[Federal Register Volume 61, Number 243 (Tuesday, December 17, 1996)]
[Notices]
[Pages 66471-66521]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31753]



[[Page 66471]]

_______________________________________________________________________

Part III





Department of Commerce





_______________________________________________________________________



International Trade Administration



_______________________________________________________________________



Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts 
Thereof From France, et al.; Final Results of Antidumping Duty 
Administrative Reviews and Partial Termination of Administrative 
Reviews; Notice

[[Page 66472]]




  Federal Register / Vol. 61, No. 243 / Tuesday, December 17, 1996 / 
Notices  

DEPARTMENT OF COMMERCE

International Trade Administration
[A-427-801, A-428-801, A-475-801, A-588-804, A-559-801, A-401-801, A-
412-801]


Antifriction Bearings (Other Than Tapered Roller Bearings) and 
Parts Thereof From France, Germany, Italy, Japan, Singapore, Sweden, 
and the United Kingdom; Final Results of Antidumping Duty 
Administrative Reviews and Partial Termination of Administrative 
Reviews

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

ACTION: Notice of Final Results of Antidumping Duty Administrative 
Reviews and Partial Termination of Administrative Reviews.

-----------------------------------------------------------------------

SUMMARY: On December 7, 1995, 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, Italy, Japan, Singapore, Sweden, and the United Kingdom (the 
Italian results were published in a separate notice). 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 64 manufacturers/exporters. The review period 
is May 1, 1993, through April 30, 1994.
    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 
the Reviews.''

EFFECTIVE DATE: December 17, 1996.

FOR FURTHER INFORMATION CONTACT: The appropriate case analyst, for the 
various respondent firms listed below, of Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW., Washington, DC. 20230; telephone: 
(202) 482-4733.

France

    Andrea Chu (AVIAC, SNFA, SNR), Davina Hashmi (INA), Hermes Pinilla 
(Technofan), Matthew Rosenbaum (Franke & Heydrich, Hoesch Rothe Erde, 
Rollix Defontaine, SKF), or Kris Campbell.

Germany

    Kris Campbell (Cross-Trade, Delta, EXTA Aussenhandel), Chip Hayes 
(NTN Kugellagerfabrik), Andrea Chu (SNR), Davina Hashmi (INA), Hermes 
Pinilla (Hepa Walzlager, Schaumloffel), Matthew Rosenbaum (Fichtel & 
Sachs, Franke & Heydrich, Hoesch Rothe Erde, Rollix Defontaine, SKF), 
Thomas Schauer (FAG), Kris Campbell, or Richard Rimlinger.

Italy

    Davina Hashmi (Meter), Mark Ross (FAG), Thomas Schauer (SKF), Kris 
Campbell, or Richard Rimlinger.

Japan

    J. David Dirstine (Koyo, NSK, ITOCHU, Godo Kogyo, Santest Co.), 
Chip Hayes (Mitsubishi, Nachi, Nankai Seiko, NTN), Lyn Johnson (I&OC, 
Kongo Colmet, Marubeni, Mihasi, Inc., Sanken Trading, Sanko Co., 
Taikoyo Sangyo, Takeshita, Tomen), Michael Panfeld (Izumoto Seiko, 
Nissho-Iwai, NPBS, Origin Electric), Mark Ross (Asahi Seiko, 
Minamiguchi, Mitsui, Naniwa Kogyo, Nichimen, Nichinan Sangyo, Nihon 
K.J., Shima Trading, Sumitomo, Toei Buhin, TOK Bearing Co.), Thomas 
Schauer (Matsuo Bearing Co., Nippon Thompson Co., Phoenix 
International, THK Co., Tsubakimoto PP), or Richard Rimlinger.

Singapore

    Lyn Johnson (NMB/Pelmec) or Richard Rimlinger.

Sweden

    Davina Hashmi (SKF) or Kris Campbell.

United Kingdom

    Hermes Pinilla (FAG/Barden, NSK/RHP) or Kris Campbell.

SUPPLEMENTARY INFORMATION:

Background

    On December 7, 1995, the Department published in the Federal 
Register the preliminary results of its administrative reviews of the 
antidumping duty orders on AFBs from France, Germany, Japan, Singapore, 
Sweden, and the United Kingdom (60 FR 62817) and the preliminary 
results of its administrative reviews of the antidumping duty orders on 
AFBs from Italy (60 FR 62813). We gave interested parties an 
opportunity to comment on our preliminary results.
    At the request of certain interested parties, we held hearings on 
case-specific issues for Germany on February 14, 1996 and for Japan on 
February 15, 1996.
    We are terminating the review with respect to Mitsubishi, Mitsui, 
Phoenix International, Shima Trading, and Sumitomo. The suppliers to 
these firms had knowledge at the time of sale that the merchandise was 
destined for the United States. Consequently, these firms are not 
resellers as defined in 19 CFR 353.2(s) because their sales cannot be 
used to calculate the U.S. price (USP).

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.

Applicable Statute and Regulations

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

Best Information Available

    In accordance with section 776(c) of the Tariff 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               
                                  SNR...............  BBs               
Italy...........................  FAG...............  BBs               
                                  SKF...............  BBs               
Germany.........................  FAG...............  BBs, CRBs, SPBs   
                                  INA...............  BBs, CRBs         
                                  SKF...............  BBs, CRBs, SPBs   

[[Page 66473]]

                                                                        
Japan...........................  Asahi Seiko.......  BBs               
                                  Koyo..............  BBs, CRBs         
                                  Nachi.............  BBs, CRBs         
                                  NSK...............  BBs, CRBs         
                                  NTN...............  BBs, CRBs, SPBs   
Singapore.......................  NMB/Pelmec........  BBs               
Sweden..........................  SKF...............  BBs, CRBs         
United Kingdom..................  Barden............  BBs               
                                  FAG...............  BBs               
                                  NSK/RHP...........  BBs, CRBs         
------------------------------------------------------------------------

Changes Since the Preliminary Results

    Based on our analysis of comments received, we have corrected 
certain programming and clerical errors in our preliminary 
calculations. Any alleged programming or clerical errors with which we 
do not agree are discussed in the relevant sections of the Issues 
Appendix.

Analysis of Comments Received

    All issues raised in the case and rebuttal briefs by parties to 
these concurrent administrative reviews of AFBs are addressed in the 
``Issues Appendix'' which is appended to this notice of final results.

Final Results of Reviews

    We determine that the following percentage weighted-average margins 
exist for the period May 1, 1993, through April 30, 1994:

----------------------------------------------------------------------------------------------------------------
                             Company                                    BBs            CRBs            SPBs     
----------------------------------------------------------------------------------------------------------------
                                                     France                                                     
                                                                                                                
----------------------------------------------------------------------------------------------------------------
AVIAC...........................................................            0.47        (\2\)           (\2\)   
Franke & Heydrich...............................................       \1\ 66.42        (\3\)           (\3\)   
Hoesch Rothe Erde...............................................        (\2\)           (\3\)           (\3\)   
INA.............................................................           66.42           18.37           42.79
Rollix Defontaine...............................................        (\2\)           (\3\)           (\3\)   
SKF.............................................................            3.75        (\2\)              18.80
SNFA............................................................           66.42           18.37        (\3\)   
SNR.............................................................           70.73            2.08        (\3\)   
Technofan.......................................................           14.59        (\2\)           (\2\)   
                                                                                                                
----------------------------------------------------------------------------------------------------------------
                                                    Germany                                                     
                                                                                                                
----------------------------------------------------------------------------------------------------------------
Cross-Trade GmbH................................................          132.25           76.27          118.98
Delta Export GmbH...............................................        (\2\)           (\2\)           (\2\)   
EXTA Aussenhandel GmbH..........................................           68.89           55.65          114.52
FAG.............................................................           13.06           13.58            2.00
Fichtel & Sachs.................................................           19.60        (\3\)           (\3\)   
Franke & Heydrich...............................................      \1\ 132.25        (\3\)           (\3\)   
Hepa Walzlager GmbH.............................................        (\2\)           (\2\)           (\2\)   
Hoesch Rothe Erde...............................................        (\2\)           (\3\)           (\3\)   
INA.............................................................           31.29           52.43        (\2\)   
NTN.............................................................           12.50        (\3\)           (\3\)   
Rollix & Defontaine.............................................        (\2\)           (\3\)           (\3\)   
Schaumloffel Technik GmbH.......................................        (\2\)           (\2\)           (\2\)   
SKF.............................................................            2.67            9.46           14.30
SNR.............................................................            3.69            0.99        (\3\)   
                                                                                                                
----------------------------------------------------------------------------------------------------------------
                                                      Italy                                                     
                                                                                                                
----------------------------------------------------------------------------------------------------------------
FAG.............................................................            1.79            0.00        (\3\)   
Meter...........................................................            3.75        (\3\)           (\3\)   
SKF.............................................................            3.26        (\3\)           (\3\)   
                                                                                                                
----------------------------------------------------------------------------------------------------------------
                                                      Japan                                                     
                                                                                                                
----------------------------------------------------------------------------------------------------------------
Asahi Seiko.....................................................            1.61        (\2\)              92.00
Godo Kogyo......................................................        (\2\)           (\2\)           (\2\)   
I & OC..........................................................        (\2\)           (\2\)           (\2\)   
ITOCHU..........................................................        (\2\)           (\2\)           (\2\)   
Izumoto Seiko...................................................            2.28        (\2\)           (\2\)   
Kongo Colmet....................................................        (\2\)           (\2\)           (\2\)   
Koyo Seiko......................................................           14.90            6.53        \1\ 0.00
Marubeni........................................................        (\2\)           (\2\)           (\2\)   
Matsuo Bearing..................................................        (\2\)           (\2\)           (\2\)   
Mihasi..........................................................        (\2\)           (\2\)           (\2\)   
Minamiguchi Bearing.............................................          106.61           51.82           92.00
Nachi-Fujikoshi.................................................           13.79            9.72        (\3\)   
Naniwa Kogyo....................................................          106.61           51.82           92.00
Nankai Seiko....................................................            0.55        (\2\)           (\2\)   
Nichinan Sangyo.................................................        (\2\)           (\2\)           (\2\)   
Nichimen........................................................          106.61           51.82           92.00
Nihon K.J.......................................................        (\2\)           (\2\)           (\2\)   
NPBS............................................................           45.83        (\3\)           (\3\)   

[[Page 66474]]

                                                                                                                
NSK Ltd.........................................................           19.39           15.37        (\2\)   
Nippon Thompson.................................................           10.16           51.82           59.63
Nissho-Iwai.....................................................          106.61           51.82           92.00
NTN.............................................................           14.34           11.05           32.33
Origin Electric.................................................          106.61           51.82           92.00
Sanken Trading..................................................          106.61           51.82           92.00
Sanko...........................................................        (\2\)           (\2\)           (\2\)   
Santest.........................................................        (\2\)           (\2\)           (\2\)   
Taikoyo Sangyo..................................................          106.61           51.82           92.00
Takeshita Seiko.................................................            0.89        (\3\)           (\3\)   
THK.............................................................          106.61           51.82           92.00
Toei Buhin......................................................        (\2\)           (\2\)           (\2\)   
TOK Bearing.....................................................          106.61           51.82           92.00
Tomen...........................................................          106.61           51.82           92.00
Tsubakimoto.....................................................            7.77        (\3\)           (\3\)   
                                                                                                                
----------------------------------------------------------------------------------------------------------------
                                                   Singapore                                                    
                                                                                                                
----------------------------------------------------------------------------------------------------------------
NMB/Pelmec......................................................            4.32        (\3\)           (\3\)   
                                                                                                                
----------------------------------------------------------------------------------------------------------------
                                                     Sweden                                                     
                                                                                                                
----------------------------------------------------------------------------------------------------------------
SKF.............................................................            2.22            0.00        (\3\)   
                                                                                                                
----------------------------------------------------------------------------------------------------------------
                                                 United Kingdom                                                 
                                                                                                                
----------------------------------------------------------------------------------------------------------------
Barden..........................................................            1.49        \1\ 8.22        (\3\)   
FAG.............................................................            3.32        \1\ 8.22        (\3\)   
NSK/RHP.........................................................           10.21           10.35       (\3\)    
----------------------------------------------------------------------------------------------------------------
\1\ No shipments or sales subject to this review. Rate is from the last relevant segment of the proceeding in   
  which the firm had shipments/sales.                                                                           
\2\ No shipments or sales subject to this review. The firm has no individual rate from any segment of this      
  proceeding.                                                                                                   
\3\ Not subject to review.                                                                                      

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 and 
exporter's sales price (ESP) deposit rates (using the United States 
price (USP) of purchase price 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 purchase price and 
ESP sales by the combined total USP value for both purchase price 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 
reviews for all shipments of AFBs entered, or withdrawn from warehouse, 
for consumption on or after the date of publication, as provided by 
section 751(a)(1) of the Tariff Act: (1) The cash deposit rates for the 
reviewed companies will be the rates shown above, except that for firms 
whose weighted-average margins are less than 0.50 percent, and 
therefore de minimis, the Department shall require a zero deposit of 
estimated antidumping duties; (2) for previously reviewed or 
investigated companies not listed above, the cash deposit rate will 
continue to be the company-specific rate published for the most recent 
period; (3) if the exporter is not a firm covered in this review, a 
prior review, or the original less-than-fair-value (LTFV) 
investigation, but the manufacturer is, the cash deposit rate will be 
the rate established for the most recent period for the manufacturer of 
the merchandise; and (4) the cash deposit rate for all other 
manufacturers or exporters will continue to be the ``All Others'' rate 
for the relevant class or kind and country made effective by the final 
results of review published on July 26, 1993 (see Final Results of 
Antidumping Duty Administrative Reviews and Revocation in Part of an 
Antidumping Duty Order, 58 FR 39729 (July 26, 1993)). These rates are 
the ``All Others'' rates from the relevant LTFV investigations.
    These deposit requirements shall remain in effect until publication 
of the final results of the next administrative reviews.

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-

[[Page 66475]]

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 purchase price sales for these final results, we 
divided the total dumping margins (calculated as the difference between 
foreign market value (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 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.
    For calculation of the ESP assessment rate, entries for which 
liquidation was suspended, but for which ultimately we do not collect 
antidumping duties under the ``Roller Chain'' principle, are included 
in the assessment rate denominator to avoid over-collecting. (The 
``Roller Chain'' principle 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 Roller Chain'' 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 Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR 
353.22.

    Dated: December 5, 1996.
Jeffrey P. Bialos,
Acting Assistant Secretary for Import Administration.

Scope Appendix Contents

A. Description of the Merchandise
B. Scope Determinations

Issues Appendix Contents

 Abbreviations
 Comments and Responses
    1. Assessment and Duty Deposits
    2. Best Information Available
    3. Circumstance-of-Sale Adjustments
    A. Technical Services and Warranty Expenses
    B. Inventory Carrying Costs
    C. Commissions
    D. Credit
    E. Indirect Selling Expenses
    F. Differences in Merchandise
    4. Cost of Production and Constructed Value
    A. Cost Test Methodology
    B. Research and Development
    C. Profit for Constructed Value
    D. Related Party Inputs
    E. Inventory Write-off
    F. Interest Expense Offset
    G. Other Issues
    5. Discounts, Rebates and Price Adjustments
    6. Further Manufacturing and Roller Chain
    7. Level of Trade
    8. Packing and Movement Expenses
    9. Related Parties
    10. Samples, Prototypes and Ordinary Courses of Trade
    11. Taxes, Duties and Drawback
    12. U.S. Price Methodology
    13. Accuracy of Home Market Database
    14. Programming
    15. Duty Absorption and Reimbursement
    16. Miscellaneous Issues
    A. Verification
    B. Pre-Final Reviews
    C. Certification of Conformance to Past Practice
    D. All Others Rate
    E. Resellers

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: 4016.93.10, 
4016.93.50, 6909.19.5010, 8482.10.10, 8482.10.50, 8482.80.00, 
8482.91.00, 8482.99.05, 8482.99.10, 8482.99.35, 8482.99.70, 8483.20.40, 
8483.20.80, 8483.30.40, 8483.30.80, 8483.90.20, 8483.90.30, 8483.90.70, 
8708.50.50, 8708.60.50, 8708.70.6060, 8708.93.6000, 8708.99.06, 
8708.99.3100, 8708.99.4000, 8708.99.4960, 8708.99.50, 8708.99.58, 
8708.99.8015, 8708.99.8080.
    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: 4016.93.10, 4016.93.50, 6909.19.5010, 8482.50.00, 
8482.80.00, 8482.91.00, 8482.99.25, 8482.99.6530, 8482.99.6560, 
8482.99.70, 8483.20.40, 8483.20.80, 8483.30.40, 8483.30.80, 8483.90.20, 
8483.90.30, 8483.90.70, 8708.50.50, 8708.60.50, 8708.99.4000, 
8708.99.4960, 8708.99.50, 8708.99.8080.
    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: 6909.19.5010, 8483.30.40, 8483.30.80, 8483.90.20, 
8483.90.30, 8485.90.00, 8708.99.4000, 8708.99.4960, 8708.99.50, 
8708.99.8080.
    The HTS item numbers are provided for convenience and Customs 
purposes.

[[Page 66476]]

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.
     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.

[[Page 66477]]

    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.
    Scope rulings completed between October 1, 1994 and December 31, 
1994 (see Scope Rulings, 60 FR 12196 (March 6, 1995)):

Products Excluded

     Rotek and Kaydon--Rotek bearings, models M4 and L6, are 
slewing rings outside the scope of the order.
    Scope rulings completed between April 1, 1995 and June 30, 1995 
(see Scope Rulings, 60 FR 36782 (July 18, 1995)):

Products Covered

     Consolidated Saw Mill International (CSMI) Inc.--Cambio 
bearings contained in CSMI's sawmill debarker are within the scope of 
the order.
     Nakanishi Manufacturing Corp.--Nakanishi's stamped steel 
washer with a zinc phosphate and adhesive coating used in the 
manufacture of a ball bearing is within the scope of the order.
    Scope rulings completed between January 1, 1996 and March 31, 1996 
(see Scope Rulings, 61 FR 18381 (April 25, 1996)):

Products Covered

     Marquardt Switches--Medium carbon steel balls imported by 
Marquardt are outside the scope of the order.
    Scope rulings completed between April 1, 1996 and June 30, 1996. 
(see Scope Rulings, 61 FR 40194 (August 1, 1996)):

Products Excluded

     Dana Corporation--Automotive component known variously as 
a center bracket assembly, center bearings assembly, support bracket, 
or shaft support bearing, is outside the scope of the order.

