[Federal Register Volume 61, Number 234 (Wednesday, December 4, 1996)]
[Notices]
[Pages 64328-64334]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30876]


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DEPARTMENT OF COMMERCE
[A-588-028]


Roller Chain, Other Than Bicycle, From Japan; Final Results of 
Antidumping Duty Administrative Reviews

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative 
reviews.

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SUMMARY: On June 4, 1996, the Department of Commerce (the Department) 
published the preliminary results of its administrative reviews of the 
antidumping finding on roller chain, other than bicycle, from Japan. 
The reviews cover two manufacturers/exporters, Daido Kogyo, Ltd. 
(Daido), and Enuma Chain Mfg. Co., Ltd. (Enuma), of the subject 
merchandise to the United States during the period April 1, 1992 
through March 31, 1993, and six manufacturers/exporters, Daido, Enuma, 
Hitachi Metals Techno Ltd. (Hitachi), Izumi Chain Manufacturing Co., 
Ltd. (Izumi), Pulton Chain Co., Ltd. (Pulton) and R.K. Excel, of this 
merchandise to the United States during the period April 1, 1993 
through March 31, 1994.
    We gave interested parties an opportunity to comment on the 
preliminary results. Based on our analysis of the comments received and 
the correction of certain clerical errors, we have made certain changes 
to the final results of each review period. We will instruct U.S. 
Customs to assess antidumping duties on all appropriate entries.

EFFECTIVE DATE: December 4, 1996.

FOR FURTHER INFORMATION CONTACT: Matthew Blaskovich, Jack Dulberger, 
Ron Trentham or Zev Primor, AD/CVD Enforcement, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230; 
telephone: (202) 482-5253.

SUPPLEMENTARY INFORMATION:

Background

    On June 4, 1996, the Department published in the Federal Register 
(61 FR 28171) the preliminary results of the above mentioned 
administrative reviews of the antidumping finding on roller chain, 
other than bicycle, from Japan. At the request of petitioner and five 
respondents, we held a hearing on July 22, 1996.

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute and the 
Department's regulations are in reference to the provisions as they 
existed on December 31, 1994.

Scope of the Review

    Imports covered by the reviews are shipments of roller chain, other 
than bicycle, from Japan. The term ``roller chain, other than 
bicycle,'' as used in these reviews includes chain, with or without 
attachments, whether or not plated or coated, and whether or not 
manufactured to American or British standards, which is used for power 
transmission and/or conveyance. Such chain consists of a series of 
alternately-assembled roller links and pin links in which the pins 
articulate inside from the bushings and the rollers are free to turn on 
the bushings. Pins and bushings are press fit in their respective link 
plates. Chain may be single strand, having one row of roller links, or 
multiple strand, having more than one row of roller links. The center 
plates are located between the strands of roller links. Such chain may 
be either single or double pitch and may be used as power transmission 
or conveyer chain.
    These reviews also cover leaf chain, which consists of a series of 
link plates alternately assembled with pins in such a way that the 
joint is free to articulate between adjoining pitches. These reviews 
further cover chain model numbers 25 and 35. Roller chain is currently 
classified under the Harmonized Tariff Schedule of the United States 
(HTSUS) subheadings 7315.11.00 through 7619.90.00. HTSUS item numbers 
are provided for convenience and Customs purposes. The written 
description remains dispositive.
    The reviews cover the periods April 1, 1992 through March 31, 1993, 
and April 1, 1993 through March 31, 1994. The Department has now 
completed these administrative reviews in accordance with section 751 
of the Tariff Act of 1930, as amended (the Act).

Analysis of Comments Received

    We invited interested parties to comment on the preliminary results 
of these administrative reviews. We received timely comments from the 
petitioner and all respondents except Hitachi.
    Comment 1: Izumi claims that sales made to its related party were 
made at arm's-length. Izumi asserts that there is no statutory or 
regulatory requirement which mandates a certain threshold percentage of 
unrelated party sales in order to conduct an appropriate arm's-length 
test. Izumi therefore requests that the Department conduct an arm's-
length test on its related party sales. If the Department cannot 
determine whether sales to its related party were made at arm's-length, 
Izumi argues that those sales should be disregarded for the purpose of 
calculating foreign market value and constructed value in the 
Department's margin calculations.
    Department's Position: We disagree with Izumi. An arm's-length test 
in this proceeding would not produce reliable results because there was 
an insufficient number of unrelated party sales available for 
comparison to related party sales. While nothing in the statute

