculate
this expense or use the lowest packing rate from any other Japanese
respondent.
NTN contends that it reported its HM packing expense accurately.
NTN states that the experience of other Japanese companies has no
bearing on the actual packing expense NTN incurred. NTN also states
that, even if expenses other than packing were included in its reported
packing expense, such expenses are negligible and, therefore, would
have little impact on the reported packing expense. In addition, NTN
argues that Torrington's allegation that NTN's packing expense includes
export sales is incorrect. NTN maintains that the Department verified
this expense and found no discrepancies with regard to this expense.
NTN argues that it allocated its packing expense correctly and states
that Torrington's suggestion that the Department recalculate this
expense is baseless.
Department Position: Other respondents' packing costs are
irrelevant to determining the accuracy of NTN's claimed amounts. We
verified the calculation and allocation of NTN's packing expenses and
found them to be reasonably undistortive (see verification report dated
May 8, 1997, at 6). Therefore, we have accepted NTN's packing expenses
as they were submitted.
8. Affiliated Parties
Comment 1: NPBS states that the Department should not treat a
certain customer as affiliated. NPBS explains that the apparent basis
for such treatment is that the customer's stockholding in NPBS barely
meets the 5-percent threshold in 771(33)(E) of the statute when only
the stock outstanding as of the time of the review is taken into
account. NPBS claims that, in fact, the shares were previously held by
employees of the NPBS company in question that would have taken the
customer's shareholding below the 5-percent threshold. NPBS argues
that, when some employees retire, their shares temporarily are
converted into treasury stock but are then re-issued. NPBS claims that
the Department should have included these shares in the denominator for
the 5-percent test and, therefore, the Department would not have found
the customer to be affiliated. NPBS contends that the customer's
minimal shareholding does not place it in a position to satisfy the
``control'' criterion of 771(33)(G) of the Tariff Act and, accordingly,
the Department should not treat the customer as affiliated.
Torrington responds that NPBS's argument should be rejected.
Torrington explains that the Department applied its test correctly on
the basis of facts observable and verifiable, rather than on
speculation that the company expects to reissue certain stock,
effectively reducing the percentage share of the customer.
Department's Position: We agree with petitioner. For these final
results, we have continued to treat NPBS and the customer in question
as affiliated. In accordance with section 771(33)(E) of the Tariff Act,
the Department employs a 5-percent stock-ownership rule to determine
whether two parties are affiliated. The party in question stated, and
we verified, that during the POR it held 5 percent of the outstanding
stock of NPBS. Once a party attains 5-percent ownership, for whatever
reason, the Department determines that the parties are affiliated.
Therefore, we have continued to treat the two companies as affiliated.
Comment 2: Torrington contends that the Department should not
excuse NTN from obtaining sales information from its affiliated
resellers in the HM. Torrington argues that NTN's excuses regarding the
size of its resellers, its legal inability to obtain proprietary
information from companies in which it holds a minority interest, the
time involved to obtain such information, and the insignificant impact
this information would have on the calculated margin are insufficient.
Torrington also dismisses NTN's argument that the Department permitted
NTN's reporting of sales to resellers in prior reviews because,
Torrington states, each review is a separate proceeding. Torrington
maintains that NTN has failed to demonstrate the arm's-length nature of
such sales. Torrington argues further that, rather than disregard such
sales when they fail the arm's length test, the Department should apply
facts available to NTN's sales to affiliated resellers. Torrington also
argues that, if the Department does not apply facts available to such
sales, it should exclude such sales from the final margin calculations.
NTN contends that the application of facts available is not
warranted because it provided responses to the Department's
questionnaires and, as per the questionnaire, notified the Department
of the difficulty involved in obtaining sales information from its
affiliated resellers. NTN also argues that the Department did not
request that NTN provide the sales information but, rather, requested
an explanation concerning NTN's inability to obtain this information
which it provided subsequently.
Department's Position: We disagree with the petitioner. NTN
notified us of the sales to affiliated customers in the HM prior to
answering our questionnaire. Given that these sales constituted a small
percentage of NTN's HM sales and that collecting the data was not
possible, we determined that NTN should report the sales to its
affiliates. In the preliminary results, we conducted an arm's-length
test and, in accordance with section 773(f)(2), we disregarded those
sales which were not made at arm's-length prices. Based upon these
facts and our determination not to request data concerning sales to
unaffiliated customers, we have determined that the application of
facts available is not warranted in this case.
9. Sample Sales and Prototypes/Zero Price Transactions
On June 10, 1997, the Court of Appeals for the Federal Circuit
(CAFC) held that the term ``sold'' requires both a transfer of
ownership to an unrelated party and consideration. NSK Ltd. v. United
States, 115 F.3d 965, 975 (CAFC 1997) (NSK). The CAFC determined that
samples which NSK had given to
[[Page 54069]]
potential customers at no charge and with no other obligation lacked
consideration. Id. Moreover, the CAFC found that, since free samples
did not constitute ``sales,'' they should not have been included in
calculating U.S. price.
In light of the CAFC's opinion, we have reevaluated and revised our
policy with respect to sales of samples. Therefore, pursuant to the
CAFC's opinion, the Department will now exclude sample transactions,
transactions for which a respondent has established that there is
either no transfer of ownership or no consideration, from the dumping
calculations.
This new policy does not mean that the Department automatically
excludes from analysis any transaction to which a respondent applies
the label ``sample.'' In fact, for these reviews, we determined that
there were instances where it is appropriate not to exclude such
alleged samples from our dumping analysis. It is well-established that
the burden of producing support rests with the party in possession of
the needed information. See, e.g., NTN Bearing Corporation of America
v. United States, 997 F.2d 1453, 1458-59 (CAFC 1993), (citing Zenith
Elecs. Corp. v. United States, 988 F.2d 1573, 1583 (CAFC 1993), and
Tianjin Mach. Import & Export Corp. v. United States, 806 F. Supp.
1008, 1015 (CIT 1992)). In several cases, as discussed below,
respondents failed to demonstrate or to submit documentation to show
that their claimed sample sales lacked consideration. When respondents
failed to support their sample claim, we did not exclude the alleged
samples from our margin analysis.
With respect to HM sales, in addition to excluding sample
transactions which do not meet the definition of ``sales,'' we may
exclude sales designated as samples or prototypes from our analysis,
pursuant to section 773(a)(1) of the Tariff Act, when a respondent has
provided evidence demonstrating that the sales were not made in the
ordinary course of trade as defined in section 771(15). We have
addressed comments regarding ordinary course of trade separately in the
section titled ``Ordinary Course of Trade.''
With regard to assessment rates, in order to ensure that we collect
duties only on sales of subject merchandise, we included the entered
values and quantities of the sample transactions in our calculation of
the assessment rates and set the dumping duties due for such
transactions to zero. We have done this because U.S. Customs will
collect the ad valorem (or per-unit, where applicable) duty-assessment
rate on all entries of subject merchandise regardless of whether the
merchandise was a sample transaction. However, to ensure that sample
transactions do not dilute the cash deposit margin, we excluded both
the calculated U.S. prices and quantities for sample transactions from
our calculation of the cash deposit rates.
Comment 1: Torrington argues that the CAFC's recent determination
in NSK does not require a modification of the preliminary results and
that the Department should continue to include in the U.S. database
free samples which respondents gave to parties in the United States.
Torrington argues further that the Department rejected respondents'
claims properly that certain sales should be excluded based upon the
information contained in respondents' questionnaire responses.
Torrington maintains that negative inferences could be made in
respondents' questionnaire responses where respondents did not supply
the requested information. Torrington maintains further that the
Department should determine whether to exclude free samples from the
sales database by distinguishing between situations where sample
recipients undertake actual obligations or engage in parallel
transactions and where the recipients remain free to purchase a product
of their own accord.
NSK, NSK/RHP, SKF, FAG, and NTN respond that the NSK decision
requires the Department to re-evaluate U.S. samples and exclude all
sample sales from the U.S. database. Respondents argue that the NSK
decision held that a transfer of a zero-priced sample lacks
consideration and does not constitute a sale; therefore, they argue,
the Department cannot use such transfers in the dumping analysis. NSK
and NSK/RHP contend further that the Department must apply the ordinary
meaning of ``sale'' to the antidumping law, which involves not only the
transfer of ownership but also the payment, or promise, of
consideration.
NSK, NSK/RHP, SKF, FAG, and INA argue that the Department's
requirement that respondents report free samples is not based on the
information presented in their questionnaire responses. Respondents
maintain that the Department's position regarding samples sales is
based on the assertion that giving away a sample constitutes a sale for
purposes of the antidumping duty statute unless proven otherwise.
Respondents argue that, since the NSK decision overturned the
Department's past practice, the Department should now exclude free
samples from the U.S. database.
Department's Position: We agree with both parties in part. We agree
with respondents that the NSK decision requires us to examine, in our
determination of whether samples offered to customers at no charge
constitute sales, whether the transactions involved both a transfer of
ownership and consideration.
We also agree with Torrington that, in our determination of whether
to exclude transactions identified as samples from the sales database,
we should examine the information on the record to determine whether
the recipients of the samples have undertaken actual obligations to
purchase AFBs from the provider of the free bearings or whether the
recipients remained free to purchase bearings of their own accord. This
approach is consistent with the CAFC's decision which, in finding that
NSK's samples given to potential customers at no charge lacked
consideration, noted ``[t]hese customers were free to transact with NSK
based solely on their whim.'' See NSK, at 975. As the CAFC noted,
``[c]onsideration generally requires a bargained for exchange'' (Id.)
and we did not limit our review of consideration to the payment of a
monetary price for the sample products.
With regard to NSK's reported U.S. sample and prototype
transactions, it appears from the record that NSK did not receive
consideration for sample transactions, but that NSK did receive
consideration for its reported prototype transactions. See Proprietary
Exhibit C-24 of NSK's September 9, 1996 response. Therefore, in
accordance with the CAFC's decision in NSK, we have excluded NSK's
reported sample transactions but not its claimed prototype transactions
from its U.S. sales database. We note that we had removed NSK's
reported HM sample transactions from its HM sales database for the
preliminary results because NSK demonstrated that such transactions
were outside the ordinary course of trade. We have not altered this
treatment for the final results.
With regard to NSK/RHP's and Nachi's reported sample transactions,
we examined the record and found no evidence that NSK/RHP and Nachi
received consideration for such transactions. Therefore, we have
excluded NSK/RHP's and Nachi's reported sample sales from their U.S.
sales databases. NSK/RHP and Nachi did not report sample sales in the
HM. With respect to FAG, INA, NTN, and SKF, we have addressed each
company's specific arguments below.
Comment 2: Torrington contends that, if the Department determines,
based upon the NSK decision, to exclude
[[Page 54070]]
certain sales claimed to be samples from the U.S. database, then the
Department should require that the expenses incurred in connection with
providing the free samples be accounted for as a direct selling expense
to be attributed to the first sales transaction following the sample
transaction. Torrington contends that, where this approach is not
appropriate, the Department should attribute the expense (based on the
COP of the sample) to all sales to the customer who received the sample
and should cover the full COP of the sample.
NSK, NSK/RHP, SKF, INA, and FAG contest Torrington's proposal to
treat the cost of samples as a direct selling expense. NSK and NSK/RHP
respond that the Department should treat the cost of samples as an
indirect advertising expense incurred in the general promotion of
sales. They argue that the cost of a sample bearing is not properly
charged to the recipient and that Torrington's approach is commercially
unrealistic as it places more weight on the sample than it can
reasonably bear. NSK, NSK/RHP, and SKF argue that the provision of free
samples is not linked to specific sales; many factors drive the
decision to purchase bearings. NSK and NSK/RHP contend further that,
under Torrington's approach, if samples are provided and no sales
occur, the expense would not be allocated to any U.S. sales.
SKF argues that, given the NSK decision, the Department need not
inquire whether expenses associated with free samples were reported as
indirect selling expenses. SKF maintains that, because the CAFC's
holding in NSK did not rest upon the reporting of expenses, the
Department should not base its decision to exclude sample sales upon
whether the respondents had accounted for the related expenses. SKF
contends that, if the Department disagrees with its argument, the
Department should inquire about expense information only in future
reviews. Finally, SKF argues that it reported its expenses related to
sample sales as indirect selling expenses.
NTN argues that sample-related expenses cannot, as Torrington
suggests, be attributed to the first sale following the sample
transaction because there can be no selling expenses associated with
the transaction since there has been no sale.
FAG and INA respond that Torrington failed to explain why the cost
of samples should be treated as a direct selling expense. FAG argues
further that there is no need to report the cost of manufacturing the
samples since the samples were not sold. In addition, FAG maintains
that respondents have accounted for all U.S. and HM selling expenses,
as required by the questionnaire.