Issues Appendix

Company Abbreviations

Asahi Seiko (Asahi)
FAG/Barden 1--The Barden Corporation (U.K.) Ltd.; The Barden 
Corporation; FAG (U.K.) Ltd.
---------------------------------------------------------------------------

    \1\ The Department requested that FAG and Barden consolidate all 
information in the original questionnaire, which they did as FAG/
Barden. FAG/Barden submitted comments on the preliminary results, 
referring to aspects of the Department's analysis of FAG and Barden. 
The Department has determined two separate rates for sales by FAG 
(U.K.) and Barden in these final results (see our response to 
Comment 1 in Section 4A).
---------------------------------------------------------------------------

FAG Germany--FAG Kugelfischer Georg Schaefer KGaA
FAG Italy--FAG Italia S.p.A.; FAG Bearings Corp.
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.
Meter--Meter S.p.A.
Nachi--Nachi-Fujikoshi Corp.; Nachi America, Inc.; Nachi Technology 
Inc.
Nankai--Nankai Seiko Co., Ltd.
NMB/Pelmec--NMB Singapore Ltd.; Pelmec Industries (Pte.) Ltd.
NPBS--Nippon Pillow Block Manufacturing Co., Ltd.; Nippon Pillow Block 
Sales Co., Ltd.; FYH Bearing Units USA, Inc.
NSK--Nippon Seiko K.K.; NSK Corporation
NSK/RHP--NSK Bearings Europe, Ltd.; RHP Bearings; RHP Bearings, Inc.
NTN Germany--NTN Kugellagerfabrik (Deutschland) GmbH
NTN--NTN Corporation; NTN Bearing Corporation of America; American NTN 
Bearing Manufacturing Corporation
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 Italy--SKF Industrie; RIV-SKF Officina de Villar Perosa; SKF 
Cuscinetti Speciali; SKF Cuscinetti; RFT
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 France--SNR Nouvelle Roulements
SNR Germany--SNR Roulements; SNR Bearings USA, Inc.
Takeshita--Takeshita Seiko Company
Torrington--The Torrington Company

Other Abbreviations

AM--Aftermarket
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
ISE(s)--Indirect Selling Expenses
LOT--Level of Trade
OEM--Original Equipment Manufacturer
POR-- Period of Review
PP--Purchase Price
USP--United States Price
VAT--Value Added Tax

AFB Administrative Determinations

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 
(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).

[[Page 66478]]

AFBs III--Final Results of Antidumping Duty Administrative Reviews and 
Revocation in Part of an Antidumping Duty Order, 58 FR 39729 (July 26, 
1993).
AFBs IV--Antifriction Bearings (Other Than Tapered Roller Bearings) and 
Parts Thereof From France, et al; Final Results of Antidumping Duty 
Administrative Reviews, Partial Termination of Administrative Reviews, 
and Revocation in Part of Antidumping Duty Orders, 60 FR 10900 
(February 28, 1995).

AFB CIT Decisions

FAG v. United States, Slip Op. 95-158, September 14, 1995 (FAG I)
FAG Kugelfischer Georg Schaefer KGAa v. United States, Slip Op. 96-108 
(CIT 1996) (FAG II)
FAG UK Ltd. v. United States, Slip Op. 96-177 (CIT, November 1, 1996) 
(FAG III)
Federal Mogul Corp. v. United States, 813 F. Supp 856 (CIT 1993) 
(Federal Mogul I)
Federal Mogul Corp. v. United States, 839 F. Supp 881 (CIT 1993), 
vacated, 907 F. Supp 432 (1995) (Federal Mogul II)
Federal Mogul Corp. v. United States, 884 F. Supp 1391 (CIT 1993) 
(Federal Mogul III)
Federal Mogul Corp. v. United States, 17 CIT 1015 (CIT 1993) (Federal 
Mogul IV)
Federal Mogul Corp. v. United States, 924 F. Supp 210 (CIT April 19, 
1996) (Federal Mogul V)
Koyo Seiko Co., Ltd. v. United States, 796 F. Supp 1526 (CIT 1992) 
(Koyo)
NSK Ltd. v. United States, 910 F. Supp 663 (CIT 1995) (NSK I)
NSK Ltd. v. United States, 896 F. Supp 1263 (CIT 1995) (NSK II)
NTN Bearing Corporation of America v. United States, 903 F. Supp 62 
(CIT 1995) (NTN I)
NTN Bearing Corporation of America v. United States, 905 F. Supp. 1083 
(CIT 1995) (NTN II)
SKF USA Inc. v. United States, 876 F. Supp 275 (CIT 1995) (SKF)
The Torrington Company v. United States, 818 F. Supp 1563 (CIT 1993) 
(Torrington I)
The Torrington Company v. United States, 832 F. Supp. 379 (1993) 
(Torrington II)
The Torrington Company v. United States, 881 F. Supp 622 (1995) 
(Torrington III)

CAFC AFB Decisions

NTN Bearing Corp. v. United States, 74 F. 3d 1204 (CAFC 1995) (NTN I)
The Torrington Company v. United States, 44 F. 3d 1572 (CAFC 1994) 
(Torrington IV)
The Torrington Company v. United States, 82 F. 3d 1039 (CAFC 1996) 
(Torrington V)

1. Assessment and Duty Deposits

    Comment 1: Torrington contends that the Department should 
reconsider its position regarding the calculation of deposit rates 
because the new VAT methodology exacerbates the discrepancy between 
deposit rates and assessment rates. Torrington suggests that the 
Department should calculate deposit rates using entered value, not 
United States price (USP), as the denominator, as it does in 
calculating assessment rates.
    Torrington acknowledges that the Department and the Court of 
Appeals for the Federal Circuit (CAFC) have previously rejected 
Torrington's argument that deposit rates should be calculated using 
entered value as the denominator, citing AFBs I at 31692, noting in 
addition that the CAFC upheld the Department regarding this issue in 
Torrington IV at 1579. Torrington contends, however, that the new VAT 
methodology adversely affects the Department's deposit rate 
calculations and increases the disparity between deposit and assessment 
rates.
    Torrington suggests that the new methodology, whereby the 
Department multiplies HMP by the VAT rate and adds this amount equally 
to the HMP and USP, increases the USP that serves as the deposit rate 
denominator while leaving entered value (the assessment rate 
denominator) unchanged. Torrington acknowledges that the previous VAT 
methodology (under which the VAT amount that was added to both HMP and 
USP was derived by multiplying USP, not FMV, by the VAT rate), also 
increased USP by an amount representing VAT. However, Torrington states 
that the addition to USP is greater under the new VAT methodology than 
it was under the old methodology, because HMP is generally greater than 
USP where there is dumping, and Torrington provides a hypothetical 
example. Torrington concludes that the new VAT-adjustment methodology 
is not tax neutral because the deposit rates for respondents in 
countries with high VAT tax rates will be far lower, everything else 
being equal, than those in countries with low VAT tax rates. For these 
reasons, Torrington argues the Department should calculate antidumping 
duty deposit rates on the same basis that it calculates antidumping 
duty assessment rates.
    FAG, INA, Koyo, NMB/Pelmec, NSK, NTN, and SKF argue that the 
Department should not alter its deposit-rate methodology. Respondents 
contend that this methodology has been established practice since the 
first review of these orders and should not be changed without good 
reason. Respondents contend that both the Court of International Trade 
(CIT) and CAFC have affirmed the Department's methodology. Respondents 
contend that Torrington's arguments regarding the change in VAT 
methodology do not constitute sufficient cause to alter the deposit-
rate methodology.
    Department's Position: We disagree with Torrington. As we have 
noted in previous reviews of these orders, duty deposits are estimates 
of future dumping liability, and any difference between the estimate 
and the calculated assessment will be collected or refunded with 
interest. See AFBs II at 28377, AFBs III at 39738, and AFBs IV at 
10905-06. As such, duty deposits need simply to be based on the level 
of dumping during the POR; how the duty-deposit rate is derived is 
within the Department's discretion, provided that the derivation is 
reasonable. Moreover, the duty-deposit rate does not have to be 
identical to the assessment rate. See Torrington IV at 1578-79.
    We do not use entered value as the denominator in estimating duty 
deposits for the following reasons. First, duty deposits calculated on 
such a basis will not necessarily reflect the final margin of dumping 
any more accurately than deposit rates calculated based on USP. Because 
margins generally change from review to review, we have no reason to 
believe or suspect that one methodology will necessarily be more 
accurate than another. Second, we do not have entered values for all 
importers of PP sales. Third, even if we had all entered values, to do 
as Torrington suggests would require calculating separate deposit rates 
for all importers, which would create an excessive administrative 
burden both on us and on the U.S. Customs Service in order to implement 
a deposit methodology that has not been shown to be more accurate. 
Finally, as we noted in the 90/91 review of these orders, we must 
maintain a consistent standard for determining whether margins are de 
minimis. In sum, practical concerns favor the approach we have 
consistently applied, and there is little theoretical appeal to 
changing the approach. This is especially true when any difference 
between the estimate and the assessment is collected (or refunded) with 
interest when the entries are liquidated.
    Nothing in Torrington's argument concerning the new VAT methodology 
invalidates the reasons provided above for using USP as the denominator 
in

[[Page 66479]]

calculating deposit rates for estimated future liability. As Torrington 
acknowledges, both the new and old VAT methodologies resulted in the 
addition to USP of an amount for VAT. In fact, under Torrington's 
hypothetical example illustrating the difference in deposit rates 
caused by the new VAT methodology, the deposit rate calculated using 
the new methodology (19 percent) differed by only one percent from that 
calculated using the previous methodology (20 percent). Therefore, 
Torrington has not shown that the new VAT methodology results in 
deposit rates that are not reasonably based on the level of dumping 
during the POR. Consequently, we have not changed our methodology for 
calculating duty-deposit rates for future entries in these final 
results.
    Comment 2: NSK argues that the Department's methodology for 
calculating dumping duties significantly overstates its dumping 
liability. NSK contends that the Department's methodology, which 
calculates POR assessment rates by dividing the amount of antidumping 
duties determined through its analysis of the six sample week sales 
(multiplied by a weight factor of 8.69 in order to derive an annual 
duty amount) by the entered value of the sample week sales (also 
multiplied by a weight factor of 8.69 to derive an annual entered value 
amount for POR sales), results in the over collection of duties from 
NSK when applied to the entered value of POR entries. NSK states that 
this is due to the fact that the entered value of its POR entries 
significantly exceeded the Department's calculated entered value of 
NSK's POR sales. NSK asserts that the Department should use the total 
entered value of NSK's POR entries as the denominator in the 
assessment-rate calculation.
    Torrington, citing Koyo at page 1529, argues that the CIT has held 
that the Department is afforded ``tremendous deference in selecting the 
appropriate [assessment] methodology'' and that the Department's 
assessment-rate methodology is reasonable and in accordance with law. 
Torrington notes that the Court in Koyo also stated that, as long as 
the methodology the Department selects is reasonable, it is appropriate 
even if ``another alternative is more reasonable.'' Id at page 1529. 
Torrington argues that the Department therefore should apply its 
established assessment-rate methodology in the final results.
    Department's Position: We disagree with NSK. In litigation arising 
from AFBs II, FAG argued (as NSK does here) that we should calculate an 
assessment rate by dividing the annualized dumping duties due by the 
entered value of entries during the POR, rather than the entered value 
of sales during the POR. In our remand determination of May 30, 1995, 
we explained that the statute requires us to assess an antidumping duty 
equal to the amount by which the FMV of the merchandise exceeds the USP 
of the merchandise (section 751(a)(2)(B) of the Act). We stated that 
both FAG's methodology and our methodology in AFBs II meet this 
standard, since both methods compute the difference between FMV and USP 
and use that difference as the basis for assessment.
    The CIT agreed with our May 30, 1995 remand redetermination, 
stating that ``[a] comparison of FAG's and Commerce's assessment 
approaches satisfactorily convinces the Court that Commerce's 
methodology is the more accurate in spite of the fact that Commerce was 
aware of FAG's data on the record pertaining to total sales and actual 
entered values.'' FAG I at 9.
    Like FAG's method, NSK's method in this review simply uses the 
difference to compute an amount of duties due for sales made during the 
POR, while the Department's method uses the difference between FMV and 
USP to compute an amount of duties due on entries made during the POR. 
Similarly, like FAG's methodology in AFBs II, NSK's method assumes that 
the amount of dumping found in the sample pool is representative of the 
amount of dumping on POR sales, whereas the Department's method assumes 
the rate of dumping found in the same pool is representative of the 
rate of dumping found on POR entries as a whole.
    In addition, there is some danger that a change to NSK's 
methodology from the methodology we used in previous reviews (i.e., the 
92/93 review period and the 93/94 review period) will result in 
estimating duties on a pool of entries twice. If our methodology 
estimates the amount of duties due on entries made during the POR and 
NSK's methodology estimates the amount of duties due on sales during 
the POR, switching methodologies between two POR's will result in 
estimating the duties due on merchandise entered during the first 
period and sold during the second period in both periods. In fact, such 
an inconsistency in assessment-rate methodologies would also occur when 
entries are subject to liquidation without administrative review. NSK's 
methodology is inconsistent with the assessment methodology we use for 
automatic assessment because, when we automatically liquidate, we 
assess duties based on the cash deposit rate at the time of entry. The 
cash deposit rate is a ``relative'' dumping rate, i.e., it reflects the 
weighted-average margin of dumping which we have calculated using the 
value of sales rather than the value of entries made during the POR, 
which is similar to our assessment-rate methodology.
    Because our methodology is reasonable and the CIT has upheld it 
(see FAG I), we have not changed our assessment-rate methodology for 
these final results.

2. Best Information Available

    Section 776(b) of the Tariff Act provides that, in making a final 
determination in an administrative review, if the Department ``is 
unable to verify the accuracy of the information submitted, it shall 
use the best information available to it as the basis for its action * 
* *'' In addition, 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 or in the 
form required, or otherwise significantly impedes an investigation * * 
*.
    In deciding what to use as BIA, section 353.37(b) of our 
regulations provides that we may take into account whether a party 
refuses to provide information. For purposes of these reviews and in 
accordance with our practice we have used the more adverse BIA--
generally the highest rate for any company for the same class or kind 
of merchandise from the same country from this or any prior segment of 
the proceeding, including the less-than-fair-value (LTFV) 
investigation--whenever a company refused to cooperate with the 
Department or otherwise significantly impeded the proceeding. When a 
company substantially cooperated with our requests for information, but 
we were unable to verify information it provided or it failed to 
provide all information requested in a timely manner or in the form 
requested, we used as BIA the higher or (1) the highest rate (including 
the ``all others'' rate) ever applicable to the firm for the same class 
or kind of merchandise from the same country from either the LTFV 
investigation or a prior administrative review; or (2) the highest 
calculated rate in this review for any firm for the same class or kind 
of merchandise from the same country (see AFBs III at 39739 (July 26, 
1993), and Empresa Nacional Siderurgica v. United States, Slip Op. 95-
33 (CIT March 6, 1995)).
    Comment 1: INA contends that the Department's application of 
second-tier BIA in the preliminary results, based on the results of a 
three-day verification at

[[Page 66480]]

INA's U.S. affiliate (INA-USA), is unduly punitive. INA alleges that 
the problems experienced at verification were due to its brevity and to 
the overlapping demands of preparing supplemental questionnaire 
responses while preparing for verification in the two weeks prior to 
the verification, and not due to deficient data per se. INA notes that 
the Department issued a large supplemental questionnaire for sections 
A-C on January 10, 1995, and scheduled the U.S. verification for 
January 23 through January 25, 1995. INA suggests that, given this 
schedule, the Department's decision to limit the verification to three 
days, as opposed to five, adversely affected the company (noting that 
the U.S. verification in the previous (92/93) review lasted five days 
and that all five days were needed to complete that verification). INA 
argues that the verification report suggests that the unresolved issues 
were due to a lack of sufficient time to complete verification and, 
while the report implies that INA was responsible due to ``periods of 
inactivity'' while company officials searched for requested materials, 
such periods of inactivity do not take into account the time problems 
inherent in a three-day verification.
    INA states that it provided supporting documents for certain items 
that the verification report nonetheless treated as unverified, as 
follows: (1) A reconciliation of certain adjustments necessary to tie 
sales data in the company's sales journal to the financial statements 
(INA claims it provided this reconciliation but the Department did not 
review it due to time constraints); (2) a reconciliation of a monthly 
sales amount, as listed in the general ledger, with the financial 
statements (INA claims it provided this reconciliation after an initial 
error but the Department took as an exhibit the initial and incorrect 
reconciliation); and (3) a reconciliation of the gross monthly sales 
figures in the transaction register with those in the sales journal 
(INA claims that the Department misunderstood this reconciliation, 
mistakenly attributing certain sales figures in a summary worksheet to 
the transaction register instead of the sales journal). INA suggests 
the means by which the Department could establish the accuracy of items 
(2) and (3), above, from information already on the record.
    In addition, INA provides explanations for other items that the 
report states remained open at the end of verification, as follows: (1) 
An invoice sequence the Department conducted to establish the 
completeness of the invoices for certain POR months (INA claims that 
company officials realized during verification that its invoices were 
not numbered in a strictly chronological sequence but this could not be 
taken into account in the invoice-sequence test due to time 
constraints); (2) certain price adjustments, including packing material 
and labor, inventory carrying costs, technical services/warranties, 
guarantees and servicing, and commissions (INA claims that supporting 
documentation for each adjustment was available at the verification 
site but was not examined due to time constraints); (3) an information 
request for employee expense vouchers (INA claims that this request was 
made after the close of business on the last day of verification and 
that the employee with access to such vouchers was not available); and 
(4) a missing U.S. sale found at verification (INA claims that this was 
due to a clerical computer error, which INA later discovered caused the 
omission of over 300 sales from the U.S. database, as well as the 
absence of HM sales, CV, and COP data for 35 products involved in the 
missing U.S. sales; INA requests that it be allowed to submit 
information to correct this error (see Comment 6, below).
    Finally, INA addresses certain verification items that the company 
states were not elements of the Department's decision to apply BIA to 
the company, but which were still noted in the verification report, as 
follows: (1) Swap agreements that were not included in the reported 
credit expense (INA argues that such agreements are not relevant to the 
cost of credit); (2) magazine publishing expenses that were not 
included in the reported advertising expense (INA claims that this 
magazine is published for company employees only); (3) ocean freight 
and brokerage and handling discrepancies (INA claims that they are 
negligible); and (4) ``PPAP'' revenues as an offset to indirect 
expenses (INA claims that this is consistent with generally accepted 
accounting principles (GAAP)).
    INA suggests that the verification problems the company experienced 
are directly related to the time constraints of a three-day 
verification, which, given the size and complexity of INA-USA's sales 
and accounting records, is not a sufficient time in which to complete 
this verification. INA notes that INA-USA is a major U.S. producer of 
AFBs, and its sales of purchased bearings, including subject 
merchandise, account for only a small percentage of its total sales; 
its accounting system and underlying documentation are more complex, 
therefore, than those of a related-party importer that is not primarily 
a bearing manufacturer. INA states that, given these facts, INA's 
failure to complete verification in three days (along with an 
inadvertent database error on the U.S. sales listing) does not warrant 
the application of a BIA rate that could cost the company millions of 
dollars of additional antidumping duties.
    Torrington responds that the Department properly applied second-
tier BIA to INA's questionnaire response due to INA-USA's failures at 
verification. Torrington cites to the Department's May 24, 1995 
memorandum concerning the application of BIA to INA and contends that 
the Department should reject INA's attempt to blame the Department for 
failing to allot sufficient time for verification for the following 
reasons: (1) Much of the time at verification was spent conducting 
routine tests; (2) U.S. sales verifications normally require only three 
days; (3) according to the report, INA officials were absent from the 
verification site for long periods of time; and (4) INA should be 
familiar with routine verification procedures, since this is the fifth 
annual review. Torrington notes that respondents, not the Department, 
carry the responsibility of demonstrating the reliability of reported 
information.
    Torrington suggests that BIA is particularly warranted in this case 
due to the verification finding that INA had omitted certain U.S. 
sales, along with an undisclosed number of HM sales. Torrington states 
that, if a single alleged programming error resulted in hundreds of 
unreported sales, it is a fair concern that the program contains other 
equally consequential errors.
    Department's Position: We disagree with INA and have assigned a 
cooperative (second-tier) BIA rate to the company for these final 
results. As noted above, under section 776(b) of the Tariff Act, if we 
are ``unable to verify the accuracy of the information submitted,'' we 
are authorized to use BIA. In addition, section 776(c) of the Tariff 
Act requires that we 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.'' When a company has substantially cooperated with our 
requests for information and, to some extent, at verification, but we 
were unable to verify the information it provided or it failed to 
provide complete or accurate information, we assign that company 
second-tier BIA. See Allied Signal versus United States, 996 F.2d 1195 
(CAFC 1993) (concluding that the Department's two-tiered BIA