[[Page 64329]]

requires a specified percentage of unrelated home market sales in order 
to conduct an appropriate arm's-length test, our regulations state that 
we ``will calculate foreign market value based on that sale 
[transactions between related persons] only if [the Department is] 
satisfied that the price is comparable to the price at which the 
producer or reseller sold such or similar merchandise to a person not 
related to the seller.'' 19 CFR 353.45(a)(1994). We therefore have the 
discretion to decide whether we could rely on the results of an arm's-
length test. The facts in this proceeding indicate that an arm's-length 
test would not produce reliable results. While the sales to unrelated 
parties may be bona fide, because of their limited number, it cannot be 
established that Izumi's related party sales were made at arm's-length. 
Consequently, we removed such sales from the home market sales 
database.
    We disagree with Izumi's assertion that we should use CV for those 
sales made to its related party if it cannot be determined that such 
sales were made at arm's-length. In accordance with 19 CFR 353.45(b), 
where related party transactions were made, we decided to base FMV on 
downstream sales made by such related parties.
    Comment 2: Izumi states that the Department erred in assigning 
partial best information available (BIA) as a result of Izumi's 
inability to supply downstream sales on related party transactions. 
Izumi argues that given the nature of its relationship with its related 
party, Izumi does not have the economic leverage or legal basis to 
persuade this party to submit downstream sales information. Further, 
Izumi argues that since it has no control or input regarding downstream 
sales, it is inequitable for the Department to require information that 
is unreasonably difficult to obtain, or to base margins on sales in 
which Izumi was not involved. Izumi further contends that reliance on 
downstream sales information would be contrary to the intent of the 
statute, and the Department's regulations do not provide for margin 
calculations based on sales in which a respondent does not have the 
ability to control, or at least influence, the price.
    Petitioner argues that the Department was justified in applying 
partial BIA. Petitioner asserts that Izumi fails to realize that the 
affiliation it has with its related reseller necessitates that they be 
considered as one entity for this proceeding. Petitioner cites to the 
Department's questionnaire, where it states ``[w]here a sale is made 
through an affiliated company, the price actually charged to the 
unrelated buyer must be reported.'' See Department's Questionnaire of 
May 26, 1994, at 10. Petitioner therefore contends that the refusal of 
Izumi's related reseller to provide downstream sales information should 
be considered as a refusal by Izumi itself. Further, petitioner states 
that an argument similar to Izumi's claim of not having a legal basis 
upon which to compel its related reseller to submit information was 
rejected by the Department in a previous segment of this proceeding. 
See Roller Chain, Other Than Bicycle, From Japan, 55 FR 42602, 42608 
(1990).
    Department's Position: We agree with petitioner. Izumi failed to 
respond to our requests for information regarding downstream sales. 
Although Izumi claims that it could not compel its related party to 
supply this information, given their affiliation, we consider the 
related party's non-compliance as an omission imputable to Izumi. 
Moreover, we assigned Izumi BIA in a previous segment of this 
proceeding, where circumstances similar to these in this review were 
found to exist. In that review, the Department's position stated in 
relevant part:

    19 CFR 353.45(b) provides that the Department may calculate 
foreign market value based on sales made through a related party. 
Pursuant to 19 CFR 353.45(a), it is the Department's practice to 
calculate foreign market value based on prices to related parties, 
if the respondent can show that those sales are as between two 
unrelated companies (i.e., that the sales were arm's-length 
transactions). If the respondent cannot show that the sales were at 
arm's-length, and the sales made through the related party are a 
significant percentage of all sales in the home market, the 
Department calculates foreign market value on the basis of the sale 
price to the first unrelated party * * * Izumi's refusal or 
inability to provide information on the sales to the first unrelated 
purchasers left the Department no basis with which to calculate 
foreign market value. Final Results of Antidumping Duty 
Administrative Review: Roller Chain, Other Than Bicycle, From Japan, 
55 FR 42608, (October 22, 1990).

Additionally, the U.S. Court of Appeals for the Federal Circuit 
recently noted, ``[t]he burden of production is appropriately placed on 
the party deemed to control the information.'' Koyo Seiko Co., Ltd. v. 
United States, No. 96-1116, Slip Op. (Fed. Cir. Aug. 12, 1996). There, 
the Court upheld our decision to apply BIA where the respondent was 
related to a party within the meaning of section 771(13)(D) of the 
Tariff Act and where the respondent failed to provide requested cost 
data of the related party. Similarly, in this proceeding, Izumi is 
related to its customer within the meaning of section 771(13)(C) and 
failed to provide the downstream sales information of its related 
party.
    Section 776(c) of the Act requires us to use the best information 
otherwise available whenever a party refuses or is unable to provide 
information requested in a timely manner and in the form required. 
Therefore, since Izumi did not supply us with requested information, we 
are required to use BIA in reaching our determination.
    Comment 3: Izumi states, arguendo, that had there been 
justification for the Department's use of BIA, the use of an adverse 
inference was not warranted. Citing Holmes Products Corp. v. United 
States, 16 CIT 628, 631 (1992) (Holmes), Izumi contends that there is 
no statutory requirement that an adverse inference be made in 
determining BIA, when a party substantially complies in a review 
proceeding. Further, Izumi claims that an adverse inference is based on 
the presumption that a party would have supplied accurate information 
if that information would have resulted in lower margins. In light of 
this, Izumi claims that since it has no influence on, or knowledge of, 
pricing of downstream sales, it could not be charged with having 
constructive knowledge that the downstream sales would be made at a 
rate higher than the BIA rate of 43.29 percent. Izumi also cites the 
Court of International Trade's (CIT) decision in Usinor Sacilor, 
Sollac, and GTS v. United States, 872 F. Supp. 1000, (CIT 1994) 
(Usinor) in which Izumi claims that the CIT directed the Department to 
select the weighted-average calculated margin as BIA because the 
respondent was unable to submit data of a related reseller over which 
it had no operational control. Izumi contends that, as the facts in 
this review model those of Usinor, the Department should use Izumi's 
constructed value data or the weighted average calculated margin as 
non-adverse BIA.
    Petitioner claims that it cannot be determined whether or not the 
downstream sales information would have produced a higher margin for 
Izumi. Nevertheless, petitioner states that an adverse inference in 
this regard is highly likely, given the extent of the sales at issue 
and the affiliation between Izumi and the reseller. Further, petitioner 
challenges Izumi's claim that this instant review is similar to Usinor. 
Petitioner states that in Usinor, voluminous downstream sales data was 
submitted. The Department, however, rejected the submission because the 
resellers were not able to conduct a material trace within the time 
limits of the investigation. The Department did not request downstream 
sales