Department's Position: We have determined that we should treat the
cost of zero-priced samples as an indirect selling expense respondents
incurred in the general promotion of sales. However, we examined the
record for these reviews and compared the total entered value of sample
transactions with the total pool of expenses respondents used to
calculate indirect selling expenses and found the total entered value
of the sample transactions for all respondents for which we eliminated
zero-price samples for these final results to be de minimis. Due to the
burden of factoring these de minimis amounts into respondents' complex
calculations of their indirect selling expenses, we did not recalculate
indirect selling expenses to reflect the cost of zero-priced samples.
Although we did not make this adjustment for these final results, in
future reviews we will require respondents to include the costs
associated with free samples as an indirect selling expense.
Comment 3: FAG Germany and FAG Italy request that the Department
exclude all zero-priced U.S. sample transactions from the dumping
margin calculation. Citing NSK, FAG Germany and FAG Italy contend that
the sample transactions in their U.S. sales databases do not constitute
``sales'' since they provided them to potential customers at no charge.
Torrington contends that, since respondents repeatedly refer to
zero-priced U.S. sample transactions as ``sales'' in their responses,
the Department should draw an adverse inference and not exclude them
from the margin calculation. Torrington also claims that respondents
did not provide sufficient data regarding the individual sales they
claimed for exclusion. Regarding FAG Italy, Torrington also contends
that the Department should not exclude transactions from the margin
calculation since the record is contradictory about whether this
company had any such sample transactions. In support of this argument,
Torrington cites to a statement in FAG Italy's supplemental
questionnaire response that suggests that there are no samples in the
U.S. sales database.
Department's Position: We have examined the record with regard to
FAG Germany's reported sample transactions and found no evidence that
FAG Germany received consideration for reported U.S. sample
transactions. We did find evidence that indicated that FAG Germany
received consideration for claimed HM sample transactions. Furthermore,
FAG Germany did not demonstrate or submit documentation to show that
its claimed HM sample sales were outside the ordinary course of trade.
Therefore, in accordance with the CAFC's decision in NSK, we have
excluded FAG Germany's reported sample sales from its U.S. sales
database; however, we did not exclude FAG Germany's claimed HM
``samples'' from the calculation of NV.
With regard to FAG Italy, we have examined its HM and U.S. sales
databases and found that FAG Italy did not identify any transactions as
samples. Moreover, we also looked for zero-priced sales and found that
FAG Italy did not report any zero-priced sales in either database.
Therefore, we determined that FAG Italy's argument regarding sample
sales is irrelevant with respect to these reviews.
Comment 4: The NTN companies (NTN Japan and NTN Germany) request
that the Department exclude their sample sales from their U.S. sales
databases in accordance with the CAFC's ruling in NSK.
Torrington argues that the Department must first determine whether
a respondent has answered the Department's questions adequately
regarding sample sales before making any exclusions. When all the
information is not presented, Torrington asserts that the Department
should assume that withheld information would have established that
consideration (to which the court referred in NSK) was provided.
Torrington maintains that such a fact pattern exists for the NTN
companies and the Department should make adverse inferences. Torrington
points to the NTN companies' questionnaire responses wherein they
declined to answer questions regarding sample sales.
Department's Position: We agree with Torrington. As we noted in the
introduction to this issue, the party in possession of the information
has the burden of producing that information, particularly when seeking
a favorable adjustment or exclusion. The NTN companies did not answer
our questions regarding the purchase history of parties receiving
samples. The NTN companies also did not answer our questions regarding
the prices and quantities involved in sample sales. Rather, the NTN
companies stated that the information is irrelevant. The answers to
these questions would have aided us in determining whether the NTN
companies received a bargained-for exchange from their U.S. customers.
[[Page 54071]]
Lacking knowledge of the details of these transactions, we cannot
conclude that the NTN companies received no consideration for these
alleged samples. In other words, because the NTN companies impeded our
investigation of these transactions, we determined that an adverse
inference is appropriate. Therefore, for these final results, we have
included the NTN companies' sample sales in their respective U.S. sales
database.
Comment 5: SNR France requests that the Department exclude its
sample sales from its U.S. sales database in accordance with the CAFC's
ruling in NSK. SNR France states that it responded to the Department's
questionnaire regarding sample sales fully and the Department did not
ask additional questions in its supplemental questionnaire.
Torrington responds that the Department must first determine
whether a respondent has answered the Department's questions regarding
sample sales at a sufficient level and a deficiency in this regard
should draw an appropriate adverse inference. Torrington contends that
the Department should assume that withheld information would have
established that consideration (to which the court referred in NSK) was
provided. Torrington maintains that such a fact pattern exists for SNR
France and the Department should make an adverse inference. Torrington
points to SNR France's questionnaire response wherein it declined to
answer questions regarding sample sales.
Department's Position: We agree with SNR France. The firm provided
a basic description of the sample sales it reported for the review
period. Moreover, we found no evidence on the record that SNR France
received consideration for reported U.S. sample transactions.
Therefore, for these final results, we have excluded these sales from
the U.S. sales database.
Comment 6: Torrington argues that the Department should reject SKF
Germany's claims that sales identified as samples or prototypes should
be excluded from the HM sales database because SKF Germany did not
supply much of the information the Department required to support
exclusion. In arguing that the respondent has the burden of proof when
claiming favorable adjustments, Torrington cites Fujitsu General
Limited v. United States, 88 F.3d 1034, 1040 (CAFC 1996). Torrington
adds that the Department denied such claims with regard to SKF and NTN
in the 1994/95 reviews.
SKF Germany argues that its response regarding samples and
prototypes should be sufficient to justify SKF Germany's claim for
exclusion of these transactions from its HM database. SKF Germany
explains that there were few transactions involving samples and
prototypes in the HM, thereby not warranting the expenditure of the
substantial resources needed to provide the detailed data responsive to
the Department's request.
Department's Position: We agree with SKF Germany. SKF Germany
provided a basic description of the sample and prototype sales it
reported for the review period. Moreover, we found no evidence on the
record that SKF Germany received consideration for reported HM sample
and prototype transactions. Therefore, for these final results, we have
excluded these sales from the HM sales database.
Comment 7: INA asserts that the Department must exclude zero-priced
samples given to customers at no charge from the U.S. sales database as
these are not ``sales'' within the meaning of the antidumping law,
citing NSK.
With regard to INA's zero-priced sample transactions, Torrington
asks that the Department draw an adverse inference and not exclude any
such transactions from the U.S. sales database. Torrington asserts that
INA elected not to provide the information the Department requested and
stated that it could not systematically identify sample transactions
from its sales records.
Department's Position: We agree with Torrington. As we noted in the
introduction to this issue, the party in possession of the information
has the burden of producing that information, particularly when seeking
a favorable adjustment or exclusion. INA did not answer our questions
regarding the purchase history of parties receiving samples. INA also
did not answer our questions regarding the prices and quantities
involved in sample transactions. The answers to these questions would
have aided us in determining whether INA received a bargained-for
exchange from its U.S. customers. Lacking knowledge of the details of
these transactions, we cannot conclude that INA received no
consideration for these alleged samples. In other words, because INA
impeded our investigation of these transactions, we determined that an
adverse inference is appropriate. Therefore for these final results, we
have included INA's sample sales in its U.S. sales database.
With regard to INA's HM ``zero-priced'' sample transactions, INA
provided a complete response with respect to these transactions. We
examined the record and found no evidence that INA received
consideration for its HM sample transactions. Therefore, in accordance
with the CAFC's decision in NSK, we have excluded INA's reported HM
``zero-priced'' sample transactions.
10. Export Price and Constructed Export Price
Comment 1: INA argues that the Department calculated CEP profit
incorrectly on a class-or-kind basis. INA contends that the calculation
should have been on a product-specific basis, since the Department
makes the CEP-profit adjustment on a transaction-specific basis.
INA contends that section 772(d) of the Tariff Act provides that,
in establishing CEP, the Department will make certain additional
deductions beyond those it makes in establishing EP. According to INA,
all of these deductions are transaction-specific since they are applied
to a particular U.S. price and among the deductions is CEP profit,
which is allocated to CEP expenses.
INA argues further that section 772(f) provides that the Department
will determine the CEP-profit rate with reference to ``the expenses
incurred with respect to the subject merchandise sold in the United
States and the foreign like product sold in the exporting country.''
Therefore, INA argues, since the Department uses the profit rate to
determine transaction-specific profit under section 772(d) and applies
it to transaction-specific expenses, it is apparent that ``the subject
merchandise sold in the United States'' in section 772(f) refers to the
particular merchandise for which CEP profit is being calculated. Thus,
INA claims the ``foreign like product'' must refer to merchandise in
the same family as the U.S. merchandise.
Furthermore, INA argues that merchandise that may be a foreign like
product with respect to one model sold in the United States may not be
a foreign like product with respect to another.
Therefore, INA argues that it is logically impossible for an
aggregation of like products to be ``the foreign like product'' to all
subject merchandise.
Finally, INA argues that the expense and profit data necessary to
calculate CEP profit for each bearing family is on the record and,
therefore, the Department should calculate CEP profit on this basis,
not on an aggregation of reported HM and U.S. data. In support of INA,
SKF argues that calculating CEP profit on a product-specific basis
would lead to more accurate results.
[[Page 54072]]
Torrington counters that the Department's methodology for
calculating CEP profit on a class-or-kind basis is a reasonable
application of the statute, citing section 772(e) and the SAA at 824-
825. Torrington disagrees with INA and SKF by arguing that the statute
does not require the Department to calculate CEP profit on a product-
specific basis and that, where the statute is silent or ambiguous with
respect to a specific issue, the agency's methodology is permissible if
based on a reasonable construction of the statute. Petitioner argues
that the Department's methodology is reasonable and, therefore, is
permissible.
Department's Position: We agree with Torrington. As discussed in
more detail in AFBs VI, neither the statute nor the SAA requires us to
calculate CEP profit on bases more specific than the subject
merchandise as a whole. See AFBs VI, 62 FR at 2125. Respondent's
suggestion would add a layer of complexity to an already complicated
exercise with no increase in accuracy. Furthermore, a subdivision of
the CEP-profit calculation would be more susceptible to manipulation.
Comment 2: SNR France and INA Germany argue that the Department
excluded imputed expenses (credit expenses and inventory carrying
costs) erroneously from its calculation of CEP profit, yet it applied
the resulting profit factor to a U.S. selling expense total that
includes these imputed costs. This, SNR France and INA Germany
maintain, results in an unfair adjustment to U.S. price.
Torrington argues that this methodology conforms with the
Department's practice in the 1994/95 reviews. Torrington suggests that
the Department reject SNR France's and INA Germany's arguments for the
reasons in AFBs VI at 2126.
Department's Position: We agree with Torrington. SNR France's
approach blurs the definition of U.S. expenses, as defined in section
772(f)(2)(B), and U.S. selling expenses, as defined in section 772(d)
(1) and (2). As we discussed in AFBs VI, 62 FR at 2126, sections 772(f)
(1) and 772(f)(2)(D) of the Tariff Act state that the per-unit profit
amount shall be an amount determined by multiplying the total 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 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
section 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 sections 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).
Comment 3: Torrington alleges that NTN failed to include certain
expenses incurred in the United States within the NTN organizational
structure as CEP selling expenses. In rebuttal, NTN argues that the
Department asked NTN the exact question that Torrington now raises and
accepted NTN's response appropriately.
Department's Position: We agree with NTN. Because of the
proprietary nature of the comments we received on this issue, however,
we are not able to respond adequately in this notice. See proprietary
memorandum to the file dated September 22, 1997.
Comment 4: Torrington alleges that certain of NTN's claimed EP
transactions are actually CEP transactions when examined in light of
the criteria for defining EP transactions as outlined in the
Department's Antidumping Manual. Petitioner notes that these criteria
are (1) the sales transaction occurs prior to importation; (2) the
merchandise in question was shipped directly from the manufacturer to
the unrelated buyer, without being introduced into the inventory of the
related selling agent; (3) this was a customary commercial channel for
sales of this merchandise between the parties involved; and (4) the
related agent in the United States acted only as a processor of the
sales-related documentation and a communication link with the unrelated
U.S. buyer. Citing to Certain Cold-Rolled and Corrosion-Resistant
Carbon Steel Flat Products from Korea, 62 FR 18,404 (April 15,
1997)(Steel), petitioner contends that, when the activities of the
related selling agent exceed the functions normally associated with a
related agent involved with EP sales, this indicates that the related
agent is involved in more than just EP sales. Petitioner cites the
following passage from the Department's Antidumping Manual (1994) as
examples of selling activities that exceed those associated with EP
sales:
The extent of the related selling agent's normal functions, such
as the administration of warranties, advertising, extensive in-house
technical assistance, and the supervision of further manufacturing,
may indicate that the agent is more than the ``paper-pusher''
envisioned for purchase price sales. Id. chapter 7 at 4-5.
