[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