[[Page 66481]]

methodology, under which cooperating companies are assigned the lower, 
``second tier'' BIA rate, is reasonable).
    INA cooperated with our requests for information and agreed to 
undergo verification. However, despite our attempts, we were unable to 
verify the completeness of its response. First, because we were unable 
to verify INA's total U.S. sales of the subject merchandise, we were 
unable to establish the proper universe of sales within which we would 
conduct our analysis. Establishing the completeness of the response 
with respect to sales of the subject merchandise in the United States 
is a very significant element of verification. However, as a result of 
verification, INA subsequently acknowledged that it had omitted over 
300 sales from its U.S. database along with the corresponding HM sales, 
CV, and COP data for 35 products involved in the missing U.S. sales. 
The completeness of the U.S. sales database is essential because it is 
used to calculate the dumping duties. It is our practice to examine at 
verification only a randomly selected subset of the reported U.S. 
sales, a practice that the CIT has upheld. See Bomont Industries versus 
United States, 733 F.Supp. 1507, 1508 (CIT 1990) (``verification is 
like an audit, the purpose of which is to test information provided by 
a party for accuracy and completeness. Normally an audit entails 
selective examination rather than testing of an entire universe.''); 
see also Monsanto Co. versus United States, 698 F. Supp. 275, 281 (CIT 
1988) (``verification is a spot check and is not intended to be an 
exhaustive examination of the respondent's business''). Where the 
Department finds discrepancies in this subset, it must judge the effect 
on the unexamined portion of the response. In the instant case, ESP 
sales are reported on a limited, sampled basis due to the large number 
of transactions. Where we have allowed for reduced reporting but 
determine that U.S. sales are missing from the database submitted as 
the complete sampled sales listing, we must be especially concerned 
about the reliability and accuracy of any margin we might calculate 
from the database. An omission of this magnitude, by itself, renders 
the remainder of INA's response inadequate for the purpose of 
calculating a dumping margin in this review. See Persico Pizzamiglio, 
S.A. v. United States, Slip Op. 94-61 (Persico) (upholding the 
Department's use of BIA for a respondent who was unable to demonstrate 
the completeness of its U.S. sales at verification). See also Comment 
3, below, regarding INA's request to submit data concerning these sales 
for the record.
    Second, among a number of other problems in establishing the 
completeness of the reported U.S. sales, we were unable to verify that 
INA's transaction register (a register allegedly used to record all 
sales during the POR) was a complete list of all sales. Specifically, 
we were unable to tie this document to either the financial statements 
or to the reported sales. See INA USA Verification Report at 3-5. This 
inconsistency raises serious concerns regarding the completeness of 
INA's reporting because the company, both at verification and in its 
brief (at 9), identified the transaction register as the basis for the 
sales reported in INA's response. See Memorandum from Office Director 
to DAS, Compliance: Antifriction Bearings from Germany; Use of Best 
Information Available for the Preliminary Results of the Fifth 
Administrative Review (May 24, 1995) (BIA memo). INA contends that the 
failure to establish the reliability of the transaction register was 
due to the Department's mistaken belief that a ``bridge'' worksheet was 
based on the transaction register (INA claims the worksheet was based 
instead on INA's sales journal). The verification report clearly 
indicates, however, that INA officials told the Department that the 
worksheet was based on the transaction register (``the monthly gross 
sales figures were claimed to be taken from INA's transaction register, 
which is a composite of all sales of subject and non-subject 
merchandise made during the POR.'' INA USA Verification Report at 3).
    INA's post-hoc explanations for other significant verification 
failures with respect to establishing the completeness of its reporting 
are similarly unconvincing. For instance, the Department attempted to 
establish the completeness of INA's reporting by examining INA's POR 
invoices, which the company stated initially were maintained in 
chronological sequence. However, as INA acknowledges, company officials 
did not discover until the last day of verification that INA's invoices 
were not numbered on a chronological basis, but instead were 
sequentially numbered by warehouse. As the Department stated in the BIA 
memo, by the time this discovery was made, there was insufficient time 
to establish the completeness of the reported total volume of sales 
using these invoices.
    For these reasons, we were unable to verify that INA reported all 
U.S. sales of subject merchandise. Moreover, we could not verify the 
volume of U.S. sales that may have been unreported. The completeness of 
the U.S. sales response is a significant element of verification. 
Further, in the instant case, ESP sales are reported on a limited, 
sampled basis due to the large number of transactions. Where we have 
allowed for reduced reporting but determine that U.S. sales are missing 
from the database submitted as the complete sampled sales listing, we 
must be especially concerned about the reliability and accuracy of any 
margin we might calculate from the database.
    In accordance with section 776(b) of the Tariff Act, our inability 
to verify INA's U.S. sales listing was the determining factor in our 
decision to apply BIA to the company's response. With respect to the 
other items INA characterized as unresolved due to time constraints, we 
note that, regardless of the resolution of these issues, we would not 
be able to use INA's response in calculating the dumping margin, given 
that we could not verify INA's U.S. sales listing. Further, it is 
incumbent upon the respondent to establish the accuracy of the 
information it submits during the time period allotted for 
verification. As we stated in Final Determination of Sales at Less Than 
Fair Value: Photo Albums and Filler Pages from Korea, 50 FR 43754, at 
43755-56 (October 29, 1985), ``[i]t is the obligation of respondents to 
provide an accurate and complete response prior to verification so that 
the Department may have the opportunity to fully analyze the 
information and other parties are able to review and comment on it. The 
purpose of verification is to establish the accuracy of a response 
rather than to reconstruct the information to fit the requirements of 
the Department.'' The time allotted for this verification, three days, 
is the normal time for which we schedule U.S. sales verifications, 
despite the size or complexity of respondents' business operations and 
records. This is the normal time period granted for such verifications 
and was the time period given for ESP verification of other respondents 
in this review. Further, as indicated by the CIT, ``[t]here is no 
statutory mandate as to how long the process of verification must 
last,'' and the Department ``is afforded discretion when conducting a 
verification pursuant to 19 U.S.C. 1677e(b).'' Persico at 19 (holding 
that a three-day overseas verification was reasonable). Notably, the 
Department conducted six other ESP verifications for this review 
period, all of which were completed in three days, the same amount of 
time given to INA-USA.
    Thus, in accordance with section 776(b) of the Act, we are relying 
on

[[Page 66482]]

cooperative BIA to determine INA's antidumping margin for each class or 
kind in these reviews.
    Comment 2: INA proposes that, instead of applying BIA, the 
Department should use its discretion to conduct a supplemental 
verification. INA contends that the Department has the authority to 
conduct an additional verification and cites to several cases in which 
the Department has conducted such verifications (Cyanuric Acid and Its 
Chlorinated Derivatives from Japan, 51 FR 45495, 45496 (December 19, 
1986); Cell Site Transceivers from Japan, 49 FR 43080, 43084 (October 
26, 1984); High Power Microwave Amplifiers and Components Thereof from 
Japan, 47 FR 22134 (May 21, 1982); Fireplace Mesh Panels from Taiwan, 
47 FR 15393, 15395 (April 9, 1982)). INA states that the Department 
examines the necessity of conducting supplemental verifications on a 
case-by-case basis, thereby underscoring the discretionary nature of 
this decision.
    INA notes that there are four reasons why the Department may not 
wish to conduct a supplemental verification: inconvenience, cost, 
schedule, and precedent. INA argues that none of these reasons 
justifies a refusal to conduct an additional verification in this case. 
INA contends that the magnitude of the potential penalty in this case 
outweighs the inconvenience and cost aspects, that a supplemental 
verification would not have an adverse impact on the Department's 
schedule in the fifth reviews, and that the case-specific nature of 
this decision should alleviate any concern over establishing a 
burdensome precedent.
    INA states that, considering the above facts, the failure to 
conduct a supplemental verification, while applying total BIA, would 
constitute an abuse of discretion. INA cites NTN I for the general 
proposition that the dumping law is remedial, not punitive. INA notes 
that the CAFC has held that the Department's refusal to accept the 
correction of clerical errors after the deadline for submitting factual 
information was an abuse of discretion when, inter alia, failure to do 
so ``resulted in the imposition of many millions of dollars in duties 
not justified under the statute,'' citing NTN I at 1208.
    Department's Position: We disagree with INA. The facts of this case 
do not justify taking the extraordinary step of conducting an 
additional verification. Although we have, in an extremely limited 
number of cases, conducted a supplemental verification, it is not our 
policy to permit re-verification of data. See Sodium Nitrate from 
Chile: Final Results of Review, 52 FR 25897 (July 9, 1987).
    Conducting a second verification after a company fails its first 
verification would be an extraordinary action. To do so would signal 
respondents that a failed verification can be overcome, which would 
undermine both our ability to obtain complete and accurate information 
from respondents in time to conduct proper verifications and to 
complete reviews in a timely manner. As we have indicated on the record 
in this case, a second verification would cease to be an opportunity to 
check the accuracy of a response and would become merely an exercise in 
identifying areas in which a response could be improved. See Memorandum 
from DAS, Import Administration to Assistant Secretary, Import 
Administration: INA Request to Submit New Information (July 29, 1995) 
(INA Memorandum).
    The most recent of the cases that INA cites occurred in 1986. 
Further, in each of the cases cited, re-verification was conducted 
pursuant to requests for additional information requested by the 
Department, or due to a particular emergency that arose in the case. In 
contrast, INA's request is based primarily on the general time 
constraints imposed by a three-day ESP verification. As noted in our 
response to Comment 1, this is the normal time period granted for such 
verifications and was the time period given for ESP verification of 
other respondents in this review. Further, as indicated by the CIT, 
``[t]here is no statutory mandate as to how long the process of 
verification must last,'' and the Department ``is afforded discretion 
when conducting a verification pursuant to 19 U.S.C. 1677e(b).'' 
Persico at 19 (holding that a three-day overseas verification was 
reasonable). Accordingly, we have declined to conduct a supplemental 
verification.
    Comment 3: INA requests that it be permitted to submit new 
information that would correct a programming error discovered at 
verification. INA states that this error resulted in the omission of 
over 300 U.S. sales as well as the HM sales, CV, and COP data 
corresponding to such sales.
    INA notes that, pursuant to Sec. 353.31(a) of the Department's 
regulations, the Department has accepted corrections of clerical errors 
after verification if the existence of the error and the accuracy of 
the correction could be determined from the existing administrative 
record (citing AFBs III at 39780). INA contends that, although this is 
not the case for the data in question, the CAFC held in NTN III that 
the Department's refusal to waive the deadlines established in 
Sec. 353.31(a) to permit correction of clerical errors that were not 
apparent from the record constituted an abuse of discretion (at 1207). 
In light of this decision, INA requests that the Department accept 
correction of the error found at verification. (INA notes that it 
previously made this request in a letter to the Department dated 
January 26, 1996.)
    Torrington objects to INA's request that it be allowed to submit 
additional information regarding these missing transactions, stating 
that NTN III should be limited to its facts and must not be allowed to 
subvert the traditional role played by antidumping verifications. 
Torrington contends that INA's error is not a clerical error and is far 
more sweeping than that involved in NTN III.
    Department's Position: We disagree with INA's position that the 
omittance of over 300 U.S. sales as well as the HM sales, CV, and COP 
data corresponding to such sales constitutes a clerical error, and we 
have not accepted any post-verification submissions regarding these 
sales for these final results. As indicated in our response to Comment 
1, INA's alleged ``clerical error'' is more appropriately described as 
a verification failure.
    There are several important distinctions between NTN III and the 
present case (see INA Memorandum). First, there is a difference in 
breadth and significance of the error. INA's process and strategy for 
identifying sales of subject merchandise was flawed; it failed to 
recognize its own product designations for subject merchandise and 
devise appropriate means to collect and report all sales. As a result, 
INA failed to report a significant number of U.S. sales, which, to 
correct, would require a substantial and fundamental addition to its 
questionnaire response. INA did not simply misreport a small amount of 
data requiring a simple correction as occurred in NTN III. The court in 
NTN III at 1208 specifically noted that correction of the errors in 
that case ``would neither have required beginning anew nor have delayed 
making the final determination'' and that ``a straightforward 
mathematical adjustment was all that was required.'' See NTN III at 
1208. In this case, correction of INA's alleged error would require 
collection of substantial amounts of new information and significant 
additional time and effort to analyze and examine the new information, 
as well as additional time to allow the petitioner to comment on the 
new information.

[[Page 66483]]

    Second, in NTN III the court found that the respondent was first 
alerted to the probability of error upon examination of the preliminary 
results at 1207. Here, INA was made aware of a problem with its 
questionnaire response when we found a missing sale at verification, 
well before the preliminary results were issued. INA was unable to 
explain the missing sale at verification or to correct its error at 
that time. Indeed, INA did not attempt to correct the alleged error 
until a year after the verification at which the error was uncovered. 
Further, the error affected an area (total volume and value of sales) 
that is always a primary focus of verification. The nature of this 
error is not such that it could only be discovered after the 
preliminary results of review as was the case in NTN III. Thus, INA's 
alleged ``clerical error'' is more appropriately described as a 
verification failure.
    Third, there is no assurance that any new sales information INA 
might submit would be complete and accurate.2 The information INA 
seeks to submit purports to cover all missing sales. Unlike the 
information in NTN III which could be verified by comparison with a few 
supporting documents, the accuracy of INA's new information could only 
be assessed through an entirely new verification which, for the reasons 
we stated in response to Comment 2, above, is inappropriate in this 
situation.
---------------------------------------------------------------------------

    \2\ In NTN III, the CAFC noted that NTN had been cooperative 
throughout the proceeding, and the Department did not verify NTN's 
U.S. sales. Thus, the court indicated that the Department appeared 
to lack any basis for questioning the accuracy of NTN's correction 
and, moreover, the argument was raised post hoc by counsel, rather 
than by the Department as a basis for rejecting the information. 
Conversely, given the verification results in the present case, we 
have substantial reasons for questioning the accuracy of any 
corrections made by INA. See NTN III at 1204.
---------------------------------------------------------------------------

    In the context of a review in which INA's response has already 
failed verification, we would have little confidence in the 
completeness and accuracy of any new ``corrective'' information INA 
might submit because we would have no assurance that the particular 
error INA found was the only such error leading to omissions of sales, 
that any additional sales that INA might report would account for all 
of the missing sales, or that the new sales information would be 
accurate (i.e., that the errors identified at verification have been 
completely remedied). Therefore, we have not accepted a revised 
response from INA.
    Comment 4: Torrington contends that, although the Department 
correctly applied second-tier BIA to INA's questionnaire response, it 
did not use the correct second-tier rates. Torrington suggests that the 
correct preliminary cooperative BIA rates are 38.18 percent and 52.43 
percent for BBs and CRBs, respectively, as opposed to the rates of 31 
and 52 percent which the Department preliminarily assigned to INA.
    INA responds that the CRB rate suggested by Torrington is a ``no 
shipment'' rate that the Department correctly disregarded in 
establishing the cooperative BIA rate. With respect to the BB rate, INA 
contends that the Department appropriately used its discretion not to 
use the highest calculated rate for this review, using instead INA's 
highest previous rate.
    Department's Position: For these final results, and in accordance 
with our policy regarding the derivation of the second-tier BIA rate, 
we are applying a rate to INA's sales based on 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 the same country 
from either the LTFV investigation or a prior administrative review; or 
(2) the highest calculated rate in this review for any firm for the 
same class or kind of merchandise from the same country. Accordingly, 
we have applied the second-tier BIA rates of 31.29 percent for BBs and 
52.43 percent for CRBs.
    Comment 5: NPBS asserts that a re-verification of its response is 
necessary to correct findings included in the verification report which 
influenced the Department's application of BIA to NPBS' sales. First of 
all, NPBS argues that the absence of an interpreter at verification 
prevented the firm from demonstrating the accuracy and reliability of 
its response. NPBS notes that it is a family-owned business and that no 
one at the firm understands English well enough to respond to the 
intensely nuanced information requests routinely made at verification. 
Second, NPBS argues that it was prevented from responding to 
verification report findings because the report did not identify or 
document specific sale transactions, and because documents taken at 
verification were destroyed. NPBS states that, as a result, it cannot 
address the following findings in the Department's verification report: 
(1) NPBS failed to explain why certain sales of NPBM-manufactured 
merchandise had been excluded from its response; (2) NPBS failed to 
report three HM sales out of * * * which were originally priced at 
zero, but were subsequently adjusted upwards after negotiation with the 
customer; (3) NPBS failed to report properly quantity adjustments for 
one out of seven selected HM sales; and (4) NPBS failed to justify the 
exclusion of sales of certain HM models which the firm initially 
claimed did not match the families sold in the United States.
    Third, NPBS argues that the verification report states crucial 
facts incorrectly regarding whether the prices reported by NPBS to its 
largest HM customer were the final and actual prices paid by that 
customer. NPBS asserts that a statement in the verification report that 
the sales price which NPBS reported for sales to this customer is not 
the final price paid is simply false. Finally, NPBS argues that the 
Department should accept a printout of sales to this particular company 
which NPBS omitted from the original response due to a clerical error 
but which it submitted to the Department's representatives at the start 
of verification. NPBS claims that, because it submitted the information 
to the Department within 180 days of initiation, under 19 CFR 353.31 
(a)(1)(ii), the Department should determine that it is timely.
    Torrington responds that the Department's application of BIA was 
fully warranted by the numerous omissions and errors in NPBS' response. 
Torrington argues that the Department is statutorily required to use 
BIA in cases where it is unable to verify the accuracy of the 
information submitted. Torrington asserts that, as a whole, the number 
and significance of NPBS' errors and omissions constitute a failed 
verification, noting that the most serious of NPBS deficiencies was the 
inability to verify the completeness of the HM and U.S. sales 
databases. Torrington asserts that the complete and accurate reporting 
of sales databases goes to the heart of the antidumping proceeding and 
references AFBs II at 28379, where the Department applied BIA to NPBS 
because NPBS failed to report a substantial number of its HM sales.
    With respect to NPBS' argument that it was hampered by the lack of 
an interpreter, Torrington suggests that NPBS' complaint is without 
merit since the Department notified NPBS that it was unable to retain 
an interpreter prior to verification. Torrington contends, moreover, 
that NPBS is not unfamiliar with the review process and has undergone 
verification on five previous occasions. To the extent that an 
interpreter was essential, Torrington maintains it was incumbent on 
NPBS to arrange for one.
    With respect to NPBS' argument that it was unable to demonstrate 
the accuracy of its response because the Department destroyed certain 
documents, Torrington states that it