Torrington concludes that this is the case for the sales in
question and that they should be reclassified as CEP transactions.
In response, NTN argues that Steel provides no support for its
position since it involved instances where there was a sale by the
affiliated U.S. importer. NTN states that the Department verified the
sales in question and found them to be sales by NTN Japan to an
unaffiliated customer in the United States. NTN argues that for the
petitioner to contend that such sales are CEP sales ignores the
verification findings and effectively creates a sale between the
unaffiliated customer and a NTN U.S. subsidiary (NBCA) where there were
no sales negotiations between the unaffiliated customer and NBCA, no
purchase orders from the unaffiliated customer, no invoices from NBCA,
NBCA never takes title to the merchandise, NBCA never carries the
merchandise in its inventory, and NBCA never acts as the importer of
record. In summary, NTN states that these sales were made in Japan and
met the Department's definition of EP sales transactions and that its
affiliated party in the United States performed no activities other
than those of being a communications link or processor of documents.
Finally, NTN argues that it provided further information in response to
a supplemental questionnaire and that the Department accepted this
information.
Department's Position: We agree with NTN. Torrington lists the
criteria the Department considers when deciding whether sales should be
classified as EP or CEP. Of the criteria outlined, however, the only
area that Torrington questions is the activities of NBCA's liaison
office. As NTN notes, there is no information on the record suggesting
that NBCA is the seller for the sales in question or that NTN has
otherwise misreported the sales. Moreover, although we did not verify
NTN's response for these reviews, we have verified this issue in past
reviews and found no activities related to these sales. Therefore,
after examining documentation for sales to the customer
[[Page 54073]]
in question, concluded that they were categorized properly as EP
transactions. Inasmuch as nothing on the record indicates any change in
NTN's business practices, we determine these sales to be EP
transactions.
Comment 5: NTN argues that the Department should calculate CEP
profit on a level-of-trade-specific basis. NTN maintains that the
statute expresses a preference for CEP profit to be calculated on the
narrowest possible basis which, NTN states, ensures more accurate
results, citing section 772f(2)C)(ii). NTN argues that, in accordance
with the statute and for the purpose of employing as specific and
accurate expenses as is possible in the calculation of NV and CEP, the
Department accepted NTN's reported level-of-trade-based selling
expenses and should, for the same reasons, calculate CEP profit based
on level of trade such that it accounts for price differences at the
levels.
Torrington contends that sections 772(C) and (D) of the statute
requires that total expenses and profit be reported, not level-of-
trade-specific expenses and profit. Torrington maintains further that,
as the Department stated in the preamble to its new regulations, CEP
profit should be based on all sales and anything less would further
complicate the calculation and make the Department more vulnerable to
manipulation.
Department's Position: We agree with Torrington for the reasons we
discussed in response to comment 1 above and in AFBs VI, 62 FR at 2125.
11. Programming and Clerical Errors
FAG Germany, INA, Koyo, Nachi, NPBS, NTN Japan, SKF Italy, SKF
Germany, SKF France, SKF Sweden, SNR France, and Torrington made
allegations of programming or clerical errors. Where all parties and we
agree that a programming or clerical error occurred, we made the
necessary correction and addressed the comment in the final results
analysis memoranda. The comments we included here address situations
where parties alleged that we made a programming or clerical error but
either we or another party to the proceedings disagrees with the
allegation. This section of the notice also deals with clerical errors
that respondents made but did not bring to our attention until after
issuance of the preliminary results.
Comment 1: Nachi contends that, due to a programming error, the
Department's credit-period calculation improperly inflates imputed
credit expenses for U.S. sales. (The reason for this error is
proprietary; therefore, we are not able to include a summary in this
notice. For a detailed description of the error, please see page 3 of
Nachi's July 1, 1997, Japan Issues Case Brief.) Nachi provides
programming language intended to correct this error.
Instead of making the programming correction Nachi requested,
Torrington requests a methodological change. Citing the questionnaire
and the antidumping manual, Torrington asserts that the Department
should base imputed credit expense solely upon the short-term interest
rate of the U.S. affiliate. Torrington argues that the credit terms
offered to the U.S. affiliate by the foreign exporter do not provide a
basis to recalculate part of the U.S. credit expense. Torrington argues
further that, if the Department accepts Nachi's methodology for
calculating credit expense, the Department should not correct the
programming error by using the computer language Nachi presented.
Torrington contends that Nachi's suggested computer language is flawed.
Department's Position: We agree with Nachi that the credit-period
calculation contains a programming error that inflates the imputed
credit expense for U.S. sales improperly. As described below, we
corrected the programming error using the programming language
Torrington suggested on page 4 of its July 8, 1997, Japan Issues
Rebuttal Brief.
We disagree with Torrington's allegation that Nachi's credit-
expense calculation methodology is improper. The foreign parent has to
finance its receivables using short-term loans during the period in
which its U.S. affiliate has not paid for purchases from the foreign
parent. Only after the U.S. affiliate reimburses its parent does it
absorb the cost of purchasing the merchandise and thus have to begin to
finance its own receivables. Therefore, we have accepted Nachi's U.S.
credit expense methodology.
We agree with Torrington, however, that Nachi's suggested computer
language is flawed as Torrington describes in its rebuttal brief. After
analyzing the programming language Nachi suggested and the language
Torrington suggested, we conclude that Torrington's language calculates
credit expense as we intended for the preliminary results. Therefore,
we have adopted Torrington's suggested programming language to account
for the programming error Nachi alleged.
Comment 2: Torrington contends that an error occurred in the cost-
test section of the Department's computer program for Barden.
Torrington claims that the program should have identified as below-cost
sales several observations that it treated as above cost.
Barden asserts that Torrington neither offers an explanation of how
or why this alleged error occurred nor does Torrington offer computer
language to correct it. Barden claims that it re-ran the computer
program and found no discrepancies with this portion of the program.
Barden requests that the Department therefore dismiss Torrington's
argument.
Barden also argues that the Department had no legal or factual
authority upon which to apply the below-cost test to its HM database.
Barden asserts that the Department unlawfully disregarded below-cost
sales in a previous review covering the 1993/94 period. Therefore,
according to Barden, there is no lawful basis for the Department to
request or utilize Barden's COP data in this review. Thus, Barden
requests that the Department not apply a below-cost test to Barden's HM
sales.
Department's Position: We disagree with Torrington. We have
confirmed that the cost test is working properly. Specifically, it is
disregarding individual below-cost sales where more than 20 percent of
the quantity of sales of a model are below cost. Therefore, we have
determined that the error Torrington alleged does not exist.
With respect to our application of the cost test to Barden's HM
sales, we disagree with Barden. As we stated in AFBs V at 66490, we
cannot disregard the fact that we found that Barden was selling its
products below the COP in the HM. Therefore, we are required to
disregard such sales in accordance with section 773(b) of the Tariff
Act. Moreover, pursuant to our AFBs V determination of below-cost sales
by Barden in the HM, in accordance with section 773(b)(2)(A)(i) of the
Tariff Act, we have the authority in this review to request COP
information and apply the cost test. As a result of applying the cost
test, we found below-cost sales and, therefore, disregarded Barden's
below-cost sales in accordance with the statute.
Comment 3: SNR France contends that it reported an incorrect
adjustment for one of the U.S. sales transactions that the Department
used for the antidumping margin calculations. SNR France explains that
it should have reported a quantity adjustment but that instead it
reported a billing adjustment equal to an amount of the gross unit
price. SNR France requests that the Department review its submission
dated June 19, 1997, and correct the error accordingly.
[[Page 54074]]
Department's Position: We established our criteria for the
correction of clerical errors made by a respondent but discovered after
the preliminary results in Certain Fresh Cut Flowers from Colombia, 61
FR 42833, 42834 (August 19, 1996) (Flowers from Colombia). In Flowers
from Colombia, we stated that we will correct these types of errors
under the following conditions: (1) The error in question must be
demonstrated to be a clerical error, not a methodological error, an
error in judgment, or a substantive error; (2) we must be satisfied
that the corrective documentation provided in support of the clerical-
error allegation is reliable; (3) the respondent must have availed
itself of the earliest reasonable opportunity to correct the error; (4)
the clerical-error allegation, and any corrective documentation, must
be submitted to us no later than the due date for the respondent's
administrative case brief; (5) the clerical error must not entail a
substantial revision of the response; and (6) the respondent's
corrective documentation must not contradict information previously
determined to be accurate at verification.
SNR France has satisfied the Department's criteria for the
correction of clerical errors made by a respondent but discovered after
the preliminary results. Thus, we made the requested correction.
Comment 4: NPBS contends that, when testing prices to affiliated
customers, the Department's computer program mistakenly treats sales to
one customer as if they were sales to several different customers. NPBS
explains that it assigned a different customer code for each of the
customer's sales offices and the sales offices of the customer's sales
subsidiary affiliate. NPBS requests that the Department rerun the
arm's-length test, treating the separate codes as a single customer.
NPBS also contends that, in the Department's arm's-length test, two of
the customer codes used for identifying sales to the affiliated
customer apply to different customers. NPBS states that the two
customer codes identify unaffiliated customers that have the same first
word in their names as the customer the Department intended to treat as
an affiliate. NPBS argues that the customers in question have no
affiliation with NPBS or the customer which the Department intended to
treat as an affiliate.
Torrington contends that the Department has no obligation to comply
with NPBS's request to rerun the arm's-length test and treat the
separate codes as one customer. Torrington argues that NPBS has not
alleged a clerical error in the application of the test but is taking
issue with how the Department applied the test. Torrington asserts that
the Department should make no change since NPBS has not explained why
its methodology is better than the Department's.
Department's Position: We agree with respondent. NPBS is correct
that we mistakenly treated sales to one customer as if they were sales
to several different customers. For the arm's-length test, it was our
intent to analyze the transactions as sales to a single customer. We
have corrected this clerical error by assigning the affiliated customer
a single code.
We also agree with NPBS that we should treat two of the customers
we treated as affiliated in our preliminary results as unaffiliated.
This clerical error occurred when we inadvertently assigned the
customers the affiliation code because they have the same first word in
their name as the affiliated customer. To correct the problem, we have
conducted the arm's-length test without designating the two companies
as affiliates.
Comment 5: Torrington contends that there is a programming error in
the section of the Department's computer program for SKF France that
converts expenses incurred in French francs on U.S. sales to U.S.
dollars. To correct this problem, Torrington requests that the
Department insert an ``ELSE'' statement in the line of programming that
performs the exchange-rate conversion.
Department's Position: We disagree with Torrington. In the
programming language to which Torrington refers, no ``ELSE'' statement
is necessary. In SAS programming, an ``ELSE'' statement gives an
alternative action if the ``THEN'' clause in an ``IF-THEN'' statement
is not executed. In the section of SKF France's program to which
Torrington refers, when the original ``IF'' clause is executed (i.e.,
SKF France has reported no expense for the transaction), then the
program simply multiplies the exchange rate by zero. If SKF France has
reported an expense, then the program multiplies the exchange rate
properly by the reported expense denominated in French francs.
Torrington's suggested language will only result in the conversion
being executed when an expense is missing and has been designated as
zero. Because Torrington's suggested language does not affect the
outcome of the programming instruction, we did not make the change.
Comment 6: NSK Japan argues that certain U.S. sales receiving facts
available should be deleted from the Department's antidumping analysis.
NSK Japan asserts that these sales were inadvertently included in the
database due to a programming error on its part.
Department's Position: We agree with NSK Japan and have deleted
these sales from our analysis for these final results. Though the
proprietary nature of the comment prevents a full discussion here, we
note that the accuracy of NSK Japan's assertion in its July 1, 1997,
Japan Issues Case Brief is obvious from the record. Thus, NSK Japan has
satisfied the Department's criteria for the correction of clerical
errors made by a respondent but discovered after the preliminary
results. See Flowers from Colombia at 42834 and our response to Comment
3 of this section.
Comment 7: Torrington argues that, when calculating NTN Japan's
margin, the Department should assign a facts-available rate to certain
HM transactions that lack a corresponding price. Torrington claims that
the Department neglected to use these transactions in the preliminary
margin calculations.
Department Position: Torrington has misinterpreted the results of
our preliminary analysis. We have not applied facts available to these
transactions. Due to the proprietary nature of the information, this
issue is discussed further in the analysis memorandum (see NTN's
analysis memorandum dated September 22, 1997).
12. Duty Absorption
Section 751(a)(4) of the Tariff Act provides for the Department, if
requested, to determine whether antidumping duties have been absorbed
by a foreign producer or exporter subject to the order if the subject
merchandise is sold in the United States through an importer who is
affiliated with such foreign producer or exporter. Section 751(a)(4)
authorizes this type of investigation during an administrative review
initiated two years or four years after publication of an order.
