[Federal Register Volume 60, Number 39 (Tuesday, February 28, 1995)]
[Notices]
[Pages 10900-10959]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-4615]
[[Page 10899]]
_______________________________________________________________________
Part II
Department of Commerce
_______________________________________________________________________
International Trade Administration
_______________________________________________________________________
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts
Thereof From France, et al.; Notices
Federal Register / Vol. 60, No. 39 / Tuesday, February 28, 1995 /
Notices
[[Page 10900]]
DEPARTMENT OF COMMERCE
International Trade Administration
[A-427-801, A-428-801, A-588-804, A-559-801, A-401-801, A-549-801, A-
412-801]
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
AGENCY: International Trade Administration, Import Administration,
Department of Commerce.
ACTION: Notice of Final Results of Antidumping Duty Administrative
Reviews, Partial Termination of Administrative Reviews, and Revocation
in Part of Antidumping Duty Orders.
-----------------------------------------------------------------------
SUMMARY: On February 28, 1994, the Department of Commerce (the
Department) published the preliminary results of its administrative
reviews of the antidumping duty orders on antifriction bearings (other
than tapered roller bearings) and parts thereof (AFBs) from France,
Germany, Japan, Singapore, Sweden, Thailand and the United Kingdom. The
classes or kinds of merchandise covered by these reviews are ball
bearings and parts thereof, cylindrical roller bearings and parts
thereof, and spherical plain bearings and parts thereof, as described
in more detail below. The reviews cover 29 manufacturers/exporters. The
review period is May 1, 1992, through April 30, 1993.
Based on our analysis of the comments received, we have made
changes, including corrections of certain inadvertent programming and
clerical errors, in the margin calculations. Therefore, the final
results differ from the preliminary results. The final weighted-average
dumping margins for the reviewed firms for each class or kind of
merchandise are listed below in the section entitled ``Final Results of
Review.''
The Department also is revoking the antidumping duty orders with
respect to the following companies and merchandise:
Spherical plain bearings from France--SKF
Spherical plain bearings from Japan--Honda
Ball bearings from Japan--Honda
Cylindrical roller bearings from Japan--Honda
EFFECTIVE DATE: February 28, 1995.
FOR FURTHER INFORMATION CONTACT: The appropriate case analyst, for the
various respondent firms listed below, at the Office of Antidumping
Compliance, International Trade Administration, Import Administration,
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW.,
Washington, DC 20230; telephone: (202) 482-4733.
France
Jacqueline Arrowsmith (SKF, SNR), Kris Campbell (SNFA), Matthew
Rosenbaum (Franke & Heydrich, Hoesch Rothe Erde, Rollix Defontaine), or
Michael Rill.
Germany
Jacqueline Arrowsmith (SKF), Kris Campbell (FAG), Carlo Cavagna
(NTN Kugellagerfabrik), Davina Friedmann (INA), Charles Riggle (Fichtel
& Sachs, GMN), Matthew Rosenbaum (Franke & Heydrich, Hoesch Rothe Erde,
Rollix Defontaine), or Michael Rill.
Japan
Carlo Cavagna (Honda, Nachi, NTN), William Czajkowski (Takeshita),
J. David Dirstine (NSK, Koyo), Joseph Fargo (Nankai Seiko), Michael
Panfeld (IKS, NPBS), or Richard Rimlinger.
Singapore
William Czajkowski (NMB/Pelmec), or Richard Rimlinger.
Sweden
Matthew Rosenbaum (SKF), or Michael Rill.
Thailand
William Czajkowski (NMB/Pelmec), or Richard Rimlinger.
United Kingdom
Jacqueline Arrowsmith (RHP/NSK), Kris Campbell (Barden/FAG), or
Michael Rill.
SUPPLEMENTARY INFORMATION:
Background
On February 28, 1994, the Department published in the Federal
Register the preliminary results of its administrative reviews of the
antidumping duty orders on antifriction bearings (other than tapered
roller bearings) and parts thereof (AFBs) from France, Germany, Japan,
Singapore, Sweden, Thailand and the United Kingdom (59 FR 9463). We
gave interested parties an opportunity to comment on our preliminary
results.
At the request of certain interested parties, we held a public
hearing on general issues pertaining to all countries on March 28,
1994, and hearings on case-specific issues as follows: Germany on March
29, 1994; and Japan on March 30, 1994.
We are terminating the administrative reviews initiated for General
Bearing Corp., SST Bearing Corp., and Peer International (Peer) with
respect to subject merchandise from Japan. General Bearing Corp. and
SST Bearing Corp. informed us that they neither produced AFBs in Japan
nor exported Japanese-produced bearings to the United States. Peer
informed us that although it is a reseller of Japanese-made bearings,
all of its suppliers had knowledge at the time of sale that the
merchandise was destined for the United States. Consequently, Peer is
not a reseller as defined in 19 CFR 353.2(s) because its sales cannot
be used to calculate U.S. price (USP).
Revocations In Part
In accordance with Sec. 353.25(a)(2) of the Department's
regulations (19 CFR 353.25(a)(2)), the Department is revoking the
antidumping duty orders covering the following companies and
merchandise:
Spherical plain bearings from France--SKF
Spherical plain bearings from Japan--Honda
Ball bearings from Japan--Honda
Cylindrical roller bearings from Japan--Honda
All of the above firms have submitted, in accordance with 19 CFR
353.25(b), requests for revocation of the orders with respect to their
sales of the merchandise in question. They have also demonstrated three
consecutive years of sales at not less than foreign market value (FMV)
and have submitted the required certifications. All of these firms have
agreed in writing to their immediate reinstatement in the order, as
long as any producer or reseller is subject to the order, if the
Department concludes under 19 CFR 353.22(f) that the firm, subsequent
to the revocation, sold the merchandise at less than FMV. Furthermore,
it is not likely that they will sell the subject merchandise at less
than FMV in the future. Therefore, the Department is revoking the
orders with respect to the indicated companies.
Scope of Reviews
The products covered by these reviews are AFBs, and constitute the
following ``classes or kinds'' of merchandise: Ball bearings and parts
thereof (BBs), cylindrical roller bearings and parts thereof (CRBs),
and spherical plain bearings and parts thereof (SPBs). For a detailed
description of the products covered under these classes or kinds of
merchandise, including a compilation of all pertinent scope
determinations, see the ``Scope Appendix'' which is appended to this
notice of final results. [[Page 10901]]
Best Information Available
In accordance with section 776(c) of the Tariff Act of 1930, as
amended (the Act), we have determined that the use of the best
information available (BIA) is appropriate for a number of firms. For
certain firms, total BIA was necessary, while for other firms, only
partial BIA was applied. For a discussion of our application of BIA,
see the ``Best Information Available'' section of the Issues Appendix.
Sales Below Cost in the Home Market
The Department disregarded sales below cost for the following firms
and classes or kinds of merchandise:
------------------------------------------------------------------------
Class or kind of
Country Company merchandise
------------------------------------------------------------------------
France................................. SKF.......... BBs, SPBs.
SNR.......... BBs, CRBs.
Germany................................ FAG.......... BBs, CRBs.
INA.......... BBs, CRBs.
SKF.......... BBs, CRBs, SPBs.
Japan.................................. Koyo......... BBs, CRBs.
Nachi........ BBs, CRBs.
NPBS......... BBs.
NSK.......... BBs, CRBs.
NTN.......... BBs, CRBs, SPBs.
Singapore.............................. NMB/Pelmec... BBs.
Sweden................................. SKF.......... BBs, CRBs.
Thailand............................... NMB/Pelmec... BBs.
United Kingdom......................... RHP.......... BBs, CRBs.
Barden/FAG... BBs.
------------------------------------------------------------------------
Changes Since the Preliminary Results
Based on our analysis of comments received, we have made the
following changes in these final results.
Where applicable, certain programming and clerical errors
in our preliminary results have been corrected. Any alleged programming
or clerical errors with which we do not agree are discussed in the
relevant sections of the Issues Appendix.
Pursuant to the decision of the United States Court of
Appeals for the Federal Circuit in Ad Hoc Committee of AZ-NM-TX-FL
Producers of Gray Portland Cement v. United States, 13 F.3d 398 (CAFC
1994) (Ad Hoc Comm.), we have allowed a deduction for pre-sale inland
freight in the calculation of foreign market value only as an indirect
selling expense under 19 CFR 353.56(b), except where such expenses have
been shown to be directly related to sales.
Analysis of Comments Received
All issues raised in the case and rebuttal briefs by parties to
these 15 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 the following percentage weighted-average margins to
exist for the period May 1, 1992, through April 30, 1993:
------------------------------------------------------------------------
Company BBs CRBs SPBs
------------------------------------------------------------------------
France
------------------------------------------------------------------------
Franke & Heydrich............................ 66.42 (\2\) (\2\)
Hoesch Rothe Erde............................ (\1\) (\2\) (\2\)
Rollix Defontaine............................ (\1\) (\2\) (\2\)
SKF.......................................... 3.45 (\1\) 0.00
SNFA......................................... 66.42 18.37 (\2\)
SNR.......................................... 1.91 2.58 (\2\)
------------------------------------------------------------------------
Germany
------------------------------------------------------------------------
FAG.......................................... 11.80 19.64 18.79
Fichtel & Sachs.............................. 14.83 (\2\) (\2\)
Franke & Heydrich............................ 132.25 (\2\) (\2\)
GMN.......................................... 35.43 (\2\) (\2\)
Hoesch Rothe Erde............................ (\1\) (\2\) (\2\)
INA.......................................... 29.80 10.88 (\2\)
NTN.......................................... 8.41 (\1\) (\1\)
Rollix Defontaine............................ (\1\) (\2\) (\2\)
SKF.......................................... 15.53 11.16 22.44
------------------------------------------------------------------------
Japan
------------------------------------------------------------------------
Honda........................................ 0.37 0.01 0.01
IKS.......................................... 8.72 (\2\) (\2\)
Koyo......................................... 39.56 3.55 (\1\)
Nachi........................................ 12.46 1.03 (\2\)
Nankai Seiko................................. 1.08 (\2\) (\2\)
NPBS......................................... 18.00 (\2\) (\2\)
NSK.......................................... 10.47 9.10 (\1\)
NTN.......................................... 13.90 13.71 4.97
Takeshita.................................... 14.58 (\2\) (\2\)
------------------------------------------------------------------------
Singapore
------------------------------------------------------------------------
NMB/Pelmec................................... 4.84
------------------------------------------------------------------------
Sweden
------------------------------------------------------------------------
SKF.......................................... 16.41 13.02
------------------------------------------------------------------------
Thialand
------------------------------------------------------------------------
NMB/Pelmec................................... 0.01
------------------------------------------------------------------------
United Kingdom
------------------------------------------------------------------------
Barden/FAG................................... 4.86 8.22
RHP/NSK...................................... 14.57 19.71
------------------------------------------------------------------------
\1\No U.S. sales during the review period.
\2\No review requested.
Cash Deposit Requirements
To calculate the cash deposit rate for each exporter, we divided
the total dumping margins for each exporter by the total net USP value
for that exporter's sales for each relevant class or kind during the
review period under each order.
In order to derive a single deposit rate for each class or kind of
merchandise for each respondent (i.e., each exporter or manufacturer
included in these reviews), we weight-averaged the purchase price (PP)
and exporter's sales price (ESP) deposit rates (using the USP of PP
sales and ESP sales, respectively, as the weighting factors). To
accomplish this where we sampled ESP sales, we first calculated the
total dumping margins for all ESP sales during the review period by
multiplying the sample ESP margins by the ratio of total weeks in the
review period to sample weeks. We then calculated a total net USP value
for all ESP sales during the review period by multiplying the sample
ESP total net value by the same ratio. We then divided the combined
total dumping margins for both PP and ESP sales by the combined total
USP value for both PP and ESP sales to obtain the deposit rate.
We will direct Customs to collect the resulting percentage deposit
rate against the entered Customs value of each of the exporter's
entries of subject merchandise entered, or withdrawn from warehouse,
for consumption on or after the date of publication of this notice.
Entries of parts incorporated into finished bearings before sales
to an unrelated customer in the United States will receive the
exporter's deposit rate for the appropriate class or kind of
merchandise.
Furthermore, the following deposit requirements will be effective
upon publication of this notice of final results of administrative
review 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 Act: (1) The cash deposit rates for the
reviewed companies will be the rates shown above, except that for firms
whose weighted-average margins are less than 0.50 percent, and
therefore de minimis, the Department shall not require a 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 [[Page 10902]] rate for all
other manufacturers or exporters will continue to be the ``All Others''
rate for the relevant class or kind and country made effective by the
final results of review published on July 26, 1993 (see Final Results
of Antidumping Duty Administrative Reviews and Revocation in Part of an
Antidumping Duty Order, 58 FR 39729, July 26, 1993). These rates are
the ``All Others'' rates from the relevant LTFV investigations.
These deposit requirements, when imposed, shall remain in effect
until publication of the final results of the next administrative
reviews.
Assessment Rates
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. Because sampling
and other simplification methods prevent entry-by-entry assessments, we
will calculate wherever possible an exporter/importer-specific
assessment rate for each class or kind of antifriction bearings.
1. Purchase Price Sales
With respect to PP sales for these final results, we divided the
total dumping margins (calculated as the difference between FMV and
USP) for each importer by the total number of units sold to that
importer. We will direct Customs to assess the resulting unit dollar
amount against each unit of merchandise in each of that importer's
entries under the relevant order during the review period. Although
this will result in assessing different percentage margins for
individual entries, the total antidumping duties collected for each
importer under each order for the review period will be almost exactly
equal to the total dumping margins.
2. Exporter's Sales Price Sales
For ESP sales (sampled and non-sampled), we divided the total
dumping margins for the reviewed sales by the total entered value of
those reviewed sales for each importer. We will direct Customs to
assess the resulting percentage margin against the entered Customs
values for the subject merchandise on each of that importer's entries
under the relevant order during the review period. While the Department
is aware that the entered value of sales during the period of review
(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.
In the case of companies which did not report entered value of
sales, we calculated a proxy for entered value of sales, based on the
price information available and appropriate adjustments (e.g.,
insurance, freight, U.S. brokerage and handling, U.S. profit, and any
other items, as appropriate, on a company-specific basis).
For calculation of the ESP assessment rate, entries for which
liquidation was suspended, but which ultimately fell outside the scope
of the orders through operation of the ``Roller Chain'' rule, are
included in the assessment rate denominator to avoid over-collecting.
(The ``Roller Chain'' rule excludes from the collection of antidumping
duties bearings which were imported by a related party and further
processed, and which comprise less than one percent of the finished
product sold to the first unrelated customer in the United States. See
the section on Further Manufacturing and the ``Roller Chain'' Rule in
the Issues Appendix.)
This notice also serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as the only reminder to parties subject to
administrative protective orders (APO) of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with 19 CFR 353.34(d). Failure to
comply is a violation of the APO.
These administrative reviews and this notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.
Dated: January 31, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
Scope Appendix Contents
A. Description of the Merchandise
B. Scope Determinations
Issues Appendix Contents
Abbreviations
Comments and Responses
1. Annual Period of Review Averaging
2. Assessment and Duty Deposits
3. Best Information Available
4. Circumstance-of-Sale Adjustments
A. Advertising and Promotional Expenses
B. Technical Services and Warranty Expenses
C. Inventory Carrying Costs
D. Post-Sale Warehousing
E. Commissions
F. Credit
G. Indirect Selling Expenses
H. Miscellaneous Charges
5. Cost of Production and Constructed Value
A. Research and Development
B. Profit for Constructed Value
C. Related Party Inputs
D. Inventory Write-off
E. Interest Expense Offset
F. Other Issues
6. Discounts, Rebates and Price Adjustments
7. Families, Model Match and Differences in Merchandise
8. Further Manufacturing and Roller Chain
9. Level of Trade
10. Packing and Movement Expenses
11. Related Parties
12. Samples, Prototypes and Ordinary Courses of Trade
13. Taxes, Duties and Drawback
14. U.S. Price Methodology
15. Accuracy of the Home Market Database
16. Miscellaneous Issues
A. Verification
B. Database Problems
C. Home Market Viability
D. Scope Ruling
E. Pre-Final Reviews
F. Termination Requests
G. Programming
H. Disclosure
I. Revocation
J. No Sales During Period of Review
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, 8482.99.10, 8482.99.35, 8482.99.6590, 8482.99.70,
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, [[Page 10903]] 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, 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, 8482.99.6590, 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,
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, 4016.93.10, 4016.93.50,
6909.19.5010, 8483.30.80, 8483.90.30, 8485.90.00, 8708.93.5000,
8708.99.50, 8803.10.00, 8803.20.00, 8803.30.00, 8803.90.30, 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.) outlined above with certain limitations.
With regard to finished parts, all such parts are included in the scope
of these orders. For unfinished parts, such parts are included if (1)
they have been heat treated, or (2) heat treatment is not required to
be performed on the part. Thus, the only unfinished parts that are not
covered by these orders are those that will be subject to heat
treatment after importation.
The ultimate application of a bearing also does not influence
whether the bearing is covered by the orders. Bearings designed for
highly specialized applications are not excluded. Any of the subject
bearings, regardless of whether they may ultimately be utilized in
aircraft, automobiles, or other equipment, are within the scope of
these orders.
B. Scope Determinations
The Department has issued numerous clarifications of the scope of
the orders. The following is a compilation of the scope rulings and
determinations the Department has made.
Scope determinations made in the Final Determinations of Sales at
Less than Fair Value; Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof from the Federal Republic of Germany (AFBs
Investigation of SLTFV), 54 FR 19006, 19019 (May 3, 1989):
Products covered:
Rod end bearings and parts thereof
AFBs used in aviation applications
Aerospace engine bearings
Split cylindrical roller bearings
Wheel hub units
Slewing rings and slewing bearings (slewing rings and slewing
bearings were subsequently excluded by the International Trade
Commission's negative injury determination. See International Trade
Commission: Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof from the Federal Republic of Germany, France, Italy,
Japan, Romania, Singapore, Sweden, Thailand and the United Kingdom, 54
FR 21488 (May 18, 1989).
Wave generator bearings
Bearings (including mounted or housed units, and flanged or
enhanced bearings) ultimately utilized in textile machinery
Products excluded:
Plain bearings other than spherical plain bearings
Airframe components unrelated to the reduction of friction
Linear motion devices
Split pillow block housings
Nuts, bolts, and sleeves that are not integral parts of a
bearing or attached to a bearing under review
Thermoplastic bearings
Stainless steel hollow balls
Textile machinery components that are substantially advanced
in function(s) or value
Wheel hub units imported as part of front and rear axle
assemblies; wheel hub units that include tapered roller bearings; and
clutch release bearings that are already assembled as parts of
transmissions
Scope rulings completed between April 1, 1990, and June 30, 1990.
See Scope Rulings, 55 FR 42750 (October 23, 1990):
Products excluded:
Antifriction bearings, including integral shaft ball bearings,
used in textile machinery and imported with attachments and
augmentations sufficient to advance their function beyond load-bearing/
friction-reducing capability
Scope rulings completed between July 1, 1990, and September 30,
1990. See Scope Rulings, 55 FR 43020 (October 25, 1990):
Products covered:
Rod ends
Clutch release bearings
Ball bearings used in the manufacture of helicopters
Ball bearings used in the manufacture of disk drives
Scope rulings completed between April 1, 1991, and June 30, 1991.
See Notice of Scope Rulings, 56 FR 36774 (August 1, 1991):
Products excluded:
Textile machinery components including false twist spindles,
belt guide rollers, separator rollers, damping units, rotor units, and
tension pulleys
Scope rulings published in Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof; Final Results of
Antidumping Administrative Review (AFBs I), 56 FR 31692, 31696 (July
11, 1991):
Products covered:
Load rollers and thrust rollers, also called mast guide
bearings
Conveyor system trolley wheels and chain wheels
Scope rulings completed between July 1, 1991, and September 30,
1991. See Scope Rulings, 56 FR 57320 (November 8, 1991):
Products covered:
Snap rings and wire races
Bearings imported as spare parts
Custom-made specialty bearings
Products excluded:
Certain rotor assembly textile machinery components
Linear motion bearings
Scope rulings completed between October 1, 1991, and December 31,
1991. See Notice of Scope Rulings, 57 FR 4597 (February 6, 1992):
Products covered:
Chain sheaves (forklift truck mast components)
Loose boss rollers used in textile drafting machinery, also
called top rollers [[Page 10904]]
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
Products excluded:
SAR series of ball bearings
Certain eccentric locking collars that are part of housed
bearing units
Scope rulings completed between October 1, 1993, and December 31,
1993. See Scope Rulings, 59 FR 8910 (February 24, 1994).
Products excluded:
Certain textile machinery components
Scope rulings completed after March 31, 1994.
Products excluded:
Certain textile machinery components
Issues Appendix
Company Abbreviations
Barden--The Barden Corporation (U.K.) Ltd.; The Barden Corporation
FAG-Germany--FAG Kugelfischer Georg Schaefer KGaA
FAG-UK--FAG (UK) Ltd.
Federal-Mogul--Federal-Mogul Corporation
Fichtel & Sachs--Fichtel & Sachs AG; Sachs Automotive Products Co.
GMN--Georg Muller Nurnberg AG; Georg Muller of America
Hoesch--Hoesch Rothe Erde AG
Honda--Honda Motor Co., Ltd.; American Honda Motor Co., Inc.
INA--INA Walzlager Schaeffler KG; INA Bearing Company, Inc.
IKS--Izumoto Seiko Co., Ltd.
Koyo--Koyo Seiko Co. Ltd.
Nachi--Nachi-Fujikoshi Corp.; Nachi America, Inc.; Nachi Technology
Inc.
Nankai--Nankai Seiko Co., Ltd.
NMB/Pelmec--NMB Singapore Ltd.; Pelmec Industries (Pte.) Ltd.; NMB
Thai, Ltd.; Pelmec Thai, 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-Europe--NSK Bearings Europe, Ltd.
NTN-Germany--NTN Kugellagerfabrik (Deutschland) GmbH
NTN--NTN Corporation; NTN Bearing Corporation of America; American NTN
Bearing Manufacturing Corporation
Peer Int'l--Peer International, Ltd.
RHP--RHP Bearings; RHP Bearings, Inc.
Rollix--Rollix Defontaine, S.A.
SKF-France--SKF Compagnie d'Applications Mecaniques, S.A. (Clamart);
ADR; SARMA
SKF-Germany--SKF GmbH; SKF Service GmbH; Steyr Walzlager
SKF-Sweden--AB SKF; SKF Mekanprodukter AB; SKF Sverige
SKF-UK--SKF (UK) Limited; SKF Industries; AMPEP Inc.
SKF Group--SKF-France; SKF-Germany; SKF-Sweden; SKF-UK; SKF USA, Inc.
SNFA--SNFA Bearings, Ltd.
SNR--SNR Roulements; SNR Bearings USA, Inc.
Takeshita--Takeshita Seiko Company
Torrington--The Torrington Company
Other Abbreviations
COP--Cost of Production
COM--Cost of Manufacturing
CV--Constructed Value
ESP--Exporter's Sales Price
FMV--Foreign Market Value
HM--Home Market
HMP--Home Market Price
OEM--Original Equipment Manufacturer
POR--Period of Review
PP--Purchase Price
USP--United States Price
DOC--Department of Commerce
AFBs LTFV Investigation--Final Determinations of Sales at Less than
Fair Value; Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof from the Federal Republic of Germany, 54 FR 19006,
19019 (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--Final Results of Antidumping Duty Administrative Reviews and
Revocation in Part of an Antidumping Duty Order, 58 FR 39729 (July 26,
1993)
1. Annual POR Averaging
Comment 1: NSK contends that, when comparing annual average FMVs
with PP transactions, the Department should include in such FMVs only
those HM models that match to PP sales, rather than HM models that
match to both PP and ESP sales. That is, the Department should
calculate two separate annual average FMVs, one based only on HM models
that match to PP sales, and one based only on HM models that match to
ESP sales. This would involve conducting a separate price stability
test on HM models that match to PP transactions. NSK notes that the
Department treats PP transactions differently than ESP transactions,
that FMVs are computed separately for ESP [[Page 10905]] and PP sales,
and that different COS adjustments are made depending on whether FMV is
matched to PP or ESP transactions. NSK requests that, if the Department
is unwilling to conduct a separate price stability test on all HM
models matched to PP transactions, the Department should use the
monthly, rather than annual, weighted-average FMVs for PP matches.
Department's Position: We disagree. The HM price stability test,
which allows for limited price fluctuations on a model-by-model basis,
measures the overall stability of HM prices for the class or kind of
merchandise under consideration over the POR (see AFBs III at 39734).
The test is designed for determining whether HM sales prices during the
POR are stable enough to allow the use of annual average, rather than
monthly average, HM prices as the basis of FMV. There is no reason to
take into consideration whether particular HM models are matched to PP
or ESP transactions as the type of U.S. sale is not relevant to the
question of whether HM prices are stable. Furthermore, the fact that PP
sales are distinguishable from ESP sales, that ESP sales may be sampled
while PP sales are not, and that different COS adjustments are made
when comparing to PP and ESP sales are not relevant to whether the HM
prices underlying FMVs are stable. In deciding whether to calculate POR
weighted-averaged FMVs we performed the tests outlined in our
preliminary results on HM sales databases to determine whether: (1)
There was a minimal variance between monthly and POR weighted-average
prices; and (2) there was any significant correlation between
fluctuations in price and time. Thus, we conclude that our price
stability test, performed on a class or kind basis, does not need to be
modified to distinguish between HM models matched to PP sales and those
matched to ESP sales.
2. Assessment and Duty Deposits
Comment 1: The FAG Group (Barden, FAG-Germany, and FAG-UK) and NSK
contend that the Department's assessment rate methodology is flawed,
and state that the Department acted contrary to law in basing
assessment rates on the Customs entered values of those sales reviewed
by the Department for the POR, because the sales actually reviewed by
the Department for the POR may have involved merchandise entered before
the POR. Instead, respondents claim that the Department should base
assessment rates on the Customs entered values of merchandise actually
entered during the POR, as submitted by respondents. Respondents
maintain that the Department should determine assessment rates by
dividing total antidumping duties due (calculated as the difference
between statutory FMV and statutory USP for the sales reported for the
POR) by the entered values of the merchandise actually entered during
the POR (not by the entered values of the merchandise actually sold
during the POR). Respondents argue that the Department's current
methodology can lead to a substantial overcollection of dumping duties.
Both Torrington and Federal-Mogul argue that the Department's
methodology is valid. Torrington notes that the Department concluded
that the current methodology is reasonable and that it constitutes an
appropriate use of the Department's discretion to implement sampling
and averaging techniques as provided for in section 777A of the Tariff
Act. See AFBs I at 31694. Torrington states that since the U.S. sales
used to calculate the dumping margins are only a sample of the total
U.S. sales during the POR, application of FAG's proposed methodology
would lead to substantial undercollection of antidumping duties, unless
the Department adjusts that methodology to take into account all U.S.
sales during the POR.
Torrington also states that both the Department's current
methodology and FAG's proposed methodology are deficient in that
neither method ``ties entries to sales.'' Torrington proposes two
methods for dealing with the problem of reviewed sales that do not
match to particular entries during the POR. First, Torrington suggests
that the Department review entries rather than sales. Torrington points
out that this method is not ideal because it could place the Department
in the position of reviewing entries made during the POR that contained
merchandise that was sold after the POR. Second, Torrington proposes
that the Department require respondents to submit adequate information
to trace each entry directly to the sale in the United States.
Torrington observes that at present this method would be impossible
because the administrative record in this review does not permit
tracing each sale to the entry.
Federal-Mogul states that the Department's methodology is logical
because it establishes a link between the values calculated on the
basis of the sales analyzed and the actual assessment values over time
and, therefore, avoids the distortions that FAG's alternative would
engender.
Department's Position: We disagree with the FAG Group and NSK. As
stated in AFBs III (at 39737), section 751 of the Tariff Act requires
that the Department calculate the amount by which the FMV exceeds the
USP and assess antidumping duties on the basis of that amount. However,
there is nothing in the statute that dictates how the actual assessment
rate is to be determined from that amount.
In accordance with section 751, we calculated the difference
between FMV and USP (the dumping margin) for all reported U.S. sales.
For PP sales we have calculated assessment rates based on the total of
these differences for each importer divided by the total number of
units sold to that importer. Therefore, each importer is only liable
for the duties related to its entries. In ESP cases, we generally
cannot tie sales to specific entries. In addition, the calculation of
specific antidumping duties for every entry made during the POR is
impossible where dumping margins have been based on sampling, even if
all sales could be tied to specific entries. Hence, for ESP sales, in
order to obtain an accurate assessment of antidumping duties on all
entries during the POR, we have expressed the difference between FMV
and USP as a percentage of the entered value of the examined sales for
each exporter/importer (ad valorem rates). We will direct the U.S.
Customs Service to assess antidumping duties by applying that
percentage to the entered value of each of that importer's entries of
subject merchandise under the relevant order during the POR.
This approach is equivalent to dividing the aggregate dumping
margins, i.e., the difference between statutory FMV and statutory USP
for all sales reviewed, by the aggregate USP value of those sales and
adjusting the result by the average difference between USP and entered
value for those sales. While we are 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 that would have been determined
if we had reviewed those sales of merchandise actually entered during
the POR.
Comment 2: Federal-Mogul and Torrington object to the Department's
policy of calculating the cash deposit rate as a percentage of
statutory USP. They claim that this practice results in a systematic
undercollection of duty deposits. Federal-Mogul and Torrington propose
that the Department base its deposit rate methodology on Customs
entered values because duty deposit rates are applied to entered value.
Torrington states that the legislative [[Page 10906]] history requires
that the estimated antidumping duty deposit rate be as accurate and as
close to actual duties as possible, given the information available.
Hence, if the Department has the entered value data available for
calculating the assessment rates, it should use this data.
Torrington contends that it is important to focus on the difference
between the entered value used by Customs to collect duties and the ESP
calculated by Commerce. Entered value is different from ESP because ESP
includes expenses, such as the value added tax, that are excluded from
entered value.
RHP, Koyo, FAG, NTN, NSK, and SKF disagree with Torrington and
Federal-Mogul. Respondents argue that it has been the Department's
consistent practice to use USP as the denominator in calculating the
cash deposit rate and to apply this rate to the entered value of future
imports of the subject merchandise. In support of this argument, NTN
notes that the Court has repeatedly upheld the Department's methodology
as reasonable and in accordance with the antidumping statute. NTN cites
Federal-Mogul Corp. v. United States, 813 F. Supp. 856, 866-67 (CIT
1993) (Federal-Mogul) , in which the Court ruled that the antidumping
statute does not specify that the same method should be used for
calculating both assessment rates and cash deposit rates, and that the
Department's methodology is ``reasonable and in accordance with the
law.'' Thus, NSK states that the Department should adhere to its
established practice and calculate separate assessment and deposit
rates.
Respondents contend that Torrington's and Federal-Mogul's arguments
fail to adequately take into account that, under any method of
calculating cash deposit rates, cash deposits are unlikely to equal the
amount by which FMV exceeds USP. Furthermore, if any difference between
the deposit rate and the ultimate antidumping liability results, the
Department will instruct the Customs Service to collect or to refund
the difference with interest.
Respondents assert that Torrington has failed to demonstrate that
its methodology would result in a more accurate estimation of the duty.
Torrington's claim is premised on the assumption that the information
on the record will remain constant from review to review. Respondents
hold that this is incorrect because even the record for a single POR
reveals fluctuations in pricing and expenses and, therefore, in margin
calculations. For example, indirect selling expense factors during the
POR can and have changed significantly from the first part of the
period to the second part. SKF claims the CIT recognized this situation
in upholding the Department's methodology in Federal-Mogul; Zenith
Electronics Corp. v. United States, 770 F. Supp. 648 (CIT 1991) and
Daewoo Electronics Co. v. United States, 712 F. Supp. 931 (CIT 1989).
SKF argues that Torrington's illustration that ESP will always be
greater than entered value is speculative. SKF points out that while
ESP includes additions for elements which are not included in entered
value, certain expenses are subtracted from ESP which are included in
entered value.
Department's Position: We disagree with Torrington and Federal-
Mogul. First, as we stated in the final results of AFBs I and AFBs III,
we do not accept the argument that the deposit rate must be calculated
in exactly the same manner as the assessment rate. Section 751 of the
Tariff Act merely requires that both the deposit rate and the
assessment rate be derived from the same FMV/USP differential.
Furthermore, under any method of calculating cash deposit rates, there
would be no certainty that the cash deposit rate would cause an amount
to be collected that is equal to the amount by which FMV exceeds USP.
Duty deposits are merely estimates of future dumping liability. If the
amount of the deposit is less than the amount ultimately assessed, the
Department will instruct the U.S. Customs Service to collect the
difference with interest, as provided for under sections 737 and 778 of
the Tariff Act and 19 CFR 353.24.
Comment 3: Torrington and Federal-Mogul contend that the Department
should deduct from ESP any antidumping duties ``effectively''
reimbursed by foreign producers to their U.S. affiliates. Torrington
argues that in past administrative reviews it has identified and
reviewed evidence of reimbursement of antidumping duties. Torrington
argues that the Department's decision not to deduct antidumping duties
from ESP in the previous review was contrary to the regulations and the
law. Torrington finds justification for removing antidumping duties
from ESP under 19 CFR 353.26, the Department's reimbursement
regulation, stating that by its own terms, it applies generally ``[i]n
calculating the United States price.'' Torrington maintains that if the
reimbursement regulation is not applicable in ESP situations, a foreign
producer can reimburse its related U.S. subsidiary for duties and
continue dumping in the United States.
Torrington and Federal-Mogul also argue that the amount of
antidumping duties assessed on imports of subject merchandise
constitutes ``additional costs, charges, and expenses, * * * incident
to bringing the merchandise from the place of shipment in the country
of exportation to the place of delivery in the United States,'' as
provided in section 772(d)(2)(A) of the Tariff Act. Furthermore,
Torrington and Federal-Mogul contend, the Department's regulations
recognize that such duties, when reimbursed by a foreign producer or
exporter, constitute a selling expense that must be deducted from USP.
NTN, RHP, SKF, and the FAG Group contend that Torrington and
Federal-Mogul have not provided credible arguments as to why the
Department should alter its position on this issue. The FAG Group
states that the reimbursement regulation cannot apply to ESP sales
because in an ESP situation the importer is the exporter. Hence, one
cannot reimburse oneself. The FAG Group also states that Torrington's
and Federal-Mogul's arguments are premature at best because respondents
have not yet been assessed with actual antidumping duties--liquidation
of all entries from November 1988 to date has remained suspended, and
the only payments made so far have been of estimated antidumping
duties. Thus, none of the reported ESP sales made by FAG (or any other
principal respondent) could have included in the resale price amounts
for assessed antidumping duties.
Koyo, NTN, and the FAG Group argue that there is no legal basis for
Torrington's and Federal-Mogul's argument that the Department should
treat antidumping duties as selling expenses to be deducted from USP.
Furthermore, respondents state that a deduction of antidumping duties
paid would violate Department and judicial precedent. FAG notes that,
in Federal-Mogul v. United States, Slip Op. 93-17 at 40 (CIT 1993), the
Court held that deposits of antidumping duties should not be deducted
from USP because such deposits are not analogous to deposits of
``normal import duties.''
FAG and NSK contend that it is clear that, in accordance with 19
USC 1673, which states that the purpose of antidumping law is to
measure the amount by which FMV exceeds USP, antidumping duties should
not be deducted from USP. Respondents claim that making an additional
deduction from USP for the same antidumping duties that correct
discrimination [[Page 10907]] between the price of comparable goods in
the U.S. and the foreign markets would result in double-counting.
FAG argues that, if the Department agrees with Torrington's
position, it should, to preserve comparability, add to USP the amount
of any antidumping duties, plus interest, that are refunded to
respondents.
Department's Position: We disagree with Torrington and Federal-
Mogul that the Department should deduct from ESP antidumping duties
allegedly reimbursed by foreign producers to their U.S. affiliates. In
this administrative review neither party has identified record evidence
that there was reimbursement of antidumping duties. Evidence of
reimbursement is necessary before we can make an adjustment to USP.
This has been our consistent interpretation of 19 CFR 353.26, the
reimbursement regulation, and was upheld by the Court in Otokumpu
Copper Rolled Products AB v. United States, 829 F.Supp. 1371 (CIT
1993).
As stated in AFBs II (at 28371) and AFBs III (at 39736), the
antidumping statute and regulations make no distinction in the
calculation of USP between costs incurred by a foreign parent company
and those incurred by its U.S. subsidiary. Therefore, the Department
does not make adjustments to USP based upon intracompany transfers of
any kind.
We also disagree with Torrington and Federal-Mogul that the amount
of antidumping duties assessed on imports of subject merchandise
constitutes a selling expense and, therefore, should be deducted from
ESP. Our position was upheld in Federal-Mogul v. United States, Slip
Op. 93-17 at 40 (CIT 1993).
We agree with respondents that making an additional deduction from
USP for the same antidumping duties that correct for price
discrimination between comparable goods in the U.S. and foreign markets
would result in double-counting. Thus, we have not deducted antidumping
duties or antidumping duty-related expenses from ESP in this case.
3. Best Information Available
Section 776(c) of the Tariff Act requires the Department to use BIA
``whenever a party or any other person refuses or is unable to produce
information requested in a timely manner and in the form required, or
otherwise significantly impedes an investigation.'' In deciding what to
use as BIA, the Department regulations provide that the Department may
take into account whether a party refuses to provide requested
information. See 19 CFR 353.37(b). Thus, the Department may determine,
on a case-by-case basis, what is the BIA.
For the purposes of these final results of review, in cases where
we have determined to use total BIA we applied two tiers of BIA
depending on whether the companies attempted to or refused to cooperate
in these reviews. When a company refused to provide the information
requested in the form required, or otherwise significantly impeded the
Department's proceedings, we assigned that company first-tier BIA,
which is the higher of: (1) The highest of the rates found for any firm
for the same class or kind of merchandise in the same country of origin
in the LTFV investigation or a prior administrative review; or (2) the
highest calculated rate found in this review for any firm for the same
class or kind of merchandise in the same country of origin.
When a company has substantially cooperated with our requests for
information including, in some cases, verification, but failed to
provide complete or accurate information, we assigned that company
second-tier BIA, which is the higher of: (1) The highest rate
(including the ``all others'' rate) ever applicable to the firm for the
same class or kind of merchandise from either the LTFV investigation or
a prior administrative review or, if the firm has never before been
investigated or reviewed, the all others rate from the LTFV
investigation; or (2) the highest calculated rate in this review for
the class or kind of merchandise for any firm from the same country of
origin. See Allied-Signal Aerospace Co. v. United States, Slip Op. 93-
1049 (June 22, 1993 CAFC). We applied this methodology to the companies
discussed below for certain classes or kinds of merchandise.
Results Based on Total BIA
(1) Franke & Heydrich (Ball Bearings from France and Germany): We
used first-tier BIA because Franke & Heydrich failed to respond to the
Department's questionnaire. In this case, the rate used was the highest
rate in the LTFV investigation, which was the highest rate ever found
for each relevant class or kind of merchandise in the country of
origin.
(2) SNFA: We used first-tier BIA because SNFA failed to respond to
the Department's questionnaire. The rate used was the highest rate in
the LTFV investigation which was the highest rate ever found for each
relevant class or kind or merchandise in the country of origin.
(3) GMN: Because GMN had substantially cooperated with our requests
for information, but was unable to complete verification, we used
second-tier BIA. The rate used was GMN's highest previous rate, which
in this case was the rate from the LTFV investigation.
Partial BIA
In certain situations, we found it necessary to use partial BIA.
Partial BIA was applied in cases where we were unable to use some
portion of a response in calculating a dumping margin. The following is
a general description of the Department's methodology for certain
situations.
In cases where the overall integrity of the questionnaire response
warrants a calculated rate, but a firm failed to provide certain FMV
information (i.e., corresponding HM sales within the contemporaneous
window or CV data for a few U.S. sales), we applied the second-tier BIA
rate (see above) and limited its application to the particular
transactions involved. See Final Results of Antidumping Duty
Administrative Reviews and Revocation in Part of an Antidumping Duty
Order, Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, et al., 58 FR 39729, 39739 (July 26, 1993).
Where any deductions to HM prices or CV, such as freight or
differences in merchandise, were not reported or were reported
incorrectly, we have assigned a value of zero. For comparisons of
similar merchandise, if adjustment information for differences in
merchandise was missing from the U.S. sales listing, we used the
second-tier BIA rate to determine the margins for these particular
transactions. If other U.S. adjustment information such as freight
charges was missing, we used other transactional information in the
response for these expenses (i.e., freight charges for other sales
transactions). Where respondents did not establish that expenses were
either indirect in the U.S. market or direct in the HM, we generally
treated them as direct in the U.S. market and indirect in the HM. See
Final Results of Antidumping Duty Administrative Reviews and Revocation
in Part of an Antidumping Duty Order, Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof From France, et al., 58 FR
39729, 39739 (July 26, 1993).
We received the following comments concerning BIA issues:
Comment 1: GMN asserts that use of ``second-tier'' BIA for GMN is
not supported by substantial evidence and is contrary to law.
GMN states that it promptly filed its questionnaire responses,
thoroughly answered all supplemental questions, [[Page 10908]] and
passed the HM sales verification because no discrepancies were found in
any of the items verified. GMN asserts that only a small number of
items were not verified, mainly due to GMN's manpower shortage and the
absences of certain key personnel during portions of the verification.
It claims that because it could not complete the sales verification,
the Department cancelled the cost verification. GMN believes it is
being penalized for the Department's decision not to conduct a cost
verification. GMN argues that as a worst case analysis, the Department
should calculate a margin by applying partial BIA only to those items
which were not verified.
Department's Position: We disagree with GMN. GMN did substantially
cooperate with our requests for information. However, we were not able
to complete sales and cost verifications of GMN's response
successfully. As stated by GMN, ``the company made every attempt to
complete this review and has * * * now found that its resources are so
diminished * * * that it is unable to proceed further in the sales
verification or to prepare for and conduct the cost verification.'' See
GMN letter dated January 13, 1994: Withdrawal of Request for Review.
Consequently, we were unable to satisfactorily verify GMN's response,
and therefore we have used second-tier BIA. The second-tier BIA rate
was GMN's highest previous rate, which was from the LTFV investigation.
Comment 2: Torrington asserts that NPBS failed verification, and as
such, the Department should apply a first-tier BIA rate to the entire
NPBS response. Specifically, Torrington cites the NPBS Sales
Verification Report dated March 1, 1994, and claims that, taken as a
whole, the following seven deficiencies represent failure of
verification: (1) Failure to report certain HM sales, which the
Department has referred to as ``zero-priced sales'' (NPBS Sales
Verification Report), (2) failure to report HM billing adjustments, (3)
a slight overstatement of domestic inland freight expenses, (4) a
discrepancy between its reported interest rate and its verified
discount rate, (5) an overstatement of indirect advertising and sales
promotion expenses, (6) an overstatement of export selling expenses for
U.S. sales, and (7) an overstatement of other indirect selling
expenses. Additionally, Torrington asserts that NPBS's actions in this
review are egregious, given that they failed to report all HM sales in
the second administrative review.