[[Page 64330]]

information for steel centers in which the manufacturer had no 
operational control, as these sales constituted a small percentage of 
total sales. Those sales were subject to the same cash deposit as the 
company's other sales.
    Department's Position: We agree with petitioner. In Holmes as well 
as in Usinor, due to the minuscule nature of the amount of sales at 
issue, non-adverse BIA margins were recommended. In Holmes, the 
manufacturer ``Hoogovens did not omit data, but only provided 
inaccurate information, which in most instances was due to a computer 
conversion error, nor were the errors systematic in nature.'' See 
Holmes at 1137. In Usinor, the court rejected the Department's argument 
``that Usinor's submissions were deficient due to Usinor's failure to 
report downstream sales from its minority-owned secondary steel 
centers.'' See Usinor at 1006. The court held that Usinor:

substantially met the requirements of the original and modified 
questionnaire requests. Usinor supplied more data than was required 
under the limited reporting arrangement and provided well over 99% 
of the data demanded by the original questionnaire * * * The 
question, therefore, is whether Commerce may use adverse BIA on the 
sole basis of Usinor's inability to trace the source of the steel 
processed by its secondary steel centers.

Id. at 1001-07. However, as the downstream sales in this review would 
comprise most of Izumi's home market sales, Izumi's failure to report 
those sales could not be construed as similar in scope to the 
aforementioned cases. Because the omission in this case was 
substantial, we followed our normal practice in determining BIA.
    Comment 4: Izumi states arguendo, that had an adverse inference 
been warranted, the Department should have taken the ``second-tier'' 
BIA rate from the most recent review in which BIA was applied, and not 
from a review more than ten years old. In regard to the methodology the 
Department should follow in assigning a BIA rate, Izumi cites a number 
of court decisions. In National Steel Corporation v. United States, 870 
F. Supp. 1130, 1136 (CIT) 1994), the Court stated that the Department 
``must be reasonable in its application of its chosen methodology.'' 
Further in Atlantic Sugar, Ltd. v. United States, 744 F.2d 1556, 1560 
(Fed. Cir. 1984), the use of BIA was compared to an ``investigative 
tool'' which may be wielded as an ``informal club'' over recalcitrant 
parties. Izumi also cites Rhone Poulenc, Inc. v. United States, 899 
F.2d 1185, 1190 (Fed. Cir. 1990) (Rhone Poulenc) to support its view 
that it is the Department's requirement that it ``consider the most 
recent information in its determination of what is best information.'' 
Allied-Signal Aerospace Co. v. United States, 996 F.2d 1185 (Fed. Cir. 
1993) (Allied-Signal) is further cited for the proposition that the 
Department was required to obtain and consider the most recent 
information in its determination of what constitutes BIA. Izumi 
contends that the Department should have used as partial BIA the 17.57 
percent rate assigned to Izumi in the 1989-1990 review instead of the 
43.29 percent rate assigned to Izumi in the 1983-1985 review periods. 
Izumi claims that the 17.57 percent rate is more probative of current 
conditions, while the 43.29 percent rate is outdated.
    Petitioner contends that the Department adhered to its standard 
``two-tier'' BIA methodology in selecting the second-tier partial BIA 
rate. Petitioner stresses that the Department's ``two-tier'' BIA 
methodology is well-established and has been upheld by the courts. 
Further, petitioner states that the 43.29 percent BIA rate is more 
current than the 17.57 percent rate, since the final results of the 
1983-1985 review periods (where the 43.29 percent rate applies) were 
published subsequent to the final results of the 1989-1990 review 