For transition orders as defined in section 751(c)(6)(C) of the
Tariff Act (i.e., orders in effect as of January 1, 1995), section
351.213(j)(2) of the Department's antidumping regulations provides that
the Department will make a duty-absorption determination, if requested,
for any administrative review initiated in 1996 or 1998. See 62 FR
27296, 27394 (May 19, 1997). Although these antidumping regulations are
not binding upon the Department for these AFB reviews, they do
constitute a public statement of how the Department expects to proceed
in construing section 751(a)(4) of the Tariff Act. This approach
ensures that interested parties will have the opportunity to request a
[[Page 54075]]
duty-absorption determination prior to the time of the sunset review of
the order under section 751(c) on entries for which the second and
fourth years following an order have already passed. Because these
orders on AFBs have been in effect since 1989, these are transition
orders in accordance with section 751(c)(6)(C) of the Tariff Act;
therefore, based on the policy stated above, the Department will
consider a request for an absorption determination during a review
initiated in 1996 or 1998. On May 31, 1996 and July 9, 1996, Torrington
requested the Department to determine, with respect to various
respondents, whether antidumping duties had been absorbed during the
POR. These being reviews initiated in 1996 and a request having been
made, we have made a duty-absorption determination as part of these
administrative reviews.
In our preliminary results of review, we calculated the percentage
of sales by a U.S. affiliate with dumping margins for each exporter. We
stated that, with respect to those companies (with affiliated
importer(s)) that had dumping margins, we would rebuttably presume that
the duties will be absorbed for those sales which were dumped.
Subsequent to the preliminary results, we received comments.
Comment 1: Respondents claim that the Department has interpreted
section 351.213(j) of its regulations incorrectly as providing for
duty-absorption inquiries in the second and fourth years following a
sunset review after which an order is continued and in periods such as
the seventh and ninth reviews for transition orders. Citing the
principle of statutory construction ``expressio unius est exclusio
alterius,'' wherein there is an inference that all omissions should be
understood as exclusions, respondents conclude that the lack of
explicit Congressional approval for duty-absorption inquiries for the
latter transition orders shows that Congress did not intend for duty-
absorption inquiries to be initiated more than four years after
publication of an antidumping order. Finally, respondents contend that
the Department is incorrect in justifying the duty-absorption inquiry
by calling AFBs orders transition orders in accordance with section
751(c)(6)(C) of the Tariff Act. According to respondents, section
751(c)(6)(C) of the Tariff Act only applies to ``sunset'' reviews.
Torrington claims that narrowing the applicability of the duty-
absorption inquiries to only the second and fourth years of sunset
reviews would unduly limit the effectiveness of the statute. Torrington
claims that there is no indication that sections 751(a)(4) or
751(c)(6)(D) intended to create such a narrow application. Torrington's
response to the legal principle of ``all omissions should be understood
as exclusions'' is that it has little force in the administrative
setting because deference is granted to an agency's interpretation of a
statute, unless Congress has directly spoken to the question at issue
(citing Mobile Communications Corp. Of America v. F.C.C., 77 F.3d 1399,
1404-1045). Torrington further argues that ``whether the specification
of one matter means the exclusion of another is a matter of legislative
intent for which one must look at the statute as a whole'' (citing
Massachusetts Trustees of Eastern Gas & Fuel Associates v. United
States, 312 F.2d 214,220 (1st Cir. 1963) (citing authority), aff'd, 377
U.S. 235 (1964)).
Department's Position: With regard to the time frame in which we
are conducting these reviews, section 351.213(j)(1), in accordance with
section 751(a)(4), provides for the conduct, upon request, of
absorption inquiries in reviews initiated two and four years after the
publication of an antidumping order. The preamble to the proposed
antidumping regulations explains that reviews initiated in 1996 will be
considered initiated in the second year and reviews initiated in 1998
will be considered initiated in the fourth year (61 FR at 7317).
Because these orders on AFBs have been in effect since 1989, these are
transition orders in accordance with section 751(c)(6)(C) of the Tariff
Act. This being a review initiated in 1996 and a request having been
made, we are making duty-absorption determinations as part of these
administrative reviews.
Comment 2: Respondents state that gauging absorption on information
that they do not know until completion of an administrative review is
unfair. More specifically, they claim that the nature of the review
process prevents them from determining the U.S. price increase
necessary to pass dumping duties onto customers because the ultimate
liability is not determined until the end of a review. Respondents
claim further that, other than dumping duties paid at the time of
entry, they have no means of estimating the price increases necessary
to pass dumping duties to the customers.
Finally, respondents argue that the Department cannot presume
``rebuttably'' that duty absorption on sales to the U.S. affiliate
exists if the record does not contain evidence of the U.S. purchaser's
assumption of liability for ultimate assessment. Respondents claim that
the Department's rebuttable presumption ignores commercial reality in
that no U.S. buyer would agree to assume liability for an
unascertainable amount of duties. Respondents claim that the Department
has not provided any reason for adopting the presumption of duty
absorption and that the presumption is not allowable by law, citing
NLRB v. Baptist Hosp. Inc., 442 U.S. 773, 787 (1979), and United Scenic
Artists, Local 829 v. NLRB, 762 F.2d 1027, 1034 (D.C. Cir 1985).
SNR and SKF state that the 15-day deadline for submitting evidence
to rebut the assumption that unaffiliated U.S. purchasers will pay the
assessed dumping duty is too short, given the amount of evidence that
would have to be collected and the number of customers that would have
to be approached.
Finally, FAG Germany and FAG Italy contend that the duty-absorption
inquiry is only applicable to the foreign producer or exporter, citing
section 751(a)(4) of the Tariff Act.
Torrington agrees with the Department's approach in using the
rebuttable presumption that the duties for sales that were dumped will
be absorbed. Torrington argues that the Department's examination of
whether duty absorption occurred by reviewing data on the volume of
dumped imports and dumping margins follows the guidelines of the SAA.
Torrington argues that the Department's decision was reasonable, given
the lack of record evidence that the first unrelated customer will be
responsible for paying the duty that is ultimately assessed and the
consistency of the Department's dumping determinations and the fact
that the Department gives the respondents the opportunity to provide
evidence that the unaffiliated purchasers will pay the assessed duty.
Additionally, Torrington asks that the Department reject respondents'
inference that the absorption inquiry only extends to the foreign
producer, rather than the foreign producer and affiliated importer(s).
Torrington cites the preamble to the new regulations and the SAA at 885
in support of the latter.
Finally, Torrington claims that, while the difficulty of obtaining
evidence increases with the extent of dumping involved, this does not
mitigate against the Department's 15-day deadline (after the
publication of preliminary results) for submitting evidence that
unaffiliated U.S. purchasers will pay the assessed dumping duty.
Department's Position: We agree with Torrington. An investigation
as to whether there is duty absorption does not simply involve
publishing the margin in the final results of review. As
[[Page 54076]]
the Department noted in the preliminary results of these reviews, the
determination that duty absorption exists is also based on the lack of
any information on the record that the first unaffiliated customer will
be responsible for paying the duty that is ultimately assessed. Absent
such an irrevocable agreement between the affiliated U.S. importer(s)
and the first unaffiliated customer, there is no basis for the
Department to conclude that the duty attributable to the margin is not
being absorbed.
This is an instance where the existence of a margin raises an
initial presumption that the respondent and its affiliated importer(s)
are absorbing the duty. As such, the burden of producing evidence to
the contrary shifts to the respondent. See Creswell Trading Co., Inc.
v. United States, 15 F.3d 1054 (CAFC 1994). Here, the respondents have
failed to place evidence on the record, despite being given ample time
to do so, in support of their position that they and their affiliated
importer(s) are not absorbing the duties.
Comment 3: Torrington argues that, even though the Department's
duty-absorption methodology is reasonable because it relies on a
weighted-average dumping margin which takes all dumped sales into
account, a more accurate reflection of the impact of dumping on the
domestic industry could be achieved by taking weighted-average dumping
margins divided by the percentage of the U.S. affiliate's sales with
dumping margins. Torrington also contends that the proposal made by
several respondents of taking into account negative margins masks
dumping and contributes to an importer's financial ability to continue
the practice of duty absorption.
Respondents contend that, once an importer has certified that it
has not been reimbursed for antidumping duties, it is unnecessary for
the Department to conduct a duty-absorption inquiry unless there is
evidence of fraud. Respondents also emphasize that, if such weighted-
average dumping margins were calculated, they could be highly
distortive when applied to a small volume of transactions. Respondents
claim further that, if the total profits exceed the amount of
antidumping liability, this can be taken as proof that duty absorption
is not occurring. SKF argues that, using data already available on the
record, the Department is able to conduct an accurate analysis of
whether dumping duties are being absorbed by comparing the total profit
of CEP sales to the total amount of the antidumping liability. SKF also
emphasizes that, while dumping must be measured on a transaction-
specific basis, there are no reasons why a duty-absorption inquiry can
not be done on an aggregate basis.
SKF, Koyo, NSK, and SNR argue that the Department's duty-absorption
methodology fails to measure duty absorption on respondents' U.S. sales
database as a whole. Respondents claim that by not considering sales
made at non-dumped prices the Department fails to get an accurate
measure of whether absorption has occurred. SKF and SNR emphasize that,
because the Department calculates dumping margins after U.S. sales are
shipped and invoiced, companies cannot calculate precisely the price
necessary to eliminate dumping. Therefore, respondents assert they can
only be expected to reach non-dumping price levels on an overall basis.
As a result, SKF contends that the Department should use weighted-
average margins which exclude from the percentage of dumped sales those
transactions with de minimis margins as a threshold test for duty-
absorption inquiries.
Department's Position: We disagree with respondents that we should
aggregate negative and positive margins in our duty-absorption
determination. The Department treats so-called ``negative'' margins as
being equal to zero in calculating a weighted-average margin because
otherwise exporters would be able to mask their dumped sales with non-
dumped sales. See Final Determination of Sales at Less Than Fair Value;
Professional Electric Cutting Tools and Professional Electric Sanding/
Grinding Tools from Japan, 58 FR 30149 (May 26, 1993). It would be
inconsistent on one hand to calculate margins using only positive-
margin sales, which is the Department's practice, and then argue, in
effect, that there are no margins for duty-absorption purposes because
a deduction from the total duties determined should be made for sales
without margins. See Certain Hot-Rolled Lead and Bismuth Carbon Steel
Products From the United Kingdom; Final Results of Antidumping Duty
Administrative Review, 62 FR 18744, 18745 (April 17, 1997). However,
non-dumped sales affect the percentage of sales through affiliated
importers which are dumped and therefore affect the results of the
absorption inquiry. Therefore, we disagree with Torrington's suggestion
as well. Only using the sales with dumping margins in the denominator
of our calculations would distort the calculations by overstating the
percentage margin of dumping.
Finally, a company's profit on CEP sales is not a relevant issue.
This, too, does not negate the fact that these are duties absorbed by
the affiliate.
13. Reimbursement
Comment 1: Torrington states that the Department should apply the
reimbursement regulation in situations where the transfer prices to an
affiliated importer are below the actual COP and the transactions were
found to have dumping margins. Torrington contends that below-cost
transfer prices are tantamount to an indirect transfer of funds,
allowing ``foreign deep pockets'' to relieve importers from having to
raise resale prices to finance assessment of antidumping duties.
Torrington, citing Color Television Receivers from Korea, 61 FR 4408,
4411(Feb. 6, 1996), states further that, because the Department
concluded that the reimbursement regulation applies in exporter's-
sales-price situations, the Department should apply the reimbursement
rule to indirect payments between affiliated parties in these reviews.
Finally, Torrington states that the Department should ask each
respondent whether it transferred subject merchandise to its affiliated
U.S. importer at prices below the COP and whether it made any capital,
equity or other contributions to its U.S. affiliate during the POR.
Respondents state that when deciding this issue the Department
should maintain its reliance, as it did during the 1992/93, 1993/94,
and 1994/95 reviews, on whether explicit and specific factual evidence
exists of direct reimbursement of dumping duties by an affiliated
importer. Koyo, NSK, INA, and SNR state that Torrington's allegations
of below-cost transfer prices do not establish the specific and direct
links between transfer pricing and reimbursement, cited in Federal-
Mogul Corp v. United States, 918 F.Supp. 386, 394 (CIT 1996)(Federal-
Mogul I), necessary to conclude reimbursement has occurred. Koyo
further states that the Korean TVs case does not undermine the CIT's
decision in Federal-Mogul I, or the Department's refusal to undertake
reimbursement investigations in the last four AFBs reviews, simply on
the basis of below-cost transfer prices.