NPBS argues that deficiencies three through seven are of the types
of discrepancies which typically arise at verification. As for the
unreported billing adjustments and unreporting of certain HM sales,
NPBS asserts that their effect is insignificant and that the Department
disregarded these in the previous review. Furthermore, NPBS asserts
that its omission of HM sales (which caused a failure of verification)
in the second administrative review is under appeal and is not relevant
to the facts in this case.
Furthermore, NPBS asserts that the Department should consider the
unreported billing adjustments to be insignificant under 19 CFR 353.59
and to disregard these. At the least, NPBS argues, the Department
should disregard those unreported billing adjustments for which the ad
valorem effect is less than 0.33 percent. As for the unreported sales,
NPBS contends that, had the sales been reported, the net effect would
have been to lower FMV for all but two of the models. Therefore, the
Department should disregard these sales.
In response to NPBS, Torrington argues that since the billing
adjustments were never reported, there is no basis for determining
their insignificance. Furthermore, the ad valorem effect is above 0.33%
for a significant number of models. As for the omission of ``zero-
priced'' sales (i.e., certain HM sales), Torrington contends that the
Department cannot allow NPBS to customize its HM database by not
reporting sales and then manually changing the price.
Federal-Mogul states that the Department correctly and reasonably
applied a second-tier BIA to those affected transactions in light of
the seriousness of the omissions.
Department's Position: We disagree with Torrington that we should
reject NPBS' response and use BIA for all U.S. sales. Although we did
find a number of deficiencies at verification, as a whole, those
deficiencies do not warrant the application of total BIA. Instead, for
deficiencies three through seven, we have adjusted the data
accordingly. For those U.S. sales whose matching FMV was based on
transactions affected by either the unreported billing adjustments or
the unreported ``zero-priced'' sales, we applied a second-tier BIA rate
of 45.83%. The full extent of the ``zero-price'' sales, which does not
significantly impact the overall integrity of the response, is
documented on the record. As for the unreported billing adjustments, we
agree with Torrington in that these should not be considered separately
in terms of their ad valorem effect, but rather their effect taken as a
whole. NPBS cooperated fully with all aspects of the verification.
Although NPBS neglected to report the billing and quantity adjustments
due to the labor intensive task of matching them to a sale, its
response was otherwise useable.
Comment 3: NSK claims that because it fully cooperated with the
Department's requests for information, the Department should not apply
a punitive BIA to a few unmatched transactions that were incorrectly
reported.
Torrington contends that the Department reasonably invoked an
adverse presumption that the margins on these few unmatched sales would
have been higher than the margin on remaining sales or the prior
margin, and should continue to apply the current BIA margin for the
final results.
Department's Position: We agree with Torrington. Since NSK did not
provide the correct information to match the U.S. and the HM
transactions, we have applied a second-tier BIA rate to those few
unmatched sales in calculating the final dumping margin. We have made
the adverse assumption that the margins on unmatched sales would have
been higher than the margin on the remaining sales and have therefore
applied a partial BIA to these unmatched transactions.
4. Circumstance-of-Sale Adjustments
4A. Advertising and Promotional Expenses
Comment 1: Torrington states that NMB/Pelmec failed to demonstrate
that its reported U.S. advertising and sales promotion expenses were
indirect in nature. Torrington believes that the Department should
reclassify certain of the reported expenses as direct selling expenses.
In rebuttal, NMB/Pelmec argues that at verification it provided the
Department with sample advertisements demonstrating that they were
indirect in nature.
Department's Position: We agree with NMB/Pelmec. At the U.S.
verification, NMB/Pelmec provided samples of its U.S. advertisements
and sales promotions and demonstrated that they were not product
specific or directed at a specific customer.
Comment 2: Torrington alleges that Koyo failed to demonstrate that
all of its reported U.S. advertising and promotion expenses were
indirect in nature. Torrington cites Timken Company v. United States,
673 F. Supp. 495, 512-13 (CIT 1987), to argue that the burden is on
respondents to demonstrate that U.S. expenses were indirect and to
support Torrington's position that the Department should treat Koyo's
U.S. advertising expenses as direct selling expenses.
In rebuttal, Koyo argues that the Department explicitly verified
Koyo's [[Page 10909]] advertising expenses, and the verifier considered
not only the amount of the expenses incurred, but also their indirect
nature.
Department's Position: At verification, we examined examples of
Koyo's advertising and sales promotions, and conclude that these
expenses were institutional in nature and correctly classified as
indirect.
Comment 3: Torrington argues that the Department should reclassify
Nachi's U.S. advertising expenses as direct expenses because Nachi has
not demonstrated that its U.S. advertising was indirect in nature.
Torrington states that, according to a Court decision (See Timken, 673
F. Supp., at 513), if respondents do not explain the exact nature of
U.S. advertising expenses, the Department must treat them as direct.
Nachi argues that it submitted sample advertisements that satisfy
the definition of indirect advertising in that they were general
advertisements aimed at promoting the Nachi brand name as opposed to
specific bearing products.
Department's Position: We agree with Nachi. The sample
advertisements submitted by Nachi promote the Nachi brand name in trade
publications and not specific bearing products. See Nachi Section B
response, at attachment 20 (September 21, 1993). Therefore, we have
treated Nachi's U.S. advertising expenses as indirect selling expenses.
Comment 4: Torrington maintains that the Department should
reclassify NPBS' U.S. indirect advertising expenses as direct selling
expenses. NPBS argues that it has documented its indirect selling
expenses and that it has complied fully with all reporting
requirements. NPBS argues that the Department should continue treating
these expenses as indirect.
Department's Position: We agree with NPBS. NPBS has fully complied
with all reporting requirements and has separated its direct and
indirect advertising and promotional expenses. Furthermore, at
verification we specifically examined NPBS' export selling expenses and
verified their indirect nature. See Nippon Pillow Block Verification
Report, at 10 (March 1, 1994).
Comment 5: Torrington argues that NTN-Germany improperly failed to
report direct advertising expenses in the United States. According to
Torrington, NTN-Germany's statement that most of its U.S. advertising
expenses were indirect expenses implies that some of these expenses are
directly related to the sales subject to this review. Therefore,
Torrington concludes that the Department should draw an adverse
inference and reclassify all of NTN-Germany's U.S. advertising expenses
as direct selling expenses for the final results.
NTN-Germany refutes Torrington's arguments on the grounds that it
provided evidence demonstrating that NTN-Germany's U.S. advertising
expenses are indirect selling expenses. According to NTN-Germany, the
sample advertisements that it submitted promote the company in general,
rather than specific products. NTN-Germany further argues that under
identical factual circumstances, the Department refuted Torrington's
arguments in the final results of AFBs III. Accordingly, NTN-Germany
concludes that the Department should treat NTN-Germany's U.S.
advertising expenses as indirect selling expenses for the final results
of this review.
Department's Position: We agree with Torrington. In stating that
most of its U.S. advertising expenses were indirect in nature, NTN-
Germany tacitly acknowledged that it incurred direct advertising
expenses in the United States. Nonetheless, NTN-Germany chose not to
provide data on its direct advertising expenses. Because NTN-Germany
elected not to provide information that it possessed regarding direct
advertising expenses, we have drawn the appropriate adverse inference
and treated all NTN-Germany's reported U.S. advertising expenses as
direct selling expenses for these final results.
Comment 6: Torrington argues that Koyo's HM advertising expenses
must have been incurred on behalf of purchasers of the merchandise to
be permitted as an adjustment for differences in COS, citing 19 CFR
353.56(a)(2). Torrington contends that Koyo should segregate such
expenses between sales to OEMs and sales to the aftermarket. Torrington
argues that it is implausible that a purchaser of an automobile or an
appliance would be the target of an advertisement of Koyo's bearings
and that only properly substantiated advertising expenses incurred with
respect to aftermarket sales should be permitted as a COS adjustment.
In rebuttal, Koyo argues that the regulation cited by Torrington to
support its argument governs direct expenses under the COS provision.
Because the HM advertising expenses reported by Koyo are indirect, the
Department properly deducts these expenses under the ESP offset
provision, 19 CFR 353.56(b)(2), which contains no requirement that the
expenses be incurred on behalf of the purchaser.
Department's Position: We agree with Koyo that the advertising
expenses in question were indirect in nature because the sample
advertisements submitted by Koyo appeared in trade publications and
were designed to promote the Koyo name. Therefore, because these
expenses were used only to offset indirect selling expenses deducted
from ESP transactions, there is no requirement that they be incurred on
behalf of a customer.
Comment 7: Torrington states that the Department should not accept
NMB/Pelmec Singapore's reported indirect sales promotion expenses
because they were incurred in order to promote future sales. Torrington
argues that expenses associated with future sales are not expenses
incurred with respect to sales of subject merchandise during the POR
and should not be accepted as an adjustment to FMV.
NMB/Pelmec Singapore argues that the expenses in question were
incurred in bringing certain OEM clients from Singapore to Thailand on
a tour of Minebea's facilities. NMB/Pelmec argues that these clients
could have made additional purchases during the POR. Therefore, NMB/
Pelmec concludes that its sales promotions did not relate exclusively
to future sales.
Department's Position: We agree with NMB/Pelmec. Advertising and
promotional expenses which are incurred during the POR are, by
Department practice, associated with POR sales because they cannot be
directly linked to particular sales. Also, as NMB/Pelmec explains, the
expenses were incurred in promoting local sales and did relate to sales
of subject merchandise during the POR. As a result, we have not changed
our preliminary determination to make an adjustment to FMV for NMB/
Pelmec Singapore's reported indirect sales promotion expenses.
Comment 8: Torrington argues that the Department failed to deduct
from USP advertising expenses that INA incurred in Germany for export
sales. Torrington notes that, in addition to U.S. advertising expenses,
INA also identified certain indirect advertising expenses, incurred in
Germany, that related to both domestic and export sales. Torrington
states that the Department should allocate to U.S. sales a portion of
the advertising expenses that INA incurred in Germany and deduct them
from USP for the final results.
INA responds that deducting the advertising expenses at issue from
ESP would result in an overstatement of INA's advertising expenses. INA
contends that it incurs the HM advertising expenses at issue for
selling merchandise to customers for whom it [[Page 10910]] has direct
selling responsibility. Furthermore, INA asserts that its U.S.
subsidiary incurs similar advertising expenses in selling to unrelated
customers for whom it has direct selling responsibility. Because both
INA and its U.S. subsidiary incur advertising expenses in making sales
to their unrelated customers, INA argues that the HM advertising
expenses at issue are not related to U.S. sales made by its subsidiary.
Accordingly, INA concludes that the Department should not deduct these
expenses from ESP for these final results.
Department's Position: We agree with INA. During our verification
at INA's U.S. subsidiary, we confirmed that the subsidiary incurred
advertising expenses for U.S. sales. Conversely, we found no evidence
during our verification of advertising expenses at INA's headquarters
in Germany that INA incurred any expenses for advertising directed
toward customers in the United States. Therefore, we have not deducted
these expenses from INA's USP for these final results.
4B. Technical Services and Warranty Expenses
Comment 9: Torrington argues that Koyo should reallocate U.S.
technical service expenses over only non-aftermarket sales because
service expenses are normally not incurred in the after-market.
Torrington claims that Koyo allocated service expenses over total
American Koyo Corporation sales, which would include both OEM and
aftermarket sales. Furthermore, Torrington contends that, because Koyo
failed to segregate service expenses into direct and indirect
components, the Department should continue its preliminary treatment of
considering all such expenses as direct expenses.
In rebuttal, Koyo argues that it allocated its service expenses
over all of its sales, including sales to both aftermarket and OEM
customers, because the services it provides to its aftermarket
customers are essentially the same as those it provides to its OEM
customers.
Department's Position: As set forth in AFBs II (at 28408) and AFBs
III (at 39743), we have accepted Koyo's allocation methodology because
Koyo provided the same technical services to all customers that
requested them, including aftermarket customers. Also, based on our
review of Koyo's response, we are satisfied that Koyo properly
separated its direct and indirect expenses.
Comment 10: Torrington argues that the Department should not accept
Koyo's reported HM direct warranties, guarantees, and servicing
expenses because Koyo calculated its expense factor by dividing total
warranty claims expenses by total bearing sales instead of quantifying
expenses on the basis of class or kind of merchandise or by customer.
Koyo responds that the Department has verified and accepted its
warranty expense methodology in previous reviews of both AFBs and TRBs
and that the Department should continue to treat Koyo's direct warranty
expenses as it did in the preliminary results and in all prior AFB
reviews.
Department's Position: Although Koyo calculated a warranty expense
factor based on the ratio of total warranty claims to total bearing
sales, there is no evidence on the record that the calculated warranty
expense factor would vary by class or kind of bearing or by customer.
Therefore, as in AFBs III (at 39743), where Koyo used the same
allocation methodology, we find that Koyo reasonably allocated direct
warranty expenses, and we have accepted them for the final results.
Comment 11: RHP argues that the Department should not have treated
RHP's U.S. technical service expenses as direct expenses, because they
were reported as indirect expenses in both the U.S. and home markets.
RHP states that the Department treats technical service expenses as
direct selling expenses only when such expenses are directly related to
sales under review.
RHP claims that it does not maintain records that tie the expenses
of its technical service engineers located in the United Kingdom
directly to particular products, customers or markets. Therefore, RHP
allocated the expenses over its total sales volume. RHP argues that
while the Department requested a breakdown of fixed and variable costs,
RHP could not have provided such information, and that the Federal
Circuit has disallowed the Department's use of BIA when the respondent
could not have provided the information requested under any
circumstances.
Torrington argues that some of RHP's reported technical service
expenses, such as expenses for vehicle leasing and travel, are clearly
direct and should have been reported as such. Torrington claims that
the Department requires respondents to separate technical services into
direct and indirect portions. Torrington claims that when respondents
fail to separate these expenses, the Department treats the entire
expense as direct in the case of U.S. sales and indirect in the case of
HM sales. Similar to Torrington, Federal-Mogul agrees that the
Department's treatment of RHP's technical service expenses is correct
and should not be changed for the final results.
Department's Position: We agree with Torrington and Federal-Mogul.
Our questionnaire specifically requests respondents to separate fixed
and variable portions of technical service expenses because we treat
fixed servicing costs as indirect expenses and variable servicing costs
as direct expenses. Based on RHP's questionnaire response, we determine
that RHP reasonably could have separated direct and indirect technical
service expenses. As RHP stated in its questionnaire, ``[t]he costs in
question include such items as salaries, travel expenses, vehicle
leasing, etc.'' See RHP's Section B Response at 56 (September 21,
1993). Generally, we consider salaries fixed expenses because they are
costs that would have been incurred whether or not sales were made. By
contrast we generally consider travel expenses to be directly related
to sales, because technicians are visiting customers to help them with
specific problems. See Roller Chain, Other Than Bicycle, From Japan;
Final Results of Administrative Review and Partial Termination, 57 FR
6810 (February 28, 1992) (Roller Chain).
Because RHP described both direct and indirect technical servicing
costs in its questionnaire response, RHP should have reported each type
of expense separately. The statute and the Department have a preference
for respondents to provide actual expense information as opposed to
allocated expense information. Because RHP did not distinguish between
the direct and indirect portions of its technical service expenses in
either market, we made an adverse inference and considered the entire
U.S. technical service expense as direct and the entire HM technical
service expense as indirect. Allocated expenses in the U.S. market are
treated as direct expenses because direct expenses will be deducted
from all USP transactions and will, therefore, reduce USP and
potentially increase dumping margins. If these expenses were treated as
indirect expenses, they would only be deducted from USP in ESP
situations and would, therefore, reduce USP and potentially increase
dumping margins only in ESP situations. Treatment of these expenses as
indirect expenses would remove any incentive a respondent has to
provide the Department with actual expense information. See The
Torrington Company v. United States, 832 F. Supp. 365, 376 (CIT 1993);
and Timken v. United States, 673 F. Supp. 495, 512-13 (CIT 1987). The
fact that RHP chooses to keep its financial records in such a
[[Page 10911]] way as to not tie its technical service expenses to
specific sales does not relieve it of its responsibility to provide the
Department with actual expenses information. See also AFBs II (at
28408) and AFBs III (at 39742).
Comment 12: Federal-Mogul argues that the Department incorrectly
treated SNR's reported U.S. warranty costs as an indirect expense
because SNR did not support its claim that warranty costs were fixed,
and thus should be treated as an indirect expense. As respondents have
an incentive to report U.S. expenses as indirect in nature, Federal-
Mogul argues that they bear the burden of proving that U.S. expenses
are indirect. Federal-Mogul concludes that because SNR has failed to
show that its warranty expenses were indirect in nature, the Department
should deduct the expenses directly from USP.
SNR responds that it reported its total U.S. warranty costs as
indirect in nature because the cost ``relates to in-house service,
rather than outside contractors.'' SNR further stated that the expense
was clearly indirect because it could not be tied to specific sales.
Department's Position: We agree with Federal-Mogul that SNR failed
to demonstrate the indirect nature of all its U.S. warranty costs. The
fact that SNR's warranty services were performed in-house does not
preclude direct expenses from being incurred. SNR did not separate its
warranty costs into fixed and variable portions, as required by the
questionnaire. Therefore, for these final results, we have reclassified
SNR's U.S. warranty costs as a direct expense, and we have deducted
them directly from USP. See also Department's Position to Comment 11,
above.
Comment 13: Torrington contends that because SKF-France did not
separate SARMA's U.S. technical service expenses into direct and
indirect portions, the Department acted improperly by classifying the
expenses as indirect. Torrington notes that it is the Department's
policy to classify as direct any U.S. expenses that the respondent has
not separated into direct and indirect portions. Torrington notes that
in prior reviews SKF reported SARMA's technical service expenses in the
same manner and the Department responded by substituting SARMA's
reported technical service expenses with SKF-USA's direct technical
service expenses as BIA. Torrington contends that the Department's
response should remain consistent with prior reviews.
SKF-France notes that its U.S. sales response explained that SARMA
provides the U.S. market with only general design and quality control
advice for future bearing development. SKF-France contends that since
such expenses do not constitute direct technical assistance, the
Department properly treated the expenses as indirect.
Department's Position: We agree with Torrington that when
respondents fail to report technical service expenses in direct and
indirect portions, it is our practice to treat the expenses as direct
in the United States. See Department's Position to Comment 11, above,
and AFBs III (at 39742). However, for this particular company the issue
is moot because the technical service expenses SARMA reported as
indirect export selling expenses have been reclassified as research and
development expenses. In its response SARMA classified all technical
service expenses as indirect selling expenses and allocated these
expenses across HM and export sales. However, verification of SKF-
France's COP response revealed that SARMA's technical service expenses
should have been classified as research and development expenses. For
the preliminary results we included all technical service expenses
reported by SARMA in the calculation of general and administrative
expenses for the purposes of calculating COP and CV. However, we only
removed from SARMA's reported selling expenses those technical service
expenses SARMA classified as HM indirect selling expenses. We
inadvertently failed to remove those technical service expenses
incurred on behalf of U.S. sales that SARMA classified as indirect
export selling expenses. Therefore, in order to avoid double counting
expenses, we have removed technical service expenses from the indirect
export selling expense adjustment because they are included in the
calculation of COP for these final results.
Comment 14: SKF-Germany asserts that the Department made a
programming error in its analysis. SKF contends that the Department
treated U.S. technical service expenses as indirect selling expenses in
the analysis memorandum, but treated them as direct selling expenses in
the computer programming. Federal-Mogul and Torrington state that SKF's
reported technical expenses are properly treated as direct selling
expenses.
Department's Position: We agree with Torrington and Federal-Mogul.
The computer program correctly deducted these expenses from USP as
direct selling expenses. However, there was a discrepancy between the
preliminary analysis memorandum and the computer program due to a
clerical error: The analysis memorandum incorrectly indicated that the
expenses in question were indirect.
Comment 15: Torrington contends that INA improperly reported its
indirect warranty, guarantee, and servicing expenses in the home
market. According to Torrington, the amount reported by INA includes
both actual expenses paid and accrued expenses. Because accrued
expenses will also be reflected among actual expenses paid, Torrington
asserts that INA's claim is overstated. Accordingly, Torrington
requests that for the final results, the Department limit INA's claimed
indirect warranty, guarantee, and servicing expenses to amounts
actually paid.
According to INA, the amounts that it reported for these expenses
were the total amounts recorded in the relevant expense accounts. These
amounts represent neither cash payments of warranty claims nor accruals
of contingent liability. Because INA reported the amounts that it
recorded as expenses during the review period, INA rejects Torrington's
claim that it double-counted its indirect warranty expenses.
Department's Position: We agree with INA. The record contains no
evidence that INA failed to report accurately and completely the data
recorded in its warranty expense accounts. We verified that INA
reported its indirect warranty expenses and found no evidence of
double-counting. Accordingly, we have treated INA's reported indirect
warranty, guarantee, and servicing expenses as indirect selling
expenses for the final results.
4C. Inventory Carrying Costs
Comment 16: Torrington argues that the Department should abandon
the practice of calculating inventory carrying costs (ICCs) and instead
impute credit costs on ESP transactions starting from the point of
shipment. Torrington contends that prices should be compared on an
``f.o.b. origin'' basis and neither HM or PP sales require a deduction
of pre-sale ICCs to arrive at f.o.b. origin prices. In ESP sales, so-
called ICCs should be viewed as a financing cost assumed by the
exporter on behalf of the related importer, which must be deducted,
while no comparable expense exists in the HM.
Torrington contends that adjustment to FMV for ICCs misconstrues
the statutory scheme and the nature of price comparisons in ESP
calculations. According to Torrington, the Department has
misinterpreted the purpose for deducting financing charges from ESP and
makes an offsetting deduction from FMV that is not permitted by the
statute. Also, the fact that the foreign manufacturer and U.S.
[[Page 10912]] importer are related is irrelevant to the requirement
under 19 USC 1677(e)(2) that expenses incurred for the account of the
importer by the manufacturer must be identified and deducted from ESP.
Finally, even if a comparable HM ICCs expense is incurred,
Torrington argues no adjustment should be made to FMV. In contrast to
its treatment of ESP, the statute provides no parallel adjustment in
calculating FMV. Where the statutory scheme is clear, the Department
may not create adjustments in misguided attempts to make ``apples-to-
apples'' comparisons. Torrington claims that, just as in The Ad Hoc
Committee of AZ-NM-TX-FL Producers of Gray Portland Cement v. United
States, No. 93-1239, Slip Op. (Fed. Cir. Jan 5, 1994) (Ad Hoc
Committee), in which the CAFC reversed the Department's allowance of a
deduction of pre-sale inland freight expenses in calculating FMV, the
statute does not provide a basis for making an ICC adjustment to FMV.
Respondents argue that the Department should again reject
Torrington's argument that ICCs should not be calculated in the HM and
that imputed credit costs on ESP transactions should start from the
point of shipment. NSK argues that the most obvious reason for
calculating ICCs from the date of production, rather than the date of
shipment, is that ICCs are incurred from the date of production
forward. See Certain Internal Combustion Forklift Trucks from Japan, 53
FR 12552 (April 15, 1988). Moreover, because ICCs represent the
``opportunity cost of holding inventory,'' NSK holds that it is
appropriate to calculate such costs from the time a product is placed
in inventory--the date of production. See Antifriction Bearings (Other
Than Tapered Roller Bearings) and Parts Thereof From France; et al.;
Final Results of Antidumping Duty Administrative Review, 57 FR 28369,
28410 (June 24, 1992). In addition, respondents argue that the
Department's adjustment of FMV for ICCs is reasonable and supported by
the antidumping statute. RHP argues that the Ad Hoc Committee case
referenced by Torrington is not on point and that Torrington has not
provided a new reason for the Department to stop recognizing ICCs in
the HM. Nachi argues that the Department has consistently applied this
practice in all of the administrative reviews of the antidumping duty
orders against AFBs in order to make fair ``apples-to-apples'' price
comparisons. This practice also has been upheld by the CIT. See The
Torrington Company v. United States, 818 F. Supp. 1563, 1577 (CIT 1993)
(Torrington I).
Department's Position: We disagree with Torrington. We calculate
ICCs from the date of production because the date of production, not
the date of shipment, is when the item becomes a part of the company's
inventory. Merchandise destined for the United States and merchandise
destined for the HM are not necessarily held in inventory from the date
of production to the date of shipment for equal lengths of time.
Therefore, in general, an accurate accounting of ICCs in each market
requires beginning at the date on which production is completed. See
AFBs III. The Department's practice in this regard has been upheld by
the CIT: ``Given its new point of reference for measuring ICCs, the
Department was correct to include home market ICCs incurred after the
time of production of the merchandise as part of the pool of indirect
selling expenses for which adjustment to FMV can be made subject to 19
CFR 353.56(b)(2) in those situations where AFBs produced for the home
market were held in inventory.'' See Torrington I, 818 F. Supp. at
1577.
Furthermore, with respect to adjustments to FMV for imputed ICCs,
the CIT has supported the Department's methodology in calculating ICCs
in both the United States and the HM. In Torrington I, the CIT found
that ``the Department's adjustment to FMV for imputed ICCs pursuant to
19 CFR 353.56(b)(2) was a reasonable exercise of the Department's
discretion in implementing the antidumping duty statute and is
affirmed.'' Id. As stated in the original investigation and the first
three reviews of this proceeding, in order for comparisons to be fair,
it is necessary to make ICC adjustments to both FMV and USP. See AFB
LTFV Investigation, 54 FR 19050 (May 3, 1989); AFBs I and AFBs II. That
the foreign seller chooses to sell from inventory in the HM is no
different from the seller's decision to undertake ESP transactions in
the United States. The Department imputes ICCs because the actual
financial cost of holding inventory after production is not recorded in
the financial records of the company.
Moreover, the Department's treatment of ICCs complies with Ad Hoc
Committee. There, the CAFC held that an adjustment may not be made to
FMV if the statute explicitly provides for such an adjustment to USP,
but not to FMV. Because the statute explicitly provides for an
adjustment to USP for pre-sale movement expenses but not for an
adjustment to FMV, the CAFC held that the Department cannot adjust FMV
for the pre-sale movement expenses without any other authority. Id.
Unlike the situation with movement expenses, however, the statute does
not contain a specific provision for deducting imputed ICCs for either
USP or FMV. Rather, the Department's authority to deduct imputed ICCs
derives from the Department's authority to deduct indirect selling
expenses. This authority stems from the general language contained in
section 772(e)(2) of the Tariff Act, which authorizes the Department to
deduct selling expenses in ESP transactions, and from the Department's
authority to make fair comparisons between USP and FMV, which allows
the Department to deduct indirect selling expenses from FMV pursuant to
the ESP offset. See Smith-Corona, 713 F.2d at 1578-79.
Finally, as recognized by the CIT in Torrington I, the intent of
the antidumping statute and the Department's practice with respect to
ICCs is to remove certain expenses from FMV and ESP in order to derive
an FMV and ESP at a comparable point in the stream of commerce to
achieve the so-called ``apples-to-apples'' price comparison. The
Department properly carried out that intent by adjusting FMV pursuant
to the ESP offset in those situations in which AFBs produced for the HM
were held in inventory. The nature of the expense incurred for ICCs
holds true regardless of whether the expense was incurred in the U.S.
market or in the HM. Because the seller incurred the opportunity cost
of holding inventory in both markets, the Department properly adjusted
for the cost in the U.S. market as well as in the HM.
Comment 17: Federal-Mogul claims that the Department's approach to
calculating ICCs is biased in favor of respondents and presents
respondents with an opportunity to manipulate and distort these
expenses. First, the calculation of the adjustment relies upon transfer
pricing. Transfer pricing between related parties is inherently suspect
and was the reason that provisions for ESP were written into the
antidumping law. Second, there is no relation between the price at
which the merchandise is sold and the theoretical cost of holding such
merchandise prior to sale. Thus, the only reliable means by which ICCs
can be quantified is on the basis of costs, rather than prices. Since
not all firms submitted the data necessary to do this, however, the
Department should at least ensure that the sales prices used are
reliable and consistent for both markets, and prices used should only
be derived from sales made to unrelated purchasers. Finally,
[[Page 10913]] the Department should eliminate variations in the
adjustments due to the interest rates employed, and should recognize
that a firm is likely to borrow in the market where it can obtain the
lowest interest rate. Because these costs are imputed and speculative,
a uniform interest rate should be applied. Federal-Mogul cites LMI-La
Metalli Industriale, S.p.A v. United States, 912 F.2d 455 (Fed. Cir.
1990) (LMI), in which the Federal Circuit noted that in LMI-La Metalli
``the ITA presumed that LMI would borrow in Italy to finance its United
States receivables, no matter how unfavorable the rate and whatever the
available alternatives. Such a presumption does not withstand
scrutiny.''
In response to Federal-Mogul, Nachi argues that transfer price is a
reliable price that is reported to and accepted by the United States
Customs Service in valuing imports. Nachi claims that the Customs
Service would require a different price, or cost, for its valuation
purposes if transfer prices were subject to ``unchecked manipulation.''
RHP notes that the Customs Service can investigate transfer prices to
determine whether such prices are too low. Furthermore, in response to
Federal-Mogul's argument that the Department should use uniform
interest rates, Koyo notes that the Department used actual, reported
interest rates in calculating ICCs, and argues that it is absurd to
suggest that the Department should reject such evidence of actual
borrowing expenses (and the associated interest rates) and use instead
a fictional rate (the ``most favorable rate available to a respondent
in either market'').
Department's Position: ICCs measure the imputed cost incurred by a
firm for storing AFBs in inventory. As the Department stated in the
third review, the transfer price reflects the cost of the merchandise
as it is entered into inventory and therefore is an accurate basis upon
which to calculate the cost to the subsidiary of holding inventory
prior to the sale to an unrelated U.S. customer. See AFBs III (at
39744); see also Portable Electric Typewriters From Japan: Final
Results of Antidumping Duty Administrative Review, 53 FR 40926,
(October 19, 1988). Furthermore, Federal-Mogul has not shown that any
prices used in the calculation of ICCs are unreliable and inconsistent,
nor that any transfer prices used are distortive.
We cannot calculate actual ICCs because these costs are not found
in the books of respondents. Thus, we must impute the financing cost of
holding inventory. The cost to a company of holding inventory is best
measured by the time it must finance such inventory and its actual
short-term borrowing rate. Accordingly, in calculating such an expense,
we use the appropriate interest rate actually realized by the entity
financing the inventory (i.e., the HM interest rate for the HM entity
and the U.S. interest rate for the U.S. affiliate). This means that the
same interest rate is used to calculate HM ICCs and U.S. ICCs to the
extent that the same company is financing the investment in inventory.
When a U.S. affiliate finances the investment in inventory, its actual
short-term borrowing rate is used because that reflects the cost to the
company. LMI is not relevant to the calculation of ICCs in these cases,
because only actual short-term borrowing rates have been used. In LMI,
the respondent had no short-term borrowings and the CAFC found it
improper to choose a higher rate over a lower rate. However, when there
exist actual borrowings by a company, it would be unreasonable to
conclude that a company would borrow at a rate other than its actual
rate. Moreover, the actual rate at which a company obtains short-term
funds depends on many factors, of which available rates is only one.
The conditions of available loans may compel a company to choose a loan
at a higher rate than another at a lower rate. Therefore, we impute
financing costs based on each company's actual borrowings where
possible. If a company did not have actual short-term borrowings,
financing costs are imputed using the lowest rate the company
demonstrates was available to it during the POR.
Comment 18: NSK claims that because the Department lowered NSK's
short-term borrowing rate at verification to take into account short-
term commercial paper borrowings, the Department must also reflect this
change in the U.S. ICCs.
Torrington agrees with NSK's proposed modification but states that
the Department must apply the revised home market rate only to the
correct portion of the inventory period.
Department's Position: We agree with Torrington. We have amended
the HM ICCs and the HM portion of U.S. ICCs to reflect the short-term
interest rate determined at verification.
Comment 19: Torrington argues that if the Department decides to
allow an adjustment to NSK's FMVs for ICCs, then a recalculation is
necessary, because NSK provided in its section C response an example of
one shipment in which the actual time in inventory varied from the
reported average time in inventory.
NSK argues that the Department discovered nothing at verification
to undermine NSK's claim regarding the average time spent in the HM
inventory.
Department's Position: We disagree with Torrington. During
verification we found NSK's ICC averages to be reasonable and adequate.
Comment 20: Torrington contends that INA improperly calculated per-
unit ICCs incurred in Germany. Torrington alleges that INA allocated
ICCs incurred in Germany over a sales amount that included the resale
prices of INA's U.S. subsidiary, and then understated the per-unit
expense by multiplying the resulting adjustment factor by the reported
per-unit Customs value rather than the resale price. For the final
results, Torrington requests that the Department revise the calculation
of INA's per-unit German ICCs by multiplying the reported adjustment
factor by the price to the first unrelated party in the United States.
INA rejects Torrington's argument, arguing that the sales values it
used in calculating its allocation factors did not include resales by
INA-USA. Rather, the U.S. sales included were INA's sales to its U.S.
subsidiary at transfer prices. Therefore, INA concludes that it
properly multiplied the adjustment factor for ICCs by the transfer
price to calculate per-unit ICCs.
Department's Position: We agree with INA. During verification, we
examined the total HM sales values that INA used to allocate various
charges and expenses. We were able to desegregate the total HM sales
values into their constituent elements and trace these elements to the
audited financial statements of the various INA entities subject to
this review. During this process, we found a separate account that INA
uses to record sales to its U.S. subsidiary. We saw no evidence to
suggest that INA recorded anything other than its transfer prices to
its U.S. subsidiary in this account. Accordingly, we determine that the
total sales value that INA used to allocate its ICCs included only
INA's transfer prices to its U.S. subsidiary. As a result, we have
accepted INA's use of transfer prices to calculate per-unit ICCs for
these final results.
4D. Post-Sale Warehousing
Comment 21: Torrington contends that the Department should treat
Nachi's claimed post-sale warehousing expenses as indirect selling
expenses. Torrington argues that these warehousing expenses are not
direct because they were incurred prior to date of shipment, which
Nachi has identified as being the same as date of sale. Torrington
states that warehousing expenses are allowed [[Page 10914]] as direct
adjustments only when the expenses are incurred after the sale.
Nachi contends that this issue has been considered by the
Department in the past three reviews and decided in Nachi's favor.
Nachi argues that the circumstances under which it incurs warehousing
expenses have not changed and that the expenses are incurred after the
sale took place. Nachi contends that the warehousing expenses were
direct because they were incurred only on sales to specific customers
and would not have been incurred if the sales had not taken place.
Department's Position: We agree with Nachi that the Department has
already evaluated this issue in the past three reviews and determined
the expenses to be direct expenses. See AFBs I (at 31692); AFBs II (at
28415); and AFBs III (at 39745). Nachi's section C response and the
verification report clearly show that the expenses in question were
incurred directly on sales to specific customers. See Nachi Section C
Response, at 35-36 (September 28, 1993) and Nachi-Fujikoshi Home Market
Sales Verification Report, at 9-10 (February 28, 1994). In particular,
the verification report states that ``[o]nce quantity is confirmed, the
warehouse delivers the desired quantity immediately to the customer and
collects a fee from Nachi for its services.'' See Verification Report,
at 9. Although the verification report shows that merchandise is
shipped and stored in the warehouse before ordered quantities are
confirmed, merchandise is sent to the warehouse only after customers
have entered into a formal agreement to purchase bearings from Nachi,
after they have provided Nachi with estimates of the quantities they
will order, and after sales prices are confirmed. The warehouse also
delivers the bearings on Nachi's behalf, and thus, the incurred
expenses include post-sale movement charges. Because Nachi is charged
for the warehouse's services only if, and after, a bearing is sold,
Nachi incurs no expenses unless a sale takes place. Therefore, we
conclude that the expenses in question varied directly with sales
volume to specific customers and would not have been incurred if sales
had not taken place. As a result, we have continued to treat the
expenses as a direct adjustment to FMV.
4E. Commissions
Comment 22: Torrington asserts that at verification the Department
learned that one of NMB/Pelmec's salesmen stopped receiving commissions
after August 22, 1992. Therefore, Torrington claims the Department
should not accept the reported commission rates and should apply
partial BIA.
According to NMB/Pelmec, the Department officials ``verified the
accounts payable and the sales commissions paid for this salesman and
tied this amount to the G/L (General Ledger).'' NMB/Pelmec concludes
that because the Department verified all financial data related to
commissions, there is no basis to apply partial BIA.
Department's Position: We agree with NMB/Pelmec. We verified
commissions in the United States, including the fact that no
commissions were paid to this salesman after August 22, 1992. Since
there were no discrepancies in the information we verified, we have no
basis for using a BIA rate for NMB/Pelmec's U.S. commissions. See ESP
Verification Report for NMB/Pelmec, February 10, 1994.
Comment 23: Torrington states that the Department should disallow
Koyo's HM adjustment for commissions paid to purchasing agents acting
on behalf of Koyo's customers because such payments do not affect the
HM price obtained by Koyo. Torrington argues that, although Koyo claims
that it enters into contracts with these agents, no contracts were
submitted on the record. Torrington also argues that Koyo failed to
demonstrate how these commissions differ from rebates paid to unrelated
customers. Further, Torrington asserts that, since Koyo has not tied
such payments to specific sales of merchandise, the payments should at
least be reclassified as indirect selling expenses.
In rebuttal, Koyo states that the purchasing agents of Koyo's
customers are not the customers themselves, nor do they act in any
capacity other than as the representatives of Koyo's customers. Also,
the contracts into which Koyo enters with these agents specify the
payment of commissions.
Department's Position: We disagree with Torrington. Consistent with
the three previous administrative reviews, we have accepted Koyo's
commissions, including commissions paid by Koyo to purchasing agents
that act on behalf of its customers, as direct selling expenses. See
AFBs I (at 31719); AFBs II (at 28407); and AFBs III (at 39746). As we
stated in the third administrative review, since Koyo pays commissions
to purchasing agents that act on behalf of its customers, Koyo's HM
sales qualify for the commission adjustment submitted. Koyo's
commissions are distinct from rebates because they are paid to
intermediaries for providing services. We consider rebates to be
discounts which are granted to the purchaser after the delivery of
merchandise to the customer.
Comment 24: Torrington states that with respect to RHP the
Department failed to deduct related-party commissions on the U.S. side
in the preliminary results. Torrington claims that the Department has
generally treated such commissions as direct expenses, citing AFBs III,
and concludes that the Department should classify all of RHP's U.S.
commissions as direct expenses.
RHP claims that the Department failed to deduct related-party
commissions in both the U.S. and home markets, but did not provide an
explanation for this treatment. RHP states that the Department adjusts
for related-party commissions when they are determined to be directly
related to the sales in question and at arm's length. RHP states that
its sales data showed that commissions were directly related to the
sales on which they were paid. RHP further contends that it submitted
additional information, including information on unrelated-party
commissions in the United States, to support its claim that related-
party commissions in the United States were negotiated at arm's length.
RHP argues that the Department should conclude that the commissions it
paid to related parties were negotiated at arm's length in both the
U.S. and home markets.
RHP contends that, because the situations in both markets are
similar, the Department can only justify making an adjustment for
related-party commissions in one market if it makes an adjustment for
such commissions in the other market. Accordingly, if the Department
decides to treat related-party commissions as direct selling expenses
in the U.S. market, related-party commissions in the HM should be
treated the same way.
Torrington counters that the Department should not deduct
commissions paid to NSK Europe by RHP in the HM because the commission
payments were made between related parties, and the Department
determined that RHP did not demonstrate the arm's-length nature of
these transactions. Torrington states that because RHP did not provide
a factual basis for the Department to reverse its decision, the
Department is justified in disregarding the commissions RHP paid to NSK
Europe.
Department's Position: In the home market RHP paid commissions to
employees of NSK Europe, an affiliated company which the Department
considers part of the same entity as RHP for purposes of these
administrative reviews. In the U.S. market RHP paid
[[Page 10915]] commissions to its employees and independent sales
agents. The commissions RHP paid both to independent agents and to
employees were expenses directly tied to sales. Therefore, for these
final results, we treated these expenses as direct selling expenses by
deducting commissions from both the FMV and the USP. See Final Results
of Antidumping Duty Administrative Review; Porcelain-on-Steel Cookware
From Mexico, 58 FR 43330 (August 16, 1993). See also Final
Determination of Sales at Less Than Fair Value; Industrial Forklift
Trucks from Japan, 53 FR 12552 (April 15, 1988) and Final Results of
Administrative Review of Antidumping Finding; Drycleaning Machinery
from West Germany, 50 FR 32154 (August 8, 1985).
Comment 25: Torrington argues that the Department erred in treating
NTN's commissions on HM sales as direct selling expenses. According to
Torrington, NTN's method of calculating commission rates by allocating
total commissions paid to a commission agent over total sales by that
agent provides no indication that the reported commissions are directly
related to HM sales of subject merchandise. As a result, Torrington
requests that the Department either deny an adjustment to FMV for NTN's
HM commissions, or treat them as indirect selling expenses for the
final results.
NTN responds that it reported commissions by applying a specific
rate for each commissionaire to sales that NTN made through that
commissionaire. NTN further argues that the Department confirmed at
verification that NTN reported commissions only on sales of subject
merchandise. Therefore, NTN argues that the Department should continue
to treat NTN's reported HM commissions as direct selling expenses for
these final results.
Department's Position: We agree with NTN. At verification, we
examined documents that confirmed that NTN paid commissions on sales of
subject merchandise and that NTN's method of reporting commissions
reflected the commissions that NTN actually paid. Accordingly, we have
treated NTN's reported HM commissions as direct selling expenses for
the final results of this review.
Comment 26: Torrington and Federal-Mogul argue that certain
expenses that NTN classified as related-party U.S. commissions appear
to be directly related to PP sales to one U.S. customer. Citing LMI-La
Metalli Industriale S.p.A. v. United States, 912 F.2d 455, 459 (Fed.
Cir. 1990), Torrington and Federal-Mogul contend that the Department
must examine the circumstances surrounding related-party commissions
before determining that they should not be used in the Department's
analysis. In this regard, Torrington states that NTN incurred the
expenses at issue for activities similar to those made by unrelated
commission agents, and that the rates NTN paid to related agents are
comparable to the rates that NTN paid to unrelated U.S. commission
agents. Accordingly, Torrington and Federal-Mogul conclude that the
Department should consider these expenses to be direct selling expenses
in the U.S. market. Federal-Mogul further contends that, because NTN
failed to report commission rates paid to the related party, the
Department should resort to BIA in determining the commission amount to
be deducted.
NTN responds that there are no facts that distinguish this review
from the three previous reviews of this case in which the Department
rejected Torrington's and Federal-Mogul's arguments concerning related-
party commissions in the United States. NTN further argues that
Torrington overstated the alleged commission rate that NTN paid to a
related company in the United States. Accordingly, NTN supports the
Department's preliminary determination that the expenses are not direct
selling expenses for PP sales.
Department's Position: We disagree with Torrington and Federal-
Mogul. NTN stated that it made commission payments to its U.S.
subsidiary, NTN Bearing Company of America (NBCA), for expenses that
NBCA incurred with respect to sales to a specific PP customer. In its
questionnaire responses, NTN provided specific data on the expenses
that NBCA incurred with respect to the sales in question. Accordingly,
rather than use the commission, which is the transfer payment between
NTN and NBCA, we have used the actual expenses incurred by NBCA with
respect to these sales. Further, an examination of the specific types
of expenses that NBCA incurred with respect to the sales in question
shows that the expenses are those that we typically consider to be
indirect expenses incurred by sales organizations. Therefore, we have
used the actual expenses that NBCA incurred with respect to the sales
in question in our analysis, and have treated them as indirect selling
expenses.