(where the 17.57 percent margin applies).
    Department's Position: We agree with petitioner. Our ``two-tier'' 
BIA methodology has been upheld in numerous court decisions. Allied-
Signal states that ``[t]he two-tier BIA methodology employed by the ITA 
in selecting the best information available for nonresponsive parties 
is a permissible and reasonable exercise of its statutory authority.'' 
Allied-Signal at 1193. The fact that the 43.29 percent rate was a 
``first-tier'' rate assigned to Izumi in a previous review is of no 
relevance to our analysis. Our BIA methodology does not require that we 
determine why a particular margin was assigned in a previous review.
    Further, our ``two-tier'' BIA methodology, ``like its predecessor, 
merely establishes a presumption that the highest prior margins are the 
best information available. That presumption can be rebutted by the 
respondent with evidence showing the actual margin to be less.'' Rhone 
Poulenc at 1190. As partial BIA, we simply adhered to our well 
established ``two-tier'' BIA methodology by using the highest margin 
ever assigned to Izumi in a previous segment of this proceeding. Izumi 
has not shown that the preliminary margins were demonstrably less 
probative of current market conditions.
    Comment 5: Izumi states that the 43.29 percent rate was 
unjustifiably assigned as a second-tier rate since this rate was also 
assigned as a ``first-tier'' BIA rate to Pulton for this review. Izumi 
argues that the Department failed to consider the intent of 19 CFR 
353.37(a) by not considering the degree to which a respondent 
cooperated before assigning the BIA rate. Izumi therefore states that 
the Department acted contrary to the purpose of the ``two-tier'' BIA 
system.
    Further, Izumi cites to the CIT's remanded decision in a previous 
segment of this proceeding. Although Pulton was characterized as 
uncooperative in that case, the CIT ruled that the Department's 
``attempt to assert a 43.54 percent rate is arbitrary and capricious 
and has no basis in law or fact.'' Pulton Chain Co., Inc. v. United 
States, 17 CIT 1136, 1144 (1993) (Pulton). Izumi asserts that since it 
has cooperated to the best of its ability in this review and since it 
does not have the ability to respond to the Department's request for 
information regarding downstream sales, the assignment of an adverse 
BIA rate of 43.29 percent is therefore punitive. Moreover, Izumi claims 
that the Department unlawfully assigned this adverse BIA, citing the 
following Court decisions as justification. In Allied-Signal, 996 F.2d 
1193 (Fed. Cir. 1993), the Court stated that ``[n]either is the goal of 
encouraging future compliance furthered by the application of the first 
tier to SNFA, because it apparently has no ability to respond more 
completely than it already had done.'' The CIT notes in Usinor, 872 F. 
Supp. at 1007, that ``Commerce's selection of a severely adverse BIA is 
`improper'* * * when the missing data is beyond the control of the 
respondent.''
    Petitioner argues that unless an adverse partial BIA rate is 
imposed, Izumi would be rewarded for its inability to provide 
downstream sales information. Petitioner is concerned that should CV be 
utilized in regard to Izumi's related party sales, an unavoidable 
policy problem would result for the Department. Petitioner contends 
that ``it will open a gaping hole in the antidumping law that will 
permit foreign manufacturers to `screen out' high-price transactions 
from the calculation of FMV. All a foreign manufacturer need do is 
channel high-price transactions through an affiliated reseller with the 
(tacit) understanding that the reseller will refuse to supply data on 
the resale transactions to unaffiliated customers.'' Petitioner's 
letter of July 15, 1996, at 7. Petitioner further argues that there 
will be no

[[Page 64331]]