[[Page 66484]]

cannot meaningfully comment since it did not attend either the 
verification or disclosure. Torrington notes however that, even if 
NPBS' assertion that the final price for certain omitted sales was 
correctly reported is true, NPBS' failure to explain its response 
adequately at verification cannot be corrected at the case-brief stage 
of the proceeding. Moreover, Torrington asserts, the Department did not 
apply BIA because NPBS omitted these sales from its response. Rather, 
Torrington contends, the Department found discrepancies in the 
reporting of these sales. Torrington summarizes that, because NPBS 
failed to support its HM and U.S. responses, the Department correctly 
applied second-tier BIA.
    Department's Position: We disagree with NPBS. The number and degree 
of discrepancies in both the HM and U.S. verifications render NPBS' 
response unusable for our margin calculations. Therefore, for these 
final results, we have applied a second-tier BIA rate for NPBS.
    First, NPBS does not dispute the results of the U.S. verification, 
at which the verification team found, among other discrepancies, 
missing U.S. sales. The completeness of the U.S. sales database is 
essential because it is used to calculate the dumping duties. It is our 
practice to examine at verification only a randomly selected subset of 
the reported U.S. sales, a practice that the CIT has upheld. See Bomont 
Industries v. United States, 733 F.Supp. 1507, 1508 (CIT 1990) 
(``[v]erification is like an audit, the purpose of which is to test 
information provided by a party for accuracy and completeness. Normally 
an audit entails selective examination rather than testing of an entire 
universe.''); see also Monsanto Co. v. United States, 698 F. Supp. 275, 
281 (CIT 1988) (``[v]erification is a spot check and is not intended to 
be an exhaustive examination of the respondent's business''). Where the 
verification team finds discrepancies in the subset of information it 
examines, it must judge the effect on the unexamined portion of the 
response. In the instant case, ESP sales are reported on a limited, 
sampled basis due to the large number of transactions. Where we have 
allowed for reduced reporting but determine that U.S. sales are missing 
from the database submitted as the complete sampled sales listing, we 
must be especially concerned about the reliability and accuracy of any 
margin we might calculate from the database.
    In addition to the omissions and discrepancies we found at the U.S. 
verification, the omission of a large number of HM sales affected our 
decision to assign NPBS a margin based on BIA. Notwithstanding the 
magnitude of the omitted HM sales, we attempted to verify these sales. 
However, the pool of sales that NPBS attempted to place on the record 
was not accurate. At verification, the Department's officials 
discovered that the sales price for some of these sales was later 
adjusted after negotiation with this particular customer. Moreover, 
company officials acknowledged that the final sales price for an 
unknown number of sales to this particular customer did not take into 
account these price adjustments. NPBS was unable to provide the final 
sales price, after adjustment, and instead, it provided a list of the 
gross monthly adjustments. Because these omitted sales were not 
verifiable, we did not accept them voluntarily into the record. After 
the verification had concluded NPBS submitted, on December 19, 1994, a 
listing of the omitted sales, stating that, under 19 CFR 
353.31(a)(1)(ii), December 19, 1994 was the 180th day on which to 
submit factual information voluntarily. This submission occurred after 
verification was completed, however, and we had already found the sales 
information to be inaccurate.
    Regarding the four verification-report findings to which, NPBS 
claims, it cannot respond, the verification exhibits do not contain 
evidence documenting the discrepancies revealed at verification. We 
note, however, that NPBS is not disputing that these discrepancies 
exist. Rather, NPBS is complaining that it cannot explain the 
discrepancies because the verification report did not indicate the 
particular sales or models connected to the discrepancies. By raising 
this issue only now, in its case brief, NPBS is attempting to 
demonstrate the accuracy of its response. We agree with Torrington that 
the case brief is not the appropriate forum for NPBS to demonstrate the 
accuracy of its response. As indicated in the HM verification report, 
NPBS did not demonstrate that its response was accurate within the 
scheduled verification time. The Department took an extraordinary step 
by rescheduling another firm's verification to allow NPBS an extra day 
of verification. Thus, NPBS had the opportunity to explain its response 
at the verification. At some point, the Department must close the 
record and make a determination based on the information available to 
it. Moreover, these particular discrepancies were not the primary 
factors in our decision to apply BIA to NPBS.
    Finally, the lack of an interpreter did not prevent NPBS from 
demonstrating the accuracy of its response. The Department was not 
required to provide an interpreter and nothing precluded NPBS from 
supplying one itself. Furthermore, the Department informed NPBS before 
the start of verification that an interpreter would not be present, and 
company officials and the Department's verification team agreed that 
the verification would proceed without an interpreter. The parties also 
agreed, however, that, if during the course of the verification a 
problem arose with regard to the ability to interpret an oral answer or 
translate a document, a service would be contacted. In fact, the 
company official who led the U.S. verification and co-led the HM 
verification spoke excellent English and there was no need to seek 
additional assistance.
    Comment 6: Asahi disagrees with the Department's decision to apply 
first-tier BIA on the basis that the company failed to provide complete 
information on its sales of SPBs. Asahi notes that it only sold a small 
quantity of SPBs to the United States and claims that the per-bearing 
price was high enough to preclude any possibility of dumping. Asahi 
argues that the sale of SPBs to the United States was outside its 
normal course of business and was akin to a sample sale that occurred 
on a one-time basis. Asahi further argues that it is commercially 
unreasonable for the Department to require a complete submission for 
such a small quantity of sales when the company has already compiled 
the required information with regard to its normal commercial line 
(BBs). Asahi suggests that, instead of assigning first-tier BIA to 
SPBs, the Department apply the rate it applies to BBs, since BBs are 
the class or kind of merchandise that Asahi usually sells to the United 
States. Alternatively, Asahi requests that the Department either treat 
the company as a no-shipper with respect to SPBs, since it only sold a 
small quantity of this merchandise to the United States, or assign a 
cooperative BIA rate to SPBs, since it provided complete information on 
sales of BBs.
    Department's Position: We disagree with Asahi that the application 
of first-tier BIA was inappropriate. 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.* * *'' With respect to SPBs, 
Asahi only provided invoices in response to the Department's 
questionnaire. The data contained on these invoices does not 
approximate the transaction-specific price and cost data requested by 
the questionnaire. As a

[[Page 66485]]

result, we do not have the information necessary for calculating a 
margin on SPBs. Because Asahi failed to produce the information the 
Department requested on SPBs, we have assigned first-tier BIA to this 
class or kind of merchandise.
    Asahi's suggestion that we assign the same rate to SPBs as that 
assigned to its sales of BBs is contrary to the Department's practice 
for establishing BIA rates. As stated above, whenever a company refused 
to cooperate with the Department or otherwise significantly impeded the 
proceeding, ``we have used the more adverse BIA--generally the highest 
rate for any company for the same class or kind of merchandise * * *.'' 
BBs is a separate class or kind of merchandise from SPBs and 
constitutes a separate antidumping duty order. Thus, the rate 
calculated for Asahi's sales of BBs is irrelevant to our review of the 
antidumping duty order on SPBs.
    Comment 7: SNR Germany claims that the Department erroneously 
applied BIA to sales that it could not match to CV. SNR Germany states 
that it provided in its questionnaire response the complete CV for each 
model sold in the United States but that, because the Department 
erroneously renamed PRODCDE to USMODEL, the computer program could not 
match the U.S. sales product codes (PRODCDE) with SNR's corresponding 
CV information.
    Department's Position: We agree with SNR Germany that we made a 
mistake in renaming PRODCDE to USMODEL in our preliminary results. For 
these final results, we have used the variable PRODCDE in our computer 
program.
    Comment 8: AVIAC states that it erroneously entered the letter 
``O'' rather than the correct digit ``zero'' for several product codes 
in its U.S. data set while entering the codes in its CV data set. AVIAC 
contends that, due to this error, the Department was not able to match 
the CV with the product code, resulting in the application of BIA to 
those products. AVIAC requests that the Department correct the codes so 
that proper matches will occur.
    Department's Position: We find that AVIAC's description of its data 
input errors is accurate and have corrected this error for the final 
results. As a result, all the products matched their corresponding CVs, 
and we did not apply BIA in these final results to AVIAC.

3. Circumstance-of-Sale Adjustments

3A. Technical Services and Warranty Expenses

    Comment 1: NSK/RHP argues that the Department should treat 
technical services associated with ESP transactions as indirect selling 
expenses (ISEs) as opposed to direct expenses. NSK/RHP asserts that it 
informed the Department that RHP (U.S.) did not provide technical 
services in the United States during the review period. NSK/RHP states 
that the United Kingdom divisions, RHP Industrial and RHP Precision, 
supplied all technical services for ESP sales. NSK/RHP further argues 
that the evidence of record conclusively demonstrates that technical 
service expenses incurred in the United Kingdom were a fixed expense 
not directly associated with particular transactions. NSK/RHP asserts 
that the Department verified that expenses for technical services by 
the United Kingdom divisions qualified as ISEs.
    Torrington argues that the Department should continue to classify 
NSK/RHP's U.S. technical services as direct rather than indirect 
expenses. Torrington asserts that NSK/RHP has not sufficiently 
demonstrated that the technical service expenses are truly indirect. 
Further, Torrington contends that the HM verification report does not 
refer to technical services in either general terms or specifically 
with respect to the technical service expenses incurred in the HM on 
behalf of U.S. sales.
    Department's Position: We agree with NSK/RHP. In its August 31, 
1994, questionnaire response, NSK/RHP noted that it did not incur 
direct technical expenses in the U.S. market. During verification, we 
examined NSK/RHP's methodology for calculating such expenses and found 
that these costs were not tied to particular transactions. Rather, NSK/
RHP allocated these costs across the total sales for two divisions 
(Industrial Bearings Division and Precision Division). See Exhibit 14 
of NSK/RHP's August 31, 1994, questionnaire response. Therefore, we 
have determined that NSK/RHP has properly demonstrated that technical 
expenses should be considered as an ISE, and we have deducted technical 
expenses associated with ESP transactions as such.
    Comment 2: Torrington argues that the Department incorrectly 
classified Koyo's HM warranty expenses as direct expenses. Torrington 
contends that Koyo's warranty-expense factor includes both scope and 
non-scope merchandise and, consistent with the CAFC's decision in 
Torrington V, the Department cannot adjust FMV for expenses incurred on 
scope and non-scope merchandise. Torrington maintains that, at best, 
these expenses should be considered ISEs.
    Koyo states that its methodology for reporting its warranty 
expenses in this review is the same as that it used in a number of 
previous reviews of the orders on AFBs and tapered roller bearings 
(TRBs). Koyo further states that the Department has verified and 
accepted Koyo's methodology in previous reviews and has never 
challenged Koyo's treatment of warranties.
    Department's Position: We agree with Koyo. In general, it is not 
possible to tie POR warranty expenses to POR sales, since the warranty 
expenses are incurred on pre-POR sales. Further, 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 IV (at 10910) 
and 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 3: Torrington argues that NSK's HM technical services 
primarily support NSK's development and sales of prototypes, and 
suggests that, since the Department excluded sales of prototypes from 
the HM sales listing, it should also exclude the technical service 
expenses provided in support of the development of these prototypes 
from the expenses allocated to non-prototype sales.
    NSK responds that its engineers provided technical service support 
for NSK's selling activities with respect to all HM customers, not just 
for those that purchased prototypes, so that no adjustment of its claim 
is necessary.
    Department's Position: We disagree with Torrington. Based on our 
analysis of the information submitted by NSK in this review, as well as 
that analyzed at verification, we agree with NSK that its engineers 
provided technical support for all of its sales. This technical support 
primarily consists of consultations with customers regarding bearing 
requirements and applications. Because this expense was both incurred 
and reported as an indirect expense (i.e., one that does not vary 
directly with the quantity of merchandise sold), we have treated this 
expense as an indirect selling expense.

[[Page 66486]]

    Comment 4: Torrington argues that, since NSK failed to comply with 
the Department's request to segregate reported U.S. technical service 
expenses between direct and indirect expenses, the Department should 
reclassify NSK's U.S. technical service expenses as direct expenses 
rather than as ISEs.
    NSK argues that it provided a complete and responsive submission to 
the Department's questionnaire. NSK also contends that the Department 
could not find any means by which to tie the technical service expenses 
to individual sales at verification and argues, therefore, that its 
U.S. technical service expense should be treated as indirect expense 
for the final results.
    Department's Position: We agree with Torrington. 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 NSK's questionnaire response, we determine that NSK 
could have separated direct and indirect technical service expenses. 
NSK explained in its questionnaire response that it would need to trace 
certain expenses, such as travel and travel-related expenses to 
individual customer calls, manually to separate these expenses between 
direct and indirect. This difficulty does not relieve it of its 
responsibility, however, to provide the Department with actual expense 
information. Therefore, for the final results we have applied BIA and 
treated NSK's U.S. technical service expense as a direct selling 
expense.

3B. Inventory Carrying Costs

    Comment 1: Torrington argues that, because Koyo has not 
consistently distinguished between its OEM and AM cost data for other 
expense categories, the Department should reject Koyo's allocation 
factors for its reported U.S. inventory carrying costs (ICCs) for OEM 
and AM sales.
    Koyo states that it has reported each of its expenses according to 
the methodology that most closely represents the manner in which it 
incurs expenses and maintains its records. Koyo argues further that its 
methodologies for reporting ICCs, air freight, and technical service 
expenses are the same in this review as in all recent reviews of AFBs. 
Koyo contends that the Department verified its methodology closely for 
calculating ICCs in this review and tied the reported data to the 
inventory turnover report by product class, as well as by OEM and AM 
groupings, without finding discrepancies in the calculation of the ICC 
factors.
    Department's Position: We agree with Koyo. We recognize that 
certain expenses are incurred in different manners and recorded in 
different ways. During verification we examined Koyo's methodology and 
tied its data to worksheets and to inventory turnover reports by 
product class as well as by either AM or OEM. Based on our findings, we 
are satisfied that Koyo allocated its ICCs between OEM and AM sales 
properly.
    Comment 2: Torrington alleges that NTN's reported inventory 
carrying turnover period for U.S.-bound merchandise is unreliable and 
should be rejected in favor of its average inventory carrying turnover 
period for HM sales. Torrington states that NTN has not supported a 
reported difference between production-to-shipment inventory periods 
for U.S. and HM sales, and that the Department should presume that 
U.S.-destined goods spend an equivalent amount of time in inventory as 
HM goods. NTN responds that the inventory periods for HM sales are 
properly calculated for the period from production to the first sale to 
an unrelated party. Respondent also states that the inventory period 
for ESP sales includes the time from production to shipment to NTN's 
U.S. subsidiary and the time in the subsidiary's inventory until sale 
to the first unrelated customer. NTN notes that this issue has been 
verified in previous reviews and has been found accurate. NTN asserts 
that Torrington's demand must be rejected without evidence to rebut the 
accuracy of the calculation.
    Department's Position: We disagree with Torrington. Although we did 
not verify this particular aspect of NTN's response, we found at both 
the HM and U.S. verifications that NTN's submitted data are basically 
reliable. Therefore, because the credibility of NTN's data has been 
established on an overall basis, we have no reason to disregard NTN's 
reported inventory period and we have used this information for these 
final results.

3C. Commissions

    Comment 1: NSK argues that the Department incorrectly disallowed 
its HM stock transfer commission (COMMH2), which consists of a premium 
paid to distributors for purchasing products from other distributors 
when a specific part was not available from NSK. NSK contends that its 
stock transfer commission is a promotional expense, intended to 
encourage distributors to locate stock, and that this payment should be 
treated as an indirect expense.
    Torrington argues that the Department correctly disallowed NSK's 
stock transfer commission, since NSK did not demonstrate that the 
reported COMMH2 is based on commissions paid on sales of in-scope 
merchandise. Torrington notes that NSK claimed that the Department 
should treat its stock transfer commission as a direct selling expense 
in its questionnaire response but it is now claiming it as an indirect 
promotional expense, and asserts that NSK has changed its position on 
the appropriate treatment of this expense to avoid the Department's 
disallowance of the entire expense because NSK allocated it on the 
basis of both scope and non-scope merchandise.
    Department's Position: We agree with NSK. Although NSK refers to 
this expense as a ``commission,'' it is evident from the record that 
this expense is not related directly to sales made by NSK to its 
customers and is properly treated as an indirect selling expense 
adjustment. This item is a promotional expense that does not relate to 
any particular sale by NSK and does not vary with the quantity of 
merchandise that NSK sells. See Zenith Electronics v. United States, 77 
F.3d 426, 431 (CAFC 1996).
    We do not accept Torrington's argument that we should disallow this 
expense because NSK did not demonstrate that the expense is based 
solely on commissions paid on sales of in-scope merchandise. Just as we 
would not expect a respondent to be able to establish whether a non-
product-specific advertising expense results in more sales of in-scope 
or out-of-scope merchandise, there is no reasonable way to establish 
the effect of this particular program on in-scope versus out-of-scope 
merchandise. As this program was equally available with respect to both 
kinds of merchandise, and was not associated with any particular sale, 
NSK's calculation of the expense was reasonable.

3D. Credit

    Comment 1: Torrington argues that SKF Italy overstated HM credit 
expenses by not using net prices in its credit calculation. Torrington 
argues that the Department should either instruct SKF Italy to modify 
its reporting of credit expenses for HM sales accordingly or reject SKF 
Italy's HM credit expenses.
    SKF Italy argues that its methodology is the same as that used and 
approved by the Department in each of the previous four reviews of 
these AFB orders.
    Department's Position: We agree with Torrington. SKF Italy 
calculated U.S.