4F. Credit
Comment 27: Torrington notes that at verification the Department
discovered that Nachi did not report actual dates of payment for its HM
sales, but had estimated dates of payment based on each customer's
terms of payment. Therefore, Torrington asserts that Nachi's
calculation of HM credit expenses is not based on actual credit
experience. As a result, Torrington argues that Nachi's HM credit
expenses claim should be denied.
Nachi responds that although it does not keep invoice-specific
records of when it receives payment, its credit expenses were
calculated on an average customer-specific credit period derived from
actual experience. Therefore, Nachi concludes the Department should
continue to deduct HM credit expenses from FMV.
Department's Position: At verification, the Department discovered
that Nachi did use estimated dates of payment based on each customer's
terms of payment. However, the payment records reviewed suggested that
Nachi was understating its HM credit period in most cases, which
resulted in a higher FMV. Therefore, the Department accepted the
payment dates submitted by Nachi and will continue to do so for the
final results, and has deducted HM credit expenses from FMV. See Nachi-
Fujikoshi Home Market Sales Verification Report, at 10-11 (February 28,
1994).
Comment 28: Torrington argues that the Department should not accept
NPBS's credit expense methodology because NPBS reported payment dates
based on the maturity date of the promissory notes, not the actual
payment date per transaction. Torrington further argues that the
Department should reject credit expenses that are not based on actual
payment dates or on average customer-specific credit periods, and that
NPBS's credit expenses should be rejected because it failed to report
its short-term interest rate accurately.
NPBS responds that its credit expenses are properly reported and
suggests that sampling error could account for a discrepancy between
the reported interest rate and the discounted rate for a few sales.
NPBS notes that it inadvertently included two long-term loans in the
calculation of short-term interest. These loans were later deleted and
short-term interest was recalculated. Finally, NPBS argues that the
firm's short-term interest rate provides the best estimate of the
discount rate. The exact discount rate is nearly impossible to
calculate since each NPBS branch discounts numerous notes each week at
varying rates.
Department's Position: The Department agrees with NPBS. The
Department verified NPBS' credit [[Page 10916]] methodology and found
only minor discrepancies in the application of its payment date
formula. We did not find that these minor discrepancies resulted in
either a systematic over- or under-reporting of the credit period for
PP sales. Furthermore, NPBS' discount rate was lower than the reported
interest rate. This minor discrepancy has been corrected by the
Department.
Comment 29: Torrington claims that NTN-Germany improperly
calculated its U.S. credit expenses. According to Torrington, NTN-
Germany determined U.S. credit expenses using interest rates that
appear to have been determined on borrowings made outside of the United
States. Because NTN-Germany has submitted no evidence that it finances
its accounts receivable using funds borrowed outside the United States,
Torrington urges the Department to reject NTN-Germany's reported
interest rate and use the highest U.S. interest rate reported by a
German respondent to calculate NTN-Germany's U.S. credit expenses.
NTN-Germany responds that Torrington's argument appears to be based
on the fact that many of the banks from which NTN-Germany borrowed
money during the POR have foreign names. NTN-Germany states that it
determined the U.S. interest rate that it submitted in its
questionnaire response based on its short-term borrowing. As a result,
NTN-Germany urges the Department to disregard Torrington's arguments.
Department's Position: We agree with NTN-Germany. The record
contains no evidence to suggest that NTN-Germany calculated its U.S.
interest rate based on borrowing outside the United States. Therefore,
for these final results we have used the U.S. interest rate that NTN-
Germany reported in its questionnaire response to calculate credit
expenses for U.S. sales.
Comment 30: NTN-Germany states that its reported U.S. credit
expense was reasonable because it was based on customer-specific
information. Accordingly, NTN-Germany contests the Department's
recalculation of the firm's reported U.S. credit expenses. If the
Department determines not to use NTN-Germany's reported U.S. credit
expenses, however, NTN-Germany asserts that the Department should
correctly calculate the credit period. According to NTN-Germany, the
Department determined the credit period as the number of days between
the sale date and the payment date. NTN-Germany requests that, if the
Department continues to calculate sale-specific credit periods, the
Department calculate the credit period as the number of days between
shipment and payment, as specified in the Department's questionnaire.
Torrington responds that NTN-Germany's concerns are unclear because
of the manner in which NTN-Germany determined shipment and sale dates
for its U.S. sales. Torrington further argues that NTN-Germany has
provided no evidence that the Department's method of calculating the
credit period for NTN-Germany's U.S. sales is unreasonable.
Accordingly, Torrington concludes that the Department should not amend
its calculation of NTN-Germany's U.S. credit expenses for these final
results.
Department's Position: We agree in part with NTN-Germany. Based on
a comparison of NTN-Germany's reported terms of payment, the actual
number of days between shipment and payment for U.S. sales and the
credit period reported by NTN-Germany in its questionnaire response, we
have determined that NTN-Germany's reported credit period does not
accurately reflect the credit that NTN-Germany granted on the U.S.
sales subject to this review. Specifically, NTN-Germany's reported
credit period does not comport with its stated terms of payment or with
the sale-specific credit period calculated using actual shipment and
payment dates for each sale. Because NTN-Germany's reporting method is
not representative of the actual credit period for its U.S. sales, and
because our questionnaire specified the actual, sale-specific credit
period as preferential to an aggregate credit period for each customer,
we have imputed the actual credit period for NTN-Germany's U.S. sales
for these final results. We agree with NTN-Germany, however, that we
should calculate the sale-specific credit period according to our
longstanding practice of using the shipment date, rather than the sale
date, as the beginning of the credit period, and have revised our
calculations accordingly for these final results.
Comment 31: Federal-Mogul claims that the Department should not
allow SARMA to apply a late payment factor to each customer's terms of
payment to establish a payment date for HM sales. Furthermore, Federal-
Mogul argues that the Department should disallow any additional credit
expenses attributed to late payments made by SARMA (SKF-France) HM
customers. Citing Federal-Mogul Corp. v. United States, 824 F. Supp.
223 (1993), Federal-Mogul argues that, since COS adjustments are only
allowed for those factors which affect price or value, additional
credit expenses incurred from a purchaser's unexpected failure to pay
within the agreed-upon period cannot affect the price which was set
specifically in contemplation of payment being made at the end of the
agreed-upon credit period.
SKF-France contends that its credit expense calculations, which are
based on the actual payment date, are consistent with Departmental
policy. SKF-France cites the Department's position in Final Results of
Antidumping Administrative Review; Certain Welded Carbon Steel Pipe and
Tube Products from Turkey, 55 FR 42230, 42231 (1990), and Final
Determination of Sales at Less than Fair Value; Certain Tapered Journal
Roller Bearings and Parts Thereof From Italy, 49 FR 2278, 2279-80
(1984), to support its position. SKF-France states that Federal-Mogul's
reference to a recent Department redetermination on remand is
inapposite (see Federal-Mogul Corp. v. United States, 824 F. Supp. 223
(1993)). Additionally, SKF-France contends that it updated SARMA's
payment dates and recalculated credit expenses using actual dates of
payment.
Department's Position: The Department disagrees with Federal-Mogul.
Consistent with Departmental policy, we adjust for credit expenses
based on sale-specific reporting of actual shipment and payment dates.
See Final Results of Administrative Review; Antifriction Bearings
(Other Than Tapered Roller Bearings) and Parts Thereof From the
Republic of Germany, 56 FR 31724 (July 11, 1991). This policy
recognizes the fact that all customers do not always pay according to
the agreed terms of payment and that respondent is aware of this fact
when setting its price. Therefore, it would be inappropriate to make a
COS adjustment for credit based entirely on the agreed terms of
payment, since it would not take into account all of the circumstances
surrounding a sale. Furthermore, the Department agrees with SKF-France
that SARMA reported its actual payment dates in its supplemental
response.
4G. Indirect Selling Expenses
Comment 32: Torrington argues that Koyo incorrectly included among
its total indirect selling expenses amounts charged to a reserve
account established for doubtful debt. Torrington states that Koyo
conceded in its deficiency response that this reserve allowance was not
an expense, but a provision for future expenses. As a result,
Torrington maintains that the Department should exclude this allowance
from Koyo's pool of indirect selling expenses for the final results.
Citing AOC Int'l. v. United States, 721 F. Supp. 314 (CIT 1989) and
Daewoo Electric Co. v. United States, 712 F. Supp. 931 (CIT 1989), Koyo
responds [[Page 10917]] that the Department should allow Koyo's
reported allowance for doubtful debt as a HM indirect selling expense.
Alternatively, Koyo maintains that if this expense is excluded from
Koyo's pool of HM indirect selling expenses, then the Department should
exclude it from the calculation of USP as well in order to ensure an
apples-to-apples comparison of FMV and USP.
Department's Position: We agree in part with Koyo. As stated in
AFBs II (at 28412), the Department considers bad debt that is actually
written off during the POR to be either a direct or an indirect selling
expense depending on the relationship between the bad debt expense and
the sale. In AOC and Daewoo, respondents reported data on bad debts
actually written off during the relevant review periods. In contrast,
although Koyo claimed as an expense an amount set aside in reserve in
the event that its customers fail to pay outstanding charges in the
future, Koyo failed to demonstrate that it actually wrote off any bad
debts during the review period. In the absence of data on actual bad
debt that Koyo wrote off during the review period, we cannot conclude
that there is a relationship between Koyo's reported doubtful debt
reserve and actual sales. Therefore, for these final results we have
disallowed Koyo's reported doubtful debt reserve as a HM indirect
selling expense.
Because we do not consider Koyo's doubtful debt reserve to be an
actual HM selling expense, we agree in principle with Koyo that
doubtful debt reserves should not be treated as U.S. selling expenses
either. After examining Koyo's financial statements, however, we found
that Koyo did not quantify its doubtful debt reserve for U.S. sales.
Accordingly, for these final results we were not able to exclude
doubtful debt reserves from Koyo's pool of U.S. indirect selling
expenses.
Comment 33: Koyo maintains that the Department's computer program
contains an error that sets the value of HM indirect selling expenses
to zero whenever the Department resorts to CV as the basis for FMV.
Koyo asserts that because it reported indirect selling expenses for CV,
the Department should revise its computer program to deduct these
expenses from CV for these final results.
Torrington rejects Koyo's argument because deducting indirect
selling expenses in certain instances would yield distorted results.
Torrington further argues that Koyo has not alleged or demonstrated
that the Department committed a clerical error in making adjustments to
CV. Therefore, Torrington concludes that the Department should not
adopt Koyo's proposed revision to the Department's computer program for
these final results.
Department's Position: We agree with Koyo. When we created new cost
and expense variables to recalculate COP pursuant to our verification
findings, we inadvertently did not include the variable for indirect
selling expenses in the margin section of the computer program. Because
we verified the data that Koyo provided on indirect selling expenses
for CV, we have revised our computer program to deduct these expenses
from CV for these final results.
Comment 34: Torrington believes that the Department should disallow
Nachi's claim for indirect selling expenses that were incurred by NFC
on HM sales made through NBC. Citing AFBs I (at 31720), Torrington
states that the Department consistently has rejected claims for selling
expenses incurred by parent companies on sales made by subsidiaries.
Furthermore, Torrington argues that there is no evidence on the record
that shows that the expenses claimed by NFC were incurred exclusively
to support NBC sales and asserts that it is reasonable to assume that
NFC's selling expense were incurred to support all aspects of sales.
Nachi contends that the Department thoroughly verified the fact
that NFC incurred indirect selling expenses to support sales made by
NBC and that Torrington has not presented any evidence to contradict
the Department's findings. Accordingly, Nachi concludes that the
Department should allow Nachi's claimed indirect selling expenses for
these final results.
Department's Position: We disagree with Torrington. In AFBs I, we
denied as HM indirect selling expenses the parent company's selling
expenses because it did not incur the expenses in question specifically
on sales to its HM subsidiary. In contrast, in this review we verified
that NFC incurred the indirect selling expenses in question on behalf
of NBC and that these expenses supported NBC's sales to its HM
customers. Accordingly, we have allowed NFC's reported selling expenses
for its sales to NBC as HM indirect selling expenses for these final
results.
Comment 35: Nachi argues that in recalculating Nachi's export
selling expenses incurred in Japan on U.S. sales, the Department
mistakenly treated all transfer prices as being reported in U.S.
dollars despite the fact that Nachi reported certain transfer prices in
yen. Therefore, Nachi requests that the Department make the necessary
exchange rate conversions for those transfer prices reported in yen.
Torrington responds that before making a correction to Nachi's
export selling expense calculation, the Department should confirm that
Nachi reported transfer prices in both dollars and yen.
Department's Position: We agree with Nachi. We confirmed that Nachi
reported transfer prices in dollars for sales made through certain
channels and in yen for sales made through other channels. Accordingly,
we have made the appropriate exchange rate conversions to Nachi's yen-
denominated transfer prices for these final results.
Comment 36: Torrington argues that the Department failed to deduct
from USP all export selling expenses that INA incurred in Germany.
Torrington notes that, in addition to export selling expenses that INA
incurred specifically for U.S. sales, INA also reported and identified
certain expenses related to all export sales, and certain other
expenses related to both domestic and export sales. Torrington requests
that the Department deduct these additional export selling expenses
from USP for the final results.
INA objects to Torrington's request on the grounds that deducting
the indirect selling expenses at issue from ESP would result in an
overstatement of INA's U.S. indirect selling expenses. INA contends
that it incurs the HM indirect selling expenses at issue for selling
the merchandise to customers for whom INA has direct selling
responsibility. INA further contends that its U.S. subsidiary incurs
similar expenses in selling to unrelated customers for whom it has
direct selling responsibility. Because both INA and its U.S. subsidiary
incur indirect selling expenses in making sales to their unrelated
customers, INA asserts that the HM indirect selling expenses at issue
are not related to U.S. sales made by its subsidiary. Accordingly, INA
concludes that the Department should not deduct these expenses from ESP
for these final results.
Department's Position: We agree with INA. During our verification
at INA's headquarters in Germany, we found that INA properly reported
all expenses that it incurs specifically for export sales to its U.S.
subsidiary. Further, we found no evidence that INA incurred the
indirect selling expenses at issue to support sales to unrelated
customers in the United States; rather, INA incurs these expenses in
Germany in making sales to customers outside the United States.
Therefore, we conclude that the indirect selling expenses in question
are not related to U.S. sales. Accordingly, [[Page 10918]] we have not
deducted these expenses from INA's USP for these final results.
Comment 37: NTN and NTN-Germany contest the Department's rejection
of NTN's claimed reduction to NTN's reported total U.S. indirect
interest expenses for that portion of the total interest expenses
attributable to cash deposits of estimated antidumping duties. NTN and
NTN-Germany argue that the Department's failure to provide an
explanation for its decision to deny their claimed reduction to U.S.
interest expenses violated the Department's regulations by prohibiting
NTN and NTN-Germany from effectively commenting on the methods that the
Department used to calculate NTN's and NTN-Germany's preliminary
dumping margins. NTN and NTN-Germany further argue that the
Department's denial of this adjustment contravenes the Department's
established practice of permitting this adjustment in previous reviews
of the antidumping duty orders on both AFBs and tapered roller
bearings. Citing Shikoku Chemicals Corp. v. United States, 795 F. Supp.
417 (CIT 1992), NTN and NTN-Germany assert that it has the right to
rely on the Department's established practice in preparing its
questionnaire responses. Accordingly, NTN and NTN-Germany conclude that
the Department's failure to adhere to its regulations and its violation
of judicial precedent in not allowing NTN and NTN-Germany to rely on
established calculation methods require the Department to allow NTN's
and NTN-Germany's claimed reduction to total U.S. interest expenses.
Torrington and Federal-Mogul support the Department's rejection of
NTN and NTN-Germany's claim. Federal-Mogul contends that because the
Department considers cash deposits of estimated antidumping duties to
be provisional in nature, any interest expenses that NTN and NTN-
Germany incurred on money borrowed to make cash deposits of estimated
duties are also provisional in nature, and could ultimately be offset
by interest received on refunded cash deposits. Torrington adds that
interest expenses, including any incurred on financing cash deposits,
are related to all NTN and NTN-Germany's U.S. sales and, therefore,
should be treated like other types of indirect selling expenses.
Torrington further argues that even if NTN and NTN-Germany's claimed
offsets were permissible, they failed to demonstrate that they actually
incurred interest expenses on borrowing to finance cash deposits of
estimated antidumping duties. Finally, Torrington and Federal-Mogul
reject NTN and NTN-Germany's procedural arguments. Torrington states
that the Department always amends its calculation methods when existing
methods are found to be inaccurate, while Federal-Mogul states that the
Department has not denied NTN's and NTN-Germany's right to participate
in the proceeding because they may still seek judicial review of the
Department's final results. Accordingly, Torrington and Federal-Mogul
conclude that the Department properly denied NTN's and NTN-Germany's
claimed adjustment to U.S. indirect selling expenses for interest paid
on borrowing to finance cash deposits of estimated antidumping duties.
Department's Position: We disagree with NTN and NTN-Germany. Cash
deposits of estimated antidumping duties are provisional in nature,
because they may be refunded, with interest, to respondents at some
future date. Because the cash deposits are provisional in nature, so
too are any interest expenses that respondents may incur on borrowing
to finance cash deposits. To the extent that respondents receive
refunds with interest on cash deposits, the interest that respondents
receive on the refunded deposits will offset any interest expenses that
respondents may have incurred in financing the cash deposits.
Therefore, we did not allow NTN's and NTN-Germany's claimed offsets to
reported interest expenses in the United States to account for that
portion of the interest expenses that respondents estimate to be
related to payment of antidumping duties.
Further, we reject NTN's and NTN-Germany's arguments that we cannot
deny their claimed adjustment because we deprived them of their right
to participate in this proceeding. The Department has the authority to
revise the methods that it uses to calculate dumping margins when it
determines that existing methods yield inaccurate results. In addition,
NTN and NTN-Germany had the opportunity to make affirmative arguments
in support of their claimed offsets in the case briefs that they
submitted subsequent to our issuance of the preliminary results of
these reviews. Therefore, we are not constrained by prior practice to
grant NTN's and NTN-Germany's claimed adjustment to U.S. interest
expenses for interest incurred to finance cash deposits of antidumping
duties, and have rejected the claim for these final results.
Comment 38: Torrington objects to NTN's claimed reductions to U.S.
indirect selling expenses. According to Torrington, NTN has provided no
evidence that the expenses that it has excluded from its reported U.S.
indirect selling expenses are not related to sales of subject
merchandise. Accordingly, Torrington requests that the Department deny
NTN's claimed reductions to U.S. indirect selling expenses for the
final results.
In response to Torrington's arguments, NTN states that the
Department has verified NTN's method of reporting these adjustments in
previous reviews, and has accepted NTN's claimed adjustments in each of
the previous reviews of AFBs. NTN further argues that the record
supports its contention that the expenses in question are not related
to sales of subject merchandise. Accordingly, NTN concludes that the
Department should grant NTN's reported adjustments to U.S. indirect
selling expenses for these final results.
Department's Position: We agree with NTN. The record contains no
evidence to refute NTN's claims that NTN incurs the expenses in
question almost exclusively for sales of non-subject merchandise, and
that any such expenses that NTN may incur on sales of subject
merchandise are insignificant. Therefore, we have permitted NTN to
deduct these expenses from its total pool of U.S. indirect selling
expenses for these final results.
Comment 39: NTN and NTN-Germany object to the Department's
determination to re-allocate their reported U.S. selling expenses using
their resale prices to the first unrelated customer. NTN and NTN-
Germany argue that because the Department failed to articulate reasons
for its rejection of their allocation method, the Department deprived
them of the opportunity to comment on the Department's determination.
NTN and NTN-Germany further argue that the Department violated judicial
precedent by abandoning the method of allocating U.S. selling expenses
that it used in the three previous reviews of AFBs. Moreover, NTN and
NTN-Germany claim that there is no evidence that the Department's
method of allocating U.S. selling expenses over resale prices is more
accurate than NTN's and NTN-Germany's allocation of these expenses over
transfer prices. Accordingly, NTN and NTN-Germany request that the
Department use in its analysis NTN's and NTN-Germany's U.S. selling
expenses as they reported them in their questionnaire responses for
these final results.
In response, Torrington and Federal-Mogul state that transfer
pricing is suspect because it is completely within the control of
respondents and, therefore, subject to manipulation. Torrington further
argues that the [[Page 10919]] Department's reallocation is rational
because there is no correlation between the selling expenses in
question and NTN's transfer prices. As a result, Torrington and
Federal-Mogul support the Department's reallocation of NTN's and NTN-
Germany's U.S. selling expenses on the basis of resale prices to the
first unrelated customer in the United States.
Department's Position: We agree with Torrington and Federal-Mogul.
First, we disagree with NTN's and NTN-Germany's arguments that we
denied them the opportunity to comment on our rejection of their
allocation method and violated judicial precedent in reallocating the
expenses in question. As stated above, NTN and NTN-Germany had the
opportunity to make affirmative arguments in support of their
allocation methods in the case briefs that they submitted subsequent to
our issuance of the preliminary results of these reviews. Further, as
stated above, we have the authority to revise our calculation methods
when we determine that existing methods yield inaccurate results.
When allocating expenses over sales value, we attempt to use the
most accurate measure of that value. Although in certain instances we
permit respondents to allocate certain types of expenses using transfer
prices, we prefer to allocate expenses using resale prices to unrelated
parties because such prices are not completely under respondents'
control and, therefore, provide a more reliable measure of value that
is not subject to potential manipulation by respondents. Thus, although
we have no evidence that NTN systematically manipulated its transfer
prices, our allocation of the specific expenses in question using
resale prices provides a more reliable measure of per-unit expenses
than does an allocation using transfer prices. Further, the allocation
of the expenses in question using resale prices to unrelated customers
is appropriate in this instance because the U.S. affiliate of NTN and
NTN-Germany incurred these expenses in the United States making U.S.
sales to unrelated customers. It is not appropriate to allocate these
expenses on the basis of the U.S. affiliate's purchase costs; rather,
the expenses should be allocated over its sales. Because we prefer to
allocate expenses using resale prices, and because the expenses in
question are attributable to U.S. sales to unrelated customers, we have
allocated the expenses in question over resale prices for these final
results.
Comment 40: Torrington asserts that the Department erred in failing
to reallocate expenses that NTN and NTN-Germany incurred on U.S. sales
prior to importation on the basis of resale prices to the first
unrelated U.S. customer. According to Torrington, because respondents
control transfer pricing, allocation of expenses based on transfer
prices affords respondents the opportunity to manipulate the
Department's analysis by shifting expenses away from certain U.S.
products. In this context, Torrington states that its own analysis of
NTN's and NTN-Germany's transfer prices and production costs suggests
that their transfer prices may not be reasonable. Therefore, Torrington
requests that the Department reallocate the remainder of NTN's and NTN-
Germany's U.S. selling expenses on the basis of resale prices for the
final results.
In rebuttal, NTN and NTN-Germany assert that Torrington's analysis
fails to demonstrate that their transfer prices are unreasonable. NTN
further argues that the pre-sale expenses that it incurred in Japan are
attributable to sales by NTN to its U.S. subsidiary. Therefore, NTN and
NTN-Germany assert that the Department should accept its allocation of
these expenses using transfer prices for these final results.
Department's Position: We agree with NTN and NTN-Germany. Although
we prefer to allocate expenses using resale prices to unrelated
parties, we may permit respondents to allocate expenses using transfer
prices when it is reasonable to do so. In this instance, such an
allocation is reasonable because the expenses at issue are movement
charges that NTN and NTN-Germany incurred on sales, made at transfer
prices, to a related party in the United States. Further, because
Torrington's analysis does not focus on the transfer prices and costs
of specific products, we find that the analysis fails to demonstrate
that NTN's and NTN-Germany's transfer prices are unreasonable or that
they systematically manipulated their transfer prices to shift expenses
away from certain U.S. sales. Therefore, we have not reallocated the
expenses in question for these final results.
Comment 41: Torrington challenges the method that NTN used to
allocate to U.S. sales the export selling expenses that NTN incurred in
Japan. According to Torrington, NTN's method of allocating these
expenses according to salaries of export department personnel appears
to understate the amount of export selling expenses attributable to
U.S. sales. Specifically, the allocation ratio that NTN developed using
salaries is significantly less than the ratio that would be derived by
comparing U.S. export sales to total export sales. Because the record
contains no evidence explaining or supporting the difference between
the allocation ratios, Torrington suggests that the Department consider
for the final results allocating the export selling expenses incurred
in Japan to U.S. sales using a ratio based on sales.
NTN rejects Torrington's argument, stating that the Department
verified the accuracy of NTN's reported export selling expenses, and
that the Department has accepted NTN's allocation method in each of the
previous AFB reviews. Therefore, NTN concludes that the Department
should not reallocate its export selling expenses for these final
results.
Department's Position: We agree with NTN. Torrington's analysis is
suspect because it appears to be based on sales of only one class or
kind of merchandise and on NTN's U.S. resale prices rather than the
value of NTN's exports to the United States. Further, Torrington has
provided no evidence that its proposed allocation method yields a more
accurate measure of the amount of NTN's export selling expenses that
are attributable to U.S. sales. Because NTN is able to identify
specific employees who are responsible for export sales to NTN's U.S.
subsidiary, NTN's allocation method yields a reasonable measure of the
export selling expenses attributable to U.S. sales. Therefore, in the
absence of evidence that the salary data that NTN used in its
allocation are inaccurate, we have accepted NTN's allocation method for
these final results.
Comment 42: Federal-Mogul questions NTN's classification of
``warehouse expenses'' and ``miscellaneous expenses'' incurred in the
United States as indirect selling expenses. Federal-Mogul argues that,
although warehouse and miscellaneous expenses may be indirect selling
expenses, NTN failed to provide any evidence to substantiate its claim
that these expenses were not directly related to U.S. sales.
Accordingly, Federal-Mogul requests that the Department treat these
expenses as direct selling expenses for the final results of this
review.
NTN responds that it provided detailed explanations of all its
expenses in its questionnaire responses, and that the Department has
accepted NTN's classification of miscellaneous and warehouse expenses
as indirect selling expenses in each of the previous AFB reviews.
Therefore, NTN concludes that the Department should continue to treat
miscellaneous and warehouse expenses as indirect selling expenses for
these final results. [[Page 10920]]
Department's Position: We agree with NTN. The record contains no
evidence that these expenses are directly related to specific U.S.
sales. Therefore, we have continued to treat them as indirect selling
expenses for these final results.
Comment 43: Torrington maintains that NPBS' allocation of export
selling expenses based on the number of personnel responsible for
export sales is unreliable. Torrington argues that the Department
should reallocate these expenses based on the relative value of U.S.
sales to total export sales, as it did in the final results of AFBs III
(at 39749).
NPBS responds that its allocation method is reasonable. According
to NPBS, it allocates expenses incurred in Japan to all export sales
based on the number of personnel responsible for export sales, and then
allocates the export selling expenses to U.S. sales based on the ratio
of U.S. sales to total export sales. Therefore, NPBS contends that its
allocation method is reasonable and consistent with the Department's
position in the final results of AFBs III. As a result, NPBS concludes
that the Department should not reallocate its export selling expenses
for these final results.
Department's Position: We agree with NPBS. To the extent that NPBS
is able to identify specific employees who are responsible for export
sales, it is acceptable for NPBS to determine that portion of its total
pool of indirect selling expenses attributable to export sales based on
the ratio of export-related employees to total employees because it
provides a reasonable measure of the selling effort that NPBS devotes
to export sales. Further, because NPBS used the ratio of U.S. export
sales to total export sales to allocate export selling expenses to U.S.
sales, we find that NPBS' allocation method is reasonable and
consistent with AFBs III. Therefore, we have used NPBS' reported export
selling expenses in our calculations for these final results.
Comment 44: Federal-Mogul questions NSK's classification of
``warehouse expenses'' incurred in the United States as indirect
selling expenses. Citing Nihon Cement Co., Ltd. v. United States, Slip.
Op. 93-80 (May 25, 1993), Federal-Mogul contends that warehouse
expenses may be movement expenses under certain circumstances. In this
context, Federal-Mogul argues that although warehouse expenses may be
indirect selling expenses, NSK failed to provide any evidence to
substantiate its claim that these expenses were not movement expenses.
Accordingly, Federal-Mogul requests that the Department treat these
expenses as movement expenses for the final results of this review.
NSK responds that the Department has no obligation to presume that
warehouse expenses are movement expenses. NSK further argues that the
Department never challenged NSK's claim that the warehouse expenses at
issue were indirect selling expenses. Therefore, NSK concludes that the
Department should continue to treat warehouse expenses as indirect
selling expenses for these final results.
Department's Position: We agree with NSK. The record contains no
evidence that NSK incurred the warehouse expenses in question for
storage of merchandise in transit from one location to another, as was
the case in Nihon. Moreover, Federal-Mogul has provided no evidence
that any other circumstances are present that would warrant treating
the warehouse expenses in question as movement expenses. As a result,
we cannot conclude that these expenses are movement expenses.
Accordingly, we have continued to treat them as indirect selling
expenses for these final results.
Comment 45: Torrington challenges two aspects of NSK's claimed HM
indirect selling expenses. First, Torrington argues that NSK improperly
claimed deductions from FMV for indirect selling expenses incurred by
NSK's HM subsidiaries as well as by NSK. Citing AFBs I, Torrington
argues that the Department previously has rejected respondents'
attempts to claim deductions from FMV for indirect expenses incurred by
both the parent company and its sales subsidiary. Torrington further
argues that NSK has not demonstrated that the research and development
(R&D) expenses that comprise a significant portion of NSK's HM indirect
selling expenses are actually related to NSK's selling functions.
Therefore, Torrington concludes that the Department should eliminate
R&D expenses from NSK's claimed HM indirect selling expenses or, at a
minimum, allow as a HM indirect selling expense only that portion of
R&D expenses attributable to HM sales.
NSK responds that because the Department considers NSK and its
related distributors to be one entity, the indirect selling expenses of
both NSK and its related distributors are properly attributed to the HM
sales subject to this review. NSK further argues that the Department
has accepted NSK's method of reporting indirect selling expenses in
previous AFB reviews, and that the Department verified NSK's reported
indirect selling expense data in this review. Moreover, NSK argues that
it reported its general R&D expenses in accordance with the statute and
the Department's instructions. According to NSK, it incurs general R&D
expenses in analyzing domestic customers' intended uses of bearings or
in assisting them in identifying the appropriate product for a
particular application; because of the need to work directly with
customers in providing general R&D services, NSK states that it does
not provide such services to export customers. Thus, because NSK incurs
general R&D expenses for domestic customers only, and because the
expenses are related to NSK's selling function, NSK concludes that the
Department should deduct them as indirect selling expenses from FMV for
these final results.
Department's Position: We agree with NSK. We consider NSK and its
related distributors to be one company for purposes of this review and,
therefore, consider all indirect selling expenses incurred by NSK and
its related distributors for the distributors' sales to unrelated
customers to be related to these sales. Further, we verified that NSK
incurs general R&D expenses to support NSK's overall sales and
marketing efforts, and that NSK does not incur general R&D expenditures
for export customers. Accordingly, we have included all expenses that
NSK incurred in making sales to its related sales companies in Japan,
and all of NSK's claimed general R&D expenses, among NSK's HM indirect
selling expenses for these final results.
Comment 46: Torrington asserts that NSK should not allocate
indirect selling expenses and G&A expenses for ESP sales on the basis
of resale prices. According to Torrington, NSK's reallocation was not
in compliance with the Department's instructions in its supplemental
questionnaire to NSK. Torrington further argues that NSK's allocation
method distorts the Department's calculations by assigning the highest
deductions for such expenses to sales with the highest per-unit resale
prices. Therefore, Torrington believes that the Department should use
the highest amount deducted for any U.S. sale to make these adjustments
for all U.S. sales. Alternatively, Torrington argues that the
Department should reallocate indirect selling expenses and G&A over the
cost of goods sold, in order to ensure that the expenses in question
are allocated to each part number without distortion.
Citing Nacco Materials Handling Group, Inc. v. U.S., Slip Op. 94-34
(March 1, 1994), NSK argues that the Department should continue to
accept its method of reporting these expenses because, as explained in
NSK's [[Page 10921]] supplemental questionnaire response, it is
accurate and reliable. NSK further argues that the Department accepted
NSK's allocation method in previous AFB reviews, and verified the
expenses in question in this review. Therefore, NSK concludes that the
Department should not reallocate NSK's indirect selling expenses and
G&A for these final results.
Department Position: We agree with NSK. In its response to our
supplemental questionnaire, NSK explained in full the sales price-based
method that it used to allocate the expenses in question. As in
previous reviews, we find that NSK's allocation method is reasonable.
Further, there is no evidence that an allocation of indirect selling
expenses based on cost of goods sold, as proposed by Torrington, is any
more accurate or reasonable than a sales price-based allocation.
Therefore, consistent with past AFB reviews, for these final results we
have accepted NSK's indirect selling expenses as NSK reported them in
its questionnaire responses.
4H. Miscellaneous Charges
Comment 47: RHP contends that the Department erred in using Federal
Reserve exchange rates rather than RHP's reported exchange rate in
recalculating RHP's claimed currency hedging adjustment. RHP states it
provided all the information that the Department requested regarding
RHP's hedging adjustment, and that RHP's reported exchange rates
accurately reflect the rates that RHP received. RHP further argues that
the Department provided no justification for its determination not to
use RHP's actual exchange rates. Therefore, RHP asserts that the
Department should use the data that RHP submitted concerning its actual
corporate exchange rates to calculate its currency hedging adjustment
for these final results.
Torrington and Federal-Mogul argue in rebuttal that the Department
must apply the exchange rate specified by the Department's regulations.
Torrington continues that it is the respondents' burden to demonstrate
their entitlement to an adjustment. In this context, Torrington argues
that the Department did not verify RHP's corporate exchange rates, and
that RHP did not explain how its reported corporate rates would result
in a more precise adjustment than those that the Department used in its
calculations. Therefore, Torrington and Federal-Mogul conclude that the
Department should not modify its calculation of RHP's currency hedging
adjustment for these final results.
Department's Position: We agree with Torrington and Federal-Mogul.
The Department is required by 19 CFR 353.60 to make currency
conversions in accordance with Customs procedures established by
section 522 of the Tariff Act. This section states that ``(t)he Federal
Reserve Bank of New York shall decide the buying rate and certify the
rate to the Secretary (of the Treasury).'' Therefore, we have used the
Federal Reserve Bank's exchange rates as the basis for RHP's currency
hedging adjustment for these final results.
5. Cost of Production and Constructed Value
5A. Research and Development
Comment 1: Torrington contends that, although RHP treated all R&D
as G&A expenses, these expenses were at least in part product-specific.
Torrington references two response exhibits listing product R&D
expenses for new products to support its view that the Department
should reject RHP's argument that it was unable to report product-
specific R&D. Torrington notes that developing new products is clearly
a product-specific activity and should have been reported as such.
Torrington concludes that the Department should reclassify all R&D
expenses and include them in the total for the COM for the final
results.
RHP explains that while its R&D facility was responsible for
developing new products, no new products were sold during the POR, and
thus, there is no basis for adjusting RHP's reported R&D costs.
Department's Position: We disagree with Torrington. The exhibits in
RHP's cost section show general areas of R&D directed at the
development of new bearings and general improvements to certain aspects
of all bearings. The exhibits do not indicate that R&D costs were
incurred for any specific bearing.
Comment 2: NMB/Pelmec argues that the R&D expenses that are not
related to the subject merchandise should not be added to the COP and
CV. In its Section D response to the Department's questionnaire, NMB/
Pelmec explained that R&D expenses were reported as part of factory
overhead. The only R&D activities noted in the 1992 Minebea Co.'s
annual report relate to ``Rod-End, Spherical and Journal Bearings.''
These types of bearings are manufactured at facilities in the United
Kingdom, the United States and Japan, and are not manufactured by the
same facilities that produce the subject merchandise. Therefore, these
expenses should not be included in the COP and CV.
Torrington rebuts NMB/Pelmec's argument by stating that R&D
expenses incurred by the parent company in Japan should be allocated to
the Thai operations. According to Torrington, there is no merit to NMB/
Pelmec's argument that the R&D expenses identified by the Department at
verification are not related to the subject merchandise and should not
be added to COP and CV. The record does not support NMB/Pelmec's
contention that the unreported R&D costs were incurred solely for rod-
end, spherical and journal bearings.
Torrington further contends that, even if NMB/Pelmec's
unsubstantiated factual contention were correct, it is irrelevant
whether or not these types of bearings are presently being manufactured
in the Thai facilities. It is recognized that the same basic technology
and production processes are utilized for the various types of
bearings. For the final results, Torrington argues that the Department
should include the allocated portion of the R&D expenses in question.
Department's Position: The Department agrees with Torrington's
argument that the respondent failed to demonstrate that the benefits of
Minebea Japan's R&D efforts are limited to nonsubject merchandise. NMB/
Pelmec's argument that the financial report only discusses R&D that
relates to nonsubject products is flawed. The same report discusses how
the Minebea Group developed a new washing system for ball bearings that
it intends to have installed in all their plants worldwide by the end
of March 1993. Furthermore, we find irrelevant NMB/Pelmec's argument
that the list of current R&D projects that the Department reviewed did
not contain R&D specifically related to bearings. We verified through
Minebea Japan's financial statements that it amortizes the cost of its
R&D over a 5-year period. Accordingly, the current list of R&D projects
does not reflect the capitalized costs of prior year projects currently
being expended as an operating cost. Therefore, it is appropriate to
allocate R&D costs to NMB/Pelmec and we have included these expenses in
the COP and CV.
5B. Profit for Constructed Value
Comment 3: Torrington argues that sales to related parties that are
not at arm's length should be excluded for purposes of calculating
statutory profits. Torrington cites Final Determination of Sales at
Less Than Fair Value; Certain Stainless Steel Wire Rods from France, 58
FR 68865 (December 29, 1993), where the Department held that ``all home
market sales to related parties that fail the arm's-length test''
should be excluded from the profit calculation.
[[Page 10922]] Torrington claims that the change in approach was
prompted by the fact that related-party sales are excluded when FMV is
based on HM sales. Torrington also cites Final Determination of Sales
at Less Than Fair Value; Certain Hot-Rolled, Cold-Rolled, Corrosion-
Resistant and Cut-to-Length Carbon Steel Flat Products from Korea, 58
FR 37176 (July 9, 1993), as a recent example of this practice. Finally,
Torrington contends that this exclusion is in accordance with 19 U.S.C.
1677b(e)(2).
Respondents assert that sales to related parties which are not at
arm's length are in the ordinary course of trade and should be included
in the calculation of the profit component of CV. They also contend
that the Department has consistently rejected Torrington's argument in
prior AFB reviews. FAG argues that, although the Department has
reconsidered this issue in Certain Stainless Steel Wire Rods from
France and declined to include such related-party sales in the profit
component of CV, such change in policy is unwarranted given the lack of
any statutory mandate to disregard related-party sales that are in the
ordinary course of trade. FAG argues that should the Department reject
such related-party sales, the Department should then perform the
equivalent of a ``10-90-10 test,'' as it does in disregarding below-
cost sales where FMV is based on price.
Department's Position: We agree in part with Torrington. Contrary
to Torrington's contention, there is no basis for automatically
excluding, for the purposes of calculating profit for CV, sales to
related parties that fail the arm's-length test.
Section 773(e)(2) of the Tariff Act provides that a transaction
between related parties may be ``disregarded if, in the case of an
element of value required to be considered, the amount representing
that element does not fairly reflect the amount usually reflected in
sales in the market under consideration.'' The arm's-length test, which
is conducted on a class or kind basis, determines whether sales prices
to related parties are equal to or higher than sales prices to
unrelated parties in the same market. This test, therefore, is not
dispositive of whether the element of profit on related party sales is
somehow not reflective of the amount usually reflected in sales of the
merchandise under consideration. However, related-party sales that fail
the arm's-length test do give rise to the possibility that certain
elements of value, such as profit, may not fairly reflect an amount
usually reflected in sales of the merchandise. We considered whether
the amount for profit on sales to related parties was reflective of an
amount for profit usually reflected on sales of the merchandise. To do
so, we compared profit on sales to related parties that failed the
arm's-length test to profit on sales to unrelated parties. If the
profit on sales to related parties varied significantly from the profit
on sales to unrelated parties, we disregarded related-party sales for
the purposes of calculating profit for CV.
We first calculated profit on sales to unrelated parties on a class
or kind basis. If the profit on these sales was less than the statutory
minimum of eight percent, we used the eight percent statutory minimum
in the calculation of CV. If the profit on these sales was equal to or
greater than the eight percent statutory minimum, we calculated profit
on the sales to related parties that failed the arm's-length test and
compared it to the profit on sales to unrelated parties as described
above. Based on this methodology, we found only one instance in which
the profit on sales to unrelated parties was greater than eight
percent--specifically, sales of CRBs by INA.
Profit on INA's sales of CRBs to unrelated parties varied
significantly in comparison to profit on its sales of CRBs to related
parties. Therefore, we conclude that the profit on INA's sales to
related parties did not fairly reflect the amount usually reflected on
HM sales of this merchandise. Accordingly, we used INA's profit on
sales to unrelated parties in the calculation of profit in determining
CV for CRBs.
With regard to FAG's contention that the Department should apply a
10-90-10 test in this situation, we note that the 10-90-10 test is a
practice we established to implement the statutory requirement, as
provided in section 773(b) of the Tariff Act, that HM sales at less
than COP be disregarded if, among other things, they have been made in
substantial quantities. The 10-90-10 test is not germane to the issue
of whether the element of profit fairly reflects the amount usually
reflected in sales in the market under consideration, which is provided
for under section 773(e) of the Tariff Act. Furthermore, we have not
based our determination to disregard related-party sales that fail the
arm's-length test for the purposes of calculating CV on whether such
sales are in the ordinary course of trade. Rather, as discussed above,
our decision to disregard such sales is based on whether, pursuant to
section 773(e)(2) of the Tariff Act, the amount for profit on such
sales was reflective of an amount for profit usually reflected on sales
of the merchandise.
Comment 4: Torrington contends that below-cost sales should be
excluded for purposes of calculating statutory profits. Torrington
argues that the same rationale for the decision in Certain Stainless
Steel Wire Rods from France applies equally to below-cost sales that
are disregarded under 19 U.S.C. 1677b(b) and contends that if sales
below cost are excluded for price-to-price comparisons, these sales
cannot be included for determining profit for the calculation of CV.
Torrington also argues that below-cost sales excluded under 19
U.S.C. 1677b(b) are not in the ordinary course of trade. The petitioner
contends that the definition of CV specifies that statutory profits
should be calculated on the basis of sales in the ordinary course of
trade. 19 U.S.C. 1677b(e)(1)(B). Thus, below-cost sales, when made in
substantial quantities over an extended period of time, must be
disregarded in calculating CV profit.
Torrington further points out that the United States has taken the
position that disregarded below-cost sales are not to be considered
sales in the normal course of trade as referred to in Article VI of the
General Agreement on Tariffs and Trade (GATT) and the Antidumping Code.