incentive for Izumi to provide downstream sales information in future 
reviews if CV would be substituted for those sales.
    Department's Position: We disagree with Izumi. As mentioned 
earlier, our use of a ``second-tier'' BIA rate for the sales in 
question follows our ``two-tier'' BIA methodology. The fact that the 
``second tier'' BIA rate for a particular segment of a proceeding also 
equals the ``first tier'' BIA rate is a consequence of the two-tier 
methodology, one which has been upheld by the U.S. Court of Appeals for 
the Federal Circuit. See Allied-Signal Aerospace Co. v. United States, 
996 F.2d 1185 (Fed. Cir. 1993).
    We also disagree that Pulton Chain Co., Ltd. v. United States, 17 
CIT 1136 (1993) precludes our use of the 43.29 rate as a BIA rate. As 
the CIT has recognized in a case subsequent to Pulton, the holding in 
Pulton was limited to the ``particular facts of the case.'' Sugiyama 
Chain Co., Ltd. v. United States, 852 F. Supp. 1103, 1114 (CIT 1994). 
Moreover, the Sugiyama Court upheld our use of the 43.29 percent rate 
as a BIA rate. Id. Therefore, we will continue to use that rate here.
    Concerning Izumi's argument that an adverse BIA rate is 
inappropriate because the data was purportedly not within the company's 
control, we refer to our reply to comment two.
    Comment 6: Izumi requests that certain models of specialty chain 
sold in the United States should not be matched to models sold in the 
home market because a comparison is precluded by significant physical 
differences and different uses. Izumi claims that the Department's 20 
percent difference in merchandise (difmer) cap does not prevent skewed 
results. Izumi requests that the Department compare certain U.S. models 
to constructed value, as performed in past reviews.
    Petitioner contends that there is no evidence on the record which 
substantiates Izumi's claim that differences in physical 
characteristics and use exist between certain models sold in the United 
States and in Japan. Petitioner cites to the model match methodology 
used in the AFB proceedings, in which all parties were able to submit 
detailed comments in regard to reported differences in physical 
characteristics in order to distinguish between various bearing models. 
Petitioner claims that since no such briefing process occurred for this 
review, the Department was justified in utilizing Izumi's model-match 
concordance for price-to-price comparison purposes.
    Department's Position: Izumi's comment is moot. Due to the 
Department's correction of a programming error for these final results 
(see ``Additional Programming Error,'' p. 34), certain U.S. models, 
including those models of concern to Izumi, are now compared to CV 
instead of to models sold in the home market.
    Comment 7: Petitioner states that the Department should determine 
whether Izumi's related party resold the subject merchandise to the 
United States. Petitioner states that any U.S. sales made by Izumi's 
related party should be treated as either purchase price (PP) or 
exporter's sales price (ESP) transactions. Petitioner argues that Izumi 
and its related party should be required to certify whether or not the 
related party resold to the United States.
    Izumi contends that petitioner's allegations in this regard are 
mere speculation since there is no evidence on the record to indicate 
that Izumi had knowledge that merchandise sold in the home market was 
destined for export to the United States Izumi further argues that as 
the Department rejected the same argument raised by petitioner in the 
1990-1991 review, there is then no need to revisit this issue. Izumi 
states that petitioner's requirement that it provide certification 
whether or not the related party resold to the United States has no 
basis in statute or regulation.
    Department's Position: We agree with Izumi. In a previous segment 
of this proceeding, petitioner raised this identical argument which we 
rejected as lacking merit since there was no indication on the record 
to support its allegations.
    Izumi certified for this review that its U.S. and home market sales 
and distribution systems were reported in a complete and accurate 
manner. Further, as there is no information on the record on which to 
conclude that merchandise Izumi sold to its related party was 
subsequently resold to the United States, we have determined that Izumi 
need not submit any additional certifications regarding possible U.S. 
sales that its related party may have made.
    Comment 8: Pulton maintains that if the Department declines to 
permit it to submit a response concerning its unreported U.S. sale, it 
should use ``second-tier'' BIA because first-tier is reserved for 
uncooperative respondents. According to Pulton, as soon as the error 
was brought to its attention, it sought permission to submit a response 
and continues to be willing to submit this information. Pulton alleges 
that under these circumstances, it is unduly harsh to apply ``first-
tier'' BIA. Further, Pulton asserts that the application of ``second-
tier'' BIA would be more consistent with the way in which the 
Department treats other respondents which have inadvertently, or even 
deliberately, failed to report sales.
    Petitioner argues that Pulton, by failing to file an accurate 
questionnaire response, has totally frustrated the Department's goal of 
calculating an accurate dumping margin. According to petitioner, 
because Pulton's failure is total, it is easily distinguished from the 
decisions cited in Pulton's brief involving respondents who provided 
partial information to the Department. Moreover, petitioner asserts 
that where a party totally frustrates the goal of calculating accurate 
margins, it is reasonable to conclude that the party has `` 
`significantly impede[d] the Department's review,' and accordingly, to 
assign it a `first-tier' BIA margin.''
    Department's Position: We disagree with Pulton that it should be 
permitted to submit a questionnaire response. Section 353.31(a)(ii) of 
our regulations allows parties to submit factual information no later 
than ``the earlier of the date of publication of notice of preliminary 
results of review or 180 days after the date of publication of notice 
of initiation of the review.'' Here, the 180-day deadline had passed. 
Moreover, to accept a questionnaire response from Pulton would delay 
our completion of these reviews.
    We disagree with Pulton's allegation that the imposition of 
``first-tier'' BIA is unduly harsh. The Department generally assigns a 
respondent ``first-tier'' BIA when that respondent is considered to be 
uncooperative because it fails to provide requested information in a 
timely manner or otherwise significantly impedes the review. It was the 
responsibility of Pulton to submit accurate and complete information in 
response to the Department's questionnaire. By certifying that it had 
no sales and no exports to U.S. customers of merchandise subject to the 
finding, when in fact it did have at least one such sale, Pulton 
significantly impeded the Department's review.
    Comment 9: Pulton claims that if the Department agrees to apply 
``second-tier'' BIA, the appropriate rate would be 5.45% from the 1982-
1983 review period. Pulton claims that although Izumi has a higher 
preliminary rate in the current review, this rate is itself largely 
based on BIA, and is in that sense not a calculated rate.
    Petitioner states that if the Department were to apply ``second-
tier'' BIA, the minimum applicable margin would be 15.92%--the margin 
assigned to Pulton in the final determination in the 1989-1990 
administrative review. However, petitioner contends that if the