[[Page 66487]]

credit expense based on prices net of discounts but did not follow a 
similar methodology for HM credit expense. Because credit calculations 
should be based on SKF Italy's net prices rather than its gross prices, 
we have recalculated SKF Italy's HM credit expense based on prices net 
of discounts for the final results.
    Comment 2: Torrington contends that SKF Italy's allocation of HM 
interest revenue, which is collected for late payments from customers, 
is improper because it does not account for the facts that (1) such 
revenues are likely to vary depending on the time elapsed between the 
due date and actual payment, and (2) SKF Italy might not always collect 
interest revenue, even if an amount is due. Torrington notes that, 
while SKF's reporting method for credit expenses reflects the amount of 
time between invoice date and payment date correctly, its reporting 
method for interest revenue does not achieve this. Torrington concludes 
that the Department should either instruct SKF Italy to modify its 
reporting of interest revenue for HM sales or reject SKF Italy's HM 
credit expenses.
    SKF Italy argues that its methodology is the same as that which the 
Department used in each of the previous four reviews of these AFBs 
orders. SKF Italy insists that the Department rejected a similar 
argument Federal-Mogul Corp. made in the 92/93 review and further 
argues that Torrington's assertion that interest revenues are likely to 
vary depending on the time elapsed is hypothetical and not supported by 
the record evidence pertaining to SKF Italy. SKF Italy contends that it 
calculated its claimed interest revenue adjustment only on interest 
revenue it received, not interest revenue due.
    Department's Position: We disagree with Torrington that we should 
disallow HM credit expenses due to alleged deficiencies in the 
reporting of interest revenue. Although we adjusted SKF Italy's HM 
credit expense (see our response to Comment 1, above), its calculation 
of credit expenses was reasonable and accurate to the extent 
practicable. We cannot disallow one claimed adjustment because of 
claimed deficiencies in another indirectly related adjustment. 
Therefore, we have used SKF Italy's claimed HM credit expense as we 
have recalculated it (see our response to Comment 1, above) for the 
final results.
    While we agree with Torrington that, in theory, interest revenue 
should be allocated in a similar manner as credit expense (in this 
case, on a customer-specific basis), it is unreasonable to do 
otherwise. In this case, we do not have the data on the record to 
perform such a reallocation. In fact, we do not have any evidence 
indicating whether such a reallocation is possible based on SKF Italy's 
accounting records. Accordingly, we have allowed interest revenue as a 
direct addition to FMV because it is reasonable to base interest 
revenue upon the actual amount collected by SKF Italy.

3E. Indirect Selling Expenses

    Comment 1: Torrington states that, because ISEs relate to all sales 
and SNR France allocated HM ISEs according to LOT, the Department 
should reject the reported HM ISEs for SNR France and apply an adjusted 
rate to all SNR France's HM sales. Citing NTN II at 1094-95, Torrington 
contends that the ISEs SNR France reported appear to be related to all 
HM sales or do not vary according to LOT. Torrington states that it is 
likely that SNR France's HM ISE methodology shifts expenses between 
LOTs (primarily from non-distributor sales to distributor sales) and 
reduces margins in the process.
    SNR France argues that it has explained its ISE allocation 
methodology according to LOT in its response, and the Department 
verified SNR France's allocation methodology fully. SNR France claims 
that many of its ISEs vary according to LOT and are incurred entirely 
for one of the two HM LOTs. SNR adds that, as shown in the responses, 
its ISEs vary either by employee time spent or by sales volume and 
value through OEMs and distributors that it identified separately and 
accounted for in its record system as maintained in the ordinary course 
of trade.
    With respect to the shifting of expenses from non-distributor sales 
to distributor sales, SNR France states that, in fact, expenses 
associated with distributors are greater than those associated with 
non-distributor sales. SNR France, therefore, does not agree with 
Torrington's argument that SNR France's allocation methodology shifts 
expenses from one level of sales to another. SNR France states that a 
large majority of the expenses that were reported for distributor sales 
were incurred solely on distributor sales.
    Department's Position: We agree with SNR France that it has 
reported ISEs properly according to LOT. SNR France has demonstrated 
that it incurs many of its expenses at a particular LOT. SNR France 
also demonstrated that its records segregate ISEs on a LOT-specific 
basis. In this respect, SNR France's reporting differs from the 
respondent in NTN I at 1094, which was unable to demonstrate that 
certain ISEs varied according to LOT. Further, as the Court noted in 
NTN I, our long-established practice has been to accept a respondent's 
accounting methodology as long as that methodology is reasonable and is 
used in the respondent's normal course of business. Id. at 1094. 
Accordingly, we have determined that SNR France's ISE-reporting 
methodology is appropriate.
    Comment 2: Torrington claims that SKF Sweden, France, and Italy are 
each over reporting HM ISEs with respect to sales made by Steyr 
Walzlager, an SKF affiliate. (Steyr is an Austrian affiliate of the SKF 
Group that made POR sales of SKF bearings (after purchasing them from 
the SKF companies) back to customers in Sweden, France, and Italy.) 
Torrington identifies two alleged deficiencies with respect to the 
reporting of HM ISEs for such sales: (1) These SKF companies did not 
adequately demonstrate that their own reported HM ISEs incurred on such 
sales (reported in the field INDSEL1H) are not duplicative of the 
expenses that they claim for Steyr on the same sales (reported in the 
field INDSEL2H); and (2) these SKF companies are improperly claiming 
additional expenses on such sales (included in the field INDSEL1H) that 
represent export selling expenses incurred by the SKF companies on the 
initial sales to Steyr. With respect to the second point, Torrington 
states that, for a similar situation in AFBs I, the Department 
classified certain expenses incurred by INA in Germany as export 
selling expenses even though they were incurred by a German parent 
company in Germany. Torrington suggests that the Department disallow 
all expenses reported in the INDSEL1H field on all Steyr sales, citing 
The Timken Company v. United States, 673 F. Supp. 495, 513 (CIT 1987) 
(Timken), in support of the proposition that the respondent has the 
burden of supporting favorable adjustments.
    These SKF companies respond that they did not report duplicative HM 
ISEs on sales by Steyr. They state that, for such sales, they reported 
only expenses that they incurred in selling the products to Steyr, 
along with indirect expenses incurred by Steyr in selling to the 
respective markets (i.e., the SKF companies did not report their own 
ISEs incurred on HM sales). SKF Sweden, France and Italy state that 
this methodology is consistent with their prior reporting and has been 
accepted and/or verified by the Department in prior reviews.
    Department's Position: We agree with SKF Sweden, France, and Italy. 
In their questionnaire responses, these SKF companies stated that they 
incur only

[[Page 66488]]

two types of HM ISEs with respect to Steyr sales, namely their export 
selling expenses in selling to Steyr (INDSEL1H) and Steyr's ISEs 
incurred on sales made in the respective home markets (INDSEL2H). In 
Timken, the court stated that the Department ``acts reasonably in 
placing the burden of establishing adjustments on a respondent that 
seeks the adjustments and that has access to the necessary 
information.'' See Timken at 513. SKF Sweden, France and Italy have met 
that burden with respect to Steyr sales through the explanations 
provided in their submissions and through verification. Further, it is 
the Department's practice to accept the information submitted by 
respondents as factual, absent verification, unless it has reason to 
believe otherwise. The record demonstrates clearly that SKF Sweden 
incurs only two types of ISEs with respect to sales in the HM, and 
there is nothing on the record to indicate that either of these 
reported expenses are duplicative.
    We also disagree with Torrington's argument that, in AFBs I, we 
determined that selling expenses such as those incurred in connection 
with sales to Steyr are export selling expenses that should not be 
reported on HM sales. In AFBs I, we found that certain expenses that 
INA claimed were related to HM sales were in fact incurred on U.S. 
sales. We treated the selling expenses incurred by INA on U.S. sales as 
U.S. ISEs, noting that a portion of the cost of INA's export team could 
be tied to sales made in the United States. Id. at 31692. In the 
present case, SKF Sweden, France and Italy have demonstrated that all 
reported expenses are associated with HM sales.
    Comment 3: Torrington contends that the Department should reject 
SKF France's and SKF Italy's calculations of separate indirect expenses 
for OEM sales and AM sales in both the U.S. market and the HM. 
Torrington states that the Department has rejected similar reporting by 
other respondents in previous reviews (referencing the Department's 
position regarding NTN's ISE allocations in AFBs III (at 39750) and 
AFBs IV (at 10940)). Torrington argues that these precedents establish 
that the Department recognized that ISEs are incurred on all sales and, 
therefore, they should be calculated as one rate for both OEM and AM 
sales.
    The SKF companies claim that the calculation of two separate ISE 
rates is consistent with how they incurred these expenses and with 
their reporting methodology in each of the four prior administrative 
reviews. SKF France adds that the Department verified this methodology 
and/or accepted it in each of these previous reviews.
    Department's Position: We disagree with Torrington. We have 
determined that both SKF France and SKF Italy have demonstrated that 
they can segregate such expenses reasonably between OEM and AM sales. 
We note that SKF France and SKF Italy stated that the AM division sells 
to small OEMs as well as the AM. We examined this situation and found 
that the AM factor is the appropriate factor to apply to these small 
OEMs. These SKF companies claimed, however, the OEM factor for these 
small OEMs. Nevertheless, the application of the OEM factor, instead of 
the AM factor, to such sales results in a smaller downward adjustment 
to FMV and is, therefore, a conservative measure of the expenses 
incurred in selling to small OEMs. For the above reasons, we have used 
ISEs for SKF France and Italy as reported for these final results.
    Comment 4: Torrington argues that Koyo's HM ISE claim, which the 
Department accepted, included a miscellaneous category that constituted 
the fifth largest category of Koyo's ISEs. Torrington maintains that 
there is insufficient detail regarding this miscellaneous category to 
determine whether these expenses are permissible. Torrington states 
that Koyo's ISEs appear to have increased for this POR even though 
total sales dropped significantly. Torrington argues that, at a 
minimum, this category of miscellaneous expenses should be deducted 
from Koyo's total ISEs for the final results.
    Koyo maintains that the categories it used for the ISEs worksheet 
in the response are the same account categories that appear in its 
accounting records. Koyo notes that this is the same reporting 
methodology that Koyo has used, and the Department has accepted, in all 
prior reviews of the AFB orders. Finally, Koyo states that the 
Department verified its reporting of ``other ISEs'' in this review and 
noted in its verification report that it was able to tie all selected 
items to source documents.
    Department's Position: We agree with Koyo. When we verified the 
various items that comprise ``other ISEs', we not only tied selected 
expenses to source documents but we also examined the nature of these 
items and found that they were properly included as ISEs.
    Comment 5: Torrington contends that the Department should reject 
certain downward adjustments to NTN's U.S. ISEs, including: (1) An 
adjustment for interest expenses that NTN allegedly incurred when 
borrowing to finance cash deposits of estimated antidumping duties, and 
(2) an adjustment for commissions paid to a related party on certain PP 
sales.
    Torrington objects to NTN's reduction of its pool of U.S. ISEs by 
the amount it paid in interest expenses on loans taken out to cover 
cash deposits of estimated antidumping duties for entries during this 
period. Petitioner notes that the Department rejected NTN's downward 
adjustment to ISEs for interest paid on loans to finance cash deposits 
in AFBs III and contends that the Department should reject the downward 
adjustment in this review for the same reasons. Torrington also argues 
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 contends that the 
Department must examine the circumstances surrounding related-party 
commissions before determining that they should not be used in the 
Department's analysis. Torrington concludes that the Department should 
consider these expenses to be direct selling expenses in the U.S. 
market and contends that, because NTN failed to report the commission 
rate it paid to the related party, the Department should resort to BIA 
in determining the commission amount to be deducted. Torrington claims 
that these actions reflect current Department policy positions.
    Department's Position: We disagree with Torrington regarding the 
adjustment for interest expenses that NTN incurred when borrowing to 
finance cash deposits of estimated antidumping duties, and consider it 
proper to allow the downward adjustment to U.S. ISEs. NTN Bearing 
Company of America (NBCA) incurred expenses on actual loans that it 
sought specifically to pay antidumping duty cash deposits. As such, the 
Department considers these expenses to be comparable to expenses for 
legal fees related to antidumping proceedings. The expenses were 
incurred only because of the existence of the antidumping duty orders 
and NTN's involvement therein. Therefore, the expenses cannot be 
categorized as selling expenses. It is the Department's longstanding 
practice to not treat expenses related to the dumping proceedings as 
selling expenses. For example, in Color Television Receivers From the 
Republic of Korea; Final Results of Administrative Review of 
Antidumping Duty Order, 58 FR 50336, the Department stated that such 
expenses ``are not expenses incurred in

[[Page 66489]]

selling merchandise in the United States.'' The CIT recognized this 
line of reasoning in Daewoo Electronics Co. v. United States, 712 F. 
Supp. 931 (CIT 1989) (Daewoo), when it concluded that the 
classification of such expenses as selling expenses subject to 
deduction from USP ``would create artificial dumping margins and might 
encourage frivolous claims . . . which would result in increased 
margins.'' These expenses were incurred as part of the process 
attendant to the antidumping duty orders. Had the antidumping duty 
orders not existed, the expenses would not have been incurred. By their 
nature, such expenses are not a selling expense, and they should not be 
deducted from USP.
    We clarified our position on this issue in our Results of 
Redetermination Pursuant to Court Remand, Slip Op. 96-37, submitted to 
the CIT on September 20, 1996. In that remand the Department was 
ordered to explain its acceptance of the downward adjustment to NTN's 
ISEs in AFBs III. In the redetermination we determined that the 
interest expenses to finance cash deposits were not borne, directly or 
indirectly by NBCA, to sell the subject merchandise in the United 
States. Consequently, these expenses were not eligible to be deducted 
from USP under section 772(e) of the Tariff Act. We also stated that we 
believed that we erred in not allowing the offset to U.S. ISEs in the 
92/93 administrative review.
    We also disagree with Torrington regarding the related-party 
commission. NTN stated that it made commission payments to 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 including in our analysis the commission, 
which is the transfer payment between NTN and NBCA, we have taken into 
account the actual expenses NBCA incurred with respect to these sales. 
Further, an examination of the specific types of expenses that NBCA 
incurred with respect to the sales in question indicates 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 we have treated them as ISEs.
    Comment 6: Torrington argues that the Department should reject 
Koyo's claim for the deduction of imputed interest expense on 
antidumping cash deposits from its U.S. ISEs.
    Department's Position: We disagree with Torrington. The imputed 
expenses in question represent expenses comparable to expenses for 
legal fees related to antidumping proceedings. The expenses were 
incurred only because of the existence of the antidumping duty orders 
and Koyo's involvement therein. Therefore, these expenses cannot be 
categorized as selling expenses. We and the CIT have recognized that 
such expenses should not be included as a cost of selling the 
merchandise. See, e.g., Daewoo Electronics Co. v. United States, 712 F. 
Supp. 931, 947 (CIT 1989).
    In Federal Mogul II, the CIT recognized our practice of imputing 
expenses where such expenses are not clearly recorded in a respondent's 
records. When we impute an expense not otherwise recorded, we adjust a 
respondent's actual selling expenses by adding to them the amount of 
the imputed selling expenses. Similarly, with respect to Koyo's 
interest expense, we removed from selling expenses an amount 
attributable to cash deposits, which do not represent a selling expense 
at all. As Koyo properly established the amount of cash deposits it 
paid during the POR, we must calculate an amount representing the 
expense to Koyo of the lost use of the cash deposits. This is required 
by section 772(e)(2) of the Tariff Act, which only permits us to deduct 
selling expenses from ESP. Therefore, we have allowed Koyo's claimed 
deduction of imputed interest expense on antidumping duty deposits from 
its U.S. ISEs.
    Comment 7: Torrington argues that the Department should reject 
NTN's and NTN Germany's allocation of certain indirect expenses to LOTs 
in the United States and HM, as it did in the two previous reviews, 
because NTN failed to justify or support with evidence the allocation 
of these expenses according to LOTs.
    Department's Position: We agree with Torrington. The CIT has upheld 
the Department's decision in AFBs III to neutralize the allocation of 
expenses based on LOTs in NTN II. The Department determined in AFBs III 
that the methods NTN and NTN Germany used for allocating their ISEs did 
not bear any relationship to the manner in which they incurred the 
expenses in question, thereby leading to distorted allocations. 
Further, we found that the allocations NTN and NTN Germany calculated 
according to LOTs were misplaced and that they could not conclusively 
demonstrate that their ISEs vary across LOTs. In the course of this 
review respondents did not provide any sufficient evidence 
demonstrating that their selling expenses are attributable to LOTs. 
Therefore, we have recalculated NTN's and NTN Germany's expenses to 
represent selling expenses for all HM sales for the final results.
    Comment 8: Torrington notes that NTN submitted selling expenses for 
CV on the basis of customer category. Petitioner believes such a basis 
is improper and should be rejected in favor of selling expenses based 
on all HM sales. Petitioner contends that LOT is irrelevant to the 
calculation of CV. Petitioner also notes that the Department rejected 
this calculation methodology in AFBs III and AFBs IV.
    Department's Position: We agree with Torrington. NTN has not 
provided sufficient evidence demonstrating that selling expenses are 
attributable to LOT. NTN's allocation of expenses according to LOT is 
unacceptable for sales used to calculate FMV and, for the same reasons, 
it is unacceptable for purposes of calculating CV in our analysis of 
NTN. Therefore, we have recalculated NTN's expenses for CV to represent 
those expenses for all HM sales.

3F. Differences in Merchandise

    Comment 1: NTN contends that the Department's methodology for 
calculating the 20-percent difference-in-merchandise (DIFMER) ceiling 
is incorrect. NTN notes that until AFBs III the Department had 
calculated the 20-percent DIFMER ceiling as a percentage of the U.S. 
variable cost of manufacturing. NTN complains that the Department's 
change in testing, from examining the ratio of the difference in U.S. 
and HM variable costs to U.S. variable cost (U.S. variable cost--HM 
variable cost/U.S. variable cost) to examining the ratio of the 
difference in U.S. and HM variable costs to U.S. COM (U.S. variable 
cost--HM variable cost/U.S. COM), was unwarranted, illogical and 
unnecessary. NTN submits that the new methodology thwarts the 
Department's intention of defining HM merchandise as similar only when 
the costs of the HM merchandise are reasonably close to the costs of 
U.S. merchandise because the new methodology broadens the range of 
costs, thereby allowing less similar merchandise to be considered 
comparable.
    Department's Position: We disagree with NTN. The Department's 
standard for commercial comparability was set forth in IA Policy 
Bulletin 92.2 (July 29, 1992). In that bulletin we explain that:

(a)lthough the 20% guideline has been used for a number of years, 
there have been some differences in practice in the calculation 
formula. While the numerator has always

[[Page 66490]]

been the difference in variable production cost, different 
denominators have been used. They have sometimes been price, other 
times total manufacturing costs, and yet other times the total 
variable manufacturing costs.  * * * Because variable manufacturing 
costs change as a share of total manufacturing costs from product to 
product, the size of a 20% difference would consequently vary as 
well in relation to both the price and total manufacturing costs. 
Therefore, a more stable basis for the denominator is the total 
manufacturing costs, and it has been chosen for uniform use.