Finally, Torrington maintains that its view of ordinary course of trade
conforms to international practice and is supported by the Final Act of
the Uruguay Round, dated December 15, 1993, in which parties to the
negotiation agreed to the principle that CV should incorporate actual
profits earned on sales in the ordinary course of trade.
Respondents maintain that it would be incorrect for the Department
to disregard below-cost sales in the calculation of CV because such
action is not supported by a proper reading of the statute.
Furthermore, respondents maintain that the international agreement
cited by Torrington is not relevant to the administration of current
U.S. antidumping law. Respondents claim that the statute and
Departmental practice implicitly recognize that sales below cost are in
the ordinary course of trade and should be included in calculating
profit for CV.
Department's Position: We disagree with Torrington's contention
that the calculation of profit should be based only on sales that are
priced above the COP. Section 773(e)(1)(B) of the Tariff Act
specifically imposes a variety of requirements on the calculation of
profit in determining CV. Namely, the profit should be equal to that
usually reflected in sales: (1) Of the same general class or kind of
merchandise; (2) made by producers in the country of exportation; (3)
in the usual commercial quantities; [[Page 10923]] and (4) in the
ordinary course of trade. Thus, the statute does not explicitly provide
that below-cost sales be disregarded in the calculation of profit. The
detailed nature of this sub-section suggests that any requirement
concerning the exclusion of below-cost sales in the calculation of
profit for CV would be explicitly included in this provision.
Accordingly, it would be inappropriate for the Department to read such
a requirement into the statute. See AFBs III (at 39752).
Furthermore, contrary to Torrington's assertions, under current
law, as expressed in section 771(15) of the Tariff Act, the definition
of ``ordinary course of trade'' does not exclude or even mention sales
below-cost. Until the changes resulting from the GATT 1994 agreements
are implemented by the United States, we must follow the above section
of the Tariff Act.
Consequently, we have used the greater of the rate of profit
provided in the response or the statutory minimum of eight percent
unless we applied a different profit rate resulting from calculations
in those situations where HM related-party sales were found not to be
at arm's length. See Comment 3.
Comment 5: Torrington argues that since the Department requested
profit data for total sales made during the POR and for the sample
sales, it should compute respondents' profits on the basis of the
sample sales reported or the average profit on all sales, whichever is
greater. Torrington states that given that the Department has relieved
respondents of reporting all sales for the period through the use of
sampling, it is appropriate to use the higher of the two available
rates. However, Torrington argues that if a single rate is adopted, it
should be the sample sales profit rate since this rate is a
representative profit tailored to the U.S. sample weeks.
Torrington further contends that for respondents that withheld
data, the Department should apply the highest profit rate earned by any
other respondent during the POR. For respondents that did not provide
data, Torrington believes the Department should apply 19 U.S.C.
1677e(c) to supply the missing information. Alternatively, Torrington
argues that for all sales that would otherwise be compared with CV, the
Department should apply the dumping margin calculated in the original
LTFV investigation as BIA.
Respondents maintain that profit on any sample of sales, including
sales of such or similar merchandise, is not representative of profit
on a general class or kind of merchandise and, therefore, should not be
used as profit for CV.
Department's Position: With the exception of those firms which had
related-party sales at prices which were less than arm's-length prices,
we disagree with Torrington's contention that profit should be computed
on the basis of the sample sales reported or the average profit rate of
all sales, whichever is greater. We requested information only on sales
of such or similar merchandise. Because the profit on the sales of such
or similar merchandise may not be representative of the profit for the
general class or kind of merchandise, we requested profit information
based on the class or kind of merchandise.
In the case of firms which needed profit adjustments to eliminate
sales made to related parties which were not at arm's length, we found
it necessary to make the adjustment based on the reported HM sales,
which was the only information available.
With respect to Torrington's proposed BIA applications for firms
that withheld profit data in this review, we found no cases where
respondents withheld such data.
5C. Related-Party Inputs
Comment 6: NSK and Koyo claim that the Department violated the
antidumping law by never establishing the grounds for collecting cost
data from related-party suppliers. NSK argues that the Department must
have a specific and objective basis for suspecting that the transfer
price paid to a particular related supplier for a major input is below
that supplier's costs before the Department can collect cost data from
that party. Citing 19 USC 1677b(e)(3), NSK claims that the Department
violated the antidumping law by not establishing ``reasonable grounds
to believe or suspect'' that the transfer price paid to related-party
suppliers was below cost. NSK claims that the quoted language of this
provision matches 19 USC 1677b(b), which grants the Department the
authority to conduct cost investigations. On this premise NSK argues
that the ``same threshold standard must be applicable to both
provisions.'' Koyo argues that not only did the Department not have any
statutory authority to request COP information for inputs that it
purchased from related suppliers, but also that there have been no
allegations by petitioners in this review, or in any prior AFBs
proceeding, that such parts were purchased at less than COP. NSK and
Koyo claim that since the Department has violated the antidumping law,
all cost data for parts purchased from related suppliers must be
removed from the administrative record. NSK further requests that
counsel for Torrington and for Federal-Mogul return this information to
counsel for NSK.
Torrington and Federal-Mogul argue that the Department properly
applied 19 U.S.C. 1677b(e)(3) by collecting cost data from related-
party suppliers. Torrington and Federal-Mogul maintain that because
respondents engaged in below-cost sales, the Department had reasonable
grounds upon which to collect cost data from related suppliers.
Torrington argues that given that the foreign producers do sell below
cost, it is reasonable to infer that their losses are passed back to
related-party suppliers, who are forced to transfer materials and
components at a loss. Torrington argues that 19 U.S.C. 1677b(b), which
provides the standard for analyzing below-cost sales, does not imply
that any particular party has to submit the evidence of below-cost
transfer prices of inputs and, therefore, does not suggest that the
burden of proof should be placed upon the petitioner, as suggested by
NSK. Federal-Mogul and Torrington claim that the best evidence
concerning related-party production cost is not accessible to domestic
parties and that the burden to submit the evidence should be placed
upon the respondents. Torrington and Federal-Mogul maintain that NSK's
position would essentially nullify 19 U.S.C. 1677b(e)(3).
Department's Position: We disagree with NSK and Koyo that the
Department violated the antidumping law by requesting cost data from
related suppliers. In calculating CV, the Department does not
necessarily accept the transfer prices paid by the respondent to
related suppliers as the appropriate value of inputs. Related parties
for this purpose are defined in section 773(e)(4) of the Tariff Act. In
accordance with section 773(e)(2) of the Tariff Act, we generally do
not use transfer prices between such related parties unless those
prices reflect the market value of the inputs purchased. To show that
the transfer prices for its inputs reflect market value, a respondent
may compare the transfer prices to prices in transactions between
unrelated parties. A respondent may provide prices for similar
purchases from an unrelated supplier or similar sales by its related
supplier to unrelated purchasers. If no comparable market price for
similar transactions between related parties is available, we may use
the actual COP incurred by the related supplier as an indication of
market value. If the transfer price is less than [[Page 10924]] the
market value of the input, we may value the input using the best
evidence available, which may be the COP.
NSK provided no information regarding prices between unrelated
parties for inputs it purchased from related suppliers. Therefore, in
accordance with section 773(e)(2) of the Tariff Act, we required the
actual COP of those inputs to determine whether the transfer prices
between NSK and its related suppliers reflected the market value of the
inputs. Where the transfer prices were less than the COP (i.e., market
value), we used the COP as the best evidence available for valuing the
input. Similarly, Koyo did not provide information regarding prices
between unrelated parties for some inputs it purchased from related
suppliers. In those instances we also required the actual COP of those
inputs to determine whether the transfer prices reflected the market
value of the inputs. Where the transfer prices were less than the COP,
we used the COP as the best evidence available for valuing the input.
Under section 773(e)(3) of the Tariff Act, if the Department has
reason to believe or suspect that the price paid to a related party for
a major input is below the COP of that input, we may investigate
whether the transfer price is in fact lower than the supplier's actual
COP of that input even if the transfer price reflects the market value
of the input. If the transfer price is below the related supplier's COP
for that input, we may use the actual COP as the value for that input.
We found in the previous review that both companies had purchased
major inputs from related parties at prices below COP. Therefore, in
accordance with normal practice, we determined that we had reasonable
grounds to believe or suspect that both NSK and Koyo purchased major
inputs from related suppliers at prices below the COP of those inputs
during this review period. See AFBs III (at 39754).
Comment 7: NSK argues that the Department should use NSK's purchase
price for parts purchased by NSK from each related supplier. NSK claims
that, according to section 773(e)(2) of the Tariff Act, the Department
should reject prices for parts purchased from related suppliers only
when it appears that these prices have been manipulated and that ``* *
* the amount representing that element does not fairly reflect the
amount usually reflected in sales in the home market under
consideration.'' Given the discretionary language of section 773(e)(2),
NSK contends that the Department should not reject every transaction
that simply falls below an unrelated supplier's price, but instead
should accept all transactions between related parties when the
business pattern demonstrates a competitive relationship.
Alternatively, if the Department concludes that it may determine
the market value at which parts should be purchased from related
suppliers simply on price-to-price comparisons, then NSK argues that it
cannot be penalized to the extent that its related supplier costs
exceed an unrelated supplier's price. Under section 773(e)(2) of the
Tariff Act, the Department cannot require that a related supplier's
price be above its COP if the fair market value established by an
unrelated supplier's price is below the related supplier's COP.
Therefore, under those circumstances in which both the related and
unrelated suppliers' prices fall below the related supplier's costs,
the Department should adjust the related party's price only to the
extent it falls below fair market value measured by the unrelated
supplier's price.
NSK further argues that if the Department determines market value
at which parts should be purchased from related suppliers on a price-
to-cost comparison when price-to-price comparisons do not exist, then
the Department should adjust NSK's costs for only those parts purchased
at prices below the COP. In these instances, NSK claims that the
Department's current adjustment is too broad and that the Department
should use the related supplier's actual COP submitted to the
Department. Finally, NSK contends that if the Department continues to
disregard the related supplier's cost data, the Department should amend
its adjustment to exclude finished bearings purchased from other
suppliers from the adjustment equation.
Department's Position: Under section 773(e)(2) of the Tariff Act,
the Department is directed to disregard a transaction between related
parties ``if the amount representing an element of value, required to
be considered in the calculation of CV, does not fairly reflect the
amount usually reflected in sales in the market under consideration.''
Given this requirement, we disagree with NSK that we should not reject
every transaction in which the prices from the related supplier do not
reflect the amounts usually reflected in sales between unrelated
parties. Although competitive factors may temporarily force related
suppliers to sell below market value, this does not relieve us of our
responsibility to capture the full market value usually reflected in
sales of the input. Lacking information as to what the market value is,
we rely on the related supplier's cost as a measure of the commercial
value of that input. In the case of major inputs, section 773(e)(3) of
the Tariff Act requires the Department to use the COP of that input if
such cost is greater than the amount that would be determined for such
input under section 773(e)(2).
We agree with NSK that, under section 773(e)(2) of the Tariff Act,
the Department should only adjust related suppliers' prices in
situations in which there were no arm's-length prices available and the
price-to-cost comparisons (in lieu of price-to-price comparisons)
reveal that the suppliers' costs exceed its prices. NSK did not provide
any comparable arm's-length prices. Therefore, for these final results,
we have compared the reported transfer price of complete bearings and
components purchased from related suppliers with the actual COP and
used the higher of the two for CV.
Comment 8: Torrington alleges that NMB/Pelmec Singapore has not
demonstrated that arm's-length prices were paid to Minebea Japan for
the equipment used by NMB/Pelmec Singapore. Therefore, the Department
should not use the prices reported by NMB/Pelmec for the final results.
NMB/Pelmec Singapore states that it reported in the supplemental
Section D response that machinery manufactured by Minebea Japan is
purchased at market value, and gave an example of how the price for one
of the machines was determined. NMB/Pelmec Singapore claims that there
is no reason to reject the prices paid by NMB/Pelmec Singapore for the
machinery from Minebea Japan.
Department's Position: NMB/Pelmec Singapore was unable to provide
prices between related parties for sales of identical equipment. As an
alternative, it submitted with its response to the Department's Section
D supplemental questionnaire copies of documents illustrating the COP
and sales information on the transfer of five inner-ring raceway
grinding machines to Pelmec Singapore. The information submitted
indicates that the machines were transferred from Minebea Japan to NMB/
Pelmec Singapore at a mark-up in addition to COP. Therefore, the
Department has concluded that NMB/Pelmec Singapore's related-party
equipment purchases can be considered arm's-length transactions.
Comment 9: NMB/Pelmec Thailand states that the Department's
conclusion that transfer prices for bearings components are below cost
is based on numerous errors. The Department stated in its analysis
memorandum for the preliminary results dated February 28, 1994, that,
based on a sample of four [[Page 10925]] bearing components, it
determined that related-party transfer prices ``may not be reflective
of fair value.'' As such, the Department increased NMB/Pelmec's COP and
CV data by the amount by which it determined that the bearings
component transfer prices were below cost. NMB/Pelmec Thailand argues
that before comparing transfer prices to costs, the Department
increased the reported costs for four items: interest, R&D,
headquarters expense, and Karuizawa's G&A expenses.
NMB/Pelmec Thailand argues that its Karuizawa plant's G&A costs and
its Minebea headquarters expenses should not be added to the component
costs because these expenses have already been taken into account.
Since the Department adds the headquarters expenses when calculating CV
value, a downward adjustment needs to be made at this stage to account
for the fact that some of the component costs have already been
increased by this amount. Similarly, NMB/Pelmec Thailand argues that if
the Karuizawa plant's G&A expenses are added to component costs, then
the markup should be deducted from the reported costs. NMB/Pelmec
further argues that since the Department increased the reported costs
for bearing components by the amount of Minebea Japan's consolidated
interest costs, the Department has double-counted this expense because
these costs were already included in the reported CV figures. Finally,
NMB/Pelmec states that R&D has also been double-counted since these
costs were included in CV.
Torrington states that the Department properly concluded that
transfer prices for NMB/Pelmec's bearing components are below cost.
Torrington states that there is no merit to NMB/Pelmec's contention
that the Department committed numerous errors. The verification team
determined that as Kuruizawa is involved with these purchases, its G&A
costs must be included in the COP along with the additional general
expenses incurred by Minebea. According to Torrington, the respondents
failed to provide calculations to illustrate that the Department's
methodology results in double-counting and that adding R&D expenses was
unjustified.
Department's Position: We found at verification that related
parties supply the majority of materials used by NMB/Pelmec Thailand in
its production of the subject merchandise. It was also shown at
verification that a sample of related-party transfers either did not
match the price from an unrelated party or were below the COP.
Additionally, Minebea Japan purchases NMB/Pelmec Thailand's finished
bearings for sale to the United States. As a consequence of the Minebea
Group's practice of purchasing and reselling materials and bearings for
the benefit of NMB/Pelmec Thailand, Minebea's reported sales and cost
of sales account for the cost of these related-party material purchases
twice. When Minebea Japan sells component parts to NMB/Pelmec Thailand,
it records a sale and cost of sale in its financial statements. Then,
correspondingly, when Minebea Japan repurchases and sells the finished
bearings which include the previously transferred components, it
records a sale and cost of sale in its financial statement. This
sequence of events constitutes double-counting in Minebea Japan's own
financial statements, i.e., sales of components and finished bearings.
Such double-counting occurs because Minebea Japan does not consolidate
its financial statements with those of NMB/Pelmec Thailand. Therefore,
the Department has adopted a similar methodology in applying its
adjustments to rectify the transfer price deficiencies it found during
verification.
Comment 10: Torrington argues that certain related-party transfer
prices that NTN reported in its CV questionnaire response do not
constitute a permissible basis for calculating CV. For the final
results, Torrington urges the Department to calculate ``arm's-length''
prices for certain inputs using information that NTN provided or, if
the Department is unable to do so, to reject NTN's CV data in favor of
BIA.
NTN responds that it provided all the information that the
Department requested regarding related-party inputs, and that it
indicated the products that contained inputs purchased from parties
related to NTN. Therefore, NTN concludes that the Department should not
use BIA to determine the dumping margins for any U.S. sales that are
matched to CV for these final results.
Department's Position: We agree with NTN. NTN provided the data
that we requested for related-party inputs and the information
necessary to make any adjustments to related-party prices. Further, we
find that adjustments to NTN's related-party prices are unnecessary.
Although certain purchases that NTN made from related-parties were not
at arm's-length prices, these inputs represent a small fraction of
NTN's total inputs and, therefore, have an insignificant effect on the
submitted CV data. As a result, we have used NTN's related-party prices
in our CV calculations for these final results.
5D. Inventory Write-Off
Comment 11: Torrington states that RHP had write-offs and write-
downs during the POR, and that the company charged these costs to all
RHP stock instead of to the particular models involved. Torrington
suggests that write-offs and write-downs of ball bearing models may
have been charged to non-scope merchandise. Torrington notes that
write-downs and write-offs are by nature model-specific and should be
charged to specific models. Torrington argues that the Department
should reallocate these costs by charging all costs to the bearing
model with the highest sales revenue in the United States during the
POR for which CV serves as FMV.
RHP agrees with Torrington that inventory write-offs and write-
downs occurred during the POR. RHP states, however, that it acceptably
charged these write-offs and write-downs against a reserve on its
financial reports.
Department's Position: We agree with RHP. RHP accounted for the
write-downs and write-offs in accordance with GAAP in the United
Kingdom. GAAP does not require that companies write down or write off
inventory on a model-specific basis. RHP appropriately off-set the
reserve rather than recognize an additional expense. In addition, RHP
realized a miscellaneous gain due to an overaccrual for write-downs and
write-offs in previous periods.
5E. Interest Expense Offset
Comment 12: Federal-Mogul argues that SNR's claim for an interest
income offset to financing expenses in the CV and COP calculations
should be disallowed because SNR failed to distinguish between interest
income from bearing manufacturing and interest income from investments.
In this respect, Federal-Mogul argues that SNR's interest earned from
``late payment for goods'' is properly classified as ``interest
revenue'' and should thus be used to adjust sales price upwards or to
offset credit expenses. Further, Federal-Mogul asserts that SNR's claim
for interest on advance payments to suppliers is not interest earned
from bearing manufacturing operations.
SNR responds that its reported interest income was all derived from
operations, specifically short-term deposits, interest on late payment
for bearings, and interest on advance payments to suppliers. SNR states
that it did not derive any of its interest income from non-operational
activities such as the sale of land or negotiable securities.
Accordingly, SNR claims [[Page 10926]] there is no basis to deny its
reported offset.
Department's Position: We agree with SNR. The interest earned on
short-term deposits, on advance payments to suppliers and on late
payments is derived from manufacturing and sales operations. The
Department's practice is to accept a reduction of total interest
expense by such short-term interest income because such income is
earned from working capital, which by definition is related to
manufacturing and sales operations. Therefore, we accepted the interest
offset as reported by SNR.
Comment 13: Federal-Mogul claims SKF's interest income offset
should be disallowed because the source of this offset was not
provided. Federal-Mogul asserts that the interest income qualifying as
an offset to interest expense must be derived from bearing
manufacturing operations.
SKF argues that total interest expense was reduced by interest
income earned solely on short-term investments (cash and marketable
securities). In addition, SKF argues that it illustrated its interest
calculation and the details were verified by the Department. SKF
asserts the Department's practice is to require a respondent to show
that interest income used to offset interest expense in the calculation
of COP relates to a firm's general operations, and that this practice
was affirmed by the CIT in The Timken Co. v. United States, Slip Op.
94-1 at 12-20 (January 3, 1994).
Department's Position: We agree with SKF. The Department verified
that the interest income offset was attributed to short-term
investments of its working capital. Therefore, interest expense was
appropriately reduced by this amount.
Comment 14: Torrington observes that NPBS reported interest
expenses for COP net of interest income. Torrington claims, however,
that NPBS failed to demonstrate that the interest income in question
was derived from short-term investments directly related to production
of merchandise. Accordingly, Torrington asserts that the Department
should recalculate NPBS' interest-expense factor without including
interest income.
NPBS responds that its interest income offset includes income
derived from short-term investments related to the production of
subject merchandise and income from investments of working capital.
Accordingly, NPBS argues that its offset is properly supported.
Department's Position: We agree with NPBS. NPBS reported that it
has investments in several types of securities and real estate, but has
not reported any interest income from these activities. Therefore, we
are satisfied that the interest income is related to production
activities and the investment of working capital.
5F. Other Issues
Comment 15: NMB/Pelmec Thailand argues that the Department
improperly recalculated the G&A expenses portion of the reported COP
and CV data to include additional Minebea Japan headquarters expenses.
According to NMB/Pelmec, some of these expenses were unrelated to the
production of the subject merchandise. Accordingly, these expenses
should not be included in the COP and CV calculations.
Torrington rebuts NMB/Pelmec's argument by stating that the
Department found at verification that Minebea Japan's G&A expenses
incurred were not fully allocated to the Thai operations. Torrington
asserts that the evidence on the record does not support NMB/Pelmec's
contention and that the Department has improperly allocated G&A
expenses to the Thai operations.
Department's Position: It is appropriate to allocate a portion of
the total headquarters expenses to NMB/Pelmec Thailand. NMB/Pelmec
lists headquarters expense as a general expense, which are period costs
that relate to the operation as a whole. We agree with Torrington that
the record evidence does not support the respondent's contention that
some of the accounts that make up headquarters expense should not be
allocated to the Thai operations.
Comment 16: NMB/Pelmec Thailand argues that the Department
incorrectly adjusted G&A expenses for certain extraordinary expenses
which were unrelated to the ordinary operations and should not be
included in the COP and CV calculations. According to NMB/Pelmec, these
extraordinary expenses consisted primarily of expenses related to the
company's 10th anniversary celebrations in Thailand and should not have
been added.
Torrington asserts that NMB/Pelmec's argument that the firm's 10th
anniversary celebration was an extraordinary loss is incorrect since by
the nature of the expense, it will recur in the future. In addition,
such events are typically an occasion to promote products and develop
customer relationships. Thus, this expense does not constitute an
extraordinary item and, at the very least, should be deemed a selling
cost.
Department's Position: We agree with Torrington that these expenses
are not extraordinary expenses. We find no merit to NMB/Pelmec's
arguments that these expenses do not relate to the ordinary operations
of the company. Since such activities and related expenses at a minimum
promote NMB/Pelmec's name, we have revised NMB/Pelmec's calculation of
G&A expenses to include these costs.
Comment 17: Torrington argues that the Department found at
verification that certain expenses, i.e., bonus for directors, bonus
for auditors, exchange loss and miscellaneous expenses, were not
included in the costs submitted by Koyo. Torrington contends that the
Department should make the appropriate adjustments to COP and CV for
the final results.
Koyo argues that the Department improperly reclassified its non-
operating expenses and payments out of retained earnings as production
expenses. Specifically, the Department incorrectly reclassified bonus
payments to auditors and directors paid out of retained earnings,
exchange losses, and all expenses booked as ``miscellaneous non-
operating.'' The reclassification of bonuses for directors and auditors
contradicts prior Department treatment of these expenses. Koyo states
that the Department in four previous tapered roller bearing (TRB)
reviews found that bonuses for directors and statutory auditors' fees
were similar to a dividend payment and, accordingly, not a production
cost. Koyo also argues that the Department erroneously reclassified the
exchange losses included in Koyo's non-operating expense account as
production costs. Koyo contends that its exchange losses are related to
international sales operations, not domestic production. Since all
production expenses are incurred and paid in yen, there can be no
production-related exchange losses.
Department's Position: During verification, Koyo's management
provided explanations of the costs that were included as certain non-
operating expenses on the financial statements. Based on the
discussions, we found that certain general expenses were not included
in the submission. These costs included miscellaneous expenses and
bonuses for the board of directors and auditors which are normal costs
incurred by companies. With respect to foreign exchange losses, these
costs were also considered to be a general expense because they did not
relate to sales.
Comment 18: Torrington argues that the Department noted at
verification that Koyo under-reported certain other expenses when it
individually adjusted factory overhead expenses allocated through its
cost centers based on an efficiency variance. Torrington contends
[[Page 10927]] that the Department's verification team observed that
the efficiency variance had a direct effect on the specific product
costs that are processed through Koyo's cost centers and that
application of this favorable variance resulted in lower factory
overhead expenses allocated to the subject merchandise. Torrington
argues that the Department should make the appropriate adjustments to
COP and CV in the final results.
Koyo argues that the Department erred in inflating Koyo's COP
because of the existence of efficiency variances in Koyo's basic labor
cost. Koyo contends that the Department's decision to adjust its
reported costs is the result of a misunderstanding of the manner in
which Koyo's basic cost is calculated and the role of the efficiency
variance in those calculations. Koyo explains that its basic cost
system employs a two-step process to determine as accurately as
possible the actual labor hours used to produce a given product in a
given period. First, Koyo's production engineers determine the amount
of time, i.e., the ``basic hours'' theoretically required to perform
each process at each cost center on the basis of time and motion
studies. Second, at the end of a given period, Koyo's cost accountants
compare the number of hours theoretically necessary to operate a
particular cost center, based on that period's ``basic hours,'' to the
number of hours actually required to operate that cost center during
that period. The ratio of actual to basic hours is the so-called
``efficiency variance,'' which is used to calculate the labor cost
element of the model-specific basic costs for the next period. Koyo
explains that dividing the previous period's basic hours by the
efficiency variance simply derives the number of actual hours incurred
in the previous period, which is then used to calculate the labor cost
for the next period. Koyo maintains that its method of updating its
models' basic cost has been repeatedly verified by the Department
without any suggestion that its method of capturing and updating the
costs at its cost centers fails to identify accurately the actual costs
incurred at those cost centers. Accordingly, there is no justification
for modifying this calculation in the review.
Koyo further argues that the Department's position that the
efficiency variances adjust a model-specific standard by an overall
rate which may or may not accurately state the individual model's
standard cost is wrong. The efficiency variances are not an ``overall
rate''--to the contrary, they are specific rates for groups of cost
centers that are used to calculate the basic cost of individual models
produced at those cost centers.
Koyo further contends that because the manufacturing variance is
used to adjust for the difference between the basic costs of the models
produced at a given plant and the actual costs incurred there, if the
Department decides to reject one element in the calculation of the
basic costs (in this case, the adjustment to reflect the difference
between standard and actual labor hours), then that element must be
included instead in the calculation of the manufacturing variance. In
summary, Koyo argues that the fact that a variance calculated on a
plant-wide basis was used to adjust expenses for individual models does
not support rejection of the manufacturing variance and that the
Department should eliminate its revision of Koyo's reported costs of
production.
Department's Position: We agree with Koyo. As this efficiency
adjustment attempts to determine more accurately the amount of labor
costs associated with individual cost centers based on actual
experience, we find that Koyo's adjustment was reasonable. Accordingly,
the Department accepted Koyo's submitted data with respect to the labor
efficiency adjustment.
Comment 19: Federal-Mogul claims that F&S failed to respond
adequately to requests for HM cost data. When the Department requested
COP data following Federal-Mogul's allegation of below-cost sales, F&S
did not provide adequate COP data for all sales. Federal-Mogul states
that, as partial BIA, the Department treats sales with missing COP data
as sales below cost. However, Federal-Mogul contends that F&S' failure
to provide adequate COP data at the Department's request warrants
application of total BIA.
F&S argues that, with regard to HM cost data, it provided COP and
CV information for all models sold in the U.S. market. F&S claims that
it has been responsive to all requests by the Department for
information.
Department's Position: We disagree with Federal-Mogul. F&S has
provided sufficient and complete COP data. There were identical HM
model matches for all U.S. sales. Because F&S provided COP data for all
HM models used for comparison purposes, and we had no need for COP data
for other models sold in the HM which were not used for comparison, we
accepted F&S' response.
Comment 20: Torrington contends that the Department found at
verification that expenses for training personnel in the use of certain
testing machinery should have been included in technical service
expenses, but that Koyo included this expense in SG&A expenses.
Torrington argues that the Department should reclassify this expense as
a technical service expense.
Department's Position: We disagree with Torrington. Since the
training of personnel cannot be tied directly to sales, it was
appropriately included as part of SG&A.
Comment 21: Torrington argues that the questionnaire requires
respondents to report a weighted-average manufacturing cost when the
subject merchandise is produced at more than one facility. Torrington
contends that since Koyo deviated from the questionnaire instructions,
the Department should apply the highest prior margin to all sales of
those part numbers manufactured by more than one supplier.
Koyo claims that it reported the weighted-average COM for all of
the models in its responses. Koyo also states that all of the
information requested by the Department has been provided and that
there is no basis upon which to apply BIA.
Department's Position: We agree with Koyo that it reported its
weighted-average COM for all of the models in its supplemental
response.
Comment 22: Torrington argues that the Department should reject
FAG-Germany's cost data because FAG only provided costs for completed
bearings and not for the individual material elements as required by
the questionnaire. Torrington further argues that FAG/Barden did not
provide cost data for all models sold in the HM. Torrington argues that
while CV data were provided for Barden-made models sold in the United
States, COP data for Barden's HM sales were not provided. Torrington
argues that since the Department initiated a COP investigation
regarding FAG, it should have included its affiliate Barden.
FAG argues that its cost responses were accurate and acceptable as
reported because its model-specific COPs and CVs were correctly
reported in accordance with Departmental precedent. Also, FAG argues
that no below-cost allegation has been made against Barden, and the
Department did not request COP data from Barden.
Department's Position: We agree with respondents. We have accepted
FAG's cost data in the format provided for this review, because we were
reasonably able to use the data for our analytical purposes in this
review. Also, petitioner has provided no other basis for the Department
to reject FAG's cost responses. [[Page 10928]]
With respect to Torrington's argument concerning a below-cost test
for products produced by Barden, the Department did not formally
request the COP data from Barden. The original below-cost allegation
was made before the companies were collapsed for the purposes of these
reviews, and only involved products produced by an unrelated company
and sold by FAG U.K. The Barden HM sales are distinct in that they are
sales of self-produced merchandise, not resales of purchased products.
Furthermore, none of the products purchased by FAG is similar to those
produced by Barden. Accordingly, if sales by FAG U.K. were disregarded
because they were sold below cost, there is no possibility that HM
sales of Barden-made products will be matched to a U.S. sale in place
of the product purchased and resold by FAG.
Comment 23: NTN objects to the Department's preliminary decision to
increase NTN's reported COM. NTN argues that the Department's analysis
memorandum contains certain factual errors and misinterprets certain
information in the record. Specifically, NTN contends that: (1) The
Department's findings are based on information that does not pertain to
the COM data subject to this review; (2) the Department relied on
general information when more specific information was available; (3)
the Department applied findings based on data from one factory to all
of NTN's other factories; (4) the Department's conclusions regarding
standard costs for subject and non-subject merchandise are not
supported by record evidence; and (5) the non-subject merchandise that
the Department examined at verification does not represent a
significant portion of NTN's costs. For these reasons, NTN asserts that
the Department should not make any adjustments to its reported COM.
NTN further argues that in the event that the Department determines
to adjust NTN's reported COM, it should revise the methodology that it
used in the preliminary results. NTN contends that the Department's
revision artificially increases the adjustment to NTN's reported COM
because the Department reallocated certain costs as a percentage of
non-subject merchandise only, rather than as a percentage of all
products. NTN further contends that the evidence in the record does not
warrant the Department's adjusting NTN's total reported COM, because
the Department's verification report and exhibits demonstrate the
accuracy of certain portions of NTN's reported COM. As a result, NTN
requests that the Department revise its adjustment to NTN's COM by
reallocating certain costs to all products, and by adjusting only
certain portions of NTN's reported COM.
Torrington responds that NTN is improperly attempting to revise the
Department's verification report and to raise issues that the
Department did not examine at verification. Torrington further argues
that the Department's verification report identifies significant flaws
in NTN's reporting methods, and concludes that these methods do not
accurately capture cost differences across NTN's product lines.
Finally, Torrington argues that the Department would be justified in
rejecting NTN's COP and CV responses if they contained the factual
errors that the Department found at verification. Given the
Department's verification findings, Torrington rejects NTN's arguments
and supports the Department's revisions to NTN's reported COP and CV.
Department's Position: We disagree with NTN. First, the COM
information that NTN challenges does pertain to cost information which
is subject to this review. NTN argues that the information used to
support the adjustment to COM was from outside the POR. The information
referred to by NTN supports the standard costs used during the POR and
is the underlying data for certain aspects of the submitted costs.
Therefore it is relevant to this review. NTN relied on pre-POR costs as
the basis for revisions to its standard costs. NTN revised certain
elements of its standard costs for certain product types during the
POR, but not for all product types. The majority of standard costs that
remained unchanged were for non-subject merchandise. Since standard
cost revisions are based on pre-POR costs, we tested selected non-
subject costs versus actual costs for the pre-POR period. We found that
the non-subject standard costs were overstated when compared to actual
costs. NTN applied a non-product-specific plant-wide variance to all
products. The application of a plant-wide variance shifts costs between
products. We adjusted the submitted costs for subject merchandise to
account for the inaccurate standard costs of non-subject merchandise.
Second, NTN's allegation that we ignored specific information in
favor of more general information is unfounded. We found at
verification that NTN routinely calculates actual costs in a more
specific manner than that used to calculate costs in its questionnaire
responses. Because we prefer to use the most specific information
possible to determine a respondent's costs, our use of NTN's own method
of calculating actual costs, as examined at verification, to calculate
COP and CV for these final results is appropriate and supported by
substantial evidence.
Third, our limited resources prohibit verification of all the data
submitted by respondents. Verification is intended to provide an
examination of representative data rather than a complete review of all
submitted data. Therefore, it is our longstanding practice to verify
selected information and draw general conclusions regarding all
respondents' data based on our verification findings. We followed this
longstanding practice in conducting our COP and CV verification at one
of NTN's factories. Moreover, NTN has failed to provide any evidence to
suggest that the data obtained from this factory is not representative
of manufacturing costs at NTN's other plants. In the absence of such
evidence, we conclude that our verification findings from the selected
NTN factory provide a reasonable basis for reaching conclusions
regarding NTN's COP and CV data.
Fourth, NTN misrepresents our findings regarding standard rates.
Our findings relate to the input factors used in the standards, not the
rates applied to the input factors. Although NTN has revised some input
factor amounts associated with the production of subject merchandise,
we found at verification that NTN has not revised these amounts for the
majority of the inputs used for the subject merchandise, while it has
revised the input amounts for non-subject merchandise. As demonstrated
by our verification findings, the practice of revising input amounts
for only certain parts creates distortion when allocating costs.
Accordingly, we have adjusted NTN's submitted data to eliminate these
distortions.
Fifth, although the non-subject merchandise in question may only
represent an insignificant portion of NTN's costs at the selected
plant, our verification findings regarding non-subject merchandise are
relevant because they reveal two flaws in the methods that NTN used to
calculate COP and CV. As described above, our examination of subject
and non-subject merchandise revealed that NTN had available cost
information that was more accurate and specific than the information
that NTN elected to submit to the Department. Our comparison of subject
and non-subject merchandise also revealed that NTN's standard costs
contain distortions because NTN has updated only portions of the
standard input amounts. The relative significance of the costs that NTN
incurred for the non-subject merchandise at issue does
[[Page 10929]] not obscure the significance of the distortions that we
found in NTN's method of reporting costs for subject and non-subject
merchandise. Based on these findings, we conclude that an adjustment to
NTN's reported COP and CV is warranted for these final results.
Finally, we disagree with NTN's contention that our adjustment to
COP and CV is excessive. As described above, we determined that it was
appropriate to adjust NTN's reported COP and CV to correct a
misallocation of costs between subject and non-subject merchandise.
Further, our calculation of the adjustment reflects the methods that we
used in conducting our verification and is based on data obtained from
NTN during verification. Accordingly, we find no basis for revising our
calculation of the adjustment to NTN's reported COP and CV for these
final results.
Comment 24: NSK contends that the Department departed from well-
established agency practice by revising NSK's reported net financing
expense. NSK claims that the allocation methodology used to determine
its reported net financing expense conforms to the methodology used to
calculate NSK's net financing expense as outlined in a memorandum
issued by the Office of Accounting for the final results of the 1990-
1991 AFBs administrative review. NSK also cites Television Receivers,
Monochrome and Color, from Japan; Final Results of Antidumping
Administrative Review, 56 FR 34,180, 34,184 (July 26, 1991) and
Porcelain-on-Steel Cooking Ware From Mexico; Final Results of
Antidumping Duty Administrative Review, 58 FR 32,095, 32,100 (June 8,
1993).
Federal-Mogul contends that NSK failed to substantiate its short-
term interest income offset claim. Therefore, the Department's decision
to revise NSK's net finance expense claim is reasonable and consistent
with past Department practice in AFBs reviews. See AFBs III (at 39756-
57).
Department's Position: The Department has not departed from its
well-established practice of determining financing costs. NSK
constructed short-term interest income by calculating a ratio based on
consolidated short-term investments to total investments and applying
the resultant percentage to interest income. This methodology may not
reflect actual short-term interest income, because the interest rates
earned on short-term investments may differ from those earned on long-
term investments. Additionally, NSK did not demonstrate that the
reported short-term interest income was derived from business
operations. We therefore used total interest expense as a percentage of
cost of sales in our calculations.
6. Discounts, Rebates and Price Adjustments
As a general matter, the Department only accepts claims for
discounts, rebates, and price adjustments as direct adjustments to
price if actual amounts are reported for each transaction. Thus,
discounts, rebates, or price adjustments based on allocations are not
allowable as direct adjustments to price. Allocated price adjustments
have the effect of distorting individual prices by diluting the
discounts or rebates received on some sales, inflating them on other
sales, and attributing them to still other sales that did not actually
receive any at all. Thus, they have the effect of partially averaging
prices. Just as we do not normally allow respondents to report average
prices, we do not allow average direct additions or subtractions to
price. Although we usually average FMVs on a monthly basis, we require
individual prices to be reported for each sale.
Therefore, we have made direct adjustments for reported HM
discounts, rebates, and price adjustments if (a) they were reported on
a transaction-specific basis and were not based on allocations, or (b)
they were granted as a fixed and constant percentage of sales on all
transactions for which they are reported. If these adjustments were not
fixed and constant but were allocated on a customer-specific or a
product-specific basis, we treated them as if they were indirect
selling expenses. We did not accept as direct deductions discount or
rebate amounts based on allocations unless the allocations calculate
the actual amounts for each individual sale, as in the case with a
fixed percentage rebate program. This is consistent with the policy we
established and followed in the second and third reviews. See AFBs II
(at 28400) and AFBs III (at 39759). In addition, the Department does
not accept a methodology which allows for the inclusion of discounts,
rebates, and price adjustments paid on out-of-scope merchandise in
calculating adjustments to FMV. See Torrington I, at 1579.
For USP adjustments, we deducted all U.S. discounts, rebates, or
price adjustments if actual amounts were reported on a transaction-
specific basis. If these expenses were not reported on a transaction-
specific basis, we used BIA for the adjustment and treated the
adjustment as a direct deduction from USP.
Comment 1: Torrington alleges that NMB/Pelmec Singapore and
Thailand did not fully report HM billing adjustments. Adjustments were
only reported up until June 1993 due to time constraints. Torrington
states that the Department should apply a partial BIA rate, i.e., the
Department should not adjust FMV for the reported price ``decreases.''
NMB/Pelmec Singapore and Thailand argue that they reported billing
adjustments up until June 1993 since the deadline for Section A of the
questionnaire was August 10, 1993, and the response had to be prepared
prior to that date. The respondent states that it was unlikely that any
significant quantity or billing adjustments relating to sales during
the POR after June 1993 occurred. In addition, even if there were such
adjustments, they could have served as decreases or increases to the
overall margin. In sum, NMB/Pelmec argues that their method for
reporting quantity and billing adjustments was reasonable and accurate.
Department's Position: We agree with respondent. The reporting of
all HM billing adjustments during the POR was not possible because the
billing adjustments had not yet occurred by the deadline for filing the
response. We verified NMB/Pelmec Singapore's reported billing
adjustments and found them to be reported in accordance with our
questionnaire instructions, and therefore have accepted the billing
adjustments as reported.
Comment 2: Torrington argues that NMB/Pelmec's quantity and billing
adjustments for the United States should not be accepted for purposes
of the final results. Torrington states that since sales adjustments
were only reported through June 1993, a partial BIA rate should be
applied. In addition, at verification, the Department discovered a
``special billing which did not reflect total purchases and was not
offset by a billing adjustment credit memo.''
NMB/Pelmec states that for the same reasons BIA is not justified
with regard to the calculation of FMV, it is not justified with respect
to USP. This special billing involved a relatively small amount, and
there is no justification for applying the BIA rate as proposed by
Torrington.
Department's Position: We verified quantity and billing adjustments
in the United States. We found that quantity and billing adjustments
were properly reported, with one exception. At verification, we
discovered a discrepancy regarding a relatively small billing
adjustment. However, because the discrepancy involved was an isolated
incident, we have accepted NMB/Pelmec's quantity and billing
adjustments as reported. See NMB/ [[Page 10930]] Pelmec ESP
Verification Report, February 10, 1994.
Comment 3: Torrington asserts that NMB/Pelmec was unable to trace
early payment discounts to particular sales invoices for its ESP sales,
because these discounts were unknown at the time of sale (i.e., NMB/
Pelmec did not know which customers were going to pay early and thus
receive this discount) and were credited to the customer's accounts
receivable balance only at the time payment was received. Since early
payment discounts should be tied to each specific invoice, Torrington
argues that they should not be allowed. Torrington also believes that
NMB/Pelmec may have allocated early payment discounts on out-of-scope
merchandise. Therefore, the Department should apply a partial BIA rate
to all U.S. sales for which an allocated discount was reported.
NMB/Pelmec claims that the record does not support Torrington's
statement. The ESP verification report demonstrates that the Department
officials examined the early payment discounts and determined that they
were properly allocated to scope merchandise.
Department's Position: We agree with NMB/Pelmec. We verified early
payment discounts and determined that NMB/Pelmec accurately reported
and properly tied the discounts to particular invoices and to in-scope
merchandise. See NMB/Pelmec ESP Verification Report, February 10, 1994.
Therefore, we have adjusted ESP for early payment discounts.
Comment 4: Torrington contends that RHP stated that it sometimes
paid ``incentive rebates''--rebates for sales lower than the
prearranged targets on HM sales. Referencing the Department's
Antidumping Manual, Torrington states that to qualify for an
adjustment, rebates ``must be contemplated at the time of sale.''
Torrington argues that RHP did not demonstrate that these rebates met
this standard. Torrington suggests that the Department identify these
rebates and disallow any adjustment. If the Department is unable to
identify these rebates, Torrington suggests that the Department should
reject ``all home-market incentive type rebates,'' because it was an
error to report the ``uncontemplated amounts'' without distinguishing
them from the ``allowable amounts.''
In its rebuttal brief RHP offers a clarification of its rebate
program: ``In the U.K. home market, RHP pays `incentive rebates' to
distributors that meet agreed sales targets. These `incentive rebates'
are calculated on an annual basis. On occasion, rebates are paid out
for sales lower than prearranged targets if it is considered essential
to maintain the customer relationship.''
RHP notes that for the POR, all but one distributor met its sales
targets in the United Kingdom. RHP states that this distributor just
missed its target, and that RHP decided to pay an ``incentive rebate''
anyway. RHP suggests that the ``radical adjustments'' proposed by
Torrington are inappropriate given the fact that the amount RHP paid to
this one distributor is a de minimis amount of the total ``incentive
rebate'' paid.