[[Page 64332]]

final calculated margin for Izumi or any other respondent exceeds 
15.92%, that high margin should be used.
    Department's Position: Since we have assigned Pulton ``first-tier'' 
BIA, the arguments of Pulton and petitioner are moot.
    Comment 10: Pulton argues that even if the Department decides that 
``first-tier'' BIA is appropriate, the 43.29% rate is inappropriate 
because it is based on a margin that was not finalized and because it 
is unduly punitive. According to Pulton, although the rate was used in 
a final results notice--1979-1980 administrative review--the Department 
recognized that it could not be used for duty assessment purposes. 
Moreover, Pulton claims that the CIT has recognized that 43.29% was not 
a valid rate for BIA (Pulton Chain Co., Ltd., 17 CIT at 1144). 
Furthermore, Pulton asserts that if the Department continues to apply 
``first-tier'' BIA, the appropriate margin would be 17.57%--the highest 
calculated rate in any prior review of the antidumping finding not 
based on the 43.29% aberrational number.
    Petitioner alleges that the CIT has sustained the application of 
the 43.29% first-tier margin in the roller chain reviews. Further, 
petitioner maintains that contrary to Pulton's claims, the CIT did not 
hold the 43.29% rate unlawful. Moreover, petitioner argues that the 
43.29% margin has been imposed as ``first-tier'' BIA on a number of 
occasions. Finally, petitioner states that since there is no 
information on the record concerning Pulton's actual margin, it is 
appropriate to impose the 43.29% rate.
    Department's Position: We disagree with Pulton. Our use of a 
``first-tier'' BIA rate for Pulton follows our ``two-tier'' BIA 
methodology. This methodology has been upheld by the U.S. Court of 
Appeals for the Federal Circuit. See Allied-Signal Aerospace Co. v. 
United States, 996 F.2d 1185 (Fed. Cir. 1993).
    We also disagree that Pulton Chain Co., Ltd. v. United States, 17 
CIT 1136 (1993) precludes our use of the 43.29 rate as a BIA rate for 
Pulton. As the CIT has recognized in a case subsequent to Pulton, the 
holding in Pulton was limited to the ``particular facts of the case.'' 
Sugiyama Chain Co., Ltd. v. United States, 852 F. Supp. 1103, 1114 (CIT 
1994). Moreover, the Sugiyama Court upheld our use of the 43.29 percent 
rate as a BIA rate. Id. Therefore, we will continue to use that rate 
here.
    Comment 11: R.K. Excel claims that although foreign brokerage and 
handling expenses (BROKHP) were reported in yen, the Department 
incorrectly treated BROKHP as a dollar-denominated expense in the 
calculation of net U.S. price for direct sales to U.S. customers.
    Petitioner states that R.K. Excel's case brief contains new factual 
information concerning the denomination for BROKHP.
    Department's Position: We agree with R.K. Excel's claim and have 
made the appropriate adjustments.
    It is evident from R.K. Excel's questionnaire response that BROKHP 
is a yen-denominated expense and the Department had no need to refer to 
the documentation presented in R.K. Excel's case brief to confirm its 
claim.
    Comment 12: R.K. Excel maintains that the Department's program 
failed to try to match the U.S. model 50D sales and the most similar 
model in the home market, model 50.
    The petitioner argues that given the significant number of 
unmatched sales, and given the likelihood that material margins would 
have been produced if the relevant data had been supplied, this is 
clearly a case in which it is appropriate to apply adverse BIA.
    Department's Position: We agree with R.K. Excel. Due to a computer 
error, our program failed to match U.S. model 50D and the most similar 
model in the home market, model 50. There was missing data; this was 
merely a programming error. The error has been corrected for these 
final results. Thus, the use of BIA is not warranted.
    Comment 13: Enuma's U.S. sales subsidiary, Daido Corporation (DC), 
contends that the Department erroneously disregarded its further 
manufacturing (FM) cost information for the purpose of calculating 
exporter's sales price (ESP), and wrongly assigned BIA to the sales in 
question. It requests that we recalculate the margin using the 
information submitted in its response instead of BIA.
    Specifically, DC objects to the Department's disregarding its FM 
material cost information and rejecting its cost allocation 
methodology. DC claims that its non-material costs were allocated on a 
transaction-specific basis, not on a broad-based allocation formula 
and, therefore, were isolated to individual FM products distinct from 
all other FM chain.
    Petitioner responds that ``under the circumstances, the Department 
had no choice but to apply BIA to these sales.'' It contends that DC's 
``allocation ratio may be convenient, but it does not produce accurate 
further manufacturing data.'' (Emphasis in original.) According to the 
petitioner, the Department was justified in concluding that both the 
material cost information and DC's cost allocation methodology are 
unreliable.
    Department's Position: We agree with petitioner. We specifically 
and clearly requested, in both the original and supplemental 
questionnaires, that DC ``furnish the cost of production data [and] * * 
* [i]f the item was transferred at `market price,' the price should be 
supported by documentation of actual sales * * * to unrelated third 
parties.'' (Questionnaire, August 9, 1993 at 45-46; Supplemental 
Questionnaire, October 19, 1995 at 25 and Section E, ``Cost of Further 
Manufacture or Assembly Performed in the United States'' (Section E).) 
In addition, we stated in Section E that ``[t]he further manufacturing 
costs that you report in response to this section of the questionnaire 
should be calculated based on the actual costs incurred by your U.S. 
affiliate,'' and that FM costs ``include direct materials and 
fabrication costs actually incurred by the company.'' Section E at E-1, 
E-8. We find that DC did not follow our questionnaire instructions as 
to FM costs.
    In computing FM costs, DC based its material costs on the related 
party transfer price (instead of actual cost of production (COP)) to 
value the roller chain attachments, stating only that it was ``not 
possible to provide production costs for the value of these attachments 
* * * within the time provided.'' Rather than reporting COP, DC 
suggested in its supplemental response that the Department use sampling 
to test arm's-length pricing of its attachments. However, DC failed to 
provide supporting detail for its sampling idea and did so at a point 
late in the review process. In view of this, we rejected DC's sampling 
concept.
    In Antifriction Bearings (Other Than Tapered Roller Bearings) and 
Parts Thereof From France, et al., 58 FR 39729, 39754 (July 26, 1993), 
we determined that where a party failed to provide either purchase 
prices from unrelated parties from which the Department could determine 
whether transfer prices paid to related parties were at arm's-length, 
or COP data to demonstrate that the transfer prices were not less than 
COP, then such data did not provide a reliable basis for FMV. Here, 
DC's methodology was an unacceptable response to our question because 
it lacked COP information, sample or otherwise, and did not permit a 
test of transfer pricing information.
    In addition, DC stated that it lacked records for the labor element 
of FM, preventing it from calculating the FM costs in the manner 
suggested by the questionnaire. Further, DC stated that it also lacked 
records for factory overhead and SG&A expenses attributable to FM.