    Since the issuance of this policy bulletin, the Department has used 
the 20-percent-of-COM guideline to determine whether HM merchandise is 
reasonably comparable to the exported merchandise. This methodology was 
employed in AFBs III (at 39766) and AFBs IV and was upheld by the CIT 
in NTN II.

4. Cost of Production and Constructed Value

4A. Cost-Test Methodology

    Comment 1: FAG/Barden asserts that the Department erred in 
excluding sales below COP for Barden. FAG/Barden argues that the 
domestic industry has not made an allegation of sales below cost 
against FAG in the United Kingdom since AFBs III. Further, FAG/Barden 
contends that the cost allegation did not include specific COM data 
particular to Barden or to Barden products. FAG/Barden points out that 
the below-cost allegation was brought specifically and exclusively 
against a particular firm, FAG U.K., and a single product, purchased 
ball bearings, and the Department did not apply the below-cost test to 
Barden's product when merging the two companies rates in the prior two 
reviews. FAG/Barden requests that the Department correct its computer 
program and exclude Barden's HM sales from the application of the cost 
test in the final results.
    Torrington argues that the Department did not err in applying a 
cost test to Barden's HM sales. Torrington asserts that the Department 
was consistent in its practice to exclude such sales because it found 
that Barden had sold these HM sales at below-cost prices. Further, 
Torrington argues, given that FAG U.K. and Barden are related parties 
and have been recognized to constitute a single legal entity for 
virtually every purpose of this review, the Department had an objective 
basis to suspect that Barden engaged in below-cost HM sales. Torrington 
requests that, for purposes of the final results, the Department not 
exempt Barden's HM sales from the application of the cost test.
    Department's Position: Consistent with the CIT's instructions in 
FAG II, we are treating FAG U.K. and Barden as separate companies for 
this review. However, the court did not issue FAG II until July 10, 
1996. Prior to that date we considered FAG (U.K.) and Barden to be one 
entity, and, upon receipt of the consolidated questionnaire response, 
we applied the cost test to all sales made by that entity. As a result 
of applying the cost test, there is now information on the record that 
shows that Barden made below-cost sales.
    In light of the Court's decision that we improperly collapsed the 
two companies, we agree with FAG/Barden that we previously did not have 
reason to believe or suspect that Barden made below-cost sales. 
However, we cannot disregard the fact that we found that Barden-made 
products were being sold in the home market below COP. Therefore, we 
must proceed in accordance with the statute, which requires that we 
disregard such sales. See section 773(b) of the Tariff Act.
    Comment 2: FAG Germany contends that the Department made an error 
in its margin analysis program by not eliminating models and sales that 
failed the cost test from the HM database.
    Torrington states that FAG Germany is correct in that the 
Department should eliminate certain below-cost sales from the HM 
database, but cautions the Department to ensure that, where ninety 
percent or more of a model's sales fail the cost test, the program will 
match the U.S. sale to CV instead of matching to HM bearings in the 
same family.
    Department's Position: We disagree with both FAG Germany and 
Torrington that a clerical error has occurred. When ninety percent or 
more of sales of a model are below cost, we disregard all sales of this 
model from our analysis and use CV as the basis for FMV for U.S. sales 
that match to such models. When between ten and ninety percent of sales 
of a model are below cost, we disregard the individual below-cost sales 
in calculating FMV. We use the remaining above-cost sales of such 
models in our analysis, and match such sales in the same manner that we 
match all HM sales. We have changed our matching methodology in one 
respect, however, applicable to all HM sales. We do not match U.S. 
sales to HM sales of similar models where we have disregarded all 
contemporaneous identical HM sales as below-cost sales. In this 
instance, we resort directly to CV. The program achieves this result. 
The ``error'' to which FAG and Torrington refer is not an error in 
programming, but simply our way of keeping a marker in the HM sales 
database so that we do not match to similar merchandise when we should 
be matching to CV.
    Section 773(b) of the Act requires that:

    Whenever sales are disregarded by virtue of having been made at 
less than the cost of production and the remaining sales, made at 
not less than the cost of production, are determined to be 
inadequate as a basis for the determination of foreign market value 
under subsection (a) of this section, the administering authority 
shall employ the constructed value of the merchandise to determine 
its foreign market value.

    As explained in Policy Bulletin 92/4, December 15, 1992, ``(i)n 
determining FMV, if the Department finds that sales of a given model, 
otherwise suitable for comparison, are sold below the cost of 
production, and the remaining sales of that model are inadequate to 
determine FMV, the Department will use constructed value to determine 
FMV.'' In defining the most similar merchandise, section 771(16) of the 
Act directs us to descend through a hierarchy of preferences for 
determining which merchandise sold in the foreign market is most 
similar to the merchandise sold in the United States. Section 771(16) 
also states that such-or-similar merchandise is the merchandise that 
falls into the first hierarchical category in which we can make 
comparisons. Section 771(16) does not direct us to condition the 
selection of the best comparison model on any basis other than 
similarity of the merchandise. Therefore, the Department does not 
select such or similar merchandise only from models which remain after 
conducting the below-cost test. As stated in the Policy Bulletin, 
``(t)he statute, therefore, directs us to the use of constructed value 
when the most similar model is sold below cost.''
    In conducting administrative reviews, the Department relies on the 
90/60-day guideline to establish the contemporaneity of sales from 
which to choose its HM comparison sales 3. If we are conducting a 
COP test, it is possible that we disregard all sales of some HM models 
within the 90/60-day window, either because between 10 and 90 percent 
of the entire POR's sales are below cost or because more than 90 
percent of the entire POR's sales are

[[Page 66491]]

below cost. In the AFB cases, we examine first our contemporaneity 
window to find identical merchandise to use as our comparator. Where 
there are no sales in the HM of identical merchandise, we identify the 
``family'' of bearings as similar merchandise. If we have selected 
identical merchandise as our comparator with the contemporaneity 
guideline in mind, but we disregard all contemporaneous sales of that 
identical model as a result of the COP test, i.e., all sales within the 
90/60-day window, the logic of the statute described in the Policy 
Bulletin still applies. In other words, in determining FMV, if the 
Department finds that contemporaneous sales of a given model, otherwise 
suitable for comparison, are sold below COP, and the remaining sales of 
that model are inadequate to determine FMV, the Department uses CV to 
determine FMV.
---------------------------------------------------------------------------

    \3\ This guideline establishes the following order of preference 
for matching sales of subject merchandise to HM sales. We first 
examine whether any identical HM sales were made in the same month 
as the U.S. sale. If there were no such identical sales in the same 
month, we look for HM sales in the three months that preceded the 
U.S. sale. Finally, we look for HM sales in the two months following 
the U.S. sale. If we do not find HM identical sales during this 
``90/60'' day window, we repeat this process for similar 
merchandise.
---------------------------------------------------------------------------

    In conducting these administrative reviews of the AFB orders, we 
have relied either on the 90/60-day guideline to establish the 
contemporaneity of sales from which to choose HM comparison sales or, 
as explained in our preliminary results, we have relied on annual-
average FMVs. Where we have relied on annual-average FMVs, the 
applicability of the Policy Bulletin's interpretation of the statute is 
clear. If between 10 and 90 percent of a model's sales are below cost 
and we disregard those below-cost sales, above-cost sales remain in the 
annual-average FMV. Where we have identified that only HM sales which 
fall within the 90/60-day contemporaneity guideline are suitable as 
potential matches to U.S. sales, the Policy Bulletin's interpretation 
of the statute applies equally to the pool of potential matches, i.e., 
those sales within the 90/60-day window. It would be inappropriate to 
apply the Policy Bulletin's interpretation differently based on 
different contemporaneity periods. Moreover, the Department's 
longstanding practice of applying the 10/90 test across the entire POR 
is not affected by the 90/60-day guideline, since the 10/90 test is an 
interpretation of the quantity requirements of section 773(b)(1).
    Therefore, for these final results, if we disregarded all 
contemporaneous sales of the best model because they are below COP, we 
relied on CV in our determination of FMV.

4B. Research and Development

    Comment 1: Torrington claims that the COP and CV formats in SKF 
Germany's cost response include separate entries only for general 
research and development (R&D) expenses but that there are no 
corresponding entries for factory R&D costs. Torrington asks the 
Department to determine whether SKF Germany allocated its factory R&D 
expense properly and, if not, to resort to an appropriate BIA.
    SKF Germany argues that its overhead variance is computed on a 
product-division and factory basis, thereby making that variance also 
specific on a class-or-kind basis. It claims that, as stated in its 
cost response, basic R&D is conducted by SKF Germany ERC in the 
Netherlands, and SKF Germany only conducts limited process-engineering 
and application R&D at the factory level. According to SKF Germany, 
this limited factory-level R&D is included in the fixed overhead 
expense of each factory and product division, as adjusted for the 
product division and factory-specific overhead variances and job order 
variances. SKF Germany contends that this methodology captures the 
actual costs of process and application engineering at the factory 
level in the COM on a class-or-kind basis. SKF Germany asserts that, 
since the involved operations are not product-specific, inclusion of 
the factory-level actual process and application engineering costs in 
factory overhead, and thereby the COM of each bearing, is the proper 
methodology for reporting the costs. Since these costs are included in 
overhead costs, SKF Germany concludes, a separate breakout for factory 
R&D costs is not possible.
    Department's Position: We disagree with Torrington. SKF Germany's 
overhead variance is computed on a product- and factory-specific basis. 
Hence, the variance is also specific on a class-or-kind basis. SKF 
Germany's methodology captures the actual costs of process and 
application engineering at the factory level in the COM on a class-or-
kind basis. We have accepted SKF Germany's methodology because the 
costs of necessary operations are not product-specific but relate to 
the products generally produced in the product division or are in the 
factory overhead. In this case, the COM of each bearing on a class-or-
kind basis reflects an acceptable methodology for reporting these 
costs. SKF Germany accounted for its factory-level R&D costs and 
allocated these costs on a class-or-kind basis appropriately.
    Comment 2: Torrington argues that the Department should restate FAG 
Germany's R&D costs for all products under review. Torrington observes 
that the questionnaire asked respondents to report ``product-specific 
or product-line'' R&D costs and, Torrington claims, while FAG Germany 
reported average amounts for all roller bearing products calculated 
using a broadly based factor, statements by FAG Germany on the 
administrative record suggest that actual amounts could have been 
reported. Torrington asks that the Department restate FAG Germany's R&D 
cost by substituting partial BIA for R&D costs in FAG Germany's COP and 
CV datasets.
    FAG Germany argues that it incurs the bulk of R&D costs before the 
first regular production unit is manufactured. FAG Germany contends 
that, because GAAP requires that most R&D costs be expensed when 
incurred and the bulk of R&D costs incurred during the POR relate to 
products which have not yet begun production, R&D costs for individual 
products reported in its response would be minimal or non-existent if 
calculated in the manner petitioner suggests. FAG Germany states that, 
to the extent possible, R&D costs have been assigned to the product 
lines for which they were incurred. FAG Germany also states that the 
Department verified FAG Germany's methodology for calculating and 
allocating R&D costs and found no discrepancies.
    Department's Position: We agree with FAG Germany. When we examined 
FAG Germany's accounting system at verification, we found that 
allocating FAG Germany's R&D expenses on a product-specific basis would 
not be feasible because a large portion of R&D projects are on-going 
and benefit more than one product or category of products. FAG 
Germany's response and the documentation it provided at verification 
confirmed that, to the extent possible, R&D expenses have been assigned 
directly to particular manufacturing and distribution cost-center 
areas. Thus, we conclude that FAG Germany's allocation method for R&D 
costs is appropriate.

4C. Profit for Constructed Value

    Comment 1: Torrington argues that the Department should recalculate 
profit for CV to exclude below-cost sales. Torrington acknowledges that 
the Department has previously rejected this position (citing AFBs IV at 
10922-23) but argues that, from a policy perspective, the Department 
should adopt an approach that is consistent with the long-standing 
construction of ``ordinary course of trade'' under the GATT code and 
find that below-cost sales are outside the ordinary course of trade 
and, therefore, inappropriate for use in the CV profit calculation.
    Respondents FAG, INA, NSK, NTN, and SKF maintain that it would be 
incorrect for the Department to disregard below-cost sales in the 
calculation of profit for CV, arguing that such an action is not 
supported by the

[[Page 66492]]

statute and would be inconsistent with prior reviews. Respondents first 
note that the Department has rejected Torrington's position in past 
reviews and that the CV profit methodology used in these previous 
reviews has been upheld by the CIT (citing AFBs II at 28374, AFBs III 
at 39752, AFBs IV at 10922, and Torrington I at 633). NSK adds that 
below-cost sales can only be excluded from the CV profit calculation if 
such sales are ``outside the ordinary course of trade,'' which does not 
exclude below-cost sales per se. NSK states that it is well accepted 
that respondents in these reviews make some sales above and some sales 
below cost as a regular business practice during the ordinary course of 
trade.
    Department's Position: We disagree with Torrington that the 
calculation of profit should include only sales priced above the COP. 
Section 773(e)(1)(B) of the Tariff Act directs that profit should be 
equal to that usually reflected on 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; 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 subsection suggests that any requirement 
concerning the exclusion of below-cost sales in the calculation of 
profit for CV would explicitly be included in this provision. 
Accordingly, it would be inappropriate to read such a requirement into 
the statute. See AFBs III at 39752 and AFBs IV at 10922. Further, the 
``ordinary course of trade'' provision in the statute (section 771(15)) 
does not include or even mention below-cost sales. Finally, Torrington 
has not demonstrated that the below-cost sales at issue are actually 
outside the ordinary course of trade. See also FAG III and case cited 
therein.
    Comment 2: Torrington argues that, if the Department rejects 
petitioner's position that below-cost sales should not be included in 
calculating profit for CV, the Department should assign a profit rate 
of zero to such sales instead of the actual, negative, profit rates 
realized. Torrington suggests that this result could be reached by 
setting the negative profit amounts realized on such sales to zero in 
the profit ratio numerator, while continuing to include the actual cost 
of production of unprofitable sales (along with all other sales) in the 
profit ratio denominator. Torrington contends that the inclusion of 
negative profit rates on such sales in the CV profit calculation allows 
respondents to offset or ``mask'' profits on selected sales with losses 
on unprofitable sales. Torrington states that setting negative profits 
to zero would be consistent with other Department practices designed to 
avoid the possibility of manipulation via targeted high-priced and low-
priced sales, and cites as an example the Department's practice of 
setting negative transaction-specific dumping margins to zero when 
calculating the weighted-average dumping margin.
    FAG, INA, NSK, NTN, and SKF respond that Torrington's proposal 
should be disregarded because the Department's current practice of 
calculating profit for CV without regard to the profitability of 
individual sales is statutorily correct and has been upheld by the CIT. 
SKF notes in addition that Torrington provides no direct statutory or 
case law support for its position and contends that Torrington's 
argument is incorrect because: (1) The statute requires that profit be 
calculated for the general class or kind of merchandise at issue 
without regard to the inclusion or exclusion of particular sales; (2) 
Congress intended profit for CV to be a ``representative'' profit 
(including both below-cost and above-cost sales) and that the remedy 
that Congress provided for situations involving a profit too low to be 
considered representative is the eight-percent statutory minimum; (3) 
Congress addressed the concern regarding ``targeted'' below-cost sales 
through the below-cost provisions of the statute; and (4) Torrington's 
suggested calculation methodology is distortive because it excludes 
below-cost sales in the numerator (total profit) but includes such 
sales in the denominator (total COP).
    FAG adds that the statute requires that the profit must be that 
``usually reflected'' in sales of the same general class or kind. FAG 
contends that Torrington's methodology does not meet this requirement 
because it excludes profit on certain sales in the general class or 
kind, namely those made at below-cost prices.
    Department's Position: We disagree with Torrington for the same 
reasons as those provided in Comment 1, above. Specifically, the 
statute requires that we base profit on sales of the general class or 
kind of merchandise at issue, provided that they are made in the 
ordinary course of trade. With respect to such sales, the statute does 
not provide that the sale, if profit is negative, be treated as a zero-
profit sale.
    Comment 3: Torrington argues that the Department should calculate 
profit for CV based on profits observed on reported HM sales made 
during the designated sample weeks, not on sales of the same general 
class or kind of merchandise in the HM as calculated by respondents. 
Torrington notes that the Department has previously rejected this 
position (citing AFBs IV at 10923), but asks that the Department 
reconsider its position for the following reasons: (1) Use of sample-
week sales insures that profit data are based on a verified database of 
sales of in-scope merchandise; and (2) general class-or-kind profit 
data are based on the particular cost-accounting methods employed by 
respondents and do not provide assurance that the reported profits are 
based on sales of in-scope merchandise.
    FAG, INA, and NSK respond that Torrington has provided no new 
evidence to alter the Department's longstanding position. Respondents 
contend that the Department's preference for non-sampled profit data is 
consistent with section 773(e)(1)(B) of the Tariff Act, which requires 
the use of profit based on sales of the same general class or kind of 
merchandise, not such-or-similar merchandise.
    Department's Position: We disagree with Torrington with respect to 
calculating profit on the basis of sample-week sales. See AFBs III at 
39752 and AFBs IV at 10923. Because the profit on 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 general class or kind of merchandise. This method for 
calculating profit for CV is in compliance with section 773(e) of the 
Tariff Act and has been upheld by the CIT. See FAG III.
    Comment 4: Torrington argues that the Department should exclude 
from the profit calculation sales to related parties that were not at 
arm's-length prices. Torrington states that this policy has been 
employed in other administrative reviews (citing AFBs IV at 10921 and 
Certain Hot-Rolled, Cold-Rolled, Corrosion-Resistant and Cut-to-Length 
Carbon Steel Flat Products from Korea, 58 FR 37176). Torrington 
requests that the Department ensure that the CV profit calculations for 
a number of companies, including NTN, Koyo, NSK, and SNR, do not 
include non-arm's-length sales.
    NSK responds that it only made sales to unrelated parties in the 
HM, and that this issue therefore does not apply to NSK. NTN states 
that the Department did not exclude any of its related-party sales in 
the 92/93 review and requests that the Department include all HM sales 
in the CV profit calculation for this review.