Department's Position: We agree with RHP. As required, RHP reported
transaction-specific rebates. Torrington's allegation that the
``incentive rebate'' that RHP paid for one distributor who just missed
its sales target was not ``contemplated at the time of sale'' is not
accurate. Our general policy is to allow rebates only when the terms of
sale are predetermined. This is to prevent respondents, after they
realize that their sales will be subject to administrative review, from
granting rebates in order to lower the dumping margins on particular
sales. We are satisfied that RHP is not engaged in this practice.
First, RHP establishes the terms of the rebates for each distributor
that is eligible for this type of rebate before the sales are made.
Second, all but one customer met their sales targets, while one
customer very nearly met its sales target. Third, as RHP explains,
competitive pressure drives the rebate program, which explains why
RHP's rebated policy is that ``[r]ebates are paid out for sales lower
than the prearranged targets if it is considered essential to maintain
the customer relationship.'' See RHP's Supplemental Questionnaire
Response to Sections A-C at 10 (December 17, 1993). RHP granted this
customer a rebate as part of its normal business practice, because this
customer had virtually met the pre-established sales target and because
of the competitive pressure of the industry. Thus, we are allowing this
adjustment for the final results.
Comment 5: Torrington contends that RHP claimed adjustments to
price for certain post-sale price adjustments which the Department
should not have allowed as direct adjustments for the preliminary
results. Torrington considers these adjustments to be rebates and notes
that all rebates in the HM must be contemplated at the time of sale.
Torrington contends that RHP did not demonstrate that these post-sale
price adjustments were ``contemplated at the time of sale,'' and thus
should not be allowed. Torrington further states that post-sale price
adjustments must be tied to in-scope merchandise as determined by the
CIT. See Torrington I. Torrington argues that RHP did not demonstrate
these rebates pertained to in-scope merchandise. Torrington concludes
that the Department should disallow all downward billing adjustments
because the record is not clear.
RHP responds that it reported all billing adjustments as requested
by the Department. RHP reiterates its assertion that billing
adjustments occur for a variety of reasons, and that billing
adjustments are generally corrections of data input errors. RHP also
states that they can ``reflect retroactive price adjustments in
response to market conditions.'' RHP claims that these price
adjustments were compatible with its continuous negotiations with HM
customers. RHP concludes that since all of the price adjustments were
made in the normal course of trade, and incorporated in RHP's response
on a transaction-specific basis, the Department should not question
RHP's billing adjustments.
Department's Position: We agree with RHP and have allowed the
claimed billing adjustments. First, RHP reported both positive and
negative billing adjustments on a transaction-specific basis and on in-
scope merchandise only. Second, most of these billing adjustments
reflect corrections of data input errors, not post-sale discounts or
rebates. Finally, the remaining billing adjustments reflect RHP's
normal business practice of conducting ongoing price negotiations with
its HM customers.
Comment 6: Torrington states that RHP claimed HM discounts in the
OTHDISH field that were actually rebates, because these ``discounts''
were negotiated subsequent to shipment. Torrington notes that the
Department did not make a deduction for these alleged ``discounts'' in
the preliminary determination. Torrington further states that the
Department was correct in denying this adjustment, because HM rebates
must be ``contemplated and quantifiable'' at the time of sale, and
RHP's alleged HM discounts were not.
RHP states that only zeros appear in OTHDISH field, and therefore,
that no adjustment was warranted.
Department's Position: We agree with RHP that no adjustment is
warranted because no values were reported in this field.
Comment 7: Torrington argues that since Koyo's HM billing
adjustments are directly related to particular invoices and specific
models, and Koyo failed to report these adjustments on an invoice-
[[Page 10931]] and product-specific basis, and because Koyo's reporting
did not permit the Department to determine whether the billing
adjustments related solely to subject merchandise, the Department
should deny these adjustments entirely instead of allowing them as
indirect selling expenses.
Koyo responds that it reported its post-sale price adjustments as
indirect selling expenses in accordance with the Department's policy as
explained in the final results for the fourth administrative review.
Department's Position: We agree with Torrington and have disallowed
Koyo's post-sale price adjustments because Koyo did not demonstrate
that the allocated price adjustments pertained to subject merchandise
only. See Torrington I. Although we verified that Koyo's billing
adjustments were reported on a customer-specific basis, Koyo provided
no means of identifying and segregating price adjustments paid to those
customers on out-of-scope merchandise.
Comment 8: Torrington argues that the Department should disallow
several of Nachi's HM rebate claims, classified as rebates 3, 5, 6, and
7, because the Department cannot use rebates paid on out-of-scope
merchandise to adjust FMV. Torrington contends that it is not clear
from Nachi's responses or from the Department's verification report
that these rebates were calculated only on the basis of sales of in-
scope merchandise.
Nachi responds that it reported all rebates on a customer-specific
basis for eligible products only. Furthermore, Nachi contends that the
Department thoroughly verified all Nachi's HM rebate programs and found
no discrepancies. Therefore, Nachi concludes that, as in past reviews,
the Department should continue to allow Nachi's rebate claims.
Department's Position: We agree with Nachi with respect to rebates
3, 6, and 7. We thoroughly verified each of these rebate programs.
Rebate 3 was granted as a fixed percentage of price and reported on a
transaction-specific basis. Rebates 6 and 7 were granted as fixed
percentages of price. We found no rebates reported on sales that did
not incur rebates, and no rebates incurred on sales of out-of-scope
merchandise allocated to sales of scope products. See Nachi-Fujikoshi
Home Market Sales Verification Report, February 28, 1994.
We agree with Torrington with respect to Rebate 5. This rebate was
reported on a monthly- and customer-specific basis (rather than a
transaction-specific basis) by dividing the total amount of that
customer's rebate by the total customer-specific shipments, including
shipments of out-of-scope merchandise. Therefore, we have disallowed
this rebate. See Torrington I.
Comment 9: Torrington argues that if the Department allows Nachi's
rebates 3, 6, and 7 as adjustments to FMV, then the Department should
at least treat these rebates as indirect expenses. In addition,
Torrington asserts that the Department should treat rebate 4 as an
indirect expense. Torrington states that the Department only treats
rebates as direct adjustments to price if they were calculated on a
transaction-specific basis or if they were granted as a fixed
percentage of sales on all transactions for which they were reported.
Torrington contends that rebates 3, 4, 6, and 7 do not meet the
Department's standards for direct adjustments to FMV. Finally,
Torrington notes that the Department treated rebates 3, 6, and 7 as
indirect expenses in the previous review.
Nachi argues that the Department correctly treated rebates 3, 4, 6,
and 7 as direct adjustments to price. With regard to rebate 3, Nachi
points out that the Department's verification report described the
rebate as ``a fixed percentage of price and * * * reported on a
transaction-specific basis.'' See Nachi Verification Report, at 7
(February 28, 1994). With regard to rebate 4, Nachi states that the
rebate was paid on sales of specific models and allocated over all
sales of a specific model to the same customer in a given month. Nachi
claims that it had to perform this minor allocation because there was
no way to determine which particular sales of a specific model were
subject to the rebate. However, the rebate was not allocated across
different models, different customers, or different months. Therefore,
Nachi argues that, at a minimum, if rebate 4 does not qualify as direct
adjustment to price, it should qualify as a direct selling expense
because it was directly related to sales.
With regard to rebate 6, Nachi argues that the Department has
verified that the rebate was granted as a contractually fixed
percentage of sales covered by the agreement. With regard to rebate 7,
Nachi also argues that it was granted as a fixed percentage of invoice
price. Therefore, Nachi believes that the Department should continue to
classify all four rebate programs as direct adjustments to price.
Department's Position: We agree with Nachi that rebates 3, 6, and 7
were reported, as they were granted, either on a transaction-specific
basis, or as a fixed percentage of price. We verified that rebate 4 was
paid on sales of specific models and allocated over all sales of a
specific model to the same customer in a given month. The rebate was
not allocated across different models, different customers, or
different months. We have accepted this rebate as a direct adjustment
to price because the limited allocation Nachi performed has no
distortive effect on FMV because HM prices are weight-averaged by month
and model.
Comment 10: Torrington argues that the Department should disallow
entirely SKF-Germany's reported HM billing adjustment number two, which
is ``not associated with a specific transaction.'' While it was proper,
according to Torrington, for the Department not to treat the adjustment
as direct, Torrington holds that the Department must disregard these
billing adjustments entirely because they may not be exclusively
associated with subject merchandise. Torrington maintains that SKF has
had ample opportunity to demonstrate the sale-specific nature of this
claimed adjustment, yet has failed to do so. Alternatively, Torrington
asserts that if the Department treats billing adjustment number two as
an indirect selling expense, the Department should reduce the pool of
the billing adjustments by a factor representing the ratio of in-scope
to out-of-scope merchandise during the POR.
SKF-Germany holds that its HM billing adjustment number two should
be treated as a direct adjustment to price. If the Department does not
agree with this categorization, SKF-Germany argues that HM billing
adjustment number two should be treated as an indirect selling expense,
as the Department has done in the preliminary results of this review
and in the final results of the past two administrative reviews.
SKF specifically argues that Torrington's arguments are
contradictory. Having acknowledged that billing adjustment number two
captures adjustments concerning multiple invoices, Torrington then
complains that SKF-Germany has not reported this adjustment on a sale-
specific basis. SKF-Germany, as it has held since the inception of this
review, argues that it cannot report this adjustment on a sale-specific
basis, and has therefore reported it on a customer-specific basis. SKF-
Germany states also that the Department verified this adjustment to its
satisfaction and found no discrepancies. SKF-Germany concludes that
Torrington's arguments ignore Koyo Seiko Co. v. United States, 796 F.
Supp. 1526 (CIT 1992) (Koyo Seiko), in which the CIT specifically
affirmed the Department's methodology of including customer-specific
[[Page 10932]] adjustments in indirect selling expenses.
Department's Position: We agree with Torrington and have disallowed
SKF's billing adjustment number two claim because SKF did not
demonstrate that the allocated billing adjustments pertained to subject
merchandise only. See Torrington I. SKF provided no means of
identifying and segregating billing adjustments paid on non-scope
merchandise.
SKF's reliance on Koyo Seiko is misplaced. In that case the CIT
upheld the Department's treatment of certain allocations as indirect
selling expenses. The CIT in Koyo Seiko was not presented with and did
not address the issue of the proper treatment of allocations which may
include out-of-scope merchandise. The CIT in Torrington I did address
this issue and held that the Department could not properly use a
methodology which included discounts, rebates, and price adjustments
``on out of scope merchandise in calculating adjustments to FMV and
ultimately the dumping margins.''
Comment 11: Torrington argues that the Department should disallow
entirely SKF-Germany's reported HM early-payment cash discounts because
they were not reported on a transaction-specific basis. Torrington
holds that the Department must disregard these billing adjustments
entirely because they may not be exclusively associated with subject
merchandise.
SKF-Germany maintains that the Department should treat the HM cash
discount as a direct adjustment to price. Alternatively, SKF-Germany
argues that the Department, in accordance with Koyo Seiko, should
continue to treat these cash discounts as indirect selling expenses.
SKF-Germany states that, as noted in the Department's verification
report, HM cash discounts were reported on a customer-specific, not
sale-specific, basis.
Department's Position: We agree with Torrington and have disallowed
SKF's cash discounts because SKF did not demonstrate that the allocated
price adjustments pertained to subject merchandise only. See Torrington
I. See our discussion of this issue at Comment 10.
Comment 12: Torrington argues that the Department should disallow
entirely SKF-Germany's reported HM rebate number two because this
rebate is neither transaction-specific nor product-specific but
customer-specific, and may thus include amounts associated with non-
subject merchandise. Alternatively, Torrington argues that the
Department should treat this adjustment as an indirect selling expense,
rather than a direct selling expense.
SKF-Germany argues that in the preliminary results of this review
the Department properly treated SKF's HM rebate number two as a direct
adjustment to price, just as in each of the three prior reviews. SKF-
Germany contends that no new evidence exists which would cause the
Department to depart from its established practice. SKF-Germany
maintains that rebate two, which guarantees a specific reseller profit,
is paid on the basis of the resale performance of SKF-Germany's
customers. Because rebate two, as verified by the Department, is paid
as a fixed percentage of all resales by SKF-Germany's customers, SKF-
Germany calculated customer-specific factors for each rebate to a
customer by allocating actual rebates paid over SKF-Germany's sales to
its customer.
Department's Position: We agree with Torrington and have disallowed
SKF's billing adjustment two because SKF did not demonstrate that the
allocated billing adjustments pertained to subject merchandise only.
See Torrington I. See our discussion of this issue at Comment 10.
Comment 13: Federal-Mogul urges the Department to apply BIA to SKF-
France's HM billing adjustments. Federal-Mogul notes that SKF-France
considered any billing adjustments which amounted to less than five
percent of the gross unit price or 1000 French francs to be
insignificant and did not report such adjustments. Federal-Mogul argues
that SKF-France cannot take upon itself the authority to determine what
constitutes an insignificant adjustment to FMV. Federal-Mogul suggests
that a proper BIA would be to increase FMV by 4.99 percent of the HM
price.
SKF-France contends that based on the verified record, neither an
adjustment to SKF's prices nor use of BIA is warranted. SKF-France
argues that according to Departmental regulations insignificant
adjustments which have an ad valorem effect of less than 0.33 percent
may be disregarded (19 CFR 353.59(a)). SKF-France asserts that the
Department verified that unreported billing adjustments are
insignificant, and in fact de minimis, under the Department's
regulations. Additionally, SKF-France notes that since all unreported
billing adjustments represent credit memos to the customer, the
unreported adjustments had a detrimental rather than beneficial effect
on SKF-France's margin calculations. Therefore, SKF-France contends
that the Department should continue to accept its billing adjustments
for these final results.
Department's Position: We agree with Federal-Mogul that SKF-France
cannot take upon itself the authority to determine what constitutes an
insignificant adjustment to FMV. However, at verification we confirmed
that the billing adjustments in question represent decreases to FMV.
Therefore, we agree with SKF-France that the omission of these billing
adjustments had a detrimental affect rather than beneficial effect on
its margin calculations. Thus, we have accepted SKF-France's billing
adjustments for these final results.
Comment 14: Torrington argues that the Department's preliminary
decision to deny FAG-Germany an adjustment for 1993 HM rebates based on
the fact that FAG failed to report either actual or estimated 1993 U.S.
corporate rebates is insufficient. Torrington argues that FAG's failure
to report 1993 corporate rebates is a fundamental deficiency which
calls for the application of a ``second-tier'' BIA to those U.S.
transactions in which FAG failed to properly report a corporate rebate.
Torrington contends that the Department's preliminary response may
reward FAG for its failure to report 1993 U.S. corporate rebates if the
HM rebates denied do not apply to the same types of sales as those
found in the U.S. market or are not of the same magnitude as the U.S.
corporate rebates which went unreported. FAG-Germany granted HM rebates
to only a small number of customers and generally at lower rates than
the U.S. corporate rebates. Finally, Torrington asserts that when
deciding what BIA approach to use for the final results, the Department
should also consider the fact the FAG never clearly stated in its
responses that it had not reported estimated 1993 corporate rebates.
FAG-Germany asserts that its rebates were accurately reported given
the nature of the rebate programs in each market and that the use of
BIA is unwarranted. The companies reported estimated 1993 rebates
differently for the HM and U.S. market because clear differences exist
between their HM and U.S. rebate programs. Therefore, the Department
erred in denying rebate adjustments in the HM on 1993 sales in order to
remain consistent with FAG-US' methodology of not reporting 1993
rebates.
Department's Position: We agree with Torrington that disallowing an
adjustment for FAG-Germany's estimated 1993 HM rebates is not the most
appropriate means to account for respondents' failure to report
estimated [[Page 10933]] 1993 U.S. rebates. Accordingly, as BIA for
these final results we used the highest 1992 U.S. corporate rebate rate
to calculate corporate rebates for 1993 U.S. sales to customers that
received rebates in 1992. We also made adjustments to FMV for estimated
1993 HM rebates as reported by respondents.
Comment 15: FAG-Germany argues that the Department improperly
treated certain HM expenses which FAG had reported on a customer-
specific basis--namely third-party payments, early payment discounts
and negative billing adjustments--as indirect selling expenses. FAG-
Germany maintains that it calculated and reported these expenses in the
same manner that it did in previous reviews and the LTFV investigation
and that its allocations are reasonable and accurate. The Department
has a longstanding policy of allowing a respondent to report expenses
using a reasonable allocation methodology when the respondent does not
maintain records enabling it to conform with preferred Departmental
methodologies and the methods employed are rational. The Department's
treatment of billing adjustments is particularly unjust in that only
negative billing adjustments were treated as indirect selling expenses
while positive billing adjustments were left as direct adjustments to
price.
Torrington maintains that the Department acted properly in treating
these expenses as indirect selling expenses because FAG reported them
on a customer-specific basis only.
Department's Position: We disagree with FAG-Germany. FAG-Germany
does not dispute the fact that these expenses were allocated and
reported on a customer-specific basis. The rationale for the treatment
of customer-specific allocations as indirect adjustments was set forth
in AFBs III (at 39759), and reiterated in the statement of our policy
at the beginning of this section. This rationale applies to third-party
payments as well as discounts and billing adjustments.
We note that FAG-Germany originally did not describe its
methodology for reporting HM billing adjustments. See FAG section C
response. When asked about the HM billing adjustment reporting
methodology in the supplemental questionnaire, FAG-Germany inaccurately
responded that ``[b]illing adjustments were reported on a transaction-
specific basis.'' See FAG section A-C supplemental response (at 49).
The fact that the majority of HM billing adjustments were not reported
on a transaction-specific basis but were instead reported using
customer-specific allocations was not discovered until verification.
See FAG KGS Germany verification report (at 7). Since we cannot
distinguish which billing adjustments were reported on a transaction-
specific basis, we treated all negative billing adjustments as indirect
expenses.
With respect to FAG-Germany's additional arguments concerning
differences in the treatment of positive and negative billing
adjustments, we disagree that both must be treated in the same manner.
The treatment of positive billing adjustments as direct adjustments is
appropriate, because treating these adjustments as indirect would
provide an incentive to report positive billing adjustments on a
customer-specific basis in order to minimize their effect on the margin
calculations. That is, by treating positive billing adjustments, which
would be upward adjustments to FMV, as indirect expenses, there may be
no upward adjustment to FMV. Consequently, respondents would have no
incentive to report these adjustments as requested (i.e., on a
transaction-specific basis).
Comment 16: FAG argues that the Department erroneously excluded
1993 rebates granted in the HM from the margin calculation and that
these rebates should be included in total indirect selling expenses.
Federal-Mogul and Torrington assert that the Department was correct
in disregarding FAG-Germany's HM rebates because, as FAG-Germany has
itself acknowledged, FAG-Germany did not report estimated corporate
rebates for 1993 U.S. sales. Torrington and Federal-Mogul assert that
the Department should in fact resort to second-tier BIA margins for
1993 transactions.
Department's Position: For these final results, we have made
adjustments for FAG's 1993 HM rebates. See response to Comment 14.
Comment 17: Torrington maintains that the NPBS case-by-case (CBC)
rebate is not directly tied to a sale and, as such, should be
reclassified as an indirect expense.
NPBS rebuts that the results of the last review should stand as
precedent, and that the Department should continue to classify these
rebates as direct expenses.
Department's Position: We agree with Torrington. Although NPBS and
its customers agree on an absolute amount for the CBC rebate before the
sale (which is the numerator in their formula), neither knows the exact
amount of sales that will be made that month (the denominator) until
after the fact. As such, the rebate is an allocated amount and not
directly tied to a particular sale. Although this adjustment was
erroneously treated as a direct deduction to FMV in the previous
review, we have reclassified NPBS' CBC rebate as a HM indirect selling
expense.
Comment 18: Torrington argues that INA calculated improperly
several of its adjustments to HM price. According to Torrington,
although INA calculated adjustment factors for certain expenses by
dividing the total expense by a total sales value that was net of
discounts and rebates, INA then multiplied this adjustment factor by a
price that was not net of discounts and rebates to calculate per-unit
expenses. Because the sales amounts used to calculate expense
adjustment factors do reflect discounts and rebates, Torrington
concludes that multiplying the adjustment factor by a price which does
not reflect discounts and rebates overstates the per-unit adjustments
to HM price. Accordingly, Torrington requests that the Department
recalculate per-unit amounts for the expenses in question by
multiplying the adjustment factors by a price net of all discounts and
rebates.
INA responds that Torrington's argument is based on the incorrect
assumption that the sales figures that INA records in its accounting
system are net of all discounts, rebates, and price adjustments.
According to INA, the sales amounts that it records in its accounting
system are not net of cash discounts and rebates, which are recorded
separately from sales in different accounts. INA states that it used
the sales amounts from its accounting system to allocate the expenses
at issue. Because these sales amounts are not net of cash discounts and
rebates, INA concludes that its calculation of per-unit expenses using
net invoice prices, which are not reduced by amounts for cash discounts
and rebates, is appropriate.
Department's Position: We agree with INA. At verification, we
confirmed that INA records in its accounting system sales values that
are not reduced by cash discounts and rebates. Cash discounts and
rebates are recorded separately in INA's accounting system. Therefore,
we determine that the sales values that INA used in its allocations
capture HM prices that are not reduced by discounts and rebates.
Accordingly, we determine that INA properly calculated per-unit
expenses by multiplying its reported allocation ratios by sales prices
that are not reduced by cash discounts and rebates.
Comment 19: Torrington asserts that the Department should revise
NTN-Germany's reported HM rebates. Torrington argues that the
Department should recalculate NTN-Germany's rebates, based on the
Department's [[Page 10934]] finding at verification that NTN-Germany's
method of calculating rebates results in rebate percentages that
differed from those stipulated in NTN-Germany's rebate agreements.
Torrington further argues that the Department should deny NTN-Germany's
claimed rebates for 1993, because the Department found at verification
that certain customers would not qualify for the reported rebates based
on 1993 sales.
NTN-Germany replies that its reported rebates are reasonable,
because it calculated rebate percentages based on information available
in its accounting records at the time that it prepared its
questionnaire response. NTN-Germany further argues that the Department
was able to verify the additional data on rebates that NTN-Germany did
not have at the time that it prepared its questionnaire responses. As a
result, NTN-Germany argues that even if the Department does not accept
NTN-Germany's reported HM rebates for these final results, the
Department should revise NTN-Germany's calculations rather than reject
NTN-Germany's claim in its entirety.
Department's Position: We agree with NTN-Germany. We verified that
NTN-Germany's reported data on HM sales and rebates were accurate,
complete and contemplated at the time of sale. Further, because NTN-
Germany did not have data on calendar year 1993 sales and rebates at
the time that it prepared its questionnaire response, we find that the
method that it used to report its HM rebates was reasonable.
Accordingly, for these final results we have used in our analysis the
data that NTN-Germany reported for rebates on HM sales.
Comment 20: Torrington argues that the Department should revise its
treatment of NTN-Germany's HM discounts, because NTN-Germany improperly
calculated its discounts. According to Torrington, NTN-Germany's
calculation of average discounts per-customer is inappropriate, given
the Department's finding at verification that NTN-Germany paid
discounts on an invoice-specific basis. As a result, Torrington
requests that the Department deny entirely NTN-Germany's claim for HM
discounts or, at a minimum, treat them as indirect selling expenses for
the final results.
Department's Position: Because we verified the accuracy and
completeness of the customer-specific data that NTN-Germany used to
calculate its reported HM discounts and because the discounts pertain
to subject merchandise only, it would be inappropriate to deny the
adjustment to NTN-Germany's HM prices for discounts. In the preliminary
determination we treated these discounts as indirect selling expenses.
In accordance with our discount and rebate policy discussed at the
beginning of this section, we have continued to treat NTN-Germany's HM
discounts as indirect selling expenses for the final results of these
reviews.
Comment 21: NTN asserts that the Department erred in classifying
NTN's HM discounts as indirect selling expenses. According to NTN, it
did not report its discounts by aggregating discounts granted on
specific sales and then allocating them over all sales to a particular
customer. Rather, NTN states that it reported its discounts on both a
product- and customer-specific basis. As a result, NTN requests that
the Department treat its reported discounts as direct adjustments to
price for the final results of this review.
Torrington and Federal-Mogul reply that NTN's method of reporting
HM discounts does not satisfy the Department's criteria for considering
discounts to be direct adjustments to price. Torrington states that the
Department's verification report indicates that NTN allocates discounts
to AFBs and non-subject merchandise. Similarly, Federal-Mogul asserts
that NTN did not report discounts on a transaction-specific basis, and
provided no evidence that it granted discounts as a fixed percentage of
all HM sales. As a result, Federal-Mogul claims that NTN may have
overstated its reported HM discounts for certain sales. Because NTN's
method of reporting home market discounts was not sufficiently
specific, Torrington and Federal-Mogul conclude that the Department
properly treated NTN's HM discounts as indirect selling expenses.
Department's Position: We agree with Torrington and Federal-Mogul.
According to the policy stated above and in previous reviews in these
cases, we will treat discounts as direct adjustments to price only if
they are reported on a sale-specific basis or if they are granted as a
fixed and constant percentage of all sales. Because NTN's reported HM
discounts are reported on a product- and customer-specific basis, and
pertain only to scope merchandise, we have treated them as indirect
selling expenses for the final results of these reviews.
Comment 22: NTN argues that the Department made a clerical error in
failing to consider billing adjustments when calculating per-unit U.S.
and HM selling expenses. According to NTN, the sales amounts over which
the Department allocated certain U.S. and HM selling expenses were net
of billing adjustments. Accordingly, NTN requests that the Department
calculate per-unit U.S. or HM selling expenses by deducting billing
adjustments from the sales prices that it uses to calculate per-unit
expenses.
Torrington responds that the record does not specifically
demonstrate that the U.S. and HM sales amounts used in the Department's
allocations are net of billing adjustments. Therefore, Torrington
requests that the Department modify its calculations as requested by
NTN only if the Department is able to determine that the sales amounts
at issue are net of billing adjustments.
Department's Position: We agree with Torrington. There is no
evidence in the record of this review that describes the manner in
which NTN recorded billing adjustments in its accounting system. In the
absence of such information, we cannot confirm that the sales values
that NTN used to allocate its expenses were net of billing adjustments.
As a result, we have not deducted billing adjustments from the sales
prices that we used to calculate per-unit expenses for these final
results.
Comment 23: Torrington argues that NTN-Japan failed to report all
HM billing adjustments on a transaction-specific basis. Citing
Torrington I at 1579, Torrington contends that adjustments to FMV must
be tied to sales of subject merchandise, rather than merely allocated
over all sales. Because NTN-Japan used an aggregate method of reporting
some billing adjustments, Torrington concludes that the Department
should deny NTN's claims for HM billing adjustments or should, at a
minimum, treat billing adjustments as indirect selling expenses.
NTN responds that it complied, to the extent possible, with the
Department's instructions for reporting billing adjustments, and that
there is no evidence that any deviations from this reporting method had
any impact on the Department's calculation of NTN's dumping margins.
NTN further argues that it did not report any billing adjustments made
for sales of non-subject merchandise. Therefore, NTN concludes that the
Department should continue to treat NTN's reported billing adjustments
as direct adjustments to price for these final results.
Department's Position: We agree with NTN. During our verification
of NTN's HM sales, we found no discrepancies in NTN's reporting of
billing adjustments to home market sales. Thus, we have no reason to
believe or suspect that NTN failed to report accurately or completely
its HM billing adjustments, or that NTN's method of reporting may have
included billing adjustments made on [[Page 10935]] sales of non-
subject merchandise. Accordingly, we have treated NTN's reported HM
billing adjustments as direct adjustments to price for these final
results.
Comment 24: NSK claims that certain rebate, discount and commission
programs should be treated as direct expenses and not as indirect
expenses because they either meet the Department's definition of a
direct expense of the sales in question (see Final Results of
Antidumping Duty Administrative Reviews and Revocation in Part of an
Antidumping Duty Order, 58 FR 39729, 39759 (July 26, 1993)) or they
meet the ``reasonable relationship'' requirement for a deduction in
price in calculating FMV (see Smith-Corona Group, SCM Corporation v.
United States, 713F.2d 1568 (Fed. Cir. 1983)). These adjustments should
be accepted as direct adjustments to price for the following reasons:
(1) Post-sale price adjustments (PSPAs), reported as REBATEH3, are
reported on a part-number and customer-specific basis; (2) lump sum
post-sale adjustments (REBATEH4) are reported on a customer-specific
basis and adjustment rates have been demonstrated to be the same for
scope and non-scope merchandise; (3) early payment discounts (OTHDISE)
are reported on a distributor-specific basis, and each customer that
receives the discount typically pays within the same number of days
each month. Therefore, the discount is equally applicable to both scope
and non-scope products throughout the POR. (4) Stock transfer
commissions (COMMH2) are reported on a distributor-specific basis and
the commission rate is a fixed percentage for all products and all
customers.
Torrington contends that: (1) PSPAs reported as REBATEH3 are not
reported on a transaction-specific basis and therefore do not qualify
as a direct adjustment to price (see Antifriction Bearings, 58 Fed.
Reg. at 39,759), and that because of certain reporting errors by NSK,
the Department should not make any adjustment for REBATEH3; (2)
although NSK claims that customers receiving lump-sum PSPA rebates,
reported as REBATEH4, purchase virtually the same proportion of scope
merchandise to total purchases, NSK has not provided any evidence that
lump sum rebates are related to in-scope products. Therefore, the
Department should make no adjustment for REBATEH4; (3) the Department
has neither the assurance that the amounts claimed for OTHDISH are
related to sales of in-scope merchandise or specific invoices that were
paid early, nor the basis that the transactions uniformly involved
sales of in-scope merchandise; (4) because NSK allocated stock transfer
commissions (COMMH2) over all sales, the Department has no assurance
that the commissions paid with respect to non-scope merchandise are not
allocated to subject sales; therefore, this adjustment should not be
treated as a direct expense. Federal-Mogul argues further that the
Department should treat NSK's reported return rebates (REBATEH1) and
distributor incentive rebates (REBATEH2) not as direct adjustments to
FMV, but rather, as indirect selling expenses because they were not
reported on a transaction-specific basis.
Department's Position: We agree with Torrington with respect to
REBATEH4, COMMH2, and OTHDISH and have disallowed these adjustments
because we do not accept adjustments to FMV which include discounts,
rebates, or commissions paid on out-of-scope merchandise. See
Torrington I. See also Comment 10. Although NSK supplied information in
its December 16, 1993, Supplemental Response, at 7-8, demonstrating
that early payment discounts (OTHDISH) granted for four distributors
had remained relatively stable during the POR, NSK did not demonstrate
that early payment discount percentages were stable for all customers
for which an early payment discount was reported. Similarly, with
respect to lump-sum rebates (REBATEH4), NSK submitted information in
its December 16, 1993, Supplemental Response, at 14-16, indicating that
the percentage of scope merchandise sales to total sales for five
customers remained stable during the POR and, therefore, lump-sum
rebates have been reasonably allocated to scope merchandise. However,
an analysis of five customers' sales does not sufficiently demonstrate
that all customers for which lump sum rebates were reported had stable
purchasing histories with respect to scope and non-scope merchandise.
With respect to Torrington's claim that PSPAs, reported as
REBATEH3, should be rejected because of reporting errors, we determined
at verification that the value of unreported PSPAs which were
unfavorable to NSK (a reduction of FMV) was more than 50 percent
greater than unreported price increases. Furthermore, the value of the
unreported price increases was an insignificant percentage of total
bearings sold in the HM during the POR. Because this error in computer
logic used to compile PSPA data affected an insignificant portion of
total HM sales, we have accepted NSK's REBATEH3. REBATEH3 has been
treated as an indirect selling expense because it was not reported on a
transaction-specific basis.
We agree with Federal-Mogul's claim that REBATEH1 and REBATEH2
should not be considered as direct adjustments to HM price. Because
REBATEH2 was reported as a customer-specific allocation of all
distributor incentive rebates paid on all sales, NSK has not
demonstrated that the reported REBATEH2 does not include rebates paid
on non-scope merchandise. Therefore, we have disallowed this
adjustment. REBATE1H was reported on a product- and customer-specific
basis, not on a transaction-specific basis. Therefore, we have treated
this rebate as an indirect adjustment to HM price.
Comment 25: Petitioner claims that NSK's method for estimating
after-sale rebates for 1993 U.S. sales fails to account for the fact
that customers purchase a greater volume of merchandise during the
final months of a program year to qualify for a sales-volume rebate.
Petitioner contends that NSK should have compared data for the eight
months of 1992 to the data for the same eight months of 1993, or
alternatively, could have reported full-year 1993 actual rebates. With
this in mind, Torrington holds that the Department should assume that
all eligible customers qualified for 1993 rebates and should make
adjustments to all U.S. sales.
NSK contends it properly reported U.S. rebates. Torrington cites no
support for its statement that ``customers often purchase a greater
volume of merchandise during the final months of a program year in
order to obtain a sales volume rebate.'' NSK claims there is not
support on the record for this statement. Additionally, NSK notes the
Department has a regulation prohibiting the voluntary submission of new
information following verification. See 19 CFR 353.31(ii). NSK Corp.,
was verified on December 7 through December 9, 1993, and could not
submit new information following the preliminary determination.
Department's Position: We agree with NSK. Torrington has provided
no evidence on the record that supports its claim that customers
purchase a greater volume of merchandise during the final months of a
program year. We have accepted NSK's estimation methodology for 1993
rebates as reasonable and accurate.
7. Families, Model Match and Differences in Merchandise
Comment 1: Federal-Mogul states that, after finding that the most
similar HM model was sold below cost in more [[Page 10936]] than 90
percent of the HM sales of that model, and over an extended period of
time, the Department may not resort to CV without first determining
whether there are other similar models to serve as a price-based
comparison. This position results from the fact that the statute
expresses a preference for price-based comparisons over CV.
Department's Position: We disagree with Federal-Mogul. Although
section 773(a) of the Tariff Act expresses a preference for using the
price of such or similar merchandise as the FMV before resorting to CV,
section 773(b) directs the Department to resort immediately to CV if,
after disregarding sales below cost, the remaining sales of a
particular model or family are inadequate as the basis of FMV. Contrary
to Federal-Mogul's assertions, therefore, the statute does not require
the exhaustion of all possible family matches (similar merchandise)
before resorting to CV. See AFBs III (at 39765).
8. Further Manufacturing and Roller Chain
Comment 1: Torrington contends that the Department should
reconsider and discontinue the practice, known as the ``Roller Chain''
rule, whereby antidumping duties are not assessed on U.S. imports of
subject merchandise used by a related party as a minor component (less
than one percent) in a further manufactured article which is then sold
to an unrelated party. See Roller Chain, Other Than Bicycle, from
Japan, 48 FR 51801 (November 14, 1983). Torrington argues that whether
or not a significant percentage of the finished product is accounted
for by the subject import, a USP can reasonably be determined from the
transfer price or by other means (e.g., the ESP on sales to other
customers, or the lowest export price to any U.S. customer).
Additionally, Torrington contends that Congress did not intend to limit
the antidumping law to imports accounting for a ``significant
percentage'' of the value of the completed product.
Torrington argues that the Department has broad authority, under
the antidumping statute, to ensure that imports of bearings
incorporated into further processed articles in the United States do
not escape the imposition of antidumping duties. According to
Torrington, the ``Roller Chain'' rule has created a substantial vehicle
for circumvention of the antidumping duty order and should be
abandoned.
Torrington argues that, assuming the Department continues to apply
the ``Roller Chain'' test, it should change the methodology used for
applying the one-percent test to avoid illogical and improper
comparisons between the entered value of the bearings and related party
transfer prices. Torrington contends that, instead, the value of
imported bearings should be based upon the ESP or PP of such or similar
bearings sold at arm's length. This value would then be compared to the
resale price of the finished merchandise, which is not subject to
manipulation by related parties. Where the importer does not resell
bearings, or resells only a small quantity, the U.S. prices for the
model in question should be based on sales by another manufacturer or
the manufacturer who produced the model in question.
Koyo argues that the Department should reject Torrington's
arguments. Koyo contends that Congress recognized that there would be
situations in which the value added in the United States would be so
great that it would be inappropriate to apply the further-processing
provision of the antidumping law (19 USC 1677a(e)(3)). This exception
is clearly authorized by the legislative history of the antidumping
statute, and there is no evidence on the record to demonstrate that the
Department's application of the ``Roller Chain'' rule in this review is
improper.
Koyo also disagrees with Torrington's argument that the Department
should not use the entered value of the subject merchandise in applying
the ``Roller Chain'' test. The entered value (rather than the resale
value of the bearings in the United States, as suggested by Torrington)
provides the correct basis for the one-percent test because the purpose
of that test is to determine the value of the subject merchandise as
imported in relation to the value of the finished product as finally
sold to an unrelated party in the United States.
FAG argues that, contrary to Torrington's opinion, imports of
subject merchandise do not escape the antidumping duty order. Full
antidumping duties are deposited on the full value of the entered
(subject) merchandise. This differs significantly from exempting a
respondent from reporting sales of such merchandise. FAG contends that
the only time a respondent might not pay antidumping duties on imported
merchandise further processed in the United States occurs when certain
operations are undertaken in an FTZ, which does not apply to FAG.
NSK argues that the Department cannot arbitrarily adopt a numerical
standard for evaluating whether an imported component in a further
manufactured product is significant. NSK claims the Department must
analyze all relevant factors before determining whether an imported
part is significant for purposes of 19 USC 1677a(e)(3). NSK states that
if the Department wishes to use a rigid quantitative test to determine
whether the imported content is significant, then it must publish, for
public comment, a proposed rule to that effect. Until such a rule is
properly adopted, the Department must analyze, prior to performing a
section 772 analysis, all relevant factors to determine whether the
imported amount contained in non-scope and in-scope finished products
is significant. NSK further argues that where the finished product is
merchandise of the type covered by the order, the Department should use
the weighted-average margin for the imported finished product as the
margin for insignificant imported parts.
NMB/Pelmec argues that Torrington is missing the point of the
Department's one-percent test and its use of the entered value and the
resale price. NMB argues that the Department established the one-
percent test as a ``bright-line'' standard for determining whether the
further-manufactured product contains more than an ``insignificant
amount'' of the imported in-scope merchandise. NMB contends that using
a different value, other than entered value, would not increase the
accuracy of the one-percent test. NMB further asserts that if the
Department should change the threshold, it should increase it from one
percent to a more realistic level.
Department's Position: Section 772 (e)(3) of the Tariff Act
requires that, where subject merchandise is imported by a related party
and further processed before being sold to an unrelated party in the
United States, we reduce ESP by any increased value, including
additional material and labor, resulting from a process of manufacture
or assembly performed on the imported merchandise after importation but
before its sale to an unrelated party. In ESP transactions, therefore,
we typically back out any U.S. value added to arrive at a USP for the
subject merchandise. See, e.g., Final Determination of Sales at Less
Than Fair Value: Certain Small Business Telephone Systems and
Subassemblies Thereof from Korea, 54 FR 53141, 53143 (December 27,
1989).
The legislative history of this provision suggests that the
practice of subtracting the value added by the further processing
operations in the United States should be employed only where the
manufactured or assembled product contains more than an insignificant
amount by quantity or value of the imported product. See S. Rep. No.
1298, 93d Cong. 2d Sess. 172-73, 245, reprinted in 1974 U.S.C.C.A.N.
[[Page 10937]] 7185, 7310. Conversely, when the quantity or value of
the imported product is insignificant in comparison to that of the
finished product, we are not required to calculate a USP for the
imported merchandise. Therefore, we conclude that Congress did not
intend that a USP be calculated in these situations and hence that no
dumping duties are due. See H. Rep. No. 571, 93d Cong. 1st. Sess. 70
(1973).
Based on section 772(e)(3) of the Tariff Act (19 USC 1677a(e)(3))
and the applicable legislative history, we developed a practice whereby
we do not calculate and do not assess antidumping duties on subject
merchandise imported by a related party and further processed where the
subject merchandise comprises less than one percent of the value of the
finished product sold to the first unrelated customer in the United
States. See AFBs III (at 39732, 39737). See Roller Chain I at 51804. In
situations such as this one, in which the statute provides general
guidance and leaves the application of a particular methodology to the
administering authority, we are given significant discretion in
determining the precise methodology to be applied in each case.
Inasmuch as our statutory interpretation is not an unalterable rule, it
does not constitute rule-making without compliance with the
Administrative Procedure Act. See Zenith Elec. Corp. v. United States,
988 F.2d 1573, 1583 (Fed. Cir. 1993). The application of a one-percent
threshold, based on a comparison of entered value of the imported
product to the sale price of the finished product, constitutes such a
use of the Department's discretion.
We disagree with Torrington's assertion that the ``Roller Chain''
rule has created a vehicle for circumvention of the antidumping duty
order. The antidumping statute provides for the assessment of
antidumping duties only to the extent of the dumping that occurs. If
there can be no determination of any dumping margin where the imported
merchandise is an insignificant part of the product sold in the United
States, then there is no dumping to offset and, therefore, antidumping
duties are not appropriate. Furthermore, the ``Roller Chain'' principle
acts only to exclude subject merchandise from assessment of antidumping
duties during the POR. We continue to require cash deposits of
estimated antidumping duties for all future entries, including entries
of bearings potentially excludable from assessment under the ``Roller
Chain'' principle. This is because we have no way of knowing at the
time of entry whether the ``Roller Chain'' principle will operate to
exclude any particular entry from assessment of antidumping duties. Any
decision to exclude subject merchandise from assessment of antidumping
duties based on a ``Roller Chain'' analysis is made on a case-by-case
basis during administrative reviews. See AFBs I (at 31703).
In order to apply the ``Roller Chain'' principle, we must examine
ESP transactions involving subject merchandise during the POR to
determine whether the amount of the subject merchandise is an
insignificant part of the amount of the finished product sold to the
first unrelated customer in the United States. We agree with Koyo that
the entered value, rather than the resale value of the bearings as
suggested by Torrington, provides a more appropriate basis for the one-
percent test. Although resale prices of identical models sold to
unrelated parties could be used in some instances in the numerator in
place of entered value, such prices are not always available for each
model, nor for all companies. In those instances where no resale price
is available, we would have to rely on entered values anyway.
Moreover, we formulated the one-percent ``Roller Chain'' threshold
based on the ratio of the entered value to the resale price of the
further-manufactured item. If we had chosen to use the resale price in
calculating this ratio, we might have chose a ratio higher than one-
percent. This is because the resale price will normally be higher than
the entered value, as it would include the mark-up of the related
importer. Regarding Torrington's claim that the transfer price can be
manipulated, we note that the U.S. Customs Service must ensure that
such price represents a reasonable commercial value. Thus, we conclude
that our use of entered value in the ``Roller Chain'' ratio is
reasonable.
Comment 2: Torrington argues that NMB/Pelmec-Singapore and NMB/
Pelmec-Thailand's (NMB/Pelmec) ``Roller Chain'' sales databases are
inaccurate. Torrington states that the U.S. sales verification report
indicates that ``the invoice does not always show the correct country
of origin.'' See NMB/Pelmec ESP verification report, February 10, 1994.