NTN cites the Department's revision of its regulations on
antidumping and countervailing duties to conform with the URAA
multilateral trade negotiations (62 FR 27355) as evidence that Congress
has rejected the application of the reimbursement regulation (section
351.402(f) (1997)) to below-cost transfer pricing between affiliated
parties. NTN claims that, when the express intent of Congress is
unclear or ambiguous, deference will be
[[Page 54077]]
granted to the Department's interpretation of its own regulations and,
therefore, the Department has been granted broad discretion in
determining what constitutes reimbursement of antidumping duties for
purposes of 19 CFR 353.26 (1996).
In response to Torrington's suggestion to pursue two additional
lines of inquiry regarding reimbursement, NSK states that the
Department should conclude reimbursement has occurred only when dumping
duties are paid directly on behalf of the importer or when dumping
duties are actually reimbursed to the importer. FAG Italy, NSK, Barden,
and NTN state that, when certification of non-reimbursement is filed
and there is no evidence of Customs fraud, the Department has no
further obligation to investigate because there is no basis for
presumption of reimbursement and no statutory authority to place any
burden on respondents to rebut such a position. SKF Italy and Germany
also note that their borrowing behavior is already addressed in their
responses to the Department's questionnaire and that the Department
verified this issue, eliminating the need to collect further data.
FAG Italy, SKF, Koyo and Nachi state that, despite having numerous
chances to present new arguments or evidence to the Department,
Torrington failed to offer anything that would warrant reconsideration
of the Department's previous position.
Department's Position: We disagree with Torrington. Although we
agree that the reimbursement regulation is applicable in CEP
situations, there must be evidence that the parent has reimbursed
(e.g., the exporter directly paid the duties for the importer or the
exporter lowered the amount invoiced to the importer) its subsidiary
for antidumping duties to be assessed (see Korean TVs at 4410-11). In
that case, we reaffirmed our original view that reimbursement, within
the meaning of the regulation, takes place between affiliated parties
if the evidence demonstrates that the exporter directly pays
antidumping duties for the affiliated importer or reimburses the
importer for such duties (see The Torrington Company v. United States,
Slip Op. 97-136 (CIT September 19, 1997)(Torrington II)). In this case,
there is no evidence that any of the named respondents engaged in
reimbursement activity with their respective affiliated U.S.
subsidiary. See also Brass Sheet and Strip from the Netherlands, 57 FR
9534, 9537 (March 19, 1992), Brass Sheet and Strip from Sweden, 57 FR
2706, 2708 (January 23, 1992), and Brass Sheet and Strip from Korea, 54
FR 33257, 33258 (August 14, 1989).
Furthermore, Torrington has presented no evidence of inappropriate
financial intermingling, an agreement to reimburse, or reimbursement in
general. FAG, Koyo, and Nachi are correct in that the presence of both
below-cost transfer prices and actual dumping margins do not, in and of
themselves, constitute evidence that reimbursement is taking place.
Therefore, consistent with our position in previous reviews of these
orders, we reject Torrington's contention that below-cost transfer
prices are tantamount to an indirect transfer of funds for
reimbursement of antidumping duties and that we should make a deduction
therefore in CEP transactions (see AFBs III (39736), AFBs IV (10906-
07), AFBs V (66519), and AFBs VI (2129)).
14. Tooling Revenue
Comment: NSK argues that the Department should not consider tooling
to be part of revenue for the purpose of calculating the dumping
margins. NSK claims that tooling revenue is not an integral part of the
product, that the Department did not include this item in its
questionnaire for previous reviews, and that Torrington did not
consider tooling as part of revenue in past AFB reviews. NSK also cites
the Department's position in Mechanical Transfer Presses from Japan, 55
FR 335, 339 (Jan. 4, 1990), where the Department did not adjust prices
by an amount for tooling. Finally, NSK points out that, in situations
where tooling can be considered subject merchandise, it is specifically
identified as an integral component of the price, citing Certain Forged
Steel Crankshafts from the United Kingdom, 56 FR 5975, 5978 (Feb. 14,
1991).
NSK argues that, even if the Department maintains that tooling
revenue should be added to NV, the Department should not add tooling
revenue to NV as facts available in its analysis of NSK. NSK argues
that it is inappropriate to use facts available in its case because it
responded fully to all of the Department's requests for information.
NSK argues that it provided tooling revenue on a product-specific basis
and the fact that the Department could not match the tooling revenue to
the product codes in its HM sales database demonstrates that those
products to which it would apply were not reported in the database.
Torrington disagrees with NSK's position, claiming that the
Department should include tooling revenue in the computation of NV
pursuant to the terms of the antidumping duty order, the applicable
law, and the questionnaire. Petitioner cites two cases where the
Department ruled as such: Certain Forged Steel Crankshafts From the
United Kingdom, 56 FR 5975, 5978 (Feb. 14, 1991), where tooling
revenues were included in price even when tooling is billed separately,
and Bicycle Speedometers From Japan, 58 FR 54328 (Oct. 21, 1993), where
amortized tooling costs were added to, not subtracted from, price.
Torrington claims that the supplemental questionnaire in these AFB
reviews further demonstrates the Department's policy of including
tooling in revenue since it asks for detailed information on tooling
costs. Finally, Torrington states that tooling is a cost of producing
bearings and that, in all market-type transactions, prices are set to
cover costs.
Department's Position: In the Final Determination of Sales at Less
Than Fair Value: Oscillating Fans From the People's Republic of China,
56 FR 55271, 55279 (Oct. 25, 1991), the Department established its
policy of considering tooling as part of factory overhead and,
therefore, a component of final price. The Department has followed this
practice in subsequent cases. See, e.g., Certain Forged Steel
Crankshafts from the United Kingdom, 55 FR at 5978, and Bicycle
Speedometers from Japan, 58 FR at 54328. In Mechanical Transfer Presses
from Japan, 55 FR at 339, the Department disallowed die tooling from
revenue computation because it was identified separately in the
contractual sales documentation along with spare parts and other
optional item prices and, therefore, was not an ``integral'' cost of
the commodity. In contrast, tooling revenue associated with AFBs is
additional revenue on the sale of the AFB, not a separate accessory.
However, upon re-examining the record, we determine that it is
clear from the record that NSK's reported tooling revenue pertains to
models which NSK did not report, appropriately, in its HM sales
database. Therefore, we have not added tooling revenue to NSK's NV for
these final results. We note, however, that the application of facts
available in our preliminary results was not meant to be a tool to
punish NSK but rather to be an estimate of NSK's actual experience with
regard to tooling revenue when we were unable to match the models for
which tooling revenue was incurred to the models NSK reported in the HM
sales database.
15. Cash Deposit Financing
Comment: NTN and NTN Germany (collectively ``NTN'') argue that the
[[Page 54078]]
Department's decision to ignore adjustments to its U.S. indirect
selling expenses for interest on cash deposits of antidumping duties is
contrary to the Department's position in past reviews of these orders
and in recent litigation.
NTN argues that section 772(d)(1) of the Tariff Act only allows for
the deduction of selling expenses. However, NTN contends, the
Department has previously stated that it does not consider cash deposit
financing expenses as such. As an example, NTN contends, the Department
noted in AFBs VI at 2,104 that such expenses were not selling expenses
since they ``were incurred only because of the existence of the
antidumping duty orders'' and the Department concluded that ``the
expenses cannot correctly be characterized as selling expenses.'' NTN
also points to the Department's acceptance of this adjustment in the
first three reviews of these orders (AFBs I-III), in the two most
recently completed reviews of these orders (AFBs V and VI), and in the
position the Department took in comments it filed with the CIT in the
litigation arising from AFBs IV. According to NTN, the CIT adopted
these comments in large part, holding that ``interest NTN paid for
antidumping duty deposits is not a selling expense and, thus, should be
excluded from NTN's U.S. indirect selling expenses.'' Federal-Mogul v.
United States, 20 CIT --, --, Slip Op. 96-193 (December 12, 1996)
(Federal-Mogul II).
NTN argues that, notwithstanding Departmental and judicial
precedent, the Department's statements in the instant review are
flawed. First, NTN contends, the Department's statement in the
preliminary results that it is ``not convinced that there are
opportunity costs associated with paying deposits'' contradicts the
well-reasoned analysis the Department set forth in Tapered Roller
Bearings and Parts Thereof, Finished and Unfinished, From Japan, and
Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and
Components Thereof, From Japan; Final Results of Antidumping Duty
Administrative Reviews and Termination in Part (TRBs Final Results), 62
FR 11,825, 11828-830 (March 13, 1997), in which the Department
explained that it ``recognize(s) that opportunity costs * * * have a
real financial impact on the firm.''
Second, NTN argues, the Department misunderstands the basis for its
allowance of the adjustment in prior reviews in its statement that
``the dumping margin should not vary depending on whether a party has
funds available to pay cash deposits or requires additional funds in
the form of loans.'' NTN agrees that this statement is correct but
contends that this does not necessarily lead to the Department's
preliminary conclusion that it should deny the adjustment. NTN points
to TRBs Final Results where the Department reasoned that a firm may
also choose to divert funds from other corporate activities to pay cash
deposits but the opportunity costs associated with the diversion
reflect a real cost to the firm.
Third, NTN asserts, the Department's statements that opportunity
costs are not associated with making cash deposits is a
misunderstanding of the definition of ``opportunity costs.'' NTN argues
that opportunity costs are ``the real economic loss which an entity
experiences when it must forgo some other, more profitable use of its
resources,'' citing Cartersville Elevator, Inc. v. ICC, 724 F. 2d 668,
670 (8th Cir. 1984), and Mira v. Nuclear Measurements Corp., 107 F. 3d
466, 472 (7th Cir. 1997) (describing the diversion of funds from more
profitable activity as ``the classic definition of opportunity
costs''). NTN argues that the expense associated with making cash
deposits fits these definitions. In NTN's view, the source of the funds
does not determine whether this is an opportunity cost because, in
either case, these funds cannot be put to a more profitable use.
NTN concludes that, since the only reference to this issue in these
proceedings is a memorandum to the file regarding an ex parte meeting
with the Torrington Company dated April 23, 1997, there is no change in
fact pattern or the law which would compel such a sudden shift in the
Department's position. Moreover, NTN argues that, at some point, the
Department's prior decisions become case law, citing Shikoku Chemicals
v. United States, 16 CIT 383, 388 (1992). NTN requests that the
Department allow the adjustment to U.S. indirect selling expenses for
the final results.
Torrington argues that the Department properly rejected an
adjustment to NTN's U.S. selling expenses for cash deposit financing
expenses. Torrington contends that there are both policy and legal
reasons that support the Department's decision.
Torrington argues that the Department's previous policy actually
encouraged dumping by allowing larger and larger adjustments to selling
expenses as deposit rates increased. Torrington reasons that, the more
a company dumps its merchandise in the United States, the larger the
interest payments covering duty deposits will be. Torrington concludes
that, as the interest expense becomes greater and greater, so does the
offset to indirect selling expenses. Likewise, the smaller the offset,
the lower the final dumping margin. Thus, Torrington contends the
Department's old policy actually encourages dumping. Torrington
suggests that this scenario will be exacerbated over time as interest
expense accumulates and in any interest expenses the Department
imputes. Torrington asserts that, if offsets become sufficiently large,
dumping margins can disappear without any change in pricing behavior.
Moreover, if the Department only allows an adjustment for actual
interest paid, Torrington asserts that the previous policy
discriminates against importers who finance deposits with cash because
these importers would not have any interest payments.
Torrington agrees with the Department's statements in the
Preliminary Results questioning whether ``opportunity costs'' are
actually incurred because, Torrington argues, ``opportunity costs''
exist only in economic theory. Torrington contends that, if deposits
were not made, then there would be no merchandise to resell. Thus,
Torrington concludes, deposits are a cost of doing business for those
who choose to trade unfairly.
Torrington acknowledges that the CIT, in Federal-Mogul II, reached
a contrary conclusion, but, petitioner contends the CIT upheld bad
policy and the Department is right in changing its policy. Torrington
argues that money is fungible and loans to finance duty deposits make
money available for other endeavors. Torrington argues that the CIT, in
Federal-Mogul II, failed to account for this.
Torrington argues that section 772(d)(1) mandates the deduction of
certain selling expenses from CEP. Since imputed expenses do not appear
on the company's books, Torrington contends that an offset to those
selling expenses is contrary to law because it reduces a mandatory
deduction improperly.
In addition, Torrington argues that, under the URAA, CEP is meant
to be a proxy for an arm's-length price to an unaffiliated importer. As
such, Torrington contends, selling expenses such as those incurred for
financing cash deposits are related solely to the sale to the
affiliated importer and are not related to the resale to the
unaffiliated U.S. customer. Torrington contends that the Department's
new regulations reflect the contemporaneous construction of the URAA as
evidenced by the preamble statement: ``In these final regulations, we
have clarified that the Secretary will deduct only expenses
[[Page 54079]]
associated with a sale to an unaffiliated customer in the United
States.'' By the same logic, Torrington argues, credit costs imputed to
the importer on account of duty deposits should not be added back to
CEP because these costs will not be deducted from CEP in the first
place.