[[Page 66493]]

    Department's Position: We agree with Torrington, in part. As we 
stated in AFBs IV, 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 earned on sales of the 
merchandise under consideration.
    Related-party sales that fail the arm's-length test do give rise to 
the possibility, however, that certain elements of value, such as 
profit, may not fairly reflect an amount usually earned on sales of the 
merchandise. We considered whether the amount for profit on these sales 
to related parties was reflective of an amount for profit usually 
experienced 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. If the profits on such sales to 
related parties varied significantly from the profits on sales to 
unrelated parties, we excluded those related-party sales for the 
purpose of calculating profit on CV. See AFBs IV at 10922.
    Comment 5: Torrington argues that the Department improperly 
accepted the statutory minimum profit figures submitted by a number of 
companies, including NTN, Koyo, NSK, and NMB/Pelmec, without 
independently testing them. Torrington argues that the Department 
should test these claims using the sales and cost data submitted by 
respondents, adjusted for below-cost sales and sales to related 
parties.
    NMB/Pelmec responds that it calculated weighted-average profit 
margins and determined whether the actual profit was above or below the 
statutory minimum before applying it to CV. NMB/Pelmec contends, 
therefore, that it performed a proper analysis of the profit margins 
prior to entering the information into the computer database.
    Department's Position: We disagree with Torrington. Torrington's 
proposal amounts to taking the higher of the reported profit for the 
general class or kind of merchandise or that found using the reported 
sales and cost data, which is inappropriate for the reasons we stated 
in response to Comment 3. As noted in that position, we have based 
profit on all sales of the general class or kind, where this data is 
available, and not on reported sales and costs. With respect to NMB/
Pelmec, we neglected to determine whether NMB/Pelmec's actual profit 
was greater than the statutory minimum. We have corrected this error 
for these final results.
    Comment 6: Asahi contends that the Department erroneously excluded 
arm's-length sales to certain related customers when calculating profit 
for CV. Asahi states that sales to only two customers should have been 
disregarded under the related-party CV profit test but that the 
Department excluded sales to a number of other customers as well.
    Department's Position: We agree with Asahi that we made an error in 
our calculation of profit for CV and have corrected this error for the 
final results.
    Comment 7: Torrington argues that NMB/Pelmec arbitrarily calculated 
profit margins for small and medium-size BBs while the statute refers 
to the profits earned on the general class or kind of merchandise. 
Given the requirements of the statute, Torrington argues that the 
Department should recalculate the actual average profit rate on the 
basis of all BB sales in Singapore.
    Department's Position: We agree with Torrington that the statute 
requires profit to be calculated on sales of the general class or kind 
of merchandise and not be based on subsets of bearings. We have 
recalculated the company's profit rate based on BB sales to reflect 
profit on the general class or kind of merchandise sold by NMB/Pelmec 
in Singapore.

4D. Related-Party Inputs

    Comment 1: Torrington contends that the Department should 
scrutinize all related-party material costs and verify data for which 
questions remain regarding related-party component costs. Torrington 
argues that the Department should apply BIA to the material costs in 
question if the Department is not satisfied that all related-party 
material costs are accurate and sold at arm's length. It claims further 
that SKF Germany did not respond sufficiently to the Department's 
supplemental question addressing the percentage of total material costs 
for each part purchased from a related supplier, but instead stated 
that the information was not available. Torrington claims that SKF 
Germany should have provided the information. Torrington also contends 
that SKF Germany stated that it has not reported, and cannot report, 
discrete elements of costs for the products not manufactured by SKF 
Germany and, Torrington concludes, there is little basis for the 
Department to accept representations of actual costs.
    SKF Germany replies that its response indicates clearly that it 
only purchased two component types from a related supplier for use in 
the production of subject merchandise. It states further that, in 
another proceeding, a related supplier provided the Department with a 
complete description of its methodology for determining the actual cost 
of the finished bearing and this related supplier's cost-accounting 
methodology has been previously verified by the Department with no 
discrepancies noted. SKF Germany states that it used the greater of 
transfer price or actual cost for CV purposes to arrive at the actual 
cost of purchased components for COP purposes and used the greater of 
the transfer or actual cost for CV purposes.
    Department's Position: We disagree with Torrington. SKF Germany has 
stated on the record that it applied its internal transfer price 
indices to arrive at the actual cost of purchased components for 
reported COP and used the greater of the transfer price or actual costs 
for CV reporting. SKF Germany has explained and provided examples of 
the methodology it used to determine the actual cost of components 
purchased from related suppliers. Because its methodology is reasonable 
and reflects respondent's normal records, we have accepted the costs of 
inputs from related suppliers, as we have done in prior reviews.
    Comment 2: Torrington argues that, if Ovako Steel, a 100-percent-
owned related supplier, sold the same or a reasonably comparable 
product to unrelated buyers of steel, SKF Germany should have reported 
Ovako Steel's arm's-length price information in order

[[Page 66494]]

to demonstrate whether Ovako Steel's sales to SKF fairly reflect market 
price. Torrington claims further that Ovako Steel apparently 
experienced improved operations during the POR and, if Ovako Steel's 
profits became healthy, market prices might exceed transfer prices and/
or COP.
    SKF Germany states that it had no referent market price data for 
the material it purchased from Ovako Steel because the steel products 
were unique to SKF. Hence, SKF Germany reported Ovako Steel's actual 
costs to manufacture the material. With respect to CV, SKF Germany 
claims that it relied on the greater of COP or transfer price for 
material purchased from Ovako Steel. SKF Germany claims that this 
methodology is consistent with instructions in the Department's 
questionnaire. Specifically, SKF Germany claims to have followed the 
Department's instructions by providing COP information for the input 
where the purchase prices for an identical or comparable input was not 
available. SKF Germany also states that its annual report, at pages 46 
and 47, makes clear that Ovako Steel continued to operate at a loss in 
1993, albeit slightly less than that experienced in 1992.
    Department's Position: We disagree with Torrington and we affirm 
our methodology from prior reviews with respect to SKF Germany's 
purchases of raw materials from the related supplier, Ovako Steel. The 
inputs that SKF Germany purchased from Ovako Steel were unique, and 
they were produced according to SKF Germany's specific product 
specifications. Absent referent market prices for the inputs, we are 
accepting SKF Germany's cost reporting with respect to CV by relying on 
the greater of the COP or transfer price for these inputs.
    Comment 3: Torrington argues that the Department should eliminate 
any related-party input transfers by Koyo that do not reflect the 
higher of arm's-length prices or COP.
    Koyo argues that the Department does not have statutory authority 
to investigate the cost of inputs Koyo obtained from related suppliers. 
Koyo contends that, in order to request information regarding the COP 
of inputs obtained from related suppliers, the Department must have 
``reasonable grounds to believe or suspect'' that the value Koyo 
reported for such inputs is below the COP of the inputs, citing section 
773(e)(3) of the Tariff Act. Koyo maintains that, according to the 
language of the statute, in order to launch an investigation under 
section 773(e)(3) and demand cost data for inputs obtained from related 
suppliers, there must be a ``bona fide allegation'' or a ``specific and 
objective basis for suspecting'' that the related suppliers of major 
inputs were transferring them to Koyo at values less than their COP. 
Since no such allegation has ever been made by the petitioner, and the 
Department had no independent basis upon which to believe or suspect 
that such sales were made at below COP, Koyo requests that the 
Department remove the COP data for such inputs from the administrative 
record in this review and use the transfer prices Koyo reported in 
calculating the CV of the affected bearing models.
    Torrington responds that related-party transfers are inherently 
different from arm's-length HMPs and, therefore, the Department may 
treat the question of below-cost related-party transfers differently 
than the issue of below-cost arm's-length sales. Torrington claims 
that, while the Department may require petitioners or domestic parties 
to show that arm's-length sales in the HM are below cost, it may 
require respondents to supply evidence as to whether related-party 
sales are below cost because (1) related-party transfers are a suspect 
category under the law, and (2) foreign manufacturers and their 
subsidiaries inherently have access to the best information for 
purposes of analyzing transfer prices. Finally, Torrington asserts that 
it has been the practice of the Department since enactment of section 
773(e)(3) of the Tariff Act to require respondents to submit evidence 
concerning related-party production costs.
    Department's Position: As we stated in AFBs IV (at 10923), we 
disagree with Koyo that the Department lacks authority to request cost 
data from related suppliers. In calculating CV, the Department does not 
necessarily accept the transfer prices the respondent paid 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 the market value of 
the input, we may value the input using the best evidence available, 
which may be the COP.
    Koyo did not provide information regarding prices between unrelated 
parties for some inputs it purchased from related suppliers. In those 
instances, we require 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 AFBs IV that Koyo 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 Koyo purchased major inputs from related 
suppliers at prices below the COP of those inputs during this review 
period. See AFBs IV (at 10923-10924).
    Comment 4: NSK argues that the Department did not have statutory 
authority to request supplier cost information absent a bona fide 
allegation that the transfer prices from suppliers are below cost, 
citing section 773(e)(3) of the Tariff Act. NSK contends further that 
the Department does not have authority to substitute COP for transfer 
price for the finished bearings NSK purchased from a related supplier. 
NSK notes that petitioners have never alleged that NSK purchased inputs 
from specific related parties at prices below the input's COP, and 
argues that the Department improperly rejected related-supplier 
transfer prices when calculating CV. NSK suggests that the Department's 
calculation of CV, using the higher of transfer price or cost for each 
input, is an unreasonable interpretation of the statute as it fails to 
consider the total return to the supplier for transfer of inputs for 
the same finished bearing or the entire relationship of the supplier 
with NSK.
    Torrington argues that there is nothing in the statute that 
supports NSK's contention that the Department should consider factors 
other than cost

[[Page 66495]]

or transfer price in determining whether related-supplier inputs 
reflect fair market value. Torrington argues that the Department should 
reject NSK's argument as it did in the prior review.
    Department's Position: As we stated in AFBs IV at 10923-24, we 
disagree with NSK that the Department violated the antidumping law by 
requesting cost data from related suppliers. In calculating CV, the 
Department does not 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 the market value of 
the input, we may value the input using the best evidence available, 
which may be the COP. Absent information from a respondent regarding 
prices between unrelated parties for some inputs it purchased from 
related suppliers, we require the actual COP of those inputs to 
determine whether the transfer prices reflected the market value of the 
inputs. In these cases, 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.

4E. Inventory Write-down and Write-off

    Comment 1: Torrington claims that FAG Germany did not report 
inventory write-down amounts as costs in its response. Citing Canned 
Pineapple Fruit from Thailand, 60 FR 29553, 29571 (June 5, 1995), and 
other cases, Torrington states that write-downs are production costs 
that should be included in antidumping cost calculations. Torrington 
argues further that the Department should include inventory write-down 
amounts on a model-specific basis and that, if this cannot be done, the 
Department should use BIA in determining inventory write-down expense.
    FAG Germany argues that inventory write-downs are not true costs 
for the Department's antidumping calculations. FAG Germany states that, 
if a product that had been written-down is later sold, the product 
would still be matched under the Department's antidumping methodology 
to the actual COM and selling, general, administrative, and financing 
expenses of the relevant periods as contained in the COP and CV data 
for the product. FAG Germany states further that, if the product that 
was written-down was later written-off, then reporting the write-down 
as a cost would effectively ``double-count'' the cost. Finally, FAG 
Germany claims that the Department verified that FAG Germany had a 
substantial net write-up of inventories and that, if the Department 
accepts Torrington's argument, it should also allow the amounts of 
inventory write-ups as an offset to cost.
    Department's Position: We agree with FAG Germany. As demonstrated 
during the cost verification, FAG Germany did not incur inventory 
write-downs during the POR. Thus, Torrington's argument concerning 
write-downs is moot.
    Comment 2: Torrington claims that FAG Germany did not report 
inventory write-off amounts on a model-specific basis, but rather 
spread the charge over numerous or all models. Torrington says that 
write-offs are model-specific by their nature and should be reported 
that way. Torrington argues that the Department should restate FAG 
Germany's inventory write-off charges to be model-specific or, if this 
cannot be done, use BIA in determining inventory write-off expense.
    FAG Germany argues that it has included all write-offs of 
materials, components and finished goods in its COP and CV 
calculations, and that its record-keeping system does not permit ready 
identification and valuation of finished goods write-offs of individual 
bearing models. FAG Germany also argues that model-specific 
calculations and application of inventory write-offs defy commercial 
reality.
    Department's Position: We agree with FAG Germany. As demonstrated 
at verification, FAG Germany accounted for the finished goods write-
offs in FAG Germany's COP/CV calculation as an addition to COM. We 
found that, due to FAG Germany's record-keeping system, it is not 
feasible for FAG Germany to allocate write-off charges to specific 
models. Since FAG Germany has allocated its write-off costs to COP/CV, 
we conclude that FAG Germany's allocation methodology is appropriate.

4F. Interest Expense Offset

    Comment 1: Torrington argues that, because NSK did not demonstrate 
that its reported short-term interest income was derived from business 
operations, the Department should disallow this offset and use total 
interest expense as a percentage of cost of goods sold.
    NSK responds that it consistently invests excess cash from 
operations in short-term investments to maximize the return on such 
funds until they are needed. NSK states further that the short-term 
income it used in the offset involves income from short-term 
investments related to the production of subject merchandise and income 
from investments of working capital. NSK contends that it determined 
the percentage of total interest income that was short-term following 
the methodology the Department recommended, i.e., by calculating the 
ratio of short-term (current) assets to long-term (non-current) assets, 
using the information on its Ministry of Finance report. NSK explains 
that it then applied the ratio to total interest income so as to 
determine the portion of interest income that was deducted from gross 
interest expense in order to calculate net interest expense. NSK argues 
that it had to calculate short-term interest indirectly because its 
record-keeping system does not track how much interest income from its 
consolidated subsidiaries is, in fact, short-term or long-term in 
nature.
    Department's Position: We agree with NSK. We are satisfied from 
information on the record that NSK's business records do not report 
separately the short- and long-term nature of the interest income 
earned by the company and its subsidiaries. NSK's alternative 
calculation of its income offset reasonably reflects the short-term 
interest income related to production activities and the investment of 
working capital.

4G. Other Issues

    Comment 1: Torrington asserts that the Department omitted SKF 
Sweden's R&D and imputed interest expenses from the calculation of 
general expenses of the CV section in the Department's computer program 
which applies the statutory minimum test for reported GS&A expenses. 
Torrington suggests

[[Page 66496]]

that the Department correct this error by adding SKF Sweden's R&D and 
imputed interest expenses to the calculation of general expenses.
    SKF Sweden agrees with Torrington that R&D and imputed interest 
expenses should be included in the general expense calculation. SKF 
Sweden states that the methodology that Torrington presents to correct 
the problem, however, is incorrect because it would leave the imputed 
expenses out of the CV selling expense fields. SKF Sweden proposes 
instead that the Department add the direct imputed interest charges 
expense to HM direct expenses for CV and add the indirect imputed 
interest charges to HM indirect expenses for CV. SKF Sweden also states 
that the R&D expenses should be added separately to the calculation of 
general expenses.
    Department's Position: We agree with the methodology proposed by 
SKF Sweden and have made the necessary changes to the final margin 
calculation program.
    Comment 2: Torrington claims that, in the Department's correction 
of SKF France's G&A ratio, as provided in SKF France's supplemental 
questionnaire at page 2, the Department omitted the R&D expenses 
reported by SKF France in the calculations of CV and COP.
    SKF France agrees with Torrington that the Department made this 
clerical error and notes further that the Department failed to add the 
imputed expenses in calculating CV selling expenses. In addition, SKF 
France states that the Department omitted inventory carrying costs from 
the calculation of HM ISEs for CV.
    Department's Position: We agree with both Torrington and SKF France 
and have corrected these errors.
    Comment 3: Torrington contends that SKF Germany did not report 
severance pay and/or restructuring costs on a class-or-kind basis, and 
recommends that, as a BIA solution, the Department assume that all POR 
severance pay and restructuring costs were attributable exclusively to 
each class or kind and should allocate these costs on that basis. 
Torrington claims that SKF Germany's reporting methodology is incorrect 
since each class or kind of bearing is produced in a completely 
separate industry and costs associated with closures in one industry 
are not appropriately allocated to another.
    SKF Germany claims that, as the Department has previously verified, 
its job order variance and cost adjustments are computed by product 
division and by factory, which assures that the job order variance and 
adjustments are specific by class or kind of merchandise. SKF Germany 
notes, in addition, that the general adjustments to the product 
division and factory-specific job order variances are also product 
division and factory-specific, although they contain, in part, amounts 
allocated from company-wide expenses in addition to the product 
division and factory-specific costs.
    Department's Position: We disagree with Torrington. SKF Germany's 
job order variance and cost adjustments are computed by product 
division and by factory, as supported by SKF Germany in its submission. 
This assures that the job order variance and adjustments are specific 
by class or kind of merchandise. Because SKF Germany's calculation of 
both the job order variance and the general adjustment to the job order 
variance are specific by product division and by factory, there is no 
reason to apply BIA to severance pay and/or restructuring costs.
    Comment 4: Torrington argues that the Department should use BIA in 
calculating FAG Germany's severance pay and restructuring costs because 
FAG Germany did not calculate such costs on a class-or-kind basis. 
Torrington contends that the Department should reject FAG Germany's 
argument that such costs are general in nature and not specifically 
attributable to any particular bearing type. Torrington argues that if, 
for example, a respondent closed a BB plant, the costs involved in the 
closure should not be allocated to other types of bearings. Torrington 
states that FAG Germany would have known which plants closed and where 
laid-off workers had worked and, thus, should have been able to report 
such costs on a class-or-kind basis. Torrington recommends that, as 
BIA, the Department assume that all POR severance pay and restructuring 
costs were attributable exclusively to each class or kind.
    FAG Germany states that its reported restructuring costs were 
general in nature, relating to company-wide downsizing and the closure 
of DKFL, and that these costs were incurred in a prior POR. FAG Germany 
also claims that they were captured and allocated properly in general 
and administrative (G&A) expenses by the ``bridge'' calculation. FAG 
Germany states that none of the plants that it closed produced specific 
bearing classes and that no single class or kind of merchandise bore a 
disproportionate share of the expense. FAG Germany claims that 
dismissed workers were not necessarily associated with the particular 
areas being downsized because, in addition to laying off workers, FAG 
Germany shifted workers and administrators extensively within the 
organization. FAG Germany contends that attempting to calculate such 
costs on a class-or-kind basis would be impossible and contrary to FAG 
Germany's actual experience.
    Department's Position: We agree with FAG Germany that it recognized 
the majority of restructuring costs related to the closure of DKFL, a 
subsidiary, in 1992. At verification we examined the restructuring 
costs indicated in the footnotes of the 1993 audited financial 
statements. We traced the amounts stated in the footnotes to FAG's 
``bridge'' adjustments and G&A expenses. We noted that the downsizing 
and closure costs of DKFL were general in nature and the related 
expenses FAG incurred cannot be applied to specific classes or kinds of 
merchandise produced at each facility. Therefore, we have included FAG 
Germany's restructuring costs and severance pay in G&A expenses for the 
final results.
    Comment 5: Torrington states that SKF Germany's responses contain 
conflicting statements as to whether it purchased finished products 
from outside suppliers. Torrington asserts SKF Germany should clarify 
the record on this matter.
    SKF Germany maintains that, for five successive administrative 
reviews, SKF Germany has reported, as sales of its own product, certain 
finished bearings manufactured by unrelated subcontractors. SKF states 
that the Department has repeatedly verified that SKF Germany's cost-
reporting and cost-accounting methodologies are correct. SKF Germany 
acknowledges that it purchased finished bearings from unrelated 
subcontractors but states that it has reported sales of such 
subcontracted bearings in the HM and United States. SKF Germany states 
that it has also reported the acquisition costs of such bearings in its 
cost response. SKF Germany claims that its unrelated subcontractors do 
not know the destination of the subcontracted products at the time of 
their acquisition and, since these products are manufactured for SKF 
Germany, SKF Germany has treated them consistently as its own 
production.
    Department's Position: As SKF Germany has stated on the record, it 
reports, as sales of its own product, certain finished bearings 
manufactured by unrelated suppliers. In addition, SKF Germany reported 
the acquisition costs of these bearings in its cost response. Because 
the unrelated suppliers do not know the destination of these finished 
bearings and because SKF Germany has consistently controlled the 
production and sale of these bearings, we have