Furthermore, Torrington alleges that the Department discovered at
verification that a bearing manufactured in Singapore was incorrectly
reported in the Thai response. Torrington argues that during the POR,
NMB/Pelmec had only one ``Roller Chain'' sale of the subject
merchandise. Therefore, the evidence on record, as indicated by the
transaction randomly selected at verification, reveals that NMB/
Pelmec's ``Roller Chain'' database is inaccurate.
The NMB/Pelmec refutes Torrington's argument by stating that it
provided the Department with all the information necessary to perform
the appropriate dumping comparison for further-manufactured sales. In
addition, the Department did not ``discover that a bearing manufactured
in Singapore was incorrectly reported in the Thai response.''
Department's Position: We agree with respondent. Although the
invoice did not always show the correct country of origin, the shipping
document did. We verified country of origin during the ESP verification
and found it to be correctly reported. In addition, contrary to
Torrington's allegations, we did not discover that a bearing
manufactured in Singapore was incorrectly reported in the Thailand
response. See NMB/Pelmec ESP verification report, February 10, 1994.
Comment 3: Torrington argues that by manipulating transfer prices,
NMB/Pelmec could create exclusions from the antidumping duty order
based on the ``Roller Chain'' analysis. Torrington contends that it is
inappropriate to use entered value as the basis for valuation of
subject merchandise. Instead, the value should be derived from the ESP,
less any value added. 19 USC 1677a(e)(3). Torrington states that the
Department should use the average ESP by part number for purposes of
the one-percent ``Roller Chain'' test.
NMB/Pelmec argues that using a value other than the entered value
would not make the one-percent ``Roller Chain'' test any more accurate.
Department's Position: We disagree with Torrington. The use of
entered value is appropriate because it is the best indication of the
imported value of subject merchandise included in the finished product,
and the purpose of the ``Roller Chain'' test is to determine the value
of the subject merchandise as imported in relation to the value of the
finished product as finally sold to an unrelated party in the United
States. See comment 1. In addition, Torrington's concerns about
manipulation of transfer prices are unfounded. The U.S. Customs Service
will not accept transfer prices as entered value if these prices do not
reflect the commercial value of the merchandise.
Comment 4: Torrington argues that the Department should reject
Koyo's request for exclusion under Roller Chain I since the company
reported estimated resale prices of finished and further processed
products without providing supporting documentation. Torrington further
contends that Koyo used weighted-average entered values for its
``Roller Chain'' calculations without [[Page 10938]] demonstrating that
the use of weighted-average values is reasonable. Also Koyo did not
indicate that only in-scope merchandise was included in its
calculations.
In rebuttal, Koyo contends that it provided in its submission of
November 23, 1993, a detailed explanation of its methodology for
determining whether the weighted-average entered values of Koyo's in-
scope products that were incorporated into non-scope products by its
affiliates exceeded one percent of the sales value of the non-scope
merchandise.
Department's Position: We agree with respondent. Koyo provided
sufficient information in its letter of November 23, 1993, to
demonstrate the applicability of the ``Roller Chain'' rule to certain
identified sales. Notably, Koyo submitted examples of all calculations
necessary to determine the one-percent threshold. Furthermore, there is
no evidence on the record to indicate that the estimated resale prices
submitted by Koyo are unreliable. In addition, while the best evidence
of the value of the finished product sold to an unrelated party is the
actual price, an estimated price is suitable if verified, as was done
in this instance. See AFBs III (at 39766).
Comment 5: Torrington claims that Koyo reported only those imported
in-scope products that were further-processed into merchandise within
the scope of the order and that Koyo did not report any sales of
products further processed into non-scope merchandise. Torrington
contends that the Department should continue to apply a partial BIA
rate for any model that exceeds the one-percent ``Roller Chain'' rule,
as well as apply the highest margin calculated for Koyo in the LTFV or
prior reviews for any sale that has not been reported.
Department's Position: We disagree. There is no evidence on the
record to suggest that Koyo has failed to report any sales of in-scope
merchandise further-processed into non-scope merchandise.
Comment 6: Torrington objects to the fact that the Department has
excluded the vast majority of Honda's imports based on the ``Roller
Chain'' rule. Torrington states that, in Honda's case, the dumping law
is not ensuring that Japanese-origin AFBs used in U.S. automobile
production are sold at fair value. Instead, Torrington contends that
the order is merely guaranteeing that Honda's ``aftermarket'' spare
parts sales in Japan and the United States are made at comparable
prices since spare parts are the only non-``Roller Chain'' sales made
by Honda. As a result, Torrington claims that the Department is not
effectively administering the antidumping duty order with respect to
Honda.
Honda states that Torrington has not offered any specific data to
support its contention and that Torrington's arguments have been
previously rejected by the Department. Honda argues that an antidumping
duty order is clearly not meant to apply to parts imported by a company
for use in its own manufacturing operations unless the imported parts
constitute a significant amount of the value of the products
manufactured in the United States.
Department's Position: We agree with Honda. The majority of Honda's
imports constituted less than one percent of the value of the finished
product sold to the first unrelated customer in the United States. The
``Roller Chain'' standard is clearly established (see Comment 1 of this
section) and, by this standard, the majority of Honda's imports will
not be assessed antidumping duties for entries during the POR.
Furthermore, Torrington has provided no specific evidence demonstrating
that circumvention is occurring.
Comment 7: NMB/Pelmec-Thailand states that the Department should
not use BIA for its further-manufactured sales. NMB/Pelmec sold a small
number of bearings to a related company, which were further
manufactured. The companies reported CV data for the bearings that were
further manufactured and, therefore, the Department should not use BIA.
Torrington argues that respondents did not submit complete and
accurate information, and, as such, it is irrelevant whether or not CV
was provided for the further-manufactured models. In light of the
evidence on record, the Department should not accept the contentions of
NMB/Pelmec for purposes of the final results.
Department's Position: We agree with respondent. For our
preliminary results, we incorrectly assigned a BIA margin to two
further-manufactured sales due to a program error. For the final
results, we corrected the margin program. Since NMB/Pelmec properly
reported CV data for the bearings that were further manufactured, we
did not use BIA for these transactions.
Comment 8: NPBS requests that the Department correct the omission
of variable COPFM (home market cost of production) used in allocating
profit to further-manufactured bearing units by modifying several lines
of the computer program. NPBS states that, due to differing product
codes, the margin program failed to recognize this variable in the
further-manufactured data file.
Torrington argues that, although NPBS' suggested correction seems
reasonable, they have failed to demonstrate that the data are
comparable. Instead, Torrington offers an example demonstrating that
the CV and COP data are not comparable.
Department's Position: We agree with Torrington. Although
Torrington cites an example allegedly showing that the CV data and COP
data are not comparable, Torrington fails to realize that the example
is based on data from the wrong files and is cited from the wrong
submission (October 19, 1993, versus corrected data from December 30,
1993). Notwithstanding these facts, Torrington is correct in asserting
that the data are not compatible without modification. See NPBS Final
Analysis memo, June 2, 1994.
These modifications, made for the final results, are necessary to
account for a difference in interest expenses and the exclusion of
packing expenses. The difference in interest expenses can be corrected
by multiplying it by a certain ratio. The exclusion of packing expenses
cannot be corrected but, since it results in a lower COPFM, it
increases the dumping margin. This is to the detriment of NPBS.
Therefore, we are satisfied that modifying the CV data in the
aforementioned manner will result in an acceptable surrogate for COPFM.
Comment 9: Torrington explains that NSK used a FIFO system to link
imported bearing parts to finished bearings. Thus, imported parts could
be matched to a finished bearing that was sold even before the parts
were imported. This created a situation whereby imported parts were
assigned resale prices and an ESP was calculated regardless of whether
those parts were actually consumed during the POR.
Torrington notes that the only solution to this problem is to trace
parts directly to finished bearings or to take account of the entire
inventory of parts from all sources, applying the FIFO method to parts
inventory until all of the parts are used up. The prices for finished
bearings should be based upon the BIA, which is the lowest USP for each
relevant part number.
NSK states it formulated its methodology for reporting Section E
data in conjunction with the Department's Office of Accounting. This
methodology was fully disclosed in the second, third, and present
reviews. NSK notes that the Department has accepted as reasonable and
proper NSK's assumptions and methodology in the second and third
reviews. See AFBs III, 58 FR 39766.
Department's Position: We have concluded that NSK's FIFO
[[Page 10939]] methodology used for reporting Section E data is in
accordance with the U.S. GAAP, and thus, an appropriate method of
valuation. This methodology was reviewed during the further-
manufacturing verification of NSK's Section E response and was found to
be acceptable.
Comment 10: NSK contends that the Department should have based the
dumping margin for imported parts ``further manufactured'' in the
United States on the margin for imported finished bearings of the same
class or kind. NSK states the imported content contained in the
bearings sold in the United States does not justify requiring NSK to
respond to Section E of the Department's questionnaire, nor does it
support the Department's calculating margins for these imported parts.
NSK asserts that the Department's use of an arbitrary one-percent
threshold for analyzing further manufactured products is unlawful
rulemaking. The Department may only reduce ESP by the value of further-
manufacturing performed in the United States if ``the product
ultimately sold to an unrelated purchaser contains a significant amount
by quantity or value of the imported product.'' See S. Rep. No. 1298,
93d Cong. 2d Sess. 172-73, reprinted in 1974 U.S.C.C.A.N. 7185, 7310.
In most cases, the imported content is a very small percentage of the
total manufacturing cost, and thus NSK believes the imported portion of
its U.S.-produced bearing is insignificant.
NSK maintains the Department has not provided guidance as to the
standards that it follows when determining whether the imported content
is significant in the context of further manufactured in-scope
products. NSK claims that since the Department has not lawfully
promulgated a rule codifying the ``Roller Chain'' principle, it must
examine each factual situation on a case-by-case basis. NSK further
argues that in this review the Department has not addressed any
qualitative or quantitative factors to support its decision to compute
margins on NSK's further-manufactured product.
NSK states that the Department should not perform a further-
manufactured analysis of imported parts that are not subject to a
process of further-manufacturing in the United States. Section
772(e)(3) of the Tariff Act (19 USC 1677a(e)(3)) only authorizes a
further manufacturing analysis where ``a process of manufacture or
assembly is performed on the imported merchandise'' in the United
States. Many of the parts imported by NSK are merely ``applied'' or
``attached'' to finished parts and are not subject to a process of
further manufacturing in the United States. Therefore, NSK contends
that the Department should use the weighted-average margin for complete
imported bearings to determine the margin for these parts.
Torrington responds that the Administrative Procedure Act permits
agencies to promulgate ``interpretative rules'' without formal
rulemaking, citing 5 USC 553(b). Because the ``Roller Chain'' test is
clearly an interpretative rule, there is no prohibition against
applying the one-percent test on a case-by-case basis in this
proceeding.
Department's Position: We disagree with NSK that the Department
should not calculate dumping margins for merchandise further
manufactured in the United States by NSK. As explained in previous
reviews (see AFBs II at 28360 and AFBs III at 39737), the Department
disregards antidumping duties on those parts and bearings that comprise
less than one percent of the value of the finished product sold to the
first unrelated customer in the United States. However, NSK's data
indicate that the subject merchandise sold to its related party in the
United States comprises more than one percent of the value of the
finished good produced by the related party. Because this imported
merchandise is subject to antidumping duties, the Department cannot
disregard sales of this merchandise in its analysis or the adjustments
to USP provided for in section 772(e)(3) of the Tariff Act. Thus, we
reject NSK's claim that NSK's imported parts and bearings should not be
subject to further-manufacturing analysis, or any analysis at all. We
also disagree with NSK's argument that the one-percent threshold is
arbitrary and that it represents unlawful rule-making. See Comment 1.
We further disagree with NSK's argument that the imported parts are
not subject to a process of assembly or manufacture. Because the
addition of a part to an otherwise unfinished bearing constitutes a
process of assembly, we have adjusted ESP sales prices by the amount of
value added, in accordance with section 772(e)(3) of the Tariff Act (19
USC 1677a(e)(3)).
Comment 11: NSK claims that the Department incorrectly classified
its repacking material and labor costs as costs of U.S. manufacturing,
a methodology which conflicts with the Department's previous rulings
wherein movement and packing expenses have been classified separately
from the cost of manufacture in determining the value added to a
product in the United States. See, e.g., Final Determination of Sales
at Less Than Fair Value: Certain Stainless Steel Wire Rods From France,
58 FR 68865 (December 29, 1993). Torrington argues that in the third
review, NSK made the same claim, which the Department rejected because
of lack of supporting evidence on the record. Torrington suggests that
the Department should reject the claim now for the same reason.
Department's Position: Cost of manufacturing includes materials,
labor, and overhead associated with producing the product in question.
Repacking material and labor costs associated with packing or movement
are not considered part of manufacturing costs. Therefore, we have not
classified NSK's repacking expenses as a cost of manufacturing for the
final results.
Comment 12: Torrington notes that changes to FAG-Germany's packing
labor and material expense factors outlined in the analysis memo were
not included in the margin program used to calculate the preliminary
results. In addition, Torrington contends that the exchange rate factor
was applied twice to the adjustment for marine insurance.
FAG-Germany contends that the preliminary computer program does
contain the appropriate adjustment factors for FAG's U.S. packing labor
and material expenses. Additionally, FAG-Germany notes that the double
application of the exchange rate to the adjustment for marine insurance
was necessary to correct a conversion error committed by FAG in its
computer response.
Department's Position: We agree with FAG-Germany. We included in
the margin program the necessary corrections to FAG-Germany's packing
expenses. In addition, we intentionally applied the exchange rate to
the marine insurance adjustment twice to compensate for an exchange
rate error committed in FAG-Germany's submitted data.
9. Level of Trade
Comment 1: NTN and NTN-Germany argue that the Department
incorrectly reallocated their reported U.S. selling expenses to all
U.S. sales without regard to level of trade. NTN further argues that
the Department's reallocation of HM selling expenses without regard to
level of trade was erroneous. According to NTN and NTN-Germany, certain
expenses that are incurred only for sales to specific customer
categories are not applicable to all sales. As a result, NTN and NTN-
Germany contend that the Department's reallocation of these expenses
across all levels of trade improperly allocates certain expenses to
sales for which NTN and NTN-Germany did not incur such expenses.
Therefore, NTN and NTN-Germany request that the
[[Page 10940]] Department abandon its reallocation and use instead, in
its final analysis, the expenses as reported by NTN and NTN-Germany in
their questionnaire responses.
In rebuttal, Torrington and Federal-Mogul respond that NTN and NTN-
Germany failed to provide any evidence to justify their method of
allocating expenses according to levels of trade. According to
Torrington, NTN and NTN-Germany should have justified their method
because it differs from the Department's customary practice and appears
to shift expenses away from sales at certain levels of trade. This
reallocation of U.S. expenses also conflicts with NTN's failure to
allocate its HM expenses according to levels of trade. Federal-Mogul
argues that the U.S. expenses that NTN allocated were indirect selling
expenses that apply equally to all sales. Federal-Mogul further argues
that the Department's verification report indicates that NTN's
identification of certain HM indirect selling expenses with sales to
certain levels of trade may be inaccurate. Accordingly, Torrington and
Federal-Mogul support the Department's reallocation of NTN's and NTN-
Germany's U.S. selling expenses, and NTN's HM selling expenses, without
regard to level of trade.
Department's Position: We agree with Torrington and Federal-Mogul.
The methods that NTN and NTN-Germany used to allocate the expenses in
question bear no relationship to the manner in which they incur them.
Such expenses are fixed period costs that do not vary according to
sales value or the number of employees who allegedly sell each type of
merchandise. Further, we find NTN's and NTN-Germany's allocations
according to levels of trade to be misplaced because the types of
expenses that they allocated are indirect selling expenses that
typically relate to all sales. In this context, NTN and NTN-Germany
failed to demonstrate that they incur any specific types of expenses
that are unique to a particular level of trade. Further, as stated in
the verification report, certain Japanese indirect selling expenses
that NTN claimed apply to sales to a specific level of trade apply to
other sales as well. Because we have no evidence that NTN and NTN-
Germany incur different selling expenses for different levels of trade,
we have not revised our reallocations of their selling expenses for
these final results.
Comment 2: NTN argues that the Department should compare U.S. and
HM sales at the same level of trade. According to NTN, comparing sales
at different levels of trade distorts the calculation of dumping
margins because prices differ significantly for each level of trade.
NTN further argues that if the Department decides to compare sales
across levels of trade for the final results, then the Department
should alleviate the distortions caused by such comparisons by making a
level-of-trade adjustment based on differences in prices or,
alternatively, differences in indirect selling expenses for each level
of trade, as set forth by NTN in its questionnaire responses.
In rebuttal, Torrington and Federal-Mogul assert that the CIT has
upheld in numerous instances the Department's selection of the most
similar merchandise without regard to levels of trade. Torrington and
Federal-Mogul further argue that NTN has no basis for its claim for a
level-of-trade adjustment. Federal-Mogul contends that NTN has not
demonstrated that it is entitled to a level-of-trade adjustment because
it has failed to establish that price differentials are due to
differences in levels of trade. Federal-Mogul further contends that
NTN's methods of quantifying level-of-trade adjustments are
inappropriate because NTN cannot determine the amount of price
differentials or selling expenses attributable to differences in levels
of trade. Torrington adds that the manner in which NTN reported its HM
indirect selling expenses nullifies the effect of any level-of-trade
adjustment. As a result, Torrington and Federal-Mogul conclude that the
Department's comparison of sales across levels of trade and denial of
NTN's request for a level-of-trade adjustment are reasonable.
Department's Position: We agree with Torrington and Federal-Mogul.
As we stated in AFBs III (at 39767), we are required by 19 CFR 353.58
to compare merchandise at different levels of trade if sales at the
same commercial level of trade do not permit an adequate comparison.
Accordingly, when we were unable to compare NTN's U.S. sales to HM
sales at the same level of trade, we attempted to find matches at the
next most similar level of trade.
We also reject NTN's request for a level-of-trade adjustment. In
order for the Department to make a level-of-trade adjustment,
respondents must quantify any price differences that are attributable
to differences in levels of trade. NTN has failed to demonstrate what
portion, if any, of those price differences is attributable to
differences in levels of trade. Further, we reject NTN's claim that we
should use differences in indirect selling expenses to make a level-of-
trade adjustment. NTN allocated a common pool of expenses to all sales,
irrespective of levels of trade, using relative sales values. This
demonstrates that such expenses were not unique to, nor
disproportionally attributable to, any level of trade. Because NTN
failed to adequately quantify its claim for a level-of-trade
adjustment, we have not made any such adjustment for these final
results.
Comment 3: Torrington objects to NTN's claim that ``aftermarket''
customers constitute a distinct level of trade. First, Torrington
argues that NTN's selling expenses do not vary across levels of trade.
Torrington further argues that the results of the Department's
comparison of weighted-average prices at different levels of trade is
insufficient to conclude that NTN makes sales to customers at three
distinct levels of trade, and that NTN has failed to provide any
evidence demonstrating a correlation between prices and selling
expenses. Finally, Torrington argues that because of the limited number
of U.S. aftermarket sales, the majority of NTN's HM aftermarket sales
are not matched to U.S. sales. As a result, Torrington concludes that
the Department should reject NTN's classification of certain sales as
aftermarket sales, and should reclassify these sales as either OEM or
distributor sales for the final results.
NTN responds that the Department examines the function of the class
of customer in reaching conclusions regarding a respondent's
identification of levels of trade. According to NTN, Torrington
provided no evidence regarding customer function or other factors that
would preclude the Department from accepting NTN's classification of
certain customers as aftermarket customers. NTN further argues that the
number of sales made to customers at a particular level of trade is
irrelevant in identifying levels of trade because the Department's
regulations mandate comparisons of sales made at the same level of
trade.
Department's Position: We agree with NTN. As we stated in the final
results of the previous administrative review of this case, we
initially base our level-of-trade classifications on the function of
the class of customer reported by respondents. See AFBs III (at 39767).
These classifications may be rebutted by such other factors as
differences in prices that discredit a respondent's classifications.
NTN submitted information in its questionnaire responses for this
review that explained the differences in the function of its OEM,
distributor and aftermarket customers. Torrington offered no evidence
that NTN's aftermarket customers did not perform functions distinct
from those of NTN's other classes of customers, or that NTN's
[[Page 10941]] prices to aftermarket customers did not differ from
NTN's prices to other classes of customers. Further, because we examine
customer function and other factors in determining levels of trade, we
agree with NTN that the number of sales to customers at a given level
of trade is irrelevant to rendering determinations regarding the
existence of distinct levels of trade. Therefore, we conclude that
NTN's aftermarket customers constitute a distinct level of trade and
have compared aftermarket sales in the United States first to
aftermarket sales of such or similar merchandise in Japan.
Comment 4: NSK argues that the Department incorrectly classified
customer category 4 sales--sales through distributors to OEMs for OEM
use--as sales to the aftermarket level-of-trade. According to NSK,
category 4 sales should be matched to OEM level of trade sales under
either of the methods of analysis used by the Department: (1)
Correlation of price to level of trade; or (2) function of the first
unrelated customer. NSK contends that these distributors act as
purchasing agents for large OEM corporations and purchase bearings for
immediate resale to OEMs, and in some cases NSK ships directly to the
OEM. In addition, NSK claims that the price to level of trade
comparison submitted in the Section C response confirms that category 4
sales are at the OEM level of trade. Finally, NSK argues that, in the
TRB reviews, the Department correctly recognized that category 4 sales
were at the OEM level of trade and accordingly matched them to OEM U.S.
sales.
Torrington contends that NSK's sales designated as category 4 meet
neither of the two tests cited by NSK as relevant. Torrington claims
that the Department requested that NSK substantiate its claim that it
sells at four different levels of trade and that pricing is reflective
of the different levels of trade. According to Torrington, NSK
submitted an analysis which collapsed the four levels of trade into two
levels, but did not demonstrate that pricing and selling practices
differed among four individual levels of trade. Furthermore, Torrington
contends that the Department should retain the level-of-trade
classifications from the preliminary results because NSK failed to
demonstrate the first unrelated customer in category 4 sales is the OEM
customer.
Department's Position: We agree with NSK. We initially consider
customer function to determine our level-of-trade classification. In
its section C response, NSK provided an analysis of quantities and
weighted-average prices by customer category and model and by customer
category and class (BBs and CRBs). This analysis revealed that the
quantities and weighted-average prices for sales to customer category 1
(sales directly between NSK and OEM customers) are similar to sales to
customer category 4 (sales to distributors for resale to OEMs) but
significantly different from the quantities and weighted-average prices
of sales to aftermarket customers and distributors (customer category 2
and 3, respectively). Therefore, based on this data, we have collapsed
sales to customer categories 2 and 3, and collapsed categories 1 and 4,
to form two levels of trade for HM sales.
10. Packing and Movement Expenses
Comment 1: Torrington and Federal-Mogul argue that FMV should not
be adjusted for pre-sale inland freight costs, whether compared to PP
sales or to ESP sales. Torrington contends that movement expenses
should be deducted from FMV only if they are directly related to home
market sales. Torrington claims that the Department has begun to allow
home market deductions for all inland freight expenses without
distinguishing between pre- and post-sale expenses. Therefore,
Torrington concludes that the Department's approach is without
statutory basis and has been found unlawful by the U.S. Court of
Appeals for the Federal Circuit (CAFC).
Torrington and Federal-Mogul also maintain that there is no basis
for treating pre-sale inland freight differently when FMV is compared
to ESP than when FMV is compared to PP. They point out that the CAFC
has disallowed deduction of pre-sale transportation costs from FMV in
PP comparisons, and they argue that the Court's decision also applies
to ESP comparisons because the statute does not provide for an
adjustment to FMV in ESP comparisons that would distinguish the
rationale applied in Ad Hoc Committee. Furthermore, Federal-Mogul
argues that pre-sale transportation costs cannot be linked to
particular sales, and that the Department lacks the authority to adjust
FMV for such expenses under the ESP offset provision.
Nachi, Koyo, NSK, SKF, NPBS, and NMB/Pelmec argue that the
Department should continue its practice of treating pre-sale inland
freight charges as a direct adjustment to FMV in ESP comparisons. They
contend that the Federal Circuit's opinion in Ad Hoc Committee does not
apply when FMV is compared to ESP transactions because the CAFC made
only a limited ruling on the Department's authority to adjust for pre-
sale inland freight in PP situations. In support, Nachi cites The
Torrington Company v. United States, No. 94-38, Slip Op. at 8 (March 4,
1994), where the CIT held that in Ad Hoc Committee, the CAFC ``limited
its decision to the calculation of FMV in purchase price situations
only.'' In addition, Nachi notes that Ad Hoc Committee leaves
undisturbed the Department's previous practice of treating pre-sale
inland freight charges as indirect selling expenses. Therefore, Nachi
states that if the Department incorrectly determines that pre-sale
inland freight should not be directly deducted from FMV, the Department
should at least treat this expense as an indirect selling expense.
FAG also contends that the Department properly adjusted FMV for
pre-sale inland freight. FAG points out that while the CAFC held that
the Department improperly rationalized its adjustment to FMV for pre-
sale freight on its inherent authority to fill gaps in the statute, the
CAFC in Ad Hoc Committee did not rule as to whether the Department
could have justified its deduction to FMV under some other statutory
authority or whether the statute permitted an adjustment to FMV for
pre-sale freight where USP was based on ESP. FAG argues that the CIT
has also rejected Torrington's contention that pre-sale freight
expenses are neither selling expenses nor indirect expenses. In
addition, FAG maintains that if the Department decides in Torrington's
favor on this issue, then the Department should also exclude pre-sale
movement charges as an adjustment to USP. SKF argues that the
Department must maintain its practice of deducting HM pre-sale inland
freight from FMV when USP is based on ESP, which has similarly been
reduced by pre-sale inland freight.
FAG, NTN, and NMB/Pelmec state that the Department's decision to
adjust FMV to account for pre-sale inland freight costs is supported by
the recent CIT decision in Federal-Mogul v. United States, 17 CIT
______, Slip Op. 94-40 (March 7, 1994). Given the Department's broad
authority to make circumstance of sale (COS) adjustments, FAG, NTN,
NSK, and NMB/Pelmec argue that the Department may legitimately make COS
adjustments to FMV to account for pre-sale inland freight costs. NSK
adds that the Department's regulations do not require that all
adjustments to FMV be related to particular sales. See 19 CFR
353.56(a)(1).
Department's Position: We have determined that, in light of the
CAFC's decision in Ad Hoc Committee, the Department no longer can
deduct home market pre-sale movement charges from [[Page 10942]] FMV
pursuant to its inherent authority to apply reasonable interpretations
in areas where the antidumping law is silent. Instead we will adjust
for those expenses under the COS provision of 19 CFR 353.56 and the ESP
offset provision of 19 CFR 353.56(b) (1) and (2), as appropriate, in
the manner described below.
When USP is based on PP, we will only adjust for home market
movement charges through the COS provision of 19 CFR 353.56. Under this
adjustment, we capture only direct selling expenses, which include
post-sale movement expenses and, in some circumstances, pre-sale
movement expenses. Specifically, we will treat pre-sale movement
expenses as direct expenses if those expenses are directly related to
the home market sales of the merchandise under consideration. Moreover,
in order to determine whether pre-sale movement expenses are direct,
the Department will examine each respondent's pre-sale warehousing
expenses, because the pre-sale movement charges incurred in positioning
the merchandise at the warehouse are, for analytical purposes,
inextricably linked to pre-sale warehousing expenses. If the pre-sale
warehousing constitutes an indirect expense, the expense involved in
moving the merchandise to the warehouse must also be indirect;
conversely, a direct pre-sale warehousing expense necessarily implies a
direct pre-sale movement expense. We note that although pre-sale
warehousing expenses in most cases have been found to be indirect
expenses, these expenses may be deducted from FMV as a COS adjustment
if the respondent is able to demonstrate that the expenses are directly
related to the sales under consideration.
When USP is based on ESP, the Department uses the COS in the same
manner as in PP situations. Additionally, under the ESP offset
provision set forth in 19 CFR 353.56(b) (1) and (2), we will adjust for
any pre-sale movement charges found to be indirect selling expenses.
We have followed the above methodology for these final results.
However, in the case of NPBS, pre- and post-sale inland freight
expenses were not distinguished. Rather, NPBS reported both expenses as
post-sale inland freight. Therefore, for the final results, we have
treated all of NPBS' inland freight expenses as pre-sale movement
charges.
Comment 2: Torrington asserts that NMB/Pelmec Thailand and NMB/
Pelmec Singapore failed to report air and ocean freight expenses on a
product- and invoice-specific basis for ESP transactions. In addition,
Torrington contends that NMB/Pelmec failed to separate air freight
expenses from ocean freight expenses. Therefore, Torrington argues that
the Department should resort to BIA by applying the highest U.S.
movement expenses reported by respondents.
NMB/Pelmec states that it is not possible to link specific air and
ocean shipments to individual U.S. transactions because all merchandise
goes into U.S. inventory before it is sold.
Department's Position: We agree with NMB/Pelmec Thailand and
Singapore. In the case of ESP transactions made by NMB/Pelmec, there is
often no direct link between shipments and resales. Therefore, because
we verified NMB/Pelmec's air and ocean freight expenses and found them
to have been reasonably allocated, we have accepted NMB/Pelmec's
freight expense calculations.
Comment 3: Torrington states that the Department's verification
report confirms that NMB/Pelmec Thailand reported movement expenses
incurred on bearings shipped to Singapore and re-entered in Thailand
(termed ``Route B'' sales in the response). Torrington argues that
freight expenses incurred in transporting bearings to Singapore and
then back to Thailand should not be allowed as an adjustment to FMV
because such transportation expenses are by definition ``pre-sale''
freight costs. Torrington also contends that the ``Route B'' sales
should be excluded from the home market database.
NMB/Pelmec Thailand responds that only part of the freight expenses
incurred on ``Route B'' sales are pre-sale expenses because freight
charges incurred for shipping merchandise back to Thailand are incurred
after sales are made. Furthermore, NMB/Pelmec Thailand argues that the
Ad Hoc Committee decision does not preclude the deduction of pre-sale
freight expenses. See Comment 1 above.
Department's Position: We agree with NMB/Pelmec Thailand. As we
found in AFBs II (at 39770), ``Route B'' sales (i.e., bearings shipped
to Singapore and then back to Thailand) are home market sales made in
the normal course of trade. As verified by the Department in this
review, ``Route B'' sales incur both pre-sale freight expenses (to ship
the merchandise to Singapore) and post-sale freight expenses (to return
the merchandise to Thailand). Therefore, we have deducted NMB/Pelmec's
post-sale movement expenses from FMV for the final results. For our
treatment of pre-sale freight expenses, please see the Department's
Position to Comment 1, above.
Comment 4: Torrington states that RHP reported a single amount for
domestic inland insurance, marine insurance, and U.S. inland insurance.
Torrington notes that RHP allocated aggregate amounts across RHP's
sales on the basis of value and contends that RHP allocated marine
insurance and U.S. inland insurance to home market sales. Torrington
argues that this allocation decreases home market prices while
increasing USP. Torrington recalls that its October 1, 1993 comments
noted this deficiency and that RHP failed to correct its error.
Torrington asserts that this failure alone justifies the use of BIA.
Torrington suggests two possible applications of BIA: the Department
could use the amounts reported by another U.K. respondent, or the
entire amount could be allocated to U.S. sales. Torrington justifies
the second alternative by stating that it would be fair to allocate
nothing to home market sales as the home market expenses were
overstated because marine insurance was included.
RHP responds that it purchases a single freight insurance policy
that covers its shipments world-wide, regardless of destination, and
that this insurance covers all production and acquisitions until the
time of delivery. RHP notes that while Torrington argues that RHP
should not have allocated the fixed insurance expense based on its
sales turnover, the Department has verified and accepted RHP's practice
in the past three administrative reviews. RHP concludes that there is
no reason to modify well-established practice.
Department's Position: We have accepted RHP's reported freight
insurance expenses--which cover domestic inland insurance, marine
insurance, and U.S. inland insurance--for the final results. Because
RHP purchased a single policy that covers all shipments world-wide, RHP
allocated the expense over all of its sales activities, based on sales
value. We find RHP's allocation methodology to be reasonable.
Comment 5: Torrington argues that the Department incorrectly made
adjustments for Koyo's ocean freight and U.S. inland freight from port
to warehouse because Koyo reported these expenses on a customer-
specific basis rather than tying them to specific transactions.
Department's Position: We accepted Koyo's allocation of these
expenses as reasonable. We verified these expenses and found no
evidence that Koyo's allocation methodology is unrepresentative of its
actual [[Page 10943]] experience. In the case of ESP transactions,
there is often no direct link between shipments and resales. See the
Department's Position to Comment 2, above.
Comment 6: Torrington argues that since Koyo allocated air freight
expenses over all bearings shipped from Japan rather than reporting
them on a per-unit and transaction-specific basis, the Department
should apply a partial BIA rate, i.e., the highest movement expenses
reported by Japanese respondents.
In rebuttal, Koyo argues that the Department has accepted its
allocation of air freight expense in prior reviews. Koyo maintains that
the Department accepted these expenses because there was no evidence on
the record to suggest that Koyo's allocation methodology was not
representative of its actual experience.
Department's Position: We disagree with Torrington. As stated in
the Department's Position to Comment 2, above, there is often no direct
link between shipments and resales in the case of ESP transactions. The
expenses in question were verified by the Department and were found to
have been reasonably allocated.
Comment 7: Torrington argues that the Department should disallow
Nachi's home market ``other direct expenses,'' which the Department has
treated as indirect expenses for the preliminary results. Torrington
claims that Nachi's reported expense, the cost of operating the fleet
of vans owned by Nachi's national sales subsidiary, Nachi Bearing
Company (NBC), is a part of general overhead that Nachi has not shown
relates entirely to customer deliveries. Furthermore, Torrington states
that Nachi has not identified which NBC sales were shipped via the van
fleet, or even demonstrated that any bearings at all were shipped via
the van fleet. Finally, Torrington argues that Nachi has failed to
segregate the expenses incurred on shipments of subject merchandise and
those incurred on non-subject merchandise.
Federal-Mogul argues that Nachi has double-counted home market
inland freight expenses because ``other direct expenses'' (which
include the cost of customer deliveries made with NBC's van fleet) and
ordinary inland freight charges are both reported for several
transactions. Therefore, Federal-Mogul asserts that Nachi's home market
freight claims should be denied.
Nachi states that the Department verified that its ``other direct
selling expenses'' consist of the cost incurred by NBC in renting vans
and purchasing gasoline for deliveries of bearings to certain
customers. Therefore, Nachi asserts that the cost in question is
clearly a selling expense. Furthermore, Nachi contends that by dividing
NBC's total expenses by total NBC sales, only that portion of NBC's
expenses attributable to deliveries of subject merchandise was
allocated to sales of subject merchandise. With regard to Federal-
Mogul's argument, Nachi argues that it has not double-counted NBC's van
expenses because they were not reported elsewhere in Nachi's response
and because they were pulled out of Nachi's indirect selling expense
calculation along with other freight charges.
Department's Position: Although we disagree with Torrington and
Federal-Mogul's reasoning, we agree that Nachi's ``other direct selling
expenses'' should be disallowed. NBC's van fleet expenses, which Nachi
has categorized as ``other direct selling expenses,'' are more
accurately described as home market freight expenses. Even though they
are in-house freight costs rather than movement services purchased from
an independent contractor, they are nonetheless movement expenses.
Thus, Nachi has categorized its home market freight expenses as either
``other direct selling expenses'' or domestic inland freight expenses.
Both categories of transportation expenses were incurred on NBC sales.
Because NBC is unable to identify which particular sales were
transported by van and which were transported by contractors, Nachi has
allocated each category of expenses over total NBC sales and applied
the resulting factors to each reported NBC sale. Normally, this would
be no different from the net effect that would have resulted if Nachi
had pooled all NBC movement charges under the same category of
expenses. However, Nachi allocated its van fleet expenses over NBC
sales by sales value rather than by bearing weights. In the case of
movement charges that cannot be traced on a transaction-specific basis,
the proper way to allocate the expenses between shipments of subject
and of non-subject merchandise is by the weight of the merchandise,
unless a respondent can show that the expenses were incurred on a
different basis. Because Nachi allocated home market inland freight
charges based on bearing weights, we have accepted Nachi's reported
home market inland freight charges. However, Nachi's allocation of
NBC's van fleet expenses based on sales value distorts the actual
amount of expense incurred on each transaction. Therefore, we have not
adjusted FMV for Nachi's reported ``other direct selling expenses'' for
the final results.
Comment 8: Federal-Mogul claims that the Department erroneously
deducted packing from SNR's home market sales. Federal-Mogul asserts
that SNR's General Conditions of Sale stated that terms of sale were
ex-factory, packing excluded, except by special agreement. Federal-
Mogul further states that the Department should not deduct packing
costs, material or labor, from SNR's home market prices. Federal-Mogul
argues that SNR did not describe any special agreements which would
demonstrate that packing was included.
SNR responds that the General Conditions of Sale referenced by
Federal-Mogul were only basic terms and conditions, and that SNR has
allocated its packing costs only across sales where packing was
included, as in previous reviews. Thus the Department's calculation,
which deducted home market packing, was correct and the Department
should not make any changes for the final results.
Department's Position: We disagree with Federal-Mogul that packing
was erroneously deducted from SNR's sales. Although SNR's General
Conditions of Sale state that prices were ex-works and that packing was
not included, this is not inconsistent with SNR's reported terms of
sale. SNR reported two categories of home market terms of sale in both
the narrative response and the computer database. For the first
category, SNR stated that its customers pay for packing. For the second
category, SNR stated that it incurs the packing costs. See SNR's
Section C Response (September 21, 1993). Because there is no evidence
on the record to indicate that SNR's reported terms of sale are not
reflective of the actual terms of its sales, we are continuing to
deduct HM packing for the final results.
Comment 9: Torrington argues that the Department should resort to
BIA because RHP failed to report all relevant packing expenses in its
questionnaire response. Torrington notes that the amounts RHP reported
in its supplemental questionnaire response were estimates and appear to
be standard costs. Torrington contends that standard costs are not
acceptable for dumping calculations. Torrington concludes that the
Department should apply BIA to RHP's U.S. packing expenses.
RHP responds that contrary to Torrington's allegations, the packing
costs reported in its supplemental response were actual costs, and
thus, no adjustments to RHP's packing expenses are warranted.
Department's Position: While we agree with Torrington that there
were gaps in RHP's original questionnaire [[Page 10944]] response, RHP
provided a full explanation and quantification of its packing material
and labor costs in the supplemental questionnaire response. See RHP
Section B Response (September 21, 1993) and RHP Supplemental
Questionnaire Response (December 16, 1993). We agree with RHP that it
reported its actual packing materials and labor costs. Torrington has
not provided any support for its allegation that RHP reported standard
costs and not actual costs. Therefore, there is no need to apply BIA to
RHP's packing expenses.
Comment 10: Torrington and Federal-Mogul argue that INA's method of
calculating per-unit ocean freight, U.S. inland freight, and U.S.
brokerage and handling charges understates the per-unit amounts
incurred for each expense. Specifically, Federal-Mogul contends that
INA's calculation of per-unit expenses using a simple average obscures
the fact that INA must have incurred significantly higher per-unit
expenses for air shipments than for sea shipments. Torrington states
that INA's method of calculating average charges is based on shipments
that are not representative of all INA's sales, and understates per-
unit charges by giving disproportionate weight to high value shipments
with low per-unit freight costs. In order to account for this
disparity, Federal-Mogul requests that the Department revise INA's
calculation of per-unit amounts for these expenses by using a single
weighted average derived from the per-unit amounts for air shipments
and for sea shipments, respectively. Alternatively, Torrington requests
that the Department revise INA's reported per-unit movement charges by
calculating a simple average of the per-unit charges for each shipment
in INA's sample.
INA responds that the Department has accepted in each previous
review the method used in this review to calculate the per-unit
movement charges at issue. INA further argues that the Department
concluded that INA's reporting method yielded representative results
after conducting two separate tests at verification to determine
whether INA's methodology was reasonable. Finally, INA contends that
Federal-Mogul has not demonstrated that the methodology that it
proposes would yield more accurate results than the methodology used by
INA, and that Torrington's method of calculating a simple average would
result in a per-unit expense that, when multiplied by the weight of the
shipments, would yield total charges far in excess of those actually
incurred. Therefore, INA concludes that the Department should not
modify INA's method of calculating the per-unit movement charges at
issue for these final results.
Department's Position: We agree with INA. At verification, we
conducted two separate tests of INA's method of reporting per-unit
movement charges on U.S. sales, and determined that INA's method
yielded representative results. Further, neither Torrington nor
Federal-Mogul has demonstrated that its proposed calculation method
would yield more accurate results than INA's method. Accordingly, we
have used the per-unit charges reported by INA in our calculations for
these final results.
Comment 11: Torrington objects to the method used by INA to
calculate per-unit amounts for packing material and packing labor
expenses incurred in Germany. Torrington states that the record does
not clearly indicate whether the sales amount over which these expenses
were allocated includes INA's prices to its U.S. subsidiary or the U.S.
subsidiary's resale prices. If the sales amount includes the
subsidiary's resale prices, then Torrington argues that INA improperly
calculated per-unit expenses using its transfer prices to its U.S.
subsidiary. If the sales amount includes transfer prices, then
Torrington challenges INA's calculations on the grounds that transfer
prices are subject to manipulation and, therefore, do not form an
appropriate basis for the allocation of expenses. In either case,
Torrington requests that the Department revise INA's calculations of
per-unit packing materials and labor expenses for the final results.
INA responds that the sales amount used to allocate the packing
expenses in question included INA's sales to its U.S. subsidiary at
transfer prices. INA further asserts that its allocation of expenses
over its total sales value represents a quantifiable and verifiable
basis for allocating the expenses in question. As a result, INA
concludes that the Department should accept the packing material and
packing labor expenses as reported.
Department's Position: We agree with INA. At verification we
examined the total home market sales values that were used to allocate
various charges and expenses. We were able to disaggregate the total
home market sales values into their constituent elements and trace
these elements to audited financial statements. During this process, we
found a separate account that INA uses to record sales to its U.S.
subsidiary. We saw no evidence to suggest that INA recorded anything
other than its transfer prices to its U.S. subsidiary in this account.
Accordingly, we have determined that the total sales value used to
allocate its packing costs included INA's transfer prices to its U.S.
subsidiary. Further, Torrington failed to demonstrate that INA's
transfer prices were unreasonable or that INA systematically
manipulated its transfer prices to shift expenses away from certain
U.S. sales. In the absence of such evidence, INA's allocation of
packing expenses over transfer prices is reasonable. As a result, we
have accepted INA's use of transfer prices to calculate per-unit
packing material and labor expenses incurred in Germany.
Comment 12: Federal-Mogul contends that NTN improperly calculated
charges for shipping merchandise from Japan to the United States.
According to Federal-Mogul, NTN combined ocean freight and air freight
expenses that it incurred for shipments to the U.S., and allocated
these expenses over all U.S. sales. Federal-Mogul states that because
air freight is more expensive than ocean freight, NTN's calculation
method understates the shipping charges for certain U.S. sales.
Therefore, Federal-Mogul concludes that the Department should separate
ocean freight and air freight charges and allocate them to the
respective sales to which they apply.
NTN rejects Federal-Mogul's argument on the grounds that it is
impossible to trace specific ESP sales to specific air or sea shipments
from Japan. As a result, NTN concludes that the Department has no basis
for revising NTN's reported air and ocean freight charges for ESP sales
for these final results.