Torrington argues that, although the Department's new regulations
do not apply to the current review per se, the foregoing analysis
reflects existing practice under the new law, citing Extruded Rubber
Thread from Malaysia, 62 FR 33,588 at 33597-98 (June 20, 1997). In sum,
Torrington maintains that antidumping cash deposits (and any credit
expenses imputed to those deposits) do not represent activities of the
importer in selling the merchandise in the U.S. market.
Finally, Torrington argues that there is no evidence that any
affiliated importers actually obtained loans for the purpose of paying
cash deposits. Therefore, Torrington contends, there is no evidence
that imputed credit costs are ``specifically associated with economic
activities in the United States,'' citing Certain Internal-Combustion
Industrial Forklift Trucks from Japan, 62 FR 5592 at 5611 (February 6,
1997). Without evidence that credit costs were incurred, Torrington
asserts there is no basis to conclude that any deductions from CEP on
account of the importer's expenses included such costs in the first
place. As such, Torrington concludes, there is no basis for NTN's
claimed adjustment.
Department's Position: We agree with Torrington that we should deny
an adjustment to NTN's U.S. indirect selling expenses for expenses
which NTN claims are related to financing of cash deposits. However, we
have not adopted Torrington's logic entirely.
The statute does not contain a precise definition of what
constitutes a selling expense. Instead, Congress gave the administering
authority discretion in this area. It is a matter of policy whether we
consider there to be any financing expenses associated with cash
deposits. We recognize that we have, to a limited extent, removed such
expenses from indirect selling expenses for such financing expenses in
past reviews of these orders. However, we have reconsidered our
position on this matter and have now concluded that this practice is
inappropriate.
We have long maintained, and continue to maintain, that antidumping
duties, and cash deposits of antidumping duties, are not expenses that
we should deduct from U.S. price. To do so would involve a circular
logic that could result in an unending spiral of deductions for an
amount that is intended to represent the actual offset for the dumping.
See, e.g., AFBs II. We have also declined to deduct legal fees
associated with participation in an antidumping case, reasoning that
such expenses are incurred solely as a result of the existence of the
antidumping duty order. Id. Underlying our logic in both these
instances is an attempt to distinguish between business expenses that
arise from economic activities in the United States and business
expenses that are direct, inevitable consequences of the dumping order.
Financial expenses allegedly associated with cash deposits are not
a direct, inevitable consequence of an antidumping order. As we stated
in the preliminary results: ``money is fungible. If an importer
acquires a loan to cover one operating cost, that may simply mean that
it will not be necessary to borrow money to cover a different operating
cost.'' See Preliminary Results at 31,569. Companies may choose to meet
obligations for cash deposits in a variety of ways that rely on
existing capital resources or that require raising new resources
through debt or equity. For example, companies may choose to pay
deposits by using cash on hand, obtaining loans, increasing sales
revenues, or raising capital through the sale of equity shares. In
fact, companies face these choices every day regarding all their
expenses and financial obligations. There is nothing inevitable about a
company having to finance cash deposits and there is no way for the
Department to trace the motivation or use of such funds even if it
were.
In a different context, we have made similar observations. For
example, we stated that ``debt is fungible and corporations can shift
debt and its related expenses toward or away from subsidiaries in order
to manage profit'' (see Ferrosilicon from Brazil, 61 FR at 59412
(regarding whether the Department should allocate debt to specific
divisions of a corporation)).
So, while under the statute we may allow a limited exemption from
deductions from U.S. price for cash deposits themselves and legal fees
associated with participation in dumping cases, we do not see a sound
basis for extending this exemption to financing expenses allegedly
associated with financing cash deposits. By the same token, for the
reasons stated above, we would not allow an offset for financing the
payment of legal fees associated with participation in a dumping case.
We see no merit to the argument that, since we do not deduct cash
deposits from U.S. price, we should also not deduct financing expenses
that are arbitrarily associated with cash deposits. To draw an analogy
as to why this logic is flawed, we also do not deduct corporate taxes
from U.S. price; however, we would not consider a reduction in selling
expenses to reflect financing alleged to be associated with payment of
such taxes.
Finally, we also determine that we should not use an imputed amount
that would theoretically be associated with financing of cash deposits.
As Torrington points out, there is no real opportunity cost associated
with cash deposits when the paying of such deposits is a precondition
for doing business in the United States. Like taxes, rent, and
salaries, cash deposits are simply a financial obligation of doing
business. Companies cannot choose not to pay cash deposits if they want
to import nor can they dictate the terms, conditions, or timing of such
payments. By contrast, we impute credit and inventory carrying costs
when companies do not show an actual expense in their records because
companies have it within their discretion to provide different payment
terms to different customers and to hold different inventory balances
for different markets. We impute costs in these circumstances as a
means of comparing different conditions of sale in different markets.
Thus, our policy on imputed expenses is consistent; under this policy,
the imputation of financing costs to actual expenses is inappropriate.
16. Romania-Specific Issues
Comment 1: TIE contends that the Department should use the factory
overhead, SG&A, and profit values of an Indonesian steel producer (Jaya
Pari) placed on the record for the POR rather than rely upon the
surrogate values obtained from a cable submitted by the U.S. embassy in
Jakarta. TIE purports that the Jaya Pari data identifies how the
overhead, SG&A, and profit values were derived, whereas the embassy
cable does not reveal how these values were calculated and, thus, TIE
cannot determine and comment on the accuracy and representativeness of
such values. TIE recognizes that, although Jaya Pari is not a bearings
producer, the Department has established a preference for use of
publicly available information (PAI) over embassy cable data. TIE
argues further that the embassy cable is nearly six years old, whereas
Jaya Pari's data was derived from a 1995 financial statement, a source
upon which the Department has relied in prior non-market-economy
bearing reviews. In addition, TIE maintains that the SG&A rate in the
embassy cable is
[[Page 54080]]
extraordinarily high and has significantly contributed to its dumping
margin.
Torrington discusses several reasons as to why the Jaya Pari
financial statement is inappropriate. Torrington asserts that Jaya
Pari's financial statement is missing certain pages which may contain
information relevant to assessing the validity of the document.
Torrington argues that the 1995 financial statement TIE placed on the
record does not contain the level of detail necessary to determine how
certain values (in particular, materials and factory overhead) were
calculated. Torrington contends further that the financial statement
reflects a much higher raw-materials value than the overhead value and,
thus, such figures may be disproportionately allocated because certain
elements such as energy, electrodes, and rolls relative to steel
manufacturing do not appear to be included in the overhead category.
Torrington argues that the embassy cable explains clearly how the
overhead figure was derived and may need only an additional adjustment
made for energy costs. Torrington maintains that the factory overhead
and SG&A rates the Department employed in the preliminary margin
calculations are understated because they did not take energy costs
into account. Torrington asserts that the ratios the Department
obtained from the embassy cable and used in the calculation of overhead
and SG&A are less affected by the lapse of time as opposed to absolute
figures which are found in the financial statement.
Department's Position: We agree with TIE. We have determined that
the financial statement of Jaya Pari provides more appropriate
surrogate information than the information in the cable from the U.S.
embassy. In our hierarchy for selecting data for possible surrogate
values, we prefer to use current, publicly available information. The
cable which we used in the preliminary results is over five years old
and therefore substantially less contemporaneous than the Jaya Pari
information. Torrington's concern that certain pages are missing is
irrelevant because the necessary pages, which show the overhead, SG&A
and profit calculations as well as the explanatory notes, have been
submitted. Additionally, the level of detail shown in the financial
statements is greater than that of the cable. Finally, we cannot accept
Torrington's contention that the financial statements have included
certain elements relative to steel making incorrectly under ``raw
materials'' rather than ``overhead.'' We have no factual basis for
concluding that the raw-materials category is disproportionally high
relative to the overhead category, and it also would be contrary to
normal accounting procedures to place these elements---energy,
electrodes and rolls are the ones hypothesized by Torrington--under the
category of ``raw materials.''
Comment 2: Torrington argues that, in the preliminary results of
review, the Department published an incorrect value for TIE's dumping
margin. Torrington suggests that, for the final results of review, the
Department multiply by 100 the dumping margin published in the
preliminary results of review in order to convert it properly to a
percentage.
Department's Position: We agree with Torrington. In the preliminary
results, we did not express the calculated margin as a percentage and,
therefore, the published margin was understated. We have converted the
margin to a percentage for the final results.
Comment 3: Torrington contends that the International Labor Office
(ILO) costs the Department employed in the preliminary results of
review are flawed for several reasons: (1) the wage rates used reflect
only minimum wages in Indonesia and, thus, do not represent actual
labor wage costs accurately; (2) the minimum wage rates do not include
fringe benefits and, thus, such rates do not reflect labor rates
accurately; and (3) certain information the Department used to value
both direct and indirect labor pertain to the industries which have
different international standard industrial classification (ISIC) codes
than bearings. Torrington points out that the proper ISIC code for the
products under review was determined in a prior segment of this
proceeding. Torrington argues that, in the interest of the Department's
desire to obtain actual, or as accurately as possible, Indonesian labor
rates, the Department should use for the final results of review a
particular table from the ILO Yearbook of Labour Statistics for 1994
instead of information from the Special Supplement to the Bureau of
Labor Statistics used in the preliminary results. Torrington maintains
that the ILO Yearbook of Labour Statistics contains actual wage rates
and states that, because this document is based on the same year and
serves as the same source of information from which the Department
extrapolated the wage rates for the preliminary results of review, it
should not constitute new information. Torrington argues further that
using such information is consistent with the Department practice to
use independent sources of information.
TIE contends that the information Torrington proposes that the
Department use for the final results of review constitutes new
information because it is untimely and has not been placed on the
record previously. TIE also argues that, despite the fact that this
information is new, it is a deficient source of information upon which
to rely for the final results of review for the following reasons: (1)
the data is more than two years older than that which the Department
relied upon for the preliminary results of review and, thus, does not
meet the Department's standard of using information that is most
contemporaneous to the POR; (2) the wage rates employed in the
preliminary results of review represent actual costs; (3) unskilled
direct labor would be overstated because the data Torrington proposes
includes salaried or skilled labor rates; and (4) the data Torrington
proposes may be affected by time and, thus, it is likely that the data
may have changed over the past five years.
Department's Position: Petitioner discusses the suitability of
surrogate labor rates and has submitted information in its case brief
recommending that the Department adjust the rates. TIE has pointed out
that this information was not previously on the record and constitutes
new information. The Department agrees with TIE that the labor rates
which petitioner presents constitute new information. As such, we have
not considered it, in accordance with 19 CFR 353.31(a), because it was
submitted after the publication of the preliminary results and more
than 180 days after the date of publication of the notice of initiation
of this review.
We agree with TIE that the wage rates we used in the preliminary
results represent actual costs. Although the ILO data is a minimum
wage, it does indeed include such costs as ``cost-of-living allowances
and other guaranteed and regularly paid allowances,'' according to the
ILO's Special Supplement to the Bulletin of Labor statistics (1994).
However, we agree with Torrington that the wage rates do not include
fringe benefits. We have made an adjustment to the rates to include
employee benefits, following the methodology in Final Determination of
Sales at Less than Fair Value; Disposable Pocket Lighters from the
People's Republic of China, 60 FR 22359 (May 5, 1995) (Disposable
Pocket Lighters), which calculated supplementary benefits as 33 percent
of manufacturing earnings. Finally, for indirect labor, rather than
continue to use the rates for supervisors and general foremen from the
crude
[[Page 54081]]
petroleum and natural gas industries, we have used the supervisory
labor rates from Disposable Pocket Lighters, which we have inflated for
the POR. This rate is not industry-specific but, rather, represents a
general estimate of supervisory labor in Indonesia. It is more accurate
than the crude rate for the petroleum and natural gas industries, which
represents supervisory labor in an industry which is not representative
of AFB production.
Comment 4: TIE contends that the foreign inland freight rate which
the Department used in the preliminary margin calculations is
extraordinarily high compared with the rates used in prior Romanian AFB
and TRB reviews and rates used in a prior Chinese TRB review. TIE also
argues that the proposed rate is also much higher than ocean freight,
implying that it costs more to transport bearings within Romania than
it costs to ship them from Romania to the United States. TIE maintains
that the high inland freight rate is attributable to either a
mathematical error in the Department's calculations or the estimated
freight rate which incorporates a division of an arbitrary distance of
40 kilometers per trip and yields an estimated per kilometer rate. TIE
provides a hypothetical example based on a 1500-kilometer distance
between its factories and the port. TIE asserts that using this
distance in the Department's calculation would yield a freight rate
that is 20 percent of the sales value which, TIE claims, is overtly
incorrect. TIE maintains that the Department has a long-established
practice to ascertain whether surrogate values are reasonable and
argues that, in the instant review, the Department should use a more
reliable and reasonable rate for foreign inland freight.