[[Page 64333]]

DC therefore submitted a factor representing gross profit (revenue 
minus cost of goods sold), which it multiplied by the transfer price of 
the attachments used in the FM process, to estimate the missing labor, 
overhead, and SG&A components of the FM process. However, this 
methodology was unacceptable because it was unsupported by information 
on the record demonstrating that use of a gross profit factor 
accurately reflects DC's non-material FM costs.
    In summary, DC provided no COP information, sample or otherwise. 
Accordingly, no test of transfer pricing information was possible. In 
addition, it provided no information on the record to support its 
contention that the use of a gross profit factor accurately reflects 
its non-material FM costs. Therefore, we determine that DC's reported 
FM costs do not provide a reliable basis on which to adjust USP and, as 
a result, we have continued to use ``second-tier'' BIA margins for the 
U.S. sales in question.
    Comment 14: The petitioner argues that the Department should have 
disallowed a portion of Daido's reported home market indirect selling 
expenses because its data was not submitted on a transaction-specific 
basis. Specifically, the petitioner claims that Daido failed to report 
its commissions, discounts, and rebates in the home market on a 
transaction-specific basis. Instead, Daido included these expenses with 
indirect selling expenses in a category called ``Other Expenses'' and 
allocated them across total home market sales. Petitioner argues that 
commissions, discounts and rebates must be tied to individual sales 
transactions. It requests that, because Daido failed to provide this 
data, we remove these ``Other Expenses'' from this adjustment. The 
petitioner requests that the Department disallow Daido's ESP offset in 
the Department's final margin calculations.
    Daido responds that the Department's position is correct and that 
the petitioner failed to show any legal prohibition against calculating 
this deduction on an allocated basis. Daido further argues that the 
Department's practice is to treat commissions, discounts, and rebates 
as indirect expenses when they cannot be tied directly to specific 
sales or customers. Daido further points out that the allocation here 
works against its favor by subjecting commissions, discounts and 
rebates expenses to the ESP offset cap.
    Department's Position: We agree with petitioner. We requested, in 
both the original and supplemental questionnaires, that Daido report 
these expenses ``on a transaction-specific basis.'' Instead, Daido 
included its commissions, rebates, and discounts in its indirect sales 
expenses. Daido then allocated indirect sales expenses as follows: 
Daido's total corporate SG&A (i.e., worldwide, scope and non-scope) 
expenses were divided by its total sales (i.e., worldwide, scope and 
non-scope) to arrive at a percentage figure, which was then multiplied 
by yen per meter price to arrive at a yen per meter SG&A expense 
figure.
    We consider rebates and discounts to be direct adjustments to price 
and will make adjustments for these expenses pursuant to sections 772 
and 773 of the Act (which require us to determine what price was 
actually charged for subject merchandise). See Antifriction Bearings 
(Other Than Tapered Roller Bearings) and Parts Thereof From France; et 
al.; Final Results of Antidumping Duty Administrative Reviews, 57 Fed. 
Reg. 28360, 28400 (June 24, 1992); SKF USA Inc. v. United States, 874 
F. Supp. 1395, 1402 (CIT 1995). Because Daido failed to report its 
discounts and rebates on a transaction-specific basis, as we requested, 
we are denying the adjustment.
    Our regulations define commissions as an expense which may receive 
an adjustment as a difference in circumstances of sale. See 19 CFR 
353.56(a)(2) (1994). However, Daido has requested that we treat its 
commissions as an indirect selling expense and grant it an adjustment 
pursuant to 19 CFR 353.56(b)(2) (1994) (the ESP offset provision). The 
U.S. Court of Appeals for the Federal Circuit has recently held that we 
may not include direct selling expenses as part of the ESP offset 
because our regulations do not allow such an adjustment. See Torrington 
Co. v. United States, 82 F.3d 1039, 1051 (Fed. Cir. 1996). The Court 
noted that the method by which an expense is allocated does not change 
its nature from being a direct expense to an indirect expense. Since 
commissions are a direct expense, we must therefore deny Daido an 
adjustment for this expense pursuant to the ESP offset provision.
    Comment 15: Petitioner claims that the Department failed to deduct 
foreign inland freight incurred by DT (on behalf of Daido and Enuma) 
from Daido and Enuma's PP sales. Daido and Enuma contend that the 
Department had in fact made the deductions to PP sales for both PORs.
    Department's Position: We agree with Daido and Enuma. Daido and 
Enuma computed foreign inland freight charges for sales to the United 
States in the same manner as for home market freight charges. 
Consequently, values for inland freight charges are identical to those 
for home market freight charges. Both of these adjustments appeared in 
the PP margin programs as INLFRTH, which was also deducted from U.S 
price to arrive at net adjusted U.S price.