Department's Position: We agree with NTN. Because we do not require
respondents to tie individual ESP sales to specific shipments, we also
do not require respondents to report sale-specific air or ocean freight
expenses for individual ESP sales. In the absence of the information
required to tie air freight charges to specific U.S. sales, we have
accepted for these final results the air and ocean freight charges as
reported by NTN.
Comment 13: Torrington argues that NSK repackaging expenses were
improperly allocated to all sales because NSK has admitted that
repackaging does not occur on all orders. NSK Supplemental Response, at
6 (December 3, 1993). Citing Timken, 673 F. Supp. at 512-513,
Torrington asserts that the Department should not permit respondents to
achieve a reduction of USP if they have withheld data. Therefore,
Torrington contends that the Department should allocate repacking
expenses over sales at the distributor level for the final results.
NSK maintains it properly allocated repackaging expenses to all
U.S. sales. [[Page 10945]] NSK reported that ``the expenses accumulated
* * * included bar code labels, shrinkwrap and other materials
generally consumed in NSK's warehouses for both OEM and distributor
orders.'' NSK's Supplemental Section B Response, at 6. NSK states all
sales receive some sort of repackaging. However, NSK states that if the
Department finds that NSK's repackaging expenses were not properly
allocated to all sales, NSK would not object to the Department yielding
to Torrington's request that such expenses be allocated only to
aftermarket sales.
Department's Position: The repackaging expenses reported by NSK
include materials consumed in the repackaging of both OEM and
aftermarket sales. Therefore, we consider NSK's allocation of such
expenses as reasonable and accurate and have accepted them as reported.
Comment 14: NSK claims that the Department incorrectly classified
its repacking material and labor costs as costs of U.S. manufacturing,
a methodology which conflicts with the Department's previous rulings
wherein movement and packing expenses have been classified separately
from the cost of manufacture in determining the value added to a
product in the United States. See, e.g., Final Determination of Sales
at Less Than Fair Value: Certain Stainless Steel Wire Rods From France,
58 FR 68865 (December 29, 1993).
Torrington argues that in the third review, NSK made the same
claim, which the Department rejected because of lack of supporting
evidence on the record. Torrington suggests that the Department should
reject the claim now for the same reason.
Department's Position: Cost of manufacturing includes materials,
labor, and overhead associated with producing the product in question.
Repacking material and labor costs associated with packing or movement
are not considered part of manufacturing costs. Therefore, we have not
classified NSK's repacking expenses as a cost of manufacturing for the
final results.
11. Related Parties
Comment 1: Torrington states that at verification of NMB/Pelmec
Thailand the Department determined that there was not a sufficient
basis to test whether HM related-party sales were made at arm's length.
Therefore, Torrington argues, because the Department must rely on a
small portion of reported HM sales, i.e., sales to unrelated parties,
as the basis of FMV, the Department should use third-country sales for
determining NMB/Pelmec Thailand's FMV.
NMB/Pelmec Thailand does not dispute Torrington's allegations that
there was not a sufficient basis to test whether HM related-party sales
were at arm's length. However, NMB/Pelmec Thailand rebuts Torrington's
argument that the Department should have used third-country sales as
the basis for FMV. NMB/Pelmec explains that HM viability was accurately
calculated on a weight basis for complete bearings and bearing parts as
instructed by the Department's questionnaire.
Department's Position: We agree with Torrington that NMB/Pelmec
Thailand's related-party sales in the HM should not be used in the
calculation of FMV. However, we do not agree with Torrington that NMB/
Pelmec Thailand did not have a viable home market and that we should
therefore use third-country sales as the basis for FMV.
NMB/Pelmec Thailand properly reported that its HM was viable using
sales to both related and unrelated parties as requested in our
questionnaire. See the Department's questionnaire at 104. Although
certain HM sales may ultimately be determined to be unusable for
comparison purposes, such as when sales made to related parties are not
made at arm's-length prices, the arm's-length test is separate from the
HM viability test. That we cannot use NMB/Pelmec Thailand's related-
party sales does not change the fact that the HM was viable. We
establish viability once at the beginning of our analysis, before the
arm's-length test for related-party sales, based on the response to
Section A of the questionnaire. If we establish that the HM is viable,
we instruct respondent to furnish HM sales.
It would be administratively infeasible to reestablish the
appropriate market for purposes of calculating FMV each time we
determine a group of HM sales to be unsuitable for comparison. If we
were to retest for viability after determining that certain related-
party sales were unsuitable, we would cause undue delays in the
completion of the review. This problem would be exacerbated when we
consider other reasons that HM sales may be unsuitable for comparison,
such as when there are models sold below cost or when the adjustment
for differences in merchandise (difmer) exceeds the 20-percent cap. The
determinations of whether models are sold below cost or whether they
exceed the 20-percent difmer cap are made at a more advanced stage of
our analysis than the HM viability test. Thus, we have no basis to
disregard NMB/Pelmec's HM sales, and, accordingly, for these final
results we used NMB/Pelmec's HM as the basis for the calculation of
FMV.
Comment 2: RHP contends that the Department should not have
collapsed RHP and NSK Europe during the POR and that the use of BIA
with respect to the U.S. sales of NSK Europe products was not
appropriate. RHP argues that the Department has been unwilling to
collapse companies in the past except where the relationship is
considered so significant that price manipulation may exist. RHP notes
that the Department will not generally collapse entities which have
separate manufacturing facilities and sales operations. RHP contends
that since it became affiliated with NSK Europe in 1990, RHP has
maintained the arm's-length relationship that they had before they
became affiliated. RHP notes that during the POR, RHP and NSK Europe
were ``separately managed and administered, maintained separate
facilities and operations and did not share significant pricing
information or marketing strategies.'' RHP maintains that both RHP and
NSK Europe have remained independent despite common parentage, which is
why RHP contends that this situation does not present ``a strong
possibility of price manipulation.'' RHP argues that it is a common
practice within the bearing industry for manufacturers to purchase
products from other manufacturers to expand their product line. RHP
contends that its purchases of bearings from NSK Europe is not
inconsistent with their separateness, because these dealings were at
arm's length.
Torrington states that RHP essentially has restated the same
arguments that the Department rejected in prior reviews and has not
provided ``new'' information to refute the Department's previous
findings. Torrington contends that RHP and NSK Europe should continue
to be collapsed for the final results. Torrington further argues that
the Department was justified in imposing BIA on RHP's sales of NSK
Europe products in the United States, because both RHP and NSK Europe
possess information crucial to the analysis of these transactions, and
NSK Europe failed to provide section C and D information for this
administrative review.
Department's Position: We agree with Torrington. As we have stated
in both AFBs II and AFBs III, our usual practice is ``to collapse
related parties if the nature of their relationship allows the
possibility of price and cost manipulation.'' See AFBs III at 39772.
RHP has provided no new information in this review to suggest that the
nature of its relationship with NSK Europe has [[Page 10946]] changed.
Therefore, we have determined that RHP and NSK Europe have a
significant financial relationship, and that the nature of their
relationship with their parent company, NSK-Japan, permits the price
and cost manipulation that requires that we consider these companies as
a consolidated entity. See AFBs II (at 28393) and AFBs III (at 39772).
Because NSK Europe did not provide the sales and cost information
(Sections C and D) necessary for this review, we were unable to
properly calculate the FMVs for particular RHP U.S. sales. Because we
know that RHP reported the entire universe of U.S. sales, we applied
BIA to those U.S. sales for which the FMVs were potentially affected by
the lack of information concerning NSK Europe's HM sales and cost. See
AFBs III (at 39773). As the BIA rate we applied RHP's highest rate for
each class or kind: 48.14 percent for BBs, which was RHP's BB margin
from the third administrative review, and 48.29 for CRBs, which was
RHP's CRB margin from the second administrative review.
Comment 3: SKF-Sweden argues that the Department eliminated a
number of HM transactions based on the erroneous conclusion that such
transactions reflected preferential prices to related parties. SKF
asserts that there is no direct or indirect ownership or control
between the companies, and that the relationship between the parties
noted by the Department at verification has no influence on price. SKF
also states that the Department's comparison of average prices is
insufficient to test the arm's-length nature of the transactions
because the Department included companies with no common ownership
interests and companies with ownership interests of less than 20
percent, did not individually analyze the companies involved, and did
not consider the relative quantities involved.
Torrington maintains that the Department will use sales to related
parties as a basis for FMV only if it is satisfied that the price is
comparable to the price at which the producer or reseller sold such or
similar merchandise to unrelated parties, and that the only valid
criterion in this determination is price. Torrington argues that there
is a regulatory presumption that related-party sales should be excluded
in a calculation of FMV. Federal-Mogul and Torrington state that the
burden is on the respondent, not the Department, to overcome this
presumption by demonstrating affirmatively that related-party
transaction prices are comparable to prices to unrelated parties.
Torrington also asserts that SKF has failed to submit any data
demonstrating that its prices to related and unrelated parties are
comparable and thus has not met its burden. Torrington and Federal-
Mogul further point out that SKF has provided no evidence on the record
regarding any particular related-party sales or the price comparability
of its related-party sales.
Department's Position: We disagree with SKF. 19 CFR 353.45 provides
that the Department ordinarily will include related-party sales in the
calculation of FMV only if it is satisfied that the sales were made at
arm's-length prices, i.e., that the prices of such sales are comparable
to the prices at which the seller sold such or similar merchandise to
unrelated parties. For purposes of applying this provision, Sec. 353.45
also refers to section 771(13) of the Tariff Act for the definition of
related parties. We preliminarily determined that SKF-Sweden made HM
sales to customers related to it as described in section 771(13)(D) of
the Tariff Act. Accordingly, we conducted an analysis to determine
whether these sales were made at arm's-length prices. Because we
determined that these sales were not made at arm's-length prices, we
excluded them from our calculations of FMV. (We note that SKF-Germany
also made HM sales to related parties, but that we determined these
sales were made at arm's-length prices. Therefore, we did not exclude
them from our calculation of FMV for SKF-Germany.)
On reexamination of the evidence on the record, however, we
determined that one of these HM customers in fact did not meet the
definition of a related party as specified in section 771(13) of the
Tariff Act. Therefore, for these final results we retained sales to
this customer by SKF-Sweden in calculating FMVs and did not include
these sales in our arm's-length analysis for related-party sales.
In determining whether prices to related parties are in fact arm's-
length prices, we rely on a comparison of average unrelated-party
prices for each model to average related-party prices for the same
models. When average prices to unrelated parties are predominantly
higher than average prices to related parties for the class or kind of
merchandise, we disregard sales to related parties for that class or
kind. Because SKF has provided no evidence to refute our findings that
the average prices of certain models sold to related parties are not
comparable to the average prices of these models sold to unrelated
parties, other than reference to statements by company personnel at
verification that these companies were not related, we have continued
to exclude these sales for the final results. See SKF Sverige AB
Verification Report, February 23, 1994, and Rhone Poulenc Inc. v.
United States 899 F. 2d 1185 (Fed Cir. 1990).
Comment 4: NTN challenges the Department's decision to exclude from
its analysis certain HM sales to related parties. According to NTN, the
Department excluded related-party sales from its analysis without
having first articulated any standard for determining whether sales
prices to related parties were comparable to sales prices to unrelated
parties. NTN also objects to the Department's use of weighted-averages
in its comparison of sales prices to related and unrelated parties
because weighted-average prices to related and unrelated parties can
differ even if the per-unit invoice prices are identical. Finally, NTN
argues that the Department failed to account for the impact of
different payment terms and differences in sales quantities on sales
prices to related and unrelated parties. As a result, NTN concludes
that the Department should revise its test for determining whether
related party prices are comparable to unrelated party prices for the
final results.
Torrington and Federal-Mogul claim that NTN has failed to meet its
burden of proving that sales prices to related parties are comparable
to those to unrelated parties. Torrington further argues that the
Department's method of comparing weighted-average prices to related and
unrelated parties is a reasonable and efficient method of comparing
prices given the large number of respondents and HM sales transactions.
Moreover, Torrington asserts that NTN failed to demonstrate that
payment and quantity terms would have any effect on the Department's
analysis, while Federal-Mogul argues that the Department's arm's-length
test accounts for the additional factors cited by NTN. As a result,
Torrington and Federal-Mogul request that the Department continue to
exclude HM sales of BBs and CRBs to related parties from its analysis
for these final results.
Department's Position: We agree with Torrington and Federal-Mogul.
Because we deduct credit and conduct our analysis by level of trade,
our arm's-length test accounts for differences in payment terms and, to
the extent that they are reflected in sales to different levels of
trade, differences in quantities of sale. Further, our use of weighted
averages in our comparisons of sales prices to related and unrelated
parties is warranted because it provides the most accurate means of
measuring, for each model, NTN's preponderant pricing
[[Page 10947]] practices for related and unrelated customers. The
failure to weight our test by quantity would give disproportionate
weight to sales of small quantities, which would result in distortions.
Therefore, we have not revised our arm's-length test for these final
results.
Finally, we reject NTN's arguments that we have not established any
standard for assessing the comparability of sales prices to related and
unrelated parties. As discussed in Comment 3 above, our longstanding
practice has been to exclude related-party sales from our analysis if
the sales prices to related parties are lower than those to unrelated
parties. See AFBs III. Because NTN's sales prices to related parties
for BBs and CRBs were lower than sales prices to unrelated parties, we
have excluded sales of these products to related parties from our
calculation of FMV for these final results.
12. Samples, Prototypes, and Ordinary Courses of Trade
Comment 1: NTN argues that the Department should not use sample
sales or sporadic, small quantity sales of certain products in its
calculation of FMV. NTN states that these sales are not in the ordinary
course of trade. NTN further states that the Department verified NTN's
recording of sample sales in its accounting system, and the sales data
that NTN used to classify certain other sales as being outside the
ordinary course of trade. Because the Department excluded sample sales
and sporadic, small-quantity sales from its analysis in Final Results
of Antidumping Duty Administrative Review; Tapered Roller Bearings and
Parts Thereof, Finished and Unfinished, from Japan, 57 FR 4960
(February 11, 1992), NTN urges the Department to exclude such sales
from its analysis in the final results of this review.
Torrington and Federal-Mogul reject NTN's argument regarding sample
sales because NTN has provided no evidence regarding the circumstances
surrounding the sample sales in question. In the absence of such
evidence, Torrington and Federal-Mogul assert that NTN has failed to
meet its burden of proof in demonstrating that such sales fall outside
the ordinary course of trade. Similarly, Torrington and Federal-Mogul
assert that a pattern of infrequent sales of small quantities of
specific products is insufficient to establish that such sales fall
outside the ordinary course of trade. In this context, Torrington and
Federal-Mogul note that the Department's verification of NTN's claims
focused solely on the method that NTN used to prepare its response
rather than NTN's sales practices. Accordingly, Torrington and Federal-
Mogul support the Department's exclusion from its calculation of FMV of
NTN's sample sales and sporadic, small-quantity sales.
Department's Position: We agree with Torrington and Federal-Mogul.
As we stated in the final results of the previous review, the fact that
NTN identified sales as sample sales does not necessarily render them
outside the ordinary course of trade. Thus, our verification of the
designation of certain sales as samples merely demonstrates that NTN
recorded such sales as samples in its own records. This designation,
however, does not indicate that NTN made such sales outside the
ordinary course of trade. We also reject NTN's claim that small
quantity sales of products with sporadic sales histories fall outside
the ordinary course of trade. Infrequent sales of small quantities of
certain models is insufficient evidence to establish that NTN made
these sales outside its ordinary course of trade because such sales
histories are typical of certain types of products. Therefore, because
NTN failed to demonstrate that samples and sporadic, small-quantity
sales fall outside the ordinary course of trade, we have included them
in our analysis for these final results.
Comment 2: FAG-Germany and FAG-UK contend that the Department
improperly used zero-priced U.S. sample and prototype sales in the
calculation of USP because such sales are not made in the ordinary
course of trade and are therefore similar to the type of sales the
statute permits the Department to exclude in the HM. Additionally, FAG
claims the Department is not required to review each and every U.S.
sale.
Alternatively, FAG argues that if the Department compares the U.S.
zero-price sample sales to HM sales in which value was received, the
Department should make a COS adjustment to account for the different
circumstances under which the sales were made. FAG argues that the
Department should adjust FMV in the amount of the expenses directly
associated with the U.S. sample sale and suggests reducing FMV by the
amount of the COP of the U.S. sample sale.
Federal-Mogul and Torrington contend that, in order to assure the
validity of the Department's sample, the Department must not drop these
U.S. sample and prototype sales from its analysis. Federal-Mogul and
Torrington further maintain that the arguments regarding the ordinary
course of trade are completely irrelevant because the ordinary course
of trade provision applies only to the calculation of FMV, not USP.
Section 751(a)(2)(A) of the Tariff Act (19 USC 1675(a)(2)(A)) requires
the Department to calculate the amount of duty payable on ``each entry
of merchandise'' into the United States. Torrington states that this
provision should be compared with section 773(a)(1)(A) of the Tariff
Act (19 USC 1677b(a)(1)(A)), which requires FMV to be calculated on the
basis of sales in the ``ordinary course of trade.''
Federal-Mogul also rejects the idea of a COS adjustment, arguing
that the cost to produce the merchandise cannot reasonably be used to
quantify any difference between a sample sale and a sale with a price
because the cost to produce the merchandise remains the same whether
the producer sells it at a profit, sells it at a dumped price, or gives
it away.
Department's Position: The Department agrees with Federal-Mogul and
Torrington. As set forth in AFBs II (at 28395), other than for
sampling, there is neither a statutory nor a regulatory basis for
excluding any U.S. sales from review. The Department must examine all
U.S. sales within the POR. See Final Results of Antidumping
Administrative Review; Color Television Receivers From the Republic of
Korea, 56 FR 12701, 12709 (March 27, 1991).
Although we have made COS adjustments as required by section 773 of
the Tariff Act and 19 CFR 353.56, we disagree with FAG's argument that
a further COS adjustment should be made if the U.S. sample sales are
not excluded from the analysis. This adjustment is not warranted under
sections 772 and 773 of the Tariff Act. FAG's argument that a COS
adjustment should be made when a zero-price U.S. sale is compared
either to HM sales in which value was received or to CV, which includes
profit, suggests that a COS adjustment should be made because of the
marked difference in the prices of the U.S. sale ($0) and the
comparable HM sale. However, differences in prices do not constitute a
bona fide difference in the circumstances of sale. Furthermore, it
would clearly be contrary to the purpose of the dumping law to make a
COS adjustment in order to compensate for price discrimination.
Moreover, we do not deduct expenses directly related to U.S. sales from
FMV either in PP or ESP comparisons. In making COS adjustments in PP
comparisons, U.S. selling expenses are added to FMV, while in ESP
comparisons U.S. selling expenses are neither added to nor deducted
from FMV; they are deducted from USP. Finally, regarding FAG's argument
that we should use the COP of U.S. merchandise (SAMPCOPE) as the basis
for such an adjustment, the difmer [[Page 10948]] methodology accounts
for appropriate differences in merchandise.
Comment 3: NSK asserts that zero-price samples and prototype sales
should be excluded from the U.S. sales database because the record
demonstrates that the provision of these samples are not sales but
rather promotional expenses. NSK contends that the ``ordinary course of
trade'' analysis has been applied by the Department to exclude certain
U.S. sales from its analysis, citing Ipsco, Inc. v. United States, 714
F. Supp. 1211, 1217 (CIT 1989). NSK contends that if the Department
does not exclude zero-price samples from the U.S. sales database, then
the Department should deduct the cost of these samples from NSK's
indirect selling and G&A expenses.
Torrington argues that the statute requires analysis of each U.S.
entry in the context of administrative reviews. Section 1675(a)(2)(A)
of the Tariff Act (19 USC 1675(a)(2)(A)) and the IPSCO decision, which
NSK cites to support its claim, did not exclude all sales from USP
which are made outside the ordinary course of trade. Federal-Mogul
argues that the Department should continue to reject exclusion of NSK's
zero-value U.S. transactions as it has done in the last two AFBs
administrative reviews. Torrington also contends that the Department
should not deduct the cost of these samples from NSK's indirect selling
and G&A expenses because NSK has not provided support on the record for
the amounts that it claims should be deducted.
Department's Position: As set forth in AFBs II (at 28395) and AFBs
III (58 FR at 39744), other than for sampling, there is neither a
statutory nor a regulatory basis for excluding any U.S. sales from
review. The statute requires the Department to analyze all U.S. sales
within the POR. See 19 USC 1675(a)(2)(A). See also Final Results of
Antidumping Administrative Review; Color Television Receivers From the
Republic of Korea, 56 FR 12701, 12709 (March 27, 1991). The Department
agrees with Torrington that Ipsco is inapplicable to this case because
that case concerns a LTFV investigation in which the Department has the
discretion to eliminate unusual U.S. sales, as opposed to an
administrative review in which section 751(a)(2)(A) of the Tariff Act
(19 USC 1675(a)(2)(A)) requires analysis of ``each U.S. entry'' except
in cases where the agency utilizes ``averages or generally recognized
sampling techniques'' pursuant to section 777A of the Tariff Act (19
USC 1677f-l). As a result, we have not excluded any of NSK's U.S.
sales. However, the Department also agrees with NSK that the costs of
these samples should not be included as part of NSK's indirect selling
expenses because we are considering these transactions as sales and are
comparing them to FMV. Therefore, we have deducted the costs of samples
from NSK's indirect selling expenses.
13. Taxes, Duties and Drawback
Comment 1: Federal-Mogul maintains that the Department's new tax
methodology is still legally flawed in that it fails to ``cap'' the
amount of tax added to USP at the amount of tax added to or included in
the price of the foreign market comparison model. Federal-Mogul cites
19 USC 1677 (d)(1)(C), which requires that forgiven taxes be added to
USP ``but only to the extent that such taxes are added to or included
in the price of such or similar merchandise when sold in the country of
exportation,'' and claims that this provision explicitly requires such
a cap. Federal-Mogul further argues that if the addition to USP is not
capped by the amount of tax paid on HM sales, a situation could arise
where the tax added to USP exceeds the actual taxes paid on HM sales.
FAG, SKF, and RHP contend that if the Department were to add the
actual amount of taxes paid on HM sales to the net U.S. invoice price,
a ``cap'' would not be necessary. SKF further argues that under the
Department's current method of accounting for taxes, the tax added to
USP exceeds that added to FMV only when USP itself is higher than FMV.
Therefore, SKF concludes that capping is unnecessary because the
Department's method does not reduce dumping margins. Finally, Koyo
argues that if the Department accepts Federal-Mogul's argument that the
tax added to USP should be capped, the Department also should cap the
amount of tax attributed to the adjustments to USP.
Department's Position: We disagree with Federal-Mogul. The
Department's methodology consists of applying the home market tax rate
to the U.S. price at the same point in the chain of distribution at
which the home market tax base is determined and then reducing the tax
in each market by that portion of the tax attributable to expenses
which are deducted from each price. For example, because we deduct
ocean freight from U.S. price, ocean freight is also eliminated from
the U.S. tax base. This is consistent with the decision of the CIT in
Federal-Mogul v. United States, 834 F. Supp. 1391 (CIT 1993). The
effect of these adjustments is the same as initially calculating the
tax in each market on the basis of adjusted prices.
The ``cap'' was devised at a time when the Department was not
effectively calculating the tax in each market on the basis of adjusted
prices. It was intended to keep differences in expenses which were
eliminated through adjustments to the price in each market from
continuing to affect the dumping margin by remaining in the basis upon
which the tax in each market was determined. The Department's current
practice of effectively using adjusted prices in each market as the tax
base automatically achieves this purpose. The imputed U.S. tax will
exceed the tax on the home market sales to which they are compared only
where the adjusted U.S. price is higher than the adjusted home market
price--that is, for non-dumped sales. A tax cap is irrelevant for such
sales, because no duties are assessed upon them. Consequently, the
absolute margins obtained under the Department's current approach are
identical to those which would be obtained after imposing a tax cap.
Although applying a tax cap may affect weighted-average margins,
and hence deposit rates, we decline to re-apply the tax cap solely to
achieve this additional purpose. The Department includes U.S. prices
that exceed foreign market prices in the denominator of the deposit
rate equation. It would be inconsistent to include that portion of the
U.S. price that exceeds the home market price in that denominator, but
to remove the tax on this amount. Just as we treat the tax on ocean
freight consistently with ocean freight itself, where we include the
full adjusted U.S. price in the denominator of the deposit rate
equation, we must also leave the tax on that full U.S. price in that
denominator.
Comment 2: FAG, SNR, SKF, RHP, NSK, and Koyo contend that the
method that the Department used to account for VAT in the preliminary
results of this review is improper.
FAG argues that the Department's methodology violates statutory and
judicial requirements because the VAT rate is not applied to USP and
FMV where the HM tax authorities apply the VAT to home market sales.
FAG claims that all laws governing the assessment of the VAT require
that the tax be applied to the net invoice price of goods sold in the
HM. Therefore, FAG contends that the Department should apply the VAT
amount collected in the foreign market to a net U.S. invoice price
instead of applying VAT to an ex-factory price in both the U.S. and
home markets. U.S. invoice price is at the same point in the stream of
commerce [[Page 10949]] as the price to which VAT is applied in the HM.
SKF, RHP, SNR, Koyo, and FAG claim that the current methodology is
flawed because it results in the so-called ``multiplier effect''
through which absolute dumping margins are increased solely because USP
is adjusted by the rate of the VAT tax instead of the amount. Thus,
respondents propose that the Department adjust USP by the amount of the
VAT applicable to the relevant HM sales and then add this amount to
both FMV and USP, as instructed by the CIT in Hyster Co., a.k.a. Nacco
Handling Group Inc., et. al. v. United States, 848 F. Supp. 178 (CIT
1994) (Hyster).
NSK contends that the Department should add taxes to USP whenever
such taxes are assessed in the HM, but that it should not add taxes to
FMV or otherwise calculate FMV so as to include taxes whether FMV is
based on HM price, third-country sales, or CV. NSK argues that the
``plain language'' of the statute does not define FMV to include taxes
imposed in the home market. Furthermore, NSK states that if Congress
had meant to include taxes in every calculation of FMV, the statute at
a minimum would have defined third-country prices and CV to include
such taxes.
Federal-Mogul and Torrington contend that the Department's current
method of accounting for VAT is lawful. Federal-Mogul maintains that
respondents have not provided any basis for the Department to change
its position on this issue. According to Federal-Mogul, the CIT ruled
unequivocally in Federal-Mogul Corp. v. United States, 834 F. Supp.
1391 (CIT 1993), appeals docketed, Nos. 94-1497, 1104 (Fed. Cir. 1994),
that the Department may not make the statutory tax adjustment by adding
the foreign market tax amount to USP. Federal-Mogul further argues that
the CIT found that any suggestion to the contrary in footnote 4 of
Zenith Electronics Corp. v. United States, 988 F.2d 1573 (CIT 1993)
(Zenith) ``was dicta and was at odds with both the body of the
appellate court's opinion and with the statute.''
Torrington states the Department should not adjust for VAT by
adding the amount of the foreign market VAT to USP. Torrington contends
that the Department has correctly applied the VAT that would have been
applied to a HM sale, by determining what tax rate would be applied to
an f.o.b origin, ex-factory price. Torrington maintains that the
Department's methodology is consistent with section 1677a(d)(1)(C). In
this context, Torrington argues that Hyster does not require the
Department to add actual amounts of foreign market taxes to USP.
According to Torrington, the CIT in Hyster simply instructed the
Department to ``consider'' adjusting USP for taxes in a manner
``consistent with Zenith and title 19.'' Therefore, Torrington
concludes that the method that the Department used to account for taxes
in the preliminary results of these reviews is consistent with judicial
precedent.
Department's Position: We disagree with respondents' contentions
that we violated current administrative practice and recent judicial
precedent by failing to apply the VAT rate to USP and FMV at the same
point in the chain of commerce. We made an addition to USP for VAT in
accordance with section 772(d)(1)(C) of the Tariff Act. In making this
adjustment, we followed the instructions that the CIT issued in
Federal-Mogul. Specifically, we added to USP the result of multiplying
the foreign market tax rate by the price of the U.S. merchandise at the
same point in the chain of commerce that the foreign market tax was
applied to foreign market sales.
Contrary to respondents' claim that we did not apply the foreign
VAT rate to the USP at the same point in the stream of commerce as
applied by the foreign market authority, we in fact did apply the tax
rate to USP at the same point in the chain of commerce, that is, the
invoice price net of price adjustments such as discounts and rebates.
We also adjusted the tax amount calculated for USP and the amount of
tax included in FMV. Specifically, we deducted those portions of the
foreign market tax and the hypothetical U.S. tax that are the result of
expenses that are included in the foreign market price used to
calculate the foreign market tax and in the USP used to calculate the
U.S. tax. Because these expenses are later deducted to calculate FMV
and USP, these adjustments are necessary to prevent our new methodology
for calculating the USP tax from creating dumping margins where no
margins would exist if no taxes were levied upon foreign market sales.
By making these adjustments to the taxes added to USP and included in
FMV, margins are not dependent on differences in expenses.
We agree with petitioner that Hyster does not order the Department
to adjust for VAT by applying the absolute amount of the HM VAT to USP.
Rather, Hyster states that Zenith ``permits Commerce to adjust USP by
the amount of the ad valorem tax,'' and directs the Department to
``consider any further adjustments to USP consistent with Zenith and
title 19.'' The CAFC in Zenith held that ``[b]y engaging in dumping,
the exporters themselves are responsible for the multiplier effect. The
multiplier effect does not create a dumping margin where one does not
already exist.'' See Zenith Electronics Corp. v. United States, 988 F2d
at 1581-82 (1993). Furthermore, in Federal-Mogul Corp. v. United
States, 834 F. Supp. 1391 (October 7, 1993), the CIT held that Zenith
made clear that tax neutrality is irrelevant to the proper application
of the statute. Therefore, the Department is under no obligation either
to adjust for VAT by the absolute amount of VAT that is assessed in the
HM or to make the VAT adjustment tax neutral.
We determine that our calculation of the amount of tax added to USP
is appropriate. Applying the rate to USP simply calculates the amount
of tax that would be applied in the HM if the product were sold in the
HM at the same price as it is in the United States. The ``multiplier
effect'' only occurs if FMV is higher than USP. We are under no
obligation to change our method of adjusting for VAT in order to
account for a firm's pricing practices when they differ between the HM
and the United States.
We disagree with NSK's argument that the Department should not add
taxes to FMV or otherwise calculate FMV so as to include taxes when FMV
is based on HM price. Taxes imposed in the foreign market are an
integral part of the final price paid by the customer and are only
``added'' when reference is made to a tax-exclusive price. Furthermore,
section 772(d)(1)(C) of the Tariff Act directs us to adjust for any
taxes which are rebated or uncollected by reason of exportation to the
extent that such taxes are added to or included in the price of such or
similar merchandise when sold in the country of exportation. This
direction can only imply that taxes would be included in the prices
used by the Department in its calculation of FMV. For the foregoing
reasons, we have not amended our treatment of U.S. and HM taxes for
these final results.
Comment 3: FAG-Germany contends that the Department improperly
applied a VAT rate of 14 percent, instead of 15 percent, for 1993
sales.
Department's Position: We disagree with FAG. We correctly applied
the 15 percent VAT rate for 1993 sales in the preliminary calculations.
See FAG KGS preliminary margin program at lines 1370-1372.
Comment 4: Torrington alleges that NMB/Pelmec made ``Route B'' and
bonded warehouse sales in order to avoid the payment of import duties
on [[Page 10950]] imported raw materials. Torrington argues that to the
extent that the Department relied on bonded warehouse or ``Route B''
sales, no adjustment should be made to USP for duty drawback. In
addition, even with respect to actual local sales, Torrington asserts
that the Department should disallow NMB/Pelmec's claimed adjustment
since NMB/Pelmec failed to demonstrate that: (1) It imported sufficient
inputs to account for the alleged rebates of import duties that it
received; (2) it actually paid, and received rebates of, import duties
on these inputs, and (3) it actually paid import duties on merchandise
sold in the HM and passed the duties on to customers in the form of
increased HM prices during the POR. Therefore, Torrington concludes
that the Department should disallow NMB/Pelmec's claim for a duty
drawback adjustment to USP.
NMB/Pelmec states that it did not claim a duty drawback adjustment
for those U.S. sales that were compared to bonded warehouse or ``Route
B'' HM sales. With respect to direct HM sales, NMB/Pelmec asserts that
the Department verified that NMB/Pelmec made duty payments on imported
components used to manufacture merchandise sold in the HM. Therefore,
NMB/Pelmec concludes that the Department should allow NMB/Pelmec's
claimed adjustment to USP for duty drawback for these final results.
Department's Position: We disagree with Torrington. We apply a two-
pronged test to determine whether a respondent has fulfilled the
statutory requirements for a duty drawback adjustment. In accordance
with section 1677a(d)(1)(B) of the statute, a duty drawback adjustment
will be made if the Department determines (1) import duties and rebates
are directly linked to and dependent upon one another, and (2) the
company claiming the adjustment can demonstrate that there are
sufficient imports of raw materials to account for the duty drawback
received on exports of the manufactured product. The CIT consistently
has accepted this application of the law. See Far Eastern Machinery,
688 F. Supp. at 612, aff'd. on remand, 699 F. Supp. at 311; Carlisle
Tire & Rubber Co. v. United States, 657 F. Supp. 1287, 1289 (1987);
Huffy Corp. v. United States, 10 CIT 215-216, 632 F. Supp. (Huffy).
The Department's two-pronged test meets the requirements of the
statute. The first prong of the test requires the Department ``to
analyze whether the foreign country in question makes entitlement to
duty drawback dependent upon the payment of import duties.'' Far East
Machinery, 699 F. Supp. at 311. This ensures that a rebate is received
by the manufacturer only if import duties were paid or accrued. The
second prong requires the foreign producer to show that it imported a
sufficient amount of raw materials (upon which it paid import duties)
to account for the exports, based on which it claimed rebates. Id.
Under this prong, the duty drawback adjustment to USP is limited to the
amount of duty actually paid.
At verification, we determined that NMB/Pelmec satisfied both
prongs of our test. Specifically, we verified (1) that Thailand's duty
drawback system makes rebates of import duties dependent upon payment
of these duties, and (2) that NMB/Pelmec paid import duties on
materials incorporated into subject merchandise, and that it imported a
sufficient amount of raw materials to account for the amount of duty
drawback claimed.
Further, in Huffy, the CIT held that section 1677a(d)(1)(B) allows
the Department to presume that HM prices include the cost of import
duties. See Avesta Sheffield v. United States, Slip Op. 93-217 (CIT
1993). Therefore, when, as in this case, the record demonstrates that
import duties were paid on raw materials, the Department is not
required to determine whether duties were passed on to customers in the
form of increased HM prices.
Finally, NMB/Pelmec did not claim an addition to USP for duty
drawback for those U.S. sales that were compared to FMV based on HM
``Route B'' sales or bonded warehouse sales. Therefore, we have allowed
NMB/Pelmec's claim for a duty drawback adjustment to USP for these
final results.
14. U.S. Price Methodology
Comment 1: Torrington asserts that resale profits should be
deducted from ESP. Torrington contends that the intent of exporter's
sales price is to determine the net amount returned to the foreign
exporter. Torrington asserts that, under the Department's
interpretation of ESP, related parties receive special advantageous
treatment that is contrary to Congressional objectives and purpose. For
example, in the case of an unrelated reseller, the Department deducts
the full commissions paid, which must cover the agent's expenses and a
reasonable profit. However, in the case of a related reseller, the
Department deducts the selling expenses associated with the resale, but
not a reasonable profit earned on the transaction.
RHP points out that partly due to Torrington's efforts, several
bills have been introduced in Congress in recent years to amend the
antidumping law to provide for the deduction of resale profits from ESP
sales. However, not one has become law. RHP feels this is an issue of
fundamental importance and should only be modified by statutory
amendment.
Koyo, NTN, and FAG argue that Torrington's claim that the
Department should deduct resale profits from ESP must be rejected. The
three respondents point out that the CIT has already repeatedly
rejected the argument, noting that the Department's practice of
refusing to deduct profits from ESP is in accordance with the
antidumping law. See Timken Co. v. United States, 673 F. Supp. 495,
518-21 (1987). Additionally, the same arguments were rejected in
previous reviews by the Department. FAG also states that in Federal-
Mogul v. United States, 19 CIT, Slip Op. 93-17 at 23, the CIT stated,
``It is well established that profit is correctly a part of the ITA's
calculation of USP.'' Thus, FAG argues that these judicial decisions do
not give the Department the discretion to deduct resale profits from
ESP.
NSK contends that the Department appropriately declined to deduct
profit on resale transactions in calculating ESP. NSK asserts that the
literal language of the statute does not permit the deduction of so-
called resale profit. NSK also holds that retention of so-called profit
in calculating ESP leads to a fair result. Even if the Department
disregarded both the statute and case law, NSK claims strong reasons
remain for not deducting purported resale profit from ESP. Profit is
included in the FMV side of the antidumping equation. To deduct profit
from the USP side would lead to a disequilibrium and result in a false
comparison as the CIT recently observed. See Federal-Mogul Corp. v.
United States, 813 F. Supp. 856, 866 (CIT 1993).
SKF argues that resale profits should not be deducted from USP on
ESP sales, and that Torrington's argument has been consistently
rejected by the Department, the CIT, and Congress. SKF maintains that
the relevant section of the Act does not include an adjustment for
resale profits, and that Congress has recently specifically rejected an
attempt to provide for such a deduction. See H.R. Conf. Rep. No. 576,
100th Cong., 2d Sess. 629, reprinted in 1988 U.S.C.C.A.N. 1547, 1662.
Therefore, one cannot infer that Congress intended to include this
provision in the statute.
SKF also claims that there is no evidence supporting Torrington's
theory that resale profits must be deducted in order to equalize PP and
ESP. SKF contends that such a deduction would penalize importers who
raise their [[Page 10951]] prices in order to eliminate dumping. SKF
holds that the CIT has upheld the Department's practice of not
deducting resale profits on ESP sales. See Federal-Mogul Corp. v.
United States, 813 F. Supp. 856, 866 (1993).
Department's Position: As stated in AFBs III (at 39777), we
disagree with Torrington that resale profits should be deducted from
ESP. We find no statutory authority for making this adjustment.
Furthermore, the CIT has upheld the Department's practice of not
deducting resale profits on ESP sales. See Federal-Mogul Corp. v.
United States, 813 F. Supp. 856, 866 (1993).
Comment 2: Koyo, RHP, SNR, NSK, and FAG claim that the Department's
practice of deducting U.S. direct selling expenses from USP, in ESP
situations, instead of adding them to FMV is unlawful. Respondents cite
judicial precedent in support of their position that direct selling
expenses should be added to FMV. For example, NSK maintains that the
Department's methodology violates the ruling of the CIT in NSK Ltd. v.
United States, Slip Op 93-216 (CIT 1993). Respondents claim that the
Department should treat direct selling expenses as COS adjustments to
be added to FMV in order to comply with recent CIT rulings.
Department's Position: The CAFC has upheld the Department's
practice of deducting U.S. direct selling expenses from USP in ESP
situations. See Koyo Seiko Co. v. United States, 36 F.3d 1565 (Fed.
Cir. 1994). Therefore, we have continued to deduct direct selling
expenses from ESP in these reviews.
Comment 3: Koyo contends that the Department's failure to average
USPs in the same manner as it averaged FMV was an abuse of discretion
and contrary to law. Koyo argues that the Department has distorted the
dumping margins through its comparison of single transaction prices in
the United States with average prices weighted over the entire review
period in the home market. Koyo maintains the ``inequity'' of this
methodology is largely attributable to the Department's practice of not
crediting manufacturers with negative dumping margins on U.S. sales at
prices ``above those in the foreign market.'' Koyo states that pursuant
to 19 U.S.C. 1677(f)(1) the Department is required to use averaging to
establish both USP and FMV when such averaging techniques yield fair
and representative results. Koyo notes that the Department used
weighted-averaged U.S. prices in Final Results of Administrative
Review; Certain Fresh Cut Flowers from Mexico, 55 FR 12696, 12697
(April 5, 1990). Koyo requests that the Department use its annual
average methodology for both USP and FMV in order to achieve
representative results as required by the antidumping law.
Torrington and Federal-Mogul disagree with Koyo's argument that
comparing weighted-average USPs with a weighted-averaged FMV is
reasonable and in accordance with Departmental precedent and the law.
Torrington's reasoning is that averaging U.S. price would ``encourage
and reward price discrimination, the very practice that antidumping law
is designed to combat.'' In response to Koyo's argument that the
Department should credit foreign manufacturers for ``negative dumping
margins,'' Torrington argues that this ``would allow dumping to
continue so long as other sales were made at prices sufficiently high
to mask dumped sales.'' In support of this position Torrington cites
the ruling in Serampore Industries Pvt., Ltd. et al. v. United States,
11 CIT 866, 874, 675 F. Supp. 1354, 1360-61 (1987). Torrington also
maintains that the Department generally only averages USPs in the case
of perishable products or other merchandise characterized by price
volatility. Torrington notes that AFBs are not perishable; therefore,
Koyo's citation to the Fresh Cut Flowers from Mexico case, a precedent
with respect to perishable goods, is inappropriate. Federal-Mogul
maintains that the Department should not average USP in this review
because it has rejected Koyo's request to do so in the past and Koyo's
arguments have not changed.
Department's Position: As stated in AFBs III (at 39779), we
disagree with Koyo's assertion that we must average USPs on the same
basis as FMV to ensure an ``apples-to-apples'' comparison. In addition,
we agree with Torrington that averaging USP is unacceptable in most
cases because it would allow a foreign producer to mask dumping margins
by offsetting dumped prices with prices above FMV. For example, a
foreign producer could sell half its merchandise in the United States
at less than FMV, and the other half at more than FMV, and arrive at a
zero dumping margin while still dumping.
Except in limited instances in which we have conducted reviews of
seasonal merchandise with very significant price fluctuations due to
perishability (see, e.g., Final Results of Administrative Review;
Certain Fresh Cut Flowers from Mexico, 55 FR 12696, 12697 (April 5,
1990)), we have not averaged U.S. prices. See Final Results of
Antidumping Administrative Review; Pressure Sensitive Plastic Tape from
Italy, 54 FR 13091 (March 30, 1989). Since the merchandise under review
is not a perishable product, there is no reason to change our current
methodology, which has been upheld by the Court of Appeals. See Koyo
Seiko v. United States, 20 F.3d 1156 (Fed. Cir. 1994).
Comment 4: Torrington argues that the Department should reclassify
Honda's sales to the United States as PP transactions, rather than
treating Honda as a reseller of AFBs. Although Torrington acknowledges
that the Department found no evidence at verification that Honda's
suppliers were aware of the ultimate destinations of their merchandise,
Torrington asserts that Honda's Japanese suppliers must have known that
Honda had substantial manufacturing activities in the United States and
that, therefore, many of their AFBs were destined for the United
States.
Honda responds that it is a reseller of AFBs, rather than a
manufacturer, and that Honda's suppliers in Japan did not know, or have
reason to know, that specific AFBs were ultimately destined for the
U.S. market. According to Honda, no AFBs were ordered directly by any
of its U.S. affiliates from its Japanese suppliers. Furthermore, Honda
states that its orders of AFBs from its suppliers did not indicate, by
way of timing of shipments or orders, the terms of sale, or any other
factors, the ultimate destination of the AFBs. Honda also contends that
these conclusions were fully verified by the Department and confirmed
in the Department's verification reports.