Torrington contends that TIE did not attempt to substantiate that
the foreign inland freight rate in the preliminary margin calculations
was too high other than comparing that rate with rates used in other
determinations. In addition, Torrington argues that TIE's hypothetical
example is baseless because the actual distance between the factories
and the port is under 400 kilometers. Torrington also contends that
utilizing a distance of 1500 kilometers in the Department's calculation
results in a percentage that is nowhere near 20 percent of the sales
prices as claimed by TIE.
Department's Position: We agree with TIE. We have changed the truck
freight rate for these final results. Because the freight-rate
calculation includes a division by an estimated distance for the
distance of transporting goods, we have determined that the resulting
estimated rate is less accurate than the rate we used in Disposable
Pocket Lighters. See Surrogate Freight submission, March 4, 1997. We
consider the freight rate we applied in Disposable Pocket Lighters to
be more accurate because it is based on actual data from a cable from
the U.S. Embassy in Indonesia and does not contain an estimated
component. Additionally, we have inflated the value using the World
Price Index for the POR. Therefore, we have used the rate of $.0326 per
MT/km for the truck freight rate for the final results.
17. Miscellaneous Issues
17. A Ocean & Air Freight
Comment: Torrington notes that the Department permitted respondents
to aggregate and then allocate ocean and air freight costs. Torrington
argues that this practice is potentially distortive because air freight
is considerably more expensive on a per-unit basis. Torrington claims
further that it is relatively easy to segregate air freight from ocean
freight because the situations in which companies use air freight, such
as emergencies and production scheduling, are easily identified.
Torrington states that the Department should require respondents to
submit information segregating air freight expenses or, absent such
information, apply facts available.
FAG Germany, FAG Italy, NSK, SKF France, SKF Germany, SKF Italy,
SKF Sweden, Koyo, NSK Japan, INA, Barden, and NMB/Pelmec contend that
it is impractical and in some cases impossible to isolate air and ocean
freight charges with their record-keeping systems. Respondents also
assert that the Department verified their reported freight costs and
found them to be non-distortive in these reviews or in prior reviews.
NSK argues that it is unreasonable to have to resubmit freight charges
at a late date. Koyo and NSK also contend that past administrative and
legal procedures support the aggregation and allocation of freight
costs, asserting that the Department in past reviews and the CIT in
various decisions have both upheld their freight-reporting
methodologies.
In addition, Barden contends that all of its U.S. freight charges
were by air and reported as such, while NSK states that it kept records
of ``expedited deliveries'' that could be tied to specific sales and
reported such expenses separately.
Department's Position: We disagree with Torrington. We have found
that it is generally not feasible for respondents to report air and
ocean freight on a transaction-specific basis in these proceedings.
See, e.g., NSK's September 9, 1996 section C response at 22. Where
respondents were unable to report ocean and air freight separately, we
have accepted aggregated international freight data. See AFBs VI, 62 FR
at 2121; see also The Torrington Company v. United States, Slip Op. 97-
57 at 11-14 (CIT May 14, 1997)(Torrington III) (affirming the
Department's methodology for accepting co-mingled ocean and air freight
where a respondent could not report the two expenses separately).
Furthermore, we note that Sec. 351.401(g) of our new antidumping
regulations provide that we may consider allocated expenses and price
adjustments when transaction-specific reporting is not feasible,
provided we are satisfied that the allocation method used does not
cause inaccuracies or distortions. See 62 FR 27410 (May 19, 1997). As
discussed above, the Department has determined that it is generally not
feasible for respondents to report air and ocean freight on a
transaction-specific basis.
Furthermore, while we have considered Torrington's claim that
aggregating and then allocating air and ocean freight is
``potentially'' distortive, we have no evidence that this methodology
in fact distorts respondents' reported freight costs. While the new
regulations are not binding in the instant reviews, they are a
codification of our intended practice.
Because we determined that respondents acted to the best of their
ability, it would be improper to make adverse inferences about their
reported data by applying facts available simply because their record-
keeping systems do not record their data on a transaction-specific
basis. Therefore, we have accepted respondents' reported air and ocean
freight expenses.
17.B. Burden of Proof
Comment: Torrington argues that the Department has shifted the
burden of proof improperly to petitioner to demonstrate the invalidity
of respondents' claims. Torrington asserts that the Department's error
originated in the 1994/95 reviews and was aggravated by the
Department's refusal to require respondents to state when they have
disregarded prior determinations and by the Department's acceptance of
petitioner-challenged respondent data without Department verification.
Torrington maintains that, when the Department found there to be no
information demonstrating distortive allocations of post-sale price
adjustments, it effectively shifted the burden of proof to petitioners
to present information to refute respondents'
[[Page 54082]]
claims. Torrington argues that, since it has no right to conduct
discovery or to attend verifications and since respondents possess all
of the information relevant to distortion, respondents should bear the
burden of proof regarding the distortion issue. Torrington asserts that
Fujitsu General Ltd. v. United States, 88 F.3d 1034 (CAFC 1996), and
Timken Co. v. United States, 673 F. Supp. 495 (CIT 1987), support its
contention that respondents should bear the burden of demonstrating
whether an allocation causes distortive results.
Torrington maintains that the Department shifts the burden of proof
when it chooses not to verify and accepts respondents' data and when
the Department does not require respondents to state on the record
whether their questionnaire responses conform to prior rulings.
Torrington claims that the Department also shifts the burden of proof
upon petitioner by requiring petitioner to demonstrate, beyond a
showing of below-cost transfer pricing, that foreign producers have in
fact reimbursed dumping duties. Torrington also asserts that the
Department places the burden of proof upon petitioner with regard to
the reporting of product-specific R&D by allowing general allocations
instead of product-specific allocations when respondents' annual
reports mention new products. Torrington maintains further that the
Department places the infeasible burden upon petitioner of proving,
with regard to reseller transactions, that sales to HM buyers, related
to U.S. OEMs or who distribute merchandise for export to third
countries, are sales for export, not HM sales.
Torrington argues that, by shifting the burden of proof to
petitioner, the Department has abdicated its fact-finding
responsibilities and required the petitioner to perform the
Department's investigation. Torrington cites Rhone-Poulenc, Inc. v.
Unites States, 927 F. Supp. 451, 456-457 (CIT 1996), to support its
contention. Torrington notes that the Department placed the burden of
proof correctly upon respondents in these reviews with regard to duty
absorption and that the burden should be similarly placed upon
respondents for each issue parties address. Torrington concludes that,
since respondents have had sufficient time to develop their records,
the Department should not accept respondents' claims that they made
their best efforts to substantiate their assertions.
NTN, SKF, and Koyo respond by stating that Torrington's argument is
a vague, overly general criticism raised against all adjustments
favorable to respondents. NTN argues that Department findings favorable
to respondents do not shift the burden of proof to petitioner. Koyo
argues that the Department is not required to investigate every claim
petitioner alleges, and the Department required additional evidence
correctly in support of petitioner's allegations of distortive
adjustment methodologies. Koyo argues further that Torrington's
position is similar to that taken by a party in Al Tech Specialty Steel
Corp. v. United States, 575 F. Supp. 1277 (CIT 1983), in that the
Department's requirement of additional information from petitioner when
petitioner's claims were based on mere suspicion did not place an undue
burden upon petitioner. Respondents argue that they and the Department
have met their burdens of proof in that the Department has investigated
petitioner's claims thoroughly and has conducted repeated
verifications. SKF notes that it has provided thousands of pages of
data in responding to the Department's questionnaires. NTN contends
that the Department verified all of NTN's records regarding adjustments
and reimbursement and found no evidence to support petitioner's claims.
NTN notes, furthermore, that the cases petitioner cites to support its
position, Fujitsu General Ltd., v. United States and Timken Co. v.
United States, are inappropriate because there is no basis for the
Department to make a presumption of bad faith on the respondents' part,
as was the situation in the cited cases. Koyo notes, moreover, that
petitioner's argument regarding below-cost transfer pricing is
immaterial since the level of transfer prices in relation to the
benchmark Torrington proposes is irrelevant for determining whether the
reimbursement of antidumping duties occurred. Finally, SKF argues that,
contrary to petitioner's claims that the Department has abdicated its
investigatory responsibilites, in the area of duty absorption--where
petitioner approves of the Department's findings--the Department has
invoked a methodology inappropriate in an investigatory fact-finding
proceeding.
Department's Position: We agree with respondents that the
petitioner does not bear an undue burden of proof in substantiating its
claims. First, we disagree with petitioner's claim that our decision
not to require respondents to state when they have disregarded prior
determinations somehow results in or aggravates a shift in the burden
of proof upon the petitioners. See our response to Comment 17(E).
Second, we disagree that we shift the burden when we choose not to
verify a particular respondent's data. As petitioner is aware, the
Department has, over the course of the seven completed AFB reviews,
verified all of the respondents subject to these 1995/96 reviews. The
fact that respondents' data is subject to verification serves to ensure
its accuracy. Moreover, where the Department has encountered
difficulties in verifying a particular respondent's data, it has been
careful to examine closely such information in later reviews.
With respect to the allocations at issue, the Department has
examined fully and, in certain cases, verified respondents' data
regarding petitioner's claims. Where we have been satisfied that a
given allocation methodology is non-distortive, we have had no reason
to require respondents to submit additional information. The mere fact
that petitioner claims a methodology is distortive does not make it so.
Where we have disagreed with petitioner, we have explained our
positions throroughly in response to specific comments contained in
this issues appendix. We have also addressed petitioner's allegations
of reimbursement through below-cost transfer pricing (see our response
to section 13, comment 1, above). In such cases, we have neither failed
to meet our investigatory responsibilities nor placed an undue burden
upon petitioner.
17.C. HTS.
Comment: Torrington argues that the Department should amend the
list of HTS subheadings listed in the preliminary results by replacing
HTS number 8482.99.6590, which Torrington claims does not currently
exist, with HTS 8482.99.7060 and HTS 8482.99.7090 (1994 HTS) and also
with HTS 8482.99.6560 and HTS 8482.99.6595 (1995 HTS and later).
Torrington states that HTS 8482.99.6590 existed to cover parts of ball
bearings and spherical plain bearings other than balls or races.
NSK agrees that HTS number 8482.99.6590 does not exist and should
be removed from the references to the HTS classification in the final
results. However, NSK states that Torrington did not describe
accurately the HTS numbers and, along with SKF, suggests that the
Department should examine the current HTS classifications applicable to
scope merchandise before adding the references Torrington claims are
appropriate.
Department's Position: We have confirmed that HTS number
8482.99.6590 has been deleted from the
[[Page 54083]]
1997 Harmonized Tariff Schedule and, therefore, we have removed it from
the description of scope merchandise for the final results. We disagree
with Torrington on the need to replace HTS 8482.99.6590 with HTS
8482.99.7060 and HTS 8482.99.7090 because these numbers refer to 1994
HTS numbers that no longer exist. Instead, after consulting with the
U.S. Customs Service, we concluded that HTS 8482.99.6590 should be
replaced with the 1997 HTS numbers HTS 8482.99.6560 and HTS
8482.99.6595. We also emphasize that HTS item numbers are provided for
convenience and that the written descriptions of the scopes of the
orders remain dispositive.
17.D. Certification of Conformance to Past Practice
Comment: Torrington claims that the Department should require all
respondents to identify each instance where they have not followed
previous Department rulings when responding to the Department's
questionnaires. Torrington claims that, by accepting information which
does not conform to previous agency determinations, the Department
changes its position effectively without providing a reasoned
explanation, which is contrary to administrative law. Torrington
asserts that, when the Department does not verify questionnaire
responses and respondents do not indicate where they have departed from
prior agency rulings, then the quality of evidence upon which the
Department relies is called into question profoundly under the
substantial-evidence standard. Additionally, citing Freeport Minerals
Co. v. United States, 776 F.2d. 1029 (CAFC 1985), among others,
Torrington claims that the Department failed to discharge its
affirmative duty to investigate and ascertain facts where (a) it knows
that certain respondents take the position that they have no obligation
to conform to prior agency rulings, and (b) it declines to take steps
to ascertain whether those respondents are failing to conform.
Torrington analogizes the administration of the antidumping laws
with customs-law enforcement. Torrington notes that, pursuant to 19 CFR
177.8(a)(2), importers are required to conform with prior customs
rulings issued to the importer in question and suggests that the
Department should take a parallel position in the administration of the
antidumping law.