Additional Clerical Errors

    In addition to the changes we made in response to the parties' 
comments above, we have corrected three inadvertent clerical errors as 
follows:
    (a) We erroneously calculated the weighted-average indirect selling 
expense factor used for Izumi's preliminary margin program, due to a 
decimal placement error; we made the appropriate correction.
    (b) In analyzing Izumi's similar merchandise in the model match 
section of the program, we inadvertently failed to use the absolute 
values for the differences in merchandise percentage valuations; we 
made the necessary correction.
    (c) The Department's second-tier BIA policy states that we will 
take as the BIA rate 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 same class or kind of merchandise for any firm. However, we 
incorrectly identified Daido and Enuma's second-tier BIA rate. We made 
the necessary correction in these final results.

Additional Programming Error

    We detected a minor programming error in Izumi's margin program, 
when merging the CV database to the U.S. sales database. We made the 
necessary correction.

Final Results of Review

    As a result of our analysis of the comments received, we determine 
that the following margins exist for the periods indicated:

------------------------------------------------------------------------
                                                                 Margin 
                Manufacturer/exporter                  Period  (percent)
------------------------------------------------------------------------
Daido...............................................    92-93       0.14
Daido...............................................    93-94       0.10
Enuma...............................................    92-93       0.04
Enuma...............................................    93-94       0.18
Hitachi.............................................    93-94     *12.68
Izumi...............................................    93-94      10.01
Pulton..............................................    93-94      43.29
R.K. Excel..........................................    93-94      0.37 
------------------------------------------------------------------------
* No sales during the period. Rate is from the last period in which     
  there were sales.                                                     


[[Page 64334]]

    The Department shall determine, and the U.S. Customs Service shall 
assess, antidumping duties on all appropriate entries. The Department 
will issue appraisement instructions directly to the U.S. Customs 
Service. Individual differences between U.S. price and NV may vary from 
the percentages listed above.
    Furthermore, the following deposit requirements will be effective, 
upon publication of these final results of administrative reviews for 
all shipments of the subject merchandise from Japan that are entered, 
or withdrawn from warehouse, for consumption on or after the 
publication date, as provided by section 751(a)(1) of the Act: (1) The 
cash deposit rates for the reviewed companies will be those rates 
listed above; (2) for previously reviewed or investigated companies not 
listed above, the cash deposit rate will continue to be the company-
specific rate published for the most recent period; (3) if the exporter 
is not a firm covered in these reviews, a prior review, or the original 
LTFV investigation, but the manufacturer is, the cash deposit rate will 
be the rate established for the most recent period for the manufacture 
of the merchandise; and (4) the cash deposit rate for all other 
manufacturers or exporters will continue to be 15.92 percent, the all 
others rate based on the first review conducted by the Department in 
which a ``new shipper'' rate was established in the final results of 
antidumping finding administrative review (48 FR 51801, November 14, 
1983).
    This notice 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 a reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 353.34(d). Timely written notification of 
the return/destruction of APO materials or conversion to judicial 
protective order is hereby requested. Failure to comply with the 
regulations and the terms of an APO is a sanctionable violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.

    Dated: November 25, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-30876 Filed 12-3-96; 8:45 am]
BILLING CODE 3510-DS-P