Honda notes that Torrington does not dispute Honda's statements or
the Department's findings. Honda further points out that the standard
for suppliers' knowledge concerning the ultimate destination of
merchandise ``is high.'' See Television Receivers, Monochrome and
Color, from Japan; Final Results of Antidumping Administrative Review,
58 FR 11216 (February 24, 1993). As a result, Honda states that the
fact that Honda's suppliers were aware that some AFBs would be exported
to the United States because Honda has U.S. manufacturing operations is
insufficient to justify reclassifying Honda's sales as PP transactions.
Department's Position: We agree with Honda that it should be
treated as a reseller. This issue was examined extensively at
verification. See Honda Motors Verification Report at 3 and 4, March 4,
1994. The standard for the ``knowledge test'' is high. See Television
Receivers, Monochrome and Color, from Japan; Final Results of
Antidumping [[Page 10952]] Administrative Review, 58 FR 11216 (February
24, 1993). Based on this standard, we concluded that Honda's suppliers
did not have reason to know that their sales to Honda would be exported
to the United States. Therefore, we continue to classify Honda as a
reseller.
15. Accuracy of the Home Market Database
Comment 1: Torrington argues that all reported HM sales destined
for export should be purged from respondents' HM sales listings. Citing
19 U.S.C. 1677a(b), (section 772(b) of the Tariff Act), Torrington
claims that sales by foreign manufacturers or producers that result in
exports to the United States are by definition PP transactions and that
there is no requirement in the statute that the foreign manufacturer
knew, or should have known, that the sale was an export sale. The
statute only refers to the knowledge of a manufacturer or producer in
the context of sales to a ``reseller'' for exportation to an
intermediate country. In addition to identifying reported HM sales
which were destined for the United States, Torrington holds that it is
equally important to ensure that FMV is based only on sales for
consumption in the HM. Therefore, where there is evidence that
particular sales were not for HM consumption, such sales should be
purged from the HM sales listing even if there is insufficient evidence
to suggest that the sales were for export to the United States.
Torrington further argues that, at the least, the Department should
adopt presumptions that shift the burden of establishing whether sales
are for exportation from the Department to respondents.
Torrington argues in particular that all reported HM sales which
were made to known German wholesalers/exporters, also referred to as
``indirect exporters,'' should be disregarded in calculating FMV.
Torrington claims it has made a substantial effort to demonstrate to
the Department a pattern whereby German producers sell bearings at
lower prices to German resellers who are exporters. The inclusion of
such sales in the HM database tends to lower FMV. Furthermore, the
Department should assume the questionable sales were actually sales to
the United States.
Torrington claims that FAG was uncooperative in this proceeding or
may have even impeded the Department's search for truth in this matter,
and urges the Department to apply BIA to FAG's entire response.
Torrington contends that FAG continued to claim a complete lack of
knowledge of sales to exporters until just several days before the
preliminary results were issued. Torrington cites evidence discovered
by the Department at verification, such as the fact that FAG sold to
one exporter from its export, rather than domestic, price list, and
other information provided for the record by the petitioner that
implies that the inclusion of these sales in the HM database would be
improper. Torrington further argues, however, that if the Department
declines to reject FAG's response and use punitive BIA, the Department
should at least reclassify as U.S. sales all FAG HM sales to customers
fairly known to export AFBs.
Torrington also argues that the Department acted properly in
excluding certain FAG sales to such HM customers. Torrington contends
that the Department has a statutory basis for this action and that the
Department established the validity of its factual findings at
verification. See FAG Verification Report, February 23, 1994.
Torrington maintains that the preliminary results call into question
all sales to German wholesalers/exporters and contends that the
Department should presume all sales to such customers are destined for
export, adding that the Department has the discretion to exclude all
questionable sales.
FAG maintains that the Department unlawfully removed sales to two
HM customers from FAG's HM database, and that FAG properly reported all
HM sales. FAG argues that the Department's test for determining whether
FAG should have known that such sales were for export, and not for HM
consumption, was arbitrary and capricious. This test involved telephone
interviews with customers to determine whether FAG had knowledge that
the merchandise sold to those customers would be exported. FAG contends
that HM sales can be excluded only under section 772(b) of the Tariff
Act (19 USC 1677 a(b)). Under that provision, the Department must first
establish that the respondent had knowledge at the time of the sale
that the merchandise was intended for export, then must determine that
the United States was the destination of the export sale. FAG further
argues that the Department has consistently maintained that the
standard for imputed knowledge is high. FAG cites Fuel Ethanol From
Brazil: Final Determination of Sales at Less Than Fair Value, 51 FR
5572 (February 14, 1986) (Fuel Ethanol), in which the Department
imputed knowledge to the supplier that exports were destined for the
United States because the reseller did not sell in the HM and the
United States accounted for 100 percent of the export market for the
in-scope product.
FAG notes that, where the Department cannot say with objective
certainty that 100 percent of a reseller's goods go to a known
destination, the Department has not determined that the supplier
``should have known'' the disposition of the goods. FAG argues that
even beyond having a high standard for imputing knowledge, the
Department requires objective information that can be corroborated by
the administrative record, citing Television Receivers, Monochrome and
Color, From Japan: Final Results of Antidumping Administrative Review,
58 FR 11211 (February 24, 1993) (Television Receivers) and Oil Country
Tubular Goods From Canada: Final Results of Antidumping Duty
Administrative Review, 55 FR 50739 (December 10, 1990) (OCTG). FAG
claims that the Department cannot satisfy the high burden of proof for
imputing knowledge by means of telephone calls to customers. FAG
maintains that the information gathered from these phone calls amounts
to hearsay, and that the information cannot be corroborated by the
administrative record.
FAG contends that its test for determining whether a sale should be
classified as a HM sale, which involves checking whether VAT was
charged and paid on the sale, is the most objective method for making
such a determination, and is the best indication of what FAG knew at
the point of sale regarding the destination of the merchandise. FAG
argues that the Department verified that all HM sales reported by FAG
included VAT.
FAG also argues that the term ``exporter'' has been so loosely used
as to have no meaning, and further argues that, even if sales to these
alleged exporters can be isolated, it is unclear whether all such sales
were actually exported. FAG maintains that the method proposed by
Torrington, as well as the one utilized by the Department, is
subjective and unverifiable.
SKF argues that its data have been thoroughly verified and that
there is no compelling evidence on the record to indicate that any of
its HM sales were made at low prices to German resellers known to
export.
INA noted that HM sales which it claimed as export sales were made
to companies that were known by INA to be exporters and were classified
as such in INA's records. INA states that the Department verified that
such sales were not included among INA's reported HM sales. INA noted,
however, that two customers classified as exporters also resell within
Germany. [[Page 10953]] All sales to these two customers were reported
as HM sales because INA had no way of knowing which particular bearings
were resold in Germany and which were exported.
Department's Position: In accordance with section 772(b) of the
Tariff Act, transactions in which the merchandise was ``purchased * * *
for exportation to the United States'' must be reported as U.S. sales
in an antidumping proceeding. However, we have not found in this review
sufficient evidence to conclude reasonably that any alleged HM sales
are in fact U.S. sales under section 772(b). Therefore, we have not
reclassified any respondent's HM sales as U.S. sales in these reviews.
Section 773(a) of the Tariff Act provides that FMV be based on
sales ``for home consumption.'' Therefore, sales which are not for home
consumption, even if they are not classifiable as U.S. sales under
section 772(b), are not appropriately classified as HM sales for
antidumping purposes. In these reviews, except for certain sales
reported as HM sales by one company, we did not find sufficient
evidence to conclude reasonably that reported HM sales were not ``for
home consumption'' as required by section 773(a).
With respect to German wholesalers/exporters specifically, at
verification we determined that, except for certain FAG sales, there
were no distinguishing characteristics by which to differentiate sales
by German manufacturers to alleged exporters from other HM sales, and
we found insufficient evidence to indicate that respondents' HM sales
to customers that Torrington alleges to be wholesalers/exporters were
destined for export.
We do not agree with Torrington's argument that all sales made to
so-called wholesalers/exporters should be treated as U.S. sales,
because we do not have sufficient reason to conclude that such sales
were for export to the United States, nor even that they were for
export at all. We also do not agree that rejection of FAG's response
and use of BIA is warranted. However, we do agree that there is
sufficient evidence to conclude that certain sales reported by FAG as
home market sales were in fact export sales.
With respect to FAG, for these final results we excluded reported
HM sales to two customers. For these sales, the evidence indicates that
the merchandise in question was destined for export and thus not for
home consumption. We found at verification that FAG referred to these
customers as ``indirect exporters'' and that FAG excluded sales to
other ``indirect exporters'' based on its conclusion that these were
export sales. In addition, one FAG subsidiary sold to one of these two
``indirect exporters'' from its export, rather than domestic, price
list. We also visited and interviewed one of these resellers and found
that it only sells in export markets. This reseller claimed that its
suppliers, including FAG, know that it does not resell within Germany.
For these reasons, we conclude that these sales were for export and not
for domestic consumption. Therefore, these sales cannot be included in
FAG's HM sales.
We do not agree with FAG's assertion that the collection of VAT is
confirmation that a sale is for HM consumption. Collection of VAT on
the sale between FAG and its customer does not preclude the customer
from reselling the merchandise for exportation and ultimately receiving
a VAT rebate on the resale of the merchandise. Thus, collection of VAT
by FAG is not a determinant of the ultimate destination of the
merchandise.
FAG's reference to Fuel Ethanol is only relevant to the question of
whether certain sales should be regarded as U.S. sales. We agree with
FAG that there is not sufficient evidence to reclassify any of its
reported HM sales as U.S. sales. However, this does not mean that such
sales are automatically sales ``for home consumption'' as required by
section 773(a) of the Tariff Act. Furthermore, Television Receivers and
OCTG also concerned the issue of whether certain sales should be
regarded as U.S. sales, not whether certain sales should be regarded as
sales for home consumption.
In Television Receivers and OCTG, the unrelated reseller sold the
product in both Canada and the United States. Therefore, the producer
did not know the ultimate destination of the merchandise at the time of
sale to the unrelated reseller. OCTG at 50740. In this case, where
unrelated German resellers both export and resell within Germany, we
determined that the manufacturer did not know the ultimate destination
of the merchandise. Such sales were retained in the HM database.
Therefore, based on the above circumstances, no further changes
have been made to either the HM or the U.S. databases with regard to HM
sales to alleged wholesalers/exporters.
Comment 2: Torrington argues that U.S. dollar- or Singapore dollar-
denominated HM sales in Singapore and/or Thailand should be excluded
from the HM database, because such sales are not HM sales.
The NMB/Pelmec companies rebut Torrington's argument by stating
that it is not unusual for multinational companies in developing
countries sometimes to conduct business in foreign currencies. Further,
the NMB/Pelmec companies claim that nothing has changed since AFBs III
(at 39783), when the Department determined that there was no evidence
that the NMB/Pelmec companies had any reason to know that U.S. dollar-
denominated sales, or sales to Thai affiliates of U.S. companies,
consisted of merchandise destined for the United States. In addition,
the NMB/Pelmec companies note that where they knew that a sale to a
domestic customer was actually destined for export, the Department
verified that such sale was excluded from the HM database.
Department's Position: We agree with the NMB/Pelmec companies. We
verified sales made in U.S. dollars and Singapore dollars, and found no
evidence to indicate that the NMB/Pelmec companies had any reason to
know or to believe that its U.S. dollar- or Singapore dollar-
denominated transactions were destined for the United States.
Comment 3: Torrington claims that NMB Pelmec/Thai's bonded
warehouse sales and Route B sales of AFBs should be excluded from the
HM sales listing because the Department determined in the original
investigation that such sales properly represented third country sales.
Torrington states that due to the exemption of VAT and import duties,
it can be inferred that all such sales are ultimately being exported.
Finally, Torrington argues that such sales are not in the ordinary
course of trade.
NMB/Pelmec Thai states that the Department has consistently treated
bonded warehouse sales as HM sales since AFBs I. Further, NMB/Pelmec
asserts that the Department has treated Route B sales as HM sales in
the past three administrative reviews. It claims that such sales fit
the statutory definition of sales made in the ordinary course of trade.
NMB/Pelmec also claims that Torrington has not offered any new evidence
as to why the Department should treat Route B sales differently than it
has in the past.
Department's Position: We agree with NMB/Pelmec Thai. We have
treated such sales as HM sales consistently in the past three reviews,
and find the facts in this review to be the same. With respect to the
sales in question, we find that the first sale to an unrelated party
occurred in Thailand. Route B sales are sales made through NMB/Pelmec
Thai's related selling agent, Minebea Singapore Branch (MSB). We
verified that MSB's sales, which represent the first sale to an
unrelated party, are to customers in Thailand. Therefore, we conclude
that [[Page 10954]] they are properly classified as HM sales. See AFBs
II (at 28422) and AFBs III (at 39783). We also verified NMB/Pelmec
Thai's reported home market sales and find that such sales were in the
ordinary course of trade. See verification reports for NMB/Pelmec
Singapore and Thailand.
Comment 4: Referring to Nachi's supplemental questionnaire response
(at 4), Torrington notes that Nachi has admitted to assisting certain
customers in obtaining Japan Bearing Institute (JBI) Inspection
certificates for a portion of Nachi's HM sales. Torrington claims that
JBI inspection certificates are prepared for merchandise destined for
export. Thus, all sales for which JBI inspection certificates were
completed should be deleted from the HM database. Further, Torrington
asserts that JBI certificates may identify destinations which would
serve as additional evidence that JBI inspected-merchandise is destined
for export.
Nachi contends that simply because merchandise is JBI inspected
does not necessarily mean it is destined for export, and that Nachi has
no way of knowing which, if any, JBI-inspected bearings were exported.
Department's Position: We agree with Nachi. We previously
determined that JBI inspection certificates merely attest to the
quality of the inspected merchandise. See Final Results of
Redetermination Pursuant to Court Remand, Federal-Mogul Corp. and the
Torrington Company v. United States, Slip Op. 93-180 (September 14,
1993). We thoroughly examined the Japanese laws that mandated which
information was to be included on the certificates. Reporting the final
destination was only required for certain commodities for which quality
standards are applied based on destination. AFBs were not included
among such commodities. The certificates are not country-specific nor
sale-specific. Inspection certificates indicate brand, model number and
quantity inspected, but are of no help in determining whether sales
reported as HM sales were destined for export. Torrington has presented
no new evidence to indicate that respondents knew, or should have
known, that reported HM sales were destined for export because JBI
inspection certificates were completed.
Comment 5: Torrington asserts that INA's HM sales database is
incomplete. Torrington states that the Department found at verification
that HM models for which INA failed to report dynamic load ratings
(DLRs) were not reported in their proper families and were deleted from
the HM sales listing. Torrington further alleges that the Department's
verification report demonstrates that the HM models for which INA
failed to provide DLRs not only belonged to the same family, but were,
in fact, identical to the bearings for which INA reported DLRs.
Finally, Torrington asserts that the Department's verification findings
support Torrington's allegations that INA reported models whose
characteristics are not listed in INA's catalogs and that do not appear
to be logical. For these reasons, Torrington concludes that INA
deliberately attempted to manipulate the Department's analysis and,
therefore, that the Department should determine INA's dumping margins
using first-tier BIA for these final results.
INA acknowledges that it improperly created certain bearing
families as a result of a computer programming error. According to INA,
however, this error has an insignificant impact on the Department's
calculations. First, INA asserts that the matches for the specific
models that the Department examined at verification were not affected
by missing load ratings, because the Department made identical rather
than family matches for one of the products at issue, and because INA
made no sales of the other product during the sample weeks. INA further
argues that its own analysis demonstrates that only a handful of U.S.
sales were matched to HM families for which INA failed to report
certain bearings. Finally, INA provides explanations of each product
for which Torrington challenged INA's reporting of physical
characteristics. For these reasons, INA contests Torrington's request
that the Department reject INA's reported HM sales and use BIA to
determine INA's dumping margins for this review.
Department's Position: We agree in part with Torrington. At
verification, we found that INA failed to report DLRs for certain
bearings that it sold in the HM. INA subsequently acknowledged that it
improperly created certain bearing families in responding to the HM
sales portion of our questionnaire. Accordingly, we have identified the
bearing families that INA created incorrectly by matching models
reported without DLRs in INA's summary HM sales database with models
reported in INA's HM sales database that we determined to be in the
same family based on family characteristics excluding DLRs, and used
BIA to determine the dumping margins for those U.S. sales that we
compared to those families. There is no evidence in the record,
however, to support Torrington's arguments that other aspects of INA's
reporting of physical characteristics are erroneous and that INA
deliberately manipulated its reporting of the physical characteristics
of its bearings in order to lower its dumping margins. Accordingly, we
have not rejected INA's reported HM sales database for these final
results.
16. Miscellaneous Issues
16A. Verification
Comment 1: Federal-Mogul challenges the Department's statement that
it found no discrepancies during the verification that it conducted at
INA's U.S. subsidiary. According to Federal-Mogul, certain data
contained in the verification exhibits do not correspond with those
contained in INA's questionnaire responses. Specifically, Federal-Mogul
states that: (1) The Deutsche mark values of certain shipments differ
from those in the responses; (2) the gross and net weights of one
shipment differ from those in the responses; and (3) the per-unit
freight charge for the one sea shipment that INA included among the
sample used to calculate per-unit movement expenses during the
verification is less than the per-unit amount that INA reported in its
questionnaire response for the same shipment. As a result, Federal-
Mogul requests that the Department increase INA's reported ocean
freight expenses by the percentage difference between the ocean freight
charge contained in the verification exhibit and that contained in
INA's questionnaire response.
INA explains that differences in the Deutsche mark values reported
in the verification exhibits and the questionnaire responses are the
result of rounding, and are insignificant. In explaining the
discrepancy between the gross and net weights reported in the
verification exhibits and the questionnaire responses, INA acknowledges
that it incorrectly calculated the total gross and net weights reported
in the verification exhibits. According to INA, however, the weights
reported for this shipment in the questionnaire response are accurate.
Finally, INA explains that the difference between the freight charges
reported in the verification exhibits and the questionnaire responses
is the result of the fact that the charges shown in the verification
exhibit include harbor maintenance and merchandise processing fees,
which are not included in the freight charge reported in the response.
Because the information reported in INA's responses is accurate, INA
concludes that the Department is not required to make any adjustments
to INA's reported freight charges. [[Page 10955]]
Department's Position: We agree with INA. During our verification
at INA's U.S. subsidiary, we examined numerous documents relating to
INA's reported movement charges, and found no discrepancies between the
source documents and the information reported in INA's questionnaire
responses. Further, although there may be minor discrepancies between
the source documents and the worksheets that INA prepared for us at
verification, the worksheets are merely prepared for the verifier's
convenience. As the actual source documents and the questionnaire
responses were in agreement, errors in the worksheets are irrelevant to
the adequate verification of INA's movement expenses. Further,
regarding the differences in Deutsche mark values, we note that the
difference is small and the result of rounding. Finally, with respect
to the freight charge at issue, we verified that the difference was due
to harbor maintenance and merchandise processing fees which were
included in the verification exhibit. These fees were not included in
the freight charges reported to the Department, but rather were broken
out and reported separately. As a result, we have not made any
adjustments to INA's reported freight charges for these final results.
16B. Database Problems
Comment 2: Nachi argues that in the Department's recalculation of
its export selling expenses incurred in Japan on U.S. sales, the
Department mistakenly treated all transfer prices as U.S. dollar values
when certain transfer prices were reported in yen.
Torrington responds that before making a correction to Nachi's
export selling expense calculation, the Department must determine which
transfer prices were reported in dollars and which transfer prices were
reported in yen.
Department's Position: We agree with Nachi that some transfer
prices were not properly treated. We have been able to determine which
transfer prices were reported in dollars and which were reported in yen
by using the codes reported in Nachi's currency variable field on the
computer tape. We have made the appropriate corrections for these final
results.
Comment 3: Koyo maintains that after reviewing the preliminary
results of review, it found that it had made a clerical error in
reporting the family name for one cylindrical roller bearing (CRB)
transaction. The other seven transactions of this CRB model correctly
list the family name.
Torrington argues that Koyo's proposal constitutes untimely, new
information, which should be rejected. The Department should not
correct the alleged error unless it is apparent from the record that it
existed prior to the preliminary results.
Department's Position: The Department agrees with Koyo. We reviewed
the record and found that the typographical error was in the database
at the time of its submission. Therefore, the error has been corrected
for these final results.
Comment 4: FAG-Germany requests that the Department exclude from
the final margin calculations U.S. sales to related customers which
they inadvertently reported. FAG-Germany identified the sales in
question and noted that information already on the record supports its
position that these sales are to related U.S. customers and therefore
should not be included in the Department's final margin calculations.
Torrington contends that such revisions are allowable only where
the underlying data have been verified and the changes are small.
Department's Position: The customer codes already submitted on the
record by FAG-Germany support the position that these sales were made
to related U.S. customers. While the specific sales in question were
not examined at verification, we did verify randomly chosen sales made
by FAG-Germany and found no discrepancies which would undermine our
confidence in the accuracy of the reported customer codes. We also note
that FAG-Germany properly reported all subject resales made by related
customers in the U.S. during the POR.
We note that the CIT has upheld the Department's authority to
permit corrections to a respondent's submission where the error is
obvious from the record, and the Department can determine that the new
information is correct. See NSK Ltd. v. United States, 798 F. Supp. 721
(CIT 1992). Adopting Torrington's argument would amount to a rule that
such corrections can never be made after verification. This is clearly
inconsistent with our practice and the holdings of the CIT.
FAG-Germany's errors were obvious from the record once brought to
our attention. It is in accordance with our longstanding practice to
exclude U.S. sales to related customers in favor of resales by such
customers to unrelated parties. Therefore, we have removed FAG-
Germany's sales to related U.S. customers from the margin calculations
for these final results.
Comment 5: Torrington argues that NSK's response indicates that
``almost all'' bearings that meet the ITA's definition of CRBs were
produced by a certain company related to NSK, and were not sold in the
U.S. market during sample weeks. Torrington alleges the database used
by the Department and the entries suspended by Customs may be
unreliable if NSK identified something less than all CRBs. Also,
Torrington claims NSK was required to report all sales of CRBs and to
implement a reporting methodology that systematically identifies and
tracks those entries.
Torrington contends that because of the alleged misreporting, the
ITA should base its final determination on BIA. The best information
should be the highest rate calculated for NSK in any prior review or
the original LTFV determination.
NSK argues that Torrington has misquoted NSK's response. NSK's
response actually states that almost all bearings classified as CRBs,
but which NSK considers needle roller bearings, were produced by the
related party in question. NSK asserts that it properly reported all
U.S. sales of CRBs with a ratio of length to diameter of less than four
to one.
Department's Position: We agree with NSK. NSK's response does not
give any indication that its reporting of CRB sales in the United
States was incomplete. Moreover, the Department verified the
completeness of NSK's U.S. database, and is satisfied with the
reliability and completeness of the database.
16C. Home Market Viability
Comment 6: Torrington states that the Department discovered at
verification that NMB/Pelmec Singapore and NMB/Pelmec Thailand
submitted sales in third countries rather than to third countries. For
purposes of the final results, ITA should ensure that the HM is viable
based on NMB's revised data.
NMB/Pelmec argues that it reported sales in third countries rather
than to third countries due to the Department's instructions in prior
reviews.
Department's Position: We determined at verification that both NMB/
Pelmec Singapore and NMB/Pelmec Thailand reported sales in third
countries rather than to third countries due to prior instructions from
the Department. We verified that there was only a minor difference in
the number of sales made to third countries versus in third countries
and ensured that the HM was viable in both Singapore and Thailand based
on the revised data.
Comment 7: Torrington alleges that NMB/Pelmec Thailand's
questionnaire response reveals that the ratio of total HM sales
quantity of AFBs to the total number of AFBs sold in third countries
only shows a viable HM when sales of [[Page 10956]] parts are excluded.
In addition, it is less than the five percent threshold if parts are
included. Torrington states that the Department should separately
calculate the viability for ball bearing parts.
NMB/Pelmec states that their HM is viable according to the
methodology which was outlined in the Department's questionnaire. In
the supplemental questionnaire, NMB/Pelmec was instructed by the
Department to calculate HM viability on a weight basis, if using
quantities of complete bearings yielded a different result than using
quantities of complete bearings and parts. Following the Department's
instructions, NMB/Pelmec reported a viable HM using this calculation
methodology.
Department's Position: We agree with NMB/Pelmec. NMB/Pelmec was
instructed by the Department in the supplemental questionnaire to
calculate HM viability on a weight basis, if using quantities of
complete bearings yielded a different result than using quantities of
complete bearings and parts. NMB/Pelmec reported a viable HM using this
calculation methodology. Moreover, we verified the information used in
this calculation. See NMB/Pelmec Thailand Verification Report, February
10, 1994. Thus, Torrington's allegation that NMB/Pelmec Thailand did
not demonstrate that the HM is viable is inaccurate. We determined that
the HM was viable based on a weight basis, since using quantities of
complete bearings yielded a different result than using quantities of
complete bearings and parts.
We note that our methodology implements the ruling of the CIT in
NMB Singapore Ltd. v. United States, 780 F. Supp. 823, 826 (CIT 1992).
The CIT held that the Department must take into account the difference
between complete bearings and bearing parts in determining viability.
The CIT noted that while bearings of different sizes are comparable,
bearing parts are not similar to complete bearings of any size (Id. at
n.2). The Department implements this decision by basing viability on
weight where sales of parts are sufficient to affect viability.
16D. Scope Ruling
Comment 8: Torrington argues that individual components of
disassembled bearings, such as locking collars and housings, are within
the scope of the antidumping duty order. However, petitioner asserts
that prior scope rulings have created a situation wherein bearing
accessories, when imported separately from a bearing, are excluded from
the order, while those same accessories are included in the order when
imported attached to a bearing. Thus, when accessories are imported
separately, the antidumping duty is applied only to the value of the
bearing, and not to the value of the entirety as it is sold in the U.S.
market. Torrington notes that SKF in particular takes advantage of this
distinction by importing housed bearing units in disassembled form.
Torrington also specifically points out NPBS as one of the companies
importing housings and ball bearing inserts separate from its bearings
in order to evade the order.
Torrington makes the point that by simply changing the packaging of
the shipment, and assembling the various accessories on the bearing
after entry, SKF avoided the antidumping duty order insofar as it
applies to housed bearings. Torrington claims that when such parts are
imported together, the clear implication is that the importer is
attempting to evade the antidumping duty order. The CAFC sanctioned a
comprehensive construction of the ``class or kind'' subject to an
antidumping duty order in Mitsubishi Elec. Corp. v. United States, 898
F.2d 1577, 1582 (Fed. Cir. 1990), to avoid attempts to evade the
antidumping duty order.
Torrington concludes that where the imported accessories and parts
arrive together with the bearings, housings, and other parts, the
Department should instruct Customs to suspend liquidation and collect
antidumping duty deposits and duties with respect to the entirety. The
mere repackaging of a housed bearing with locking collar or sleeves and
with other accessories should not serve to exempt all of the
accessories from the antidumping duty order.
SKF argues that it has already been determined that pillow blocks
and accessories are not covered by the scope of the order and the fact
that they may be used in AFB applications upon importation is
irrelevant.
NPBS responds that the housings are imported separately and as such
are not included in the scope of the order. Furthermore, there is no
avoidance issue since the price of the completed bearing is reduced by
the costs of the imported housing, as well as by further-manufacturing
costs incurred in the United States and an allocated share of profit.
Department's Position: Locking collars, adaptor sleeves, housings
and such accessories to antifriction bearings, when not assembled to
those bearings, are not within the scope of the orders. The orders
apply only to ``ball bearings, mounted or unmounted, and parts thereof
* * * cylindrical roller bearings, mounted or unmounted, and parts
thereof * * * (and) spherical plain bearings, mounted or unmounted, and
parts thereof.'' See Final Determinations of Sales at Less Than Fair
Value; Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From Japan, 54 FR 19102 (May 3, 1989). The language makes
no specific statement that housings and like accessories were
considered during the LTFV investigation, nor were such accessories
specifically included in the orders.
In a scope ruling in this case, the Department determined that
``eccentric collars are not integral parts of a bearing and are * * *
outside the scope of the antidumping duty orders.'' Furthermore, the
Department found that eccentric collars were not ``constituent part(s)
of completed bearing(s) which are irreplaceable in their function,''
that ``(a)n eccentric collar is an attachment to the bearing, not a
part of a completed bearing,'' and that ``the function of locking a
bearing to the shaft (could) be performed by other accessories such as
concentric collars, sleeves, or set-screws.'' Based on this evidence,
the Department determined that an ``eccentric collar,'' when imported
unattached, is an accessory to a bearing, not a bearing part, and is,
therefore, outside the scope of the antidumping duty orders.'' See
memorandum dated May 14, 1993, ``Final Scope Ruling--Antidumping Duty
Orders on Antifriction Bearings (Other Than Tapered Roller Bearings)
from Japan.''
When such accessories are assembled with an antifriction bearing
and imported into the United States, we treat them as one unit because
they are imported as one unit, and because addition of the accessory
does not remove the bearing from the class or kind of merchandise. This
does not mean that such accessories are, in and of themselves, subject
to the orders. The housings, collars, and sleeves that are mentioned by
the petitioner, like eccentric collars, are attachments to the bearings
that are not essential to the antifriction property of the bearings;
thus, they do not constitute either bearings or bearing parts by
themselves. Therefore they are not subject to the order. Based on the
foregoing argument, we conclude that importing such items not attached
to the bearing is not, as petitioner contends, an evasion of the order.
Comment 9: FAG-Germany argues that the Department improperly
included in its preliminary margin calculations U.S. sales of needle
roller bearings with roller length-to-diameter ratios between three to
one and four to one. FAG states that although the Department made a
scope determination [[Page 10957]] on December 23, 1991 in another case
establishing this standard, it was not until September 2, 1992, four
months into the fourth period of review, that the Department formally
notified parties that the four to one standard would be applied in all
circumstances for distinguishing needle roller bearings from CRBs.
Hence, FAG claims that it was not forewarned that such merchandise
would become part of the margin calculation and standards of due
process of law were violated.
Torrington holds that the Department properly included all CRBs,
including those with roller length-to-diameter ratios equal to or less
than four to one. Torrington states that the respondents were aware of
the scope determination 10 months before they received the
questionnaire for the fourth review.
Department's Position: We agree with Torrington. In several prior
scope rulings, including one requested by FAG, the Department stated
that ``the ratio of 4 to 1 is the common industry standard to
distinguish a needle roller bearing from a cylindrical roller bearing.
Accordingly, we have determined for purposes of this scope proceeding
that the ratio of 4 to 1, as selected by the ITC in its final
determination, is the dispositive ratio in defining the physical
characteristics of a needle roller bearing.'' See memorandum dated
December 23, 1991, ``Final Determination on the Request by FAG for
Exclusion of Certain Engine Crank Shaft and Engine Main Shaft Pilot
Bearings from the Scope of Antidumping Duty Orders: Ball Bearings,
Cylindrical Roller Bearings, and Spherical Plain Bearings and Parts
Thereof From the Federal Republic of Germany.'' Conversely, those
roller bearings with roller length-to-diameter ratios of less than 4 to
1 are properly classified as cylindrical roller bearings and are
therefore subject to the antidumping duty orders, as was stated in a
later memorandum. See memorandum dated June 1, 1993, ``Final Scope
Ruling--Antidumping Duty Orders on Antifriction Bearings (Other than
Tapered Roller Bearings) from Germany: INA Walzlager.'' This
determination has been upheld by the CIT. See Koyo Seiko Co. Ltd. v.
United States, Slip. Op. 93-191 (CIT 1993).
Additionally, the Department's scope ruling issued in December of
1991 to FAG clearly adopted an industry standard which was applicable
to all cylindrical roller bearings. This occurred well before the POR.
Moreover, the September 2, 1992, clarification was issued long before
FAG's questionnaire responses were due. Therefore, there was no
ambiguity regarding the fact that the Department would consider CRBs
with roller length-to-diameter ratios of less than four to one to be
covered in this review.
16E. Pre-Final Reviews
Comment 10: RHP, SNR, IKS, and FAG request that the Department
authorize and implement pre-final disclosure of computer programs and
printouts. Respondents claim that in prior administrative reviews the
correction of clerical errors has been delayed until many months after
the final determination. Respondents maintain that the delay occurred
because an action was filed in the CIT depriving the Department of
jurisdiction to correct the relevant errors. RHP proposes that the
Department either delay publication pending analysis or publish
tentative final results so that clerical errors can be corrected.
Department's Position: As noted in the previous review (see AFBs
III (at 39786)), in the interest of issuing the final results in a
timely manner, the Department cannot implement this step. Furthermore,
it is unnecessary. Because there were few changes made between the
preliminary results and the final results, the Department finds that
granting this request would cause unnecessary delay in the release of
the final results.
Comment 11: SNR and FAG request that upon final disclosure the
Department give parties a complete printout of all positive margin
sales used by the Department in its final determination. SNR and FAG
maintain that prompt release of complete printouts is essential for
their analysis of the Department's results.
Department's Position: In response to SNR and FAG's request that
additional data be printed out for final disclosure, we must decline to
change our procedure. It is not practical to print out every bit of
data that might be generated by our computer programs. Therefore, we
have chosen to print out as much data as is necessary to ensure that
the programs are functioning as intended. While FAG and SNR may wish to
examine certain additional data, other interested parties may wish to
examine still other data. In that printing out additional data is not
needed to ensure the accuracy of our results and it is burdensome to
the Department to tailor printouts for individual parties, we must
decline requests that additional data be printed. Furthermore, we note
that all parties have access to the same original data used by the
Department and complete copies of our computer programs. Therefore,
parties have the ability to duplicate the Department's results and
generate any additional data they wish.
16F. Termination Requests
Comment 12: GMN argues that the Department's rejection of GMN's
termination request is unreasonable and constitutes an abuse of agency
discretion. GMN admits that it made a late request to withdraw its
request for review and to terminate this review. This review was
requested by GMN in order to obtain revocation of the order against it.
GMN declared bankruptcy on December 1, 1993, but still tried to
complete the review and the sales verification during the week of
January 10, 1994. The only domestic competitor, Torrington, did not
object to GMN's request. Federal-Mogul, an interested party although
not a competitor, filed an objection. GMN responded to this objection,
but Federal-Mogul did not respond to GMN's rebuttal. According to GMN,
the use of the BIA rate is in no way reflective of GMN's recent
history. GMN notes that because the request for review was made by GMN
itself, and its existing deposit rate was zero percent, its late
request for withdrawal from the review could only be motivated by the
bankruptcy. By allowing Federal-Mogul ``veto power'' over GMN's
request, the Department abdicated its statutory right to exercise
discretion in such matters.
If the Department rejects GMN's request to withdraw, and if the
Department maintains that it cannot calculate a margin for GMN without
further verification, GMN suggests that we sever GMN's review and place
it on a separate schedule.
Department's Position: The Department has determined that it would
be inappropriate to terminate this review for GMN. Our decision is
based on the fact that GMN's request to terminate the review was
submitted during the verification process, an advanced stage of the
review process, and that we were unable to complete sales and cost
verifications successfully. Moreover, GMN was aware that it would be
unable to complete verification, and thus that its margin would
probably be based on BIA when it requested the termination. We also
note that Federal-Mogul objected to termination of the review.
Although GMN substantially cooperated with our review, we consider
the inability of a respondent to complete a verification in progress to
be a serious matter. Though GMN's pending bankruptcy may have played a
role in GMN's inability to complete the verifications, we cannot
determine what other factors may have hindered the verifications. We
note that, at the [[Page 10958]] hearing, GMN's counsel acknowledged
that GMN was aware of its financial troubles long before the
verification. Respondents should not be given incentive to request
reviews and then withdraw their requests if verifications appear to be
going poorly. This is one of the reasons why 19 CFR 353.22(a)(5)
generally requires that review requests be withdrawn no later than 90
days after the date of publication of the initiation notice. Federal-
Mogul's objection only indicates that other parties have an interest in
the outcome of an administrative review, which supports the
Department's decision not to terminate this proceeding.
16G. Programming
Comment 13: Torrington argues that RHP's the Department's
preliminary SAS programs for RHP improperly assigned a zero margin to
sales with a USP of less than zero. Torrington continues that it is
possible to have a U.S. sale with a value of less than zero. Torrington
asserts that the Department should calculate margins on all U.S. sales
including those with a value less than zero.
RHP states that it has no objection to the Department adjusting the
program so that sales with an adjusted price of less than zero are
included.
Department's Position: Torrington misunderstood our program. The
lines of the program which are quoted in its case brief do not
improperly assign all sales with a negative USP a zero margin.
Generally, margins were calculated for such sales as appropriate.
However, for certain U.S. sales RHP provided no FMV information and,
accordingly, we determined BIA dumping margins for such sales by
applying the appropriate BIA rate to the USP of each of those sales.
For these sales, negative margins would be generated by applying the
BIA rate to a negative USP. Therefore, the lines of the program in
question merely set to zero the margins for any U.S. sales to which a
BIA rate should be applied but which have a negative USP.
Comment 14: Torrington contends that while RHP's program should
assign a BIA rate to RHP's U.S. sales of models that would be matched
with HM sales by NSK Europe, it appears that there are errors in the
treatment of NSK's sales which prevented the application of BIA to
those U.S. sales. Torrington argues that the program did not properly
classify these NSK sales in the RHP preliminary program.
RHP states that it attempted to find the alleged errors, but has
been unable to do so. RHP argues that because it did not find any
errors and Torrington has not identified specific errors, the
Department should not change the treatment of NSK sales.
Department's Position: We agree with Torrington that there was a
flaw in RHP's preliminary program. However, the flaw merely created
duplicate listings of NSK Europe models and was not the reason that no
RHP U.S. sales matched to HM sales by NSK Europe. Rather, no sales were
matched because there were no comparable families of bearings, i.e.,
similar merchandise, sold by NSK Europe. In response, we modified the
program to match NSK Europe's sales with RHP's U.S. sales by model
instead of by family. The fact that no NSK Europe models matched with
RHP models further demonstrates that RHP and NSK did not sell
comparable merchandise.
Comment 15: FAG UK/Barden alleges that the Department incorrectly
identified domestic brokerage and handling expenses (DBROKHE) using the
variable name for domestic presale inland freight (DPRSFRE).
Department's Position: We disagree with FAG UK/Barden. Our analysis
of the firm's response, including its format sheets, leads us to
conclude that FAG reported its brokerage and handling expenses in the
field DPRSFRE. Therefore, we have deducted brokerage and handling
expenses as DPRSFRE.
Comment 16: Torrington asserts that a clerical error occurs at line
990 in FAG UK's program where the margin is set to zero whenever USP is
less than zero.
FAG UK argues that there is no clerical error at line 990 of the
program, and that the setting of PCTMARG equal to zero where USP is
less than zero, in any event, has no impact on the margin.
Department's Position: We disagree with Torrington that there is a
clerical error. Without this line of the program, U.S. sales with
dumping margins and negative U.S. prices would show a negative
percentage margin. This programming eliminates this anomaly. The
setting of the PCTMARG variable at line 990 has no effect on the
calculation of the dumping margin.
Comment 17: Torrington states that, in PP transactions, the UNTCUSE
variable (customs value) in the program for FAG-Germany is defined as
UNITPRE--OCNFRE--MARNINE, and that UNITPRE was modified to include an
amount representing VAT, to allow comparison with a VAT-inclusive FMV.
Torrington argues that the VAT amount should be removed from UNTCUSE.
Department's Position: We disagree with Torrington that any change
is necessary. This variable is not used for PP sales in either the
margin calculation or in the calculation of assessment rates. The
UNTCUSE variable is only used when calculating ad valorem assessment
rates. However, purchase price sales are assessed on a per-unit, not ad
valorem, basis.
16I. Revocation
Comment 18: Torrington asserts that the Department should deny SKF-
France's request to revoke the antidumping duty orders spherical plain
bearings (SPBs). Torrington notes that revocation is permissible only
if the requesting company is unlikely to sell below FMV in the future.
Torrington contends the circumstances indicate that this is doubtful,
since SKF-France is part of a larger multinational organization which
has preliminarily received dumping margins for SPBs in other countries.
SKF responds that Torrington has presented no legal basis on which
to deny revocation. SKF argues that since neither the antidumping law
nor the Department's regulations mandate a different standard for
revocation for multinational corporations, Torrington's argument
concerning SKF's multinational activity for purposes of revocation is
irrelevant.
Department's Position: Under 19 CFR 353.25(a)(2)(i), the Department
may revoke an order in part if it finds sales at not less than FMV for
a period of at least three consecutive years. The results in this
review, combined with the results in the two prior reviews, satisfies
this requirement for SKF-France in the antidumping duty proceeding
SPBs. Additionally, respondent has agreed, pursuant to 19 CFR
353.25(a)(2)(iii), to the immediate reinstatement of the order if
circumstances develop indicating that they have resumed dumping the
subject merchandise. We are satisfied that the respondents is not
likely to sell the merchandise in the future at less than FMV, and we
agree with respondents that the requirements for revocation have been
met.
16J. No Sales During Period of Review
Comment 19: Kaydon, a U.S. producer of ball bearing products, urges
the Department to reconsider its preliminary finding that Hoesch and
Rollix had no U.S. sales of subject merchandise during the review
period. Kaydon asserts that it has provided evidence to the Department
which indicates that the respondents sell merchandise in the U.S.
market which are properly characterized as bearings subject to the
order rather than slewing rings. According to Kaydon, sales of these
products, or substantially similar products, may have taken place
during the POR but remain unreported due to [[Page 10959]] the
respondents insistence that the merchandise are slewing rings and
therefore fall outside the scope of the orders. Kaydon argues that if
the Department concludes that these products are bearings, not slewing
rings, and if respondent made sales of these products during the POR,
the Department should consider Hoesch and Rollix's responses as
inadequate and should seek further information regarding the
merchandise sold by these respondents during the POR.
Hoesch and Rollix believe that Kaydon's request is not appropriate.
Respondents claim that a scope determination rather than an
administrative review is the proper context for considering scope
issues. According to the respondents any scope questions Kaydon had
with respect to the merchandise in question should have been raised
within the context of a scope determination request. Therefore,
respondents claim that Hoesch and Rotek's (a related affiliate in the
United States) filing of its own scope determination request preclude
consideration of the same issues in these final results. Furthermore
respondents claim that the evidence Kaydon presented to support its
allegations fails to justify any investigation by the Department of
unreported sales.
Department's Position: We have confirmed through the U.S. Customs
service that neither Hoesch nor Rollix have entered subject merchandise
into the U.S. market during the POR. Furthermore, there is no
information on the record to support Kaydon's assertion that these
respondents, or related affiliates in the United States, have made
sales of subject merchandise during the POR. Finally, we agree with
respondents that a scope determination rather than an administrative
review is the proper context for considering scope issues. Therefore,
we will address the scope issues raised by Kaydon through the process
of a scope inquiry which has been requested by both Kaydon and Hoesch.
[FR Doc. 95-4615 Filed 2-27-95; 8:45 am]
BILLING CODE 3510-DS-P