In addition, Torrington considers it illogical and unfair to
continue an approach which requires the Department or Torrington to
comb through every questionnaire response anew to detect instances
wherein companies fail to follow prior rulings. Torrington states that
respondents know when they are complying and where they are
disregarding prior determinations. Torrington suggests that the
Department should recognize this by requiring them to identify
instances where their reporting reinstates a previously rejected
method.
Torrington raises issues specifically pertaining to NTN and
disagrees with NTN's position that it has no obligation to follow prior
Department rulings expressly pertaining to NTN when answering
subsequent Department questionnaires on the theory that each review is
an independent proceeding, citing AFBs V, 61 FR at 66520-21. Torrington
discusses several instances in which the Department rejected NTN's
position in the various bearings reviews and suggests that the
Department pursue the question carefully of whether NTN has disregarded
prior negative rulings in these reviews. In Torrington's view, failure
to apply past determinations when circumstances are essentially
unchanged would constitute arbitrary administrative action and
departures from precedent without explanation. If the Department cannot
allay concerns on any of the foregoing pre-decided issues, Torrington
urges the Department to resort liberally to facts available since
Torrington believes that NTN should assume any risk of disregarding
prior determinations.
NTN responds to Torrington's comments specifically addressing NTN's
reporting methodology and states that, for four of Torrington's points,
Torrington has mischaracterized NTN's reporting methodology. NTN
observes that the CIT reversed the fifth issue. NTN claims that
Torrington is unfamiliar with this case since it does not stand for the
proposition that the Department may ``liberally resort to facts
available'' when NTN has used a methodology with which Torrington
disagrees. NTN also disagrees with Torrington's interpretation of the
manner in which NTN has reported expenses and costs in prior segments
of this proceeding.
Koyo submits that, if Torrington is to insist on such a practice,
the Department should likewise restrict the issues that a petitioner
may raise in its various filings in these proceedings to matters which
have not already been addressed and rejected repeatedly by the
Department and, often, by the Court of International Trade and not
further appealed by the petitioner. Koyo suggests that, if Torrington
persists with this proposal and the Department approves it, the
Department should also restrict petitioners to matters not rejected
previously.
SKF asserts that Torrington's reference to customs law is
inapposite. SKF rebuts that one cannot compare a Customs tariff-
classification ruling applicable to an entry of a particular type of
merchandise to a complicated antidumping investigatory proceeding
where, in any given review, hundreds or thousands of rulings and
Department practices may be at issue. Moreover, SKF asserts that
Customs has itself determined by rule that the cited entry procedure is
necessary for the effective enforcement of the customs laws.
NTN, Koyo, SKF, NSK, and FAG disagree with Torrington's demand that
respondents identify all cases where they are not following prior
Departmental rulings and view the argument as pointless and impossible.
Respondents state that Torrington has raised this argument in previous
AFB reviews and the Department ultimately rejected Torrington's
argument. Respondents point out that they are not bound by decisions in
prior reviews as each administrative review is a distinct proceeding
involving different sales, adjustments, and underlying facts and what
transpired in previous reviews is not binding precedent in later
reviews. Respondents also claim that Torrington has failed to provide
any statutory support for such a drastic change in reported
requirements. Respondents argue that Torrington's request be rejected
because it would be unduly burdensome on both respondents and the
Department.
Department's Position: We disagree with Torrington that we should
require all respondents to conform their submissions, their
allocations, and their methodology to our most recent determinations
and rulings. In accordance with our usual practice, we also did not
require respondents to identify where they have continued to use any
methodology that we rejected in a prior review and justify the
departure from established practice. Each administrative review is a
separate reviewable proceeding involving different sales, adjustments,
and underlying facts. What transpired in previous reviews is not
binding precedent in later reviews and parties are entitled, at the
risk of the Department's determining otherwise, to argue against a
prior Department determination. As a practical matter, methodologies
the Department accepts in one review are generally used by respondents
in subsequent reviews and methodologies the Department rejects are not
perpetuated in later reviews. The Department, however, may reconsider
[[Page 54084]]
its position on an issue during the course of the proceeding in light
of facts and arguments presented by the parties. See AFBs V and AFBs
VI.
While the issue of a party's conformance to the Department's
previous rulings has been addressed in prior administrative reviews,
Torrington raises a new argument in these reviews with respect to its
analogy of the administration of the antidumping law with customs-law
enforcement. We have considered this argument, but we did not find that
we are required by statute to adopt Torrington's suggestions or that
the administration of the antidumping statute would be best served by
changing our practice in this regard.
17.E. Pre-Existing Inventory
Comment: SKF claims that SKF USA made some CEP sales of merchandise
that entered into the United States prior to suspension of liquidation
(November 9, 1988) and that, although SKF identified these sales in the
questionnaire response, the Department did not exclude these sales from
the margin calculations. SKF cites Stainless Steel Wire Rod From
France: Final Results of Antidumping Duty Administrative Review (61 FR
27296, 27314 (Sept. 11, 1996))(Wire Rods from France) to support its
argument that merchandise which entered the United States prior to the
1988 suspension of liquidation (and in the absence of affirmative
critical-circumstances finding) is not subject merchandise and is
therefore not subject to review by the Department. SKF asserts that it
demonstrated at verification the accuracy of its tracing system, so the
Department should be satisfied that these sales involve merchandise
which entered the United States prior to the suspension of liquidation.
Torrington claims that, because sampling prevents the Department
from linking a sale to an entry, it is incorrect to exclude any POR
sales from the margin calculations. Torrington claims that SKF has
neither demonstrated a link between these sales and entries made prior
to the suspension of liquidation nor has it provided sufficient
explanation of the circumstances involving the extended length of time
these bearings spent in inventory.
Department's Position: The record regarding the alleged pre-
November 9, 1988 entries is insufficient to satisfy us that SKF's
country-of-origin tracking system establishes conclusively that the
specific sales were of bearings which entered the United States prior
to the original suspension of liquidation. SKF's only explanation,
submitted in its case brief, is that its inventory system can link
European invoices with receipts into inventory at the U.S. affiliate.
Therefore, SKF has not demonstrated a link between the entry to
inventory and the sale to the unaffiliated party during the POR.
17.F. Inland Freight
Comment 1: Torrington contends that the Department should
recalculate NTN Japan's reported HM pre-sale inland freight and U.S.
inland freight expenses. Torrington maintains that determining these
expenses based upon sales value yields distortive figures. Torrington
points out that NTN Japan's current method of valuing these expenses
date back to the LTFV investigation in which the Department permitted
this approach because NTN Japan could not calculate a sale-by-sale
freight expense. Torrington argues that these expenses should be valued
based on weight and/or distance which are more relevant and accurate
factors than sales value.
NTN Japan argues that it incurs the pre-sale freight and inland
freight expenses regardless of weight. NTN Japan also contends that the
Department has verified these expenses in previous reviews and has
found that the basis upon which it calculates these expenses is not
unreasonably distortive. NTN Japan therefore maintains that the
Department should not recalculate freight on the basis of weight.
Department's Position: We agree with NTN Japan. We have accepted
the methodology NTN Japan used in past reviews and did not find it to
be distortive. See AFBs VI at 2122. Since there is nothing on the
record in the current reviews that would indicate that a change in
methodology is necessary, we have accepted NTN Japan's methodology for
allocating freight expenses.
17.G. Other Issues
Comment: Agusta Aerospace Corporation (AAC), an importer of subject
merchandise produced by SNFA France, argues that it is exempt from the
antidumping duty order in this review pursuant to the Agreement on
Trade in Civil Aircraft, 31 U.S.T. 619, April 12, 1979, (hereinafter
``the Agreement''). It maintains that the Agreement, which applies to
aircraft, components and spare parts, provides that signatories agree
to eliminate ``all customs duties and other charges of any kind levied
on, or in connection with, the importation of products * * * if such
products are for use in a civil aircraft and incorporation therein, in
the course of its manufacture, repair, maintenance, rebuilding,
modification or conversion * * * .'' (citing 31 U.S.T. 619, Art. 2).
AAC asserts that the AFBs it imported during the POR were used as parts
in A109 helicopters and such helicopters are exempt from duties under
the Agreement. AAC argues further that the improved AFBs which it
imported as a result of a mandate from its parent company should also
be exempt from antidumping duties since the mandate from its parent
company is functionally equivalent to AAC's parent company installing
the bearings on the aircraft at manufacture. AAC concludes that, since
the Agreement is an international treaty, the Department should not
establish antidumping orders which conflict with it, absent express
congressional language to the contrary.
AAC also argues that the Department should not assess antidumping
duties on AAC's imported AFBs because AAC imports a relatively small
amount of AFBs which comprise less than one percent of the total price
of their completed aircraft. AAC argues further that, since AAC and its
parent corporation permit only a finite, authorized market restricted
to Agusta aircraft service centers and owners and operators of their
aircraft to have access to the AFBs, the AFBs AAC imported cannot have
a negative material impact on the U.S. AFB market since AAC has not
authorized the U.S. AFB market to purchase AAC's AFBs. AAC concludes
that, if the Department were to impose antidumping duties against AAC,
the Department would defeat the purpose of the antidumping law,
particularly since AAC cannot elect to purchase bearings by other
manufacturers.
AAC challenges the Department's assessment of AFBs imported by AAC
as adverse facts available and argues that the assessment is the unfair
byproduct of SNFA's failure to respond to the Department's
questionnaire. AAC argues that the Department should take into
consideration the fact that, in its pre-preliminary results comments,
AAC provided the Department with detailed import information but, given
SNFA's refusal to respond, could not obtain information from SNFA. AAC
argues that it lacks any authority or influence over SNFA to secure
information from SNFA. AAC argues that the Department is punishing AAC
for SNFA's unwillingness to cooperate in this review by rejecting the
information AAC provided and by not requesting further information from
AAC or its parent corporation.
Torrington rebuts that the Department should reject AAC's
arguments. Citing ASG Industries, Inc. v. United States, 610 F. 2d 770,
777 n. 14 (1979),
[[Page 54085]]
Torrington states that antidumping and countervailing duties are
imposed in addition to regular duties. Torrington also notes that,
pursuant to Section 1335 of the Omnibus Trade and Competitiveness Act
of 1988, the Department may exclude certain sales of bearings that have
no substantial non-military use and are made pursuant to an existing
Memorandum of Understanding, citing 61 FR 66471, 66508 (December 17,
1996). Torrington argues that AAC makes no such claim.
Department's Position: We disagree with AAC. The elimination of
duties discussed in article 2 of the Agreement on Trade in Civil
Aircraft refers to the elimination of ordinary customs duties, not
antidumping duties imposed to offset unfair foreign trade practices.
Indeed, U.S. law makes even U.S. government agencies acting as
importers subject to antidumping or countervailing duties applicable to
the merchandise imported unless it is merchandise ``acquired by, or for
the use of,'' the Department of Defense from a country with which
Defense had a Memorandum of Understanding in effect on January 1, 1988,
or merchandise imported by Defense which ``has no substantial
nonmilitary use.'' See section 771(20) of the Tariff Act; AFBs V, 61 FR
66,472, 66,508 (Dec. 17, 1996). See also Federal-Mogul Corp. v. United
States, 813 F. Supp. 856, 865 n.6 (CIT 1993) (stating that in case of a
conflict between GATT and U.S. law, U.S. law applies). Therefore, the
Agreement on Trade in Civil Aircraft does not exempt AAC from the
requirement to pay antidumping duties on the merchandise at issue.
We also reject AAC's request that it be exempted from the order
because it imported and sold only a small amount of subject merchandise
from SNFA during the POR and because it imported and installed the
bearings in response to a ``mandate'' from its parent company. Neither
the statute nor our regulations provides exemptions from the dumping
law for such reasons. Thus, importing subject merchandise subject to a
``mandate'' is not ``functionally equivalent'' to installing
merchandise on the aircraft at manufacture. Moreover, the fact that
AAC's bearings comprise under one percent of the total price of the
finished product when sold to unrelated customers does not exempt it
from paying antidumping duties.
Finally, we have not used the information provided by AAC regarding
its imports of SNFA bearings to calculate an antidumping duty rate for
SNFA or AAC. In market-economy cases, the Department's practice is to
calculate a single rate for each respondent investigated or reviewed.
As AAC notes, however, SNFA did not respond to the Department's
questionnaire. While we recognize the difficulty that AAC may have
encountered in trying to obtain information from SNFA, the information
provided by AAC was based on its own imports of subject merchandise
and, absent SNFA's data, was insufficient to allow for the calculation
of an antidumping duty rate. As stated in the SAA at page 826, imported
components which are further manufactured are not exempt from
antidumping duties.
[FR Doc. 97-27473 Filed 10-16-97; 8:45 am]
BILLING CODE 3510-DS-P