[[Page 66497]]

treated them as SKF bearings in our analysis.
    Comment 6: Torrington contends that it is unclear whether FAG 
Germany included costs associated with DKFL-produced ``FAG Germany-
brand'' bearings in its cost response. Torrington states that, although 
FAG Germany said that it included such costs in its submission, FAG 
Germany's cost response contains very little discussion of DKFL and 
focuses on FAG Germany-KGS. Torrington argues that the Department 
should resolve this question prior to issuing the final results and 
that, if weighted-average DKFL costs are not included, the Department 
should not accept FAG Germany's cost response for the models in 
question.
    FAG Germany argues that, because no identical DKFL-made and FAG 
Germany-made bearing types were sold in the United States during the 
POR, weight-averaging the costs is not necessary. FAG Germany states 
that it included all appropriate DKFL production costs in its response 
for DKFL-made bearings sold in the United States during the POR. FAG 
Germany claims that the reason it placed little emphasis on DKFL in its 
narrative cost response is due to the fact that FAG Germany withdrew 
from the DKFL business three months into the POR, so DKFL's production 
had little overall impact on the response.
    Department's Position: We agree with FAG Germany. We examined FAG 
Germany's cost response and found that it had reported the costs for 
DKFL bearings properly. Therefore, we have accepted FAG Germany's 
reported costs for such bearings for the final results.
    Comment 7: Torrington notes that, at verification, the Department 
found that FAG Germany did not include a loss it incurred on the sale 
of a Korean subsidiary in its G&A expense calculation. Torrington 
argues that the Department should assign the amount of the loss to the 
type of merchandise the Korean facility produced. Torrington argues 
further that, if the Department rejects its arguments about 
restructuring costs, then the Department should allocate the amount of 
the loss on the sale of the Korean subsidiary to all bearings under 
review.
    FAG Germany argues that the Department should not include the loss 
it incurred on the sale of its Korean affiliate because this entity 
produced bearings in Korea, not Germany, and thus the merchandise 
produced was not within the scope of the order. FAG Germany argues that 
this loss should be treated as an investment loss and not included in 
the pool of G&A expenses.
    Department's Position: We disagree with Torrington that we should 
allocate the loss on the sale of the Korean subsidiary to FAG Germany's 
sales on a class-or-kind basis. This cost relates to the overall 
operation of the company. Therefore, it is most appropriately 
characterized as a G&A expense and, for the preliminary results, we 
recalculated FAG Germany's G&A expense to include this expense. For 
these final results, we have also allocated the amount of the loss on 
the sale of the Korean subsidiary on the basis of all costs incurred by 
the company during the POR, including non-subject merchandise.
    Comment 8: Torrington observes that FAG Germany reported different 
CVs for further-manufactured products depending on whether they were 
sold to OEM or to distributor customers, and argues that the printout 
of CV of further-manufactured products shows that FAG Germany did not 
report distributor values for certain parts. Torrington concedes that 
it may be possible that there were no distributor sales for these 
parts, but argues that the Department should insure that it calculates 
margins properly if there were such sales. Torrington suggests 
computer- programming language to conduct this test.
    Department's Position: We agree with Torrington that, in the event 
that FAG Germany did not report the CV for all further-manufactured 
products to distributors, we must apply BIA to such sales. Torrington's 
suggestion is reasonable and appropriate in this case, as the value we 
would use would be calculated for the same component for the same 
manufacturer, albeit for a different LOT. Therefore, we made the 
programming change suggested by Torrington for the final results as a 
safeguard. However, we note that information on the record does not 
indicate that FAG Germany actually failed to report the CV for 
components further manufactured into products sold to distributors.
    Comment 9: Torrington argues that the Department should adjust the 
reported G&A data to include certain miscellaneous, non-operating 
expenses which (i) the Department adjusted for in the previous review, 
(ii) the Department did not verify in the current review, and (iii) it 
appears are not included in Koyo's response in this review. Torrington 
suggests that the adjustment be made based on Koyo's 1993-94 financial 
statements, which indicate that nonoperating expenses amounted to about 
two percent of the cost of goods sold.
    Koyo argues that the Department's reclassification of these 
expenses was erroneous in the previous review because these expenses 
were clearly unrelated to its production activities, and Koyo has 
appealed the Department's treatment of these expenses to the CIT. 
According to Koyo, even if the Department were to accept Torrington's 
argument, the total amount of the adjustment for the prior review was 
de minimis, as identified in the Department's cost verification report. 
Assuming that the specific expenses the Department identified in the 
previous review remained a consistent percentage of total non-operating 
expenses, Koyo states that, since the total non-operating expenses as a 
percentage of cost of sales declined in this review, these expenses 
would be even lower.
    Department's Position: We disagree with Torrington. In the previous 
review, as a result of a cost verification, we adjusted for certain 
non-operating expenses, i.e., bonus payments to directors and auditors, 
exchange losses, and miscellaneous non-operating expenses, that were 
not included in Koyo's reported costs of production. Although we did 
not verify costs in this review, there is no evidence on the record for 
this review that indicates that an adjustment is needed.
    Comment 10: Torrington argues that Koyo did not provide sufficient 
information for the Department to determine where it has reported 
depreciation on idle assets. Torrington recommends that the Department 
apply as BIA the highest amount of depreciation on idle assets reported 
by any other respondent.
    Koyo asserts that it responded directly to the Department's 
supplemental questionnaire regarding changes in the manner in which it 
calculated its depreciation of idled assets. Koyo claims that 
Torrington has provided no evidence that Koyo had additional 
depreciation on idle assets which it did not report and, therefore, 
there is no reason for the Department to apply BIA in this situation.
    Department's Position: We agree with Koyo. Koyo responded to our 
supplemental questions on this issue, adequately explaining that it 
reported an amount for depreciation on idled assets. There is no 
evidence that Koyo's reporting of depreciation on idle assets was 
deficient.
    Comment 11: Torrington argues that NSK has excluded depreciation on 
some classes of assets since its non-consolidated financial statements 
indicate that depreciation of plant and equipment declined during the 
POR while non-current assets increased. Thus, Torrington argues, the 
Department should apply as BIA the

[[Page 66498]]

highest amount of depreciation on idle assets reported by any other 
respondent.
    NSK responds that Torrington failed to note that, in its financial 
statements, NSK uses a declining-balance method of depreciation which 
results in larger depreciation expenses in early years. NSK contends 
that there is no need for adjustment for idle asset depreciation, since 
the full expense is already included in NSK's reported costs.
    Department's Position: We agree with NSK. We found no indication 
from information on the record that NSK excluded depreciation from its 
reported totals.
    Comment 12: Torrington states that the Department used the ten-
percent statutory minimum selling, general and administrative expense 
(SG&A) calculation for NMB/Pelmec without first determining whether 
NMB/Pelmec's actual SG&A exceeded the statutory minimum. Torrington 
asserts that the Department must confirm that the use of the statutory 
minimum is appropriate.
    Department's Position: We have reviewed our calculations. In our 
preliminary results, we neglected to test actual SG&A for NMB/Pelmec to 
determine whether NMB/Pelmec's actual SG&A exceeded the statutory 
minimum. We have corrected this error for these final results.

5. Discounts, Rebates, and Price Adjustments

    As a general matter, the Department only accepts claims for 
discounts, rebates, and other price adjustments as direct adjustments 
to price if actual amounts are reported for each transaction. 
Discounts, rebates, or other price adjustments based on allocations are 
not allowable as adjustments to price unless, as described below, they 
are based on a fixed and constant percentage of sales 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 respondents to 
average direct additions to or subtractions from 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, or (b) they were granted as a fixed and 
constant percentage of sales price on all transactions for which they 
are reported, as in the case with a fixed-percentage rebate program or 
an early-payment discount granted on the total price of a pool of 
sales. In other words, we did not accept as direct deductions discounts 
or rebates unless the actual amount for each individual sale was 
calculated. This is consistent with the policy we established and 
followed in AFBs II (at 28400), AFBs III (at 39759), and AFBs IV (at 
10929).
    In accordance with the CAFC's decision in Torrington V (at 1047-
51), we have not treated improperly allocated HM price adjustments as 
ISEs, but have instead disallowed negative (downward) adjustments in 
their entirety. We have included positive (upward) HM price adjustments 
(e.g., positive billing adjustments that increase the final sales 
price) in our analysis. The treatment of positive billing adjustments 
as direct adjustments is appropriate because disallowing such 
adjustments would provide an incentive to report positive billing 
adjustments on an allocated (e.g., customer-specific) basis in order to 
minimize their effect on the margin calculations. That is, if we were 
to disregard positive billing adjustments, which would be upward 
adjustments to FMV, respondents would have no incentive to report these 
adjustments on a transaction-specific basis, as requested. See AFBs IV 
at 10933.
    With respect to the CIT's decision in Torrington V (at 640) that we 
must disallow HM price adjustments that respondents allocated in a 
manner that does not allow us to separate expenses incurred on sales of 
scope products from those incurred on non-scope products, we note that 
our methodology incorporates this decision because we have denied all 
allocated price adjustments except those granted as a fixed and 
constant percentage of sales price on all transactions for which they 
are reported. If a respondent grants and reports a price adjustment as 
a fixed percentage across only those sales to which it pertains, the 
fact that this pool of sales may include non-scope merchandise does not 
distort the amount of the adjustment respondent granted and reported on 
sales of subject merchandise, since the same percentage applies to both 
subject and non-subject merchandise.
    For USP adjustments, we deducted the per-unit amounts reported for 
U.S. discounts, rebates, or price adjustments if respondents granted 
and reported these adjustments on a transaction-specific basis or as a 
fixed and constant percentage of sales price. 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. 
See AFBs IV at 10929.

Post-Sale Price Adjustments (PSPAs)

    Comment 1: Torrington argues that the Department should not accept 
customer-specific billing adjustments reported by SKF Germany, SKF 
France, SKF Italy, and SKF Sweden because the reporting methodology 
does not tie the adjustments to individual transactions and does not 
separate billing adjustments granted on in-scope merchandise from those 
granted on out-of-scope merchandise. Torrington cites Torrington III 
(at 640) for the proposition that the Department must develop a 
methodology that removes HM PSPAs and rebates paid on sales of out-of-
scope merchandise from any adjustments made to FMV or, if no viable 
method can be developed, the Department must deny such adjustments to 
FMV. Torrington recommends that, since these SKF companies could not 
provide evidence to support limiting their allocation of these billing 
adjustments with respect to in-scope merchandise only, the Department 
should disallow any downward adjustments to FMV for the claimed 
adjustments. Torrington further requests that the Department retain all 
upward adjustments so that these respondents do not benefit from a 
failure to report information (citing AFBs IV at 10907, 10933).
    The SKF companies argue that there is no basis for the treatment of 
these billing adjustments in the manner Torrington suggests. These 
respondents contend that, since these billing adjustments were 
associated with multiple invoices and multiple invoice-lines, it was 
necessary to report these adjustments on a customer-specific basis 
rather than on a transaction-specific basis. The respondents assert 
that the manner in which these adjustments were reported was not the 
result of an unwillingness to report more narrowly, but was the only 
manner feasible. The companies contend that the fact that they are 
unable to prove the negative (that these allocations were not affected 
by price adjustments made on out-of-scope merchandise) is not a 
sufficient reason to treat these adjustments in the manner suggested by 
Torrington. Further, the respondents contend that the CIT's rationale 
for denying any allocated adjustment that is not limited to in-scope 
merchandise is unreasonable, and note that this argument is now on 
appeal.

[[Page 66499]]

    The SKF companies also argue that Torrington's proposal that only 
upward adjustments to FMV be retained serves no useful purpose since 
the treatment of such adjustments as indirect expenses, or even their 
complete denial, serves as an adequate incentive for respondents to 
report such adjustments in the most accurate manner possible. Moreover, 
Torrington's proposal contravenes the CIT's remand order in that no 
adjustments should be made on merchandise that cannot be limited to in-
scope merchandise.
    Finally, the respondents contend that Torrington's cite to AFBs IV 
is incorrect with respect to the treatment of positive and negative 
billing adjustments. They state that, in that review, the Department 
did not disallow negative billing adjustments but instead treated them 
as ISEs.
    Department's Position: We agree with Torrington. The SKF companies 
did not tie the billing adjustments in question to specific 
transactions, but instead calculated and reported them using customer-
specific allocations. The contention that these adjustments could not 
be reported on a transaction-specific basis because they were granted 
on multiple invoices or multiple invoice lines is beside the point; the 
fact that a single billing adjustment is granted with respect to 
multiple transactions does not preclude our treatment of the item as a 
direct adjustment to FMV. However, in order for us to do so, each 
individual billing adjustment must be reported only with respect to the 
specific transaction(s) involved in the invoice (or group of invoices) 
on which the billing adjustment is granted. Further, the per-unit 
amount reported must be the amount specifically credited to the 
transaction in the company's records or, if there is no such 
transaction-specific recording, the adjustment must be granted and 
reported as a fixed and constant percentage of the sales price on all 
transactions to which the adjustment applies.
    The reporting methodology used by respondents does not tie each 
billing adjustment to the specific transaction(s) on which each 
adjustment was granted. Instead, all POR billing adjustments were 
cumulated by customer and allocated across all POR sales to the 
customer, regardless of whether the customer actually received a 
billing adjustment on a particular sale. Therefore, in accordance with 
the guidelines regarding the acceptance of such adjustments, as stated 
above, we have disallowed the allocated negative HM billing adjustments 
and have included positive billing adjustments in our analysis.
    Because we have disallowed these negative billing adjustments due 
to the allocation methodology used by these companies, and these 
adjustments were not granted as a fixed percentage across sales, we do 
not reach Torrington's argument that we should disregard these 
adjustments because they do not remove the effect of adjustments paid 
on out-of-scope merchandise. However, as noted above, our methodology 
is consistent with, and incorporates, the CIT's decision regarding the 
in-scope/out-of-scope distinction in Torrington III at 640.
    Comment 2: Torrington argues that the Department's allowance of 
Koyo's HM billing adjustments (BILLADJH1, BILLADJH2) as ISEs in the 
preliminary results was incorrect. Torrington states that Koyo granted 
these adjustments on a transaction- or product-specific basis but 
allocated both adjustments on a customer-specific basis. Torrington 
notes that Koyo assigns debit and credit memos to the POR without any 
ties to specific invoice numbers establishing that the debits or 
credits related to period sales or to non-scope products. Torrington 
recommends that the Department deny negative HM billing and include 
positive billing adjustments in the antidumping analysis. Torrington 
further suggests that, since positive billing adjustments were not 
reported on a transaction-specific basis, the Department should not use 
the reported positive billing amounts but should apply, as partial BIA, 
Koyo's highest reported positive billing adjustment to all sales 
involving positive adjustments.
    Koyo acknowledges that it reported both types of billing 
adjustments using customer-specific allocations. Koyo maintains, 
however, that the Department should accept these adjustments for the 
final results as, at a minimum, ISEs. Koyo notes that, contrary to 
Torrington's statements, the Department in fact treated only BILLADJH1 
as an ISE in the preliminary results, while denying BILLADJH2 
altogether.
    With respect to the billing adjustments reported in the field 
BILLADJH1, Koyo contends that, although it reported these adjustments 
on a customer-specific basis, the granting and reporting of such 
billing adjustments were limited to scope merchandise (AFBs). Koyo 
requests that the Department therefore treat this adjustment as an ISE.
    With respect to billing adjustments reported in the BILLADJH2 
field, Koyo argues that the Department's rejection of this adjustment 
was improper because Koyo reported the PSPAs that comprise this 
adjustment as accurately as possible according to the records it 
maintained in the normal course of business. Koyo states that it 
granted its second billing adjustment (BILLADJH2) on a model-specific 
basis, but it did not maintain the adjustment in that format in its 
computer records. Koyo therefore reported this adjustment by 
calculating customer-specific allocation ratios and applying such 
ratios across all POR sales to the customer. (Koyo calculated the 
customer-specific ratios by summing all POR billing adjustments per 
customer, multiplying the customer-specific adjustment totals by the 
ratio of its POR AFB sales to that customer to the total POR sales to 
that customer, then divided the resulting amount by the POR AFB sales 
to each customer, thus deriving a factor).
    Department's Position: We agree with Torrington, in part. In 
accordance with our guidelines regarding PSPAs, as stated above, we 
have denied Koyo's negative HM billing adjustments reported under the 
BILLADJH1 and BILLADJH2 fields, and have retained positive billing 
adjustments for both fields, because Koyo reported these adjustments 
using customer-specific allocations. Although we verified that Koyo's 
billing adjustments were allocated on a customer-specific basis, they 
were not reported on a transaction-specific basis. As previously stated 
in this section, we do not accept allocations that do not result in the 
reporting of the actual amount of price adjustments incurred on each 
transaction. We do not agree with Torrington's proposal that we apply 
the highest reported HM billing adjustment for each field to all 
reported HM transactions because this would be unnecessarily punitive. 
We are satisfied that our guidelines in this area provide sufficient 
incentive to report transaction-specific adjustments in the manner in 
which they are granted.

Discounts

    Comment 3: Torrington argues that the Department should disallow 
SKF Germany's reported HM ``cash discounts'' (early payment discounts) 
because SKF Germany claimed amounts on the basis of broad allocations 
that included sales of non-subject merchandise and SKF Germany did not 
establish that all sales earned the cash discount or did so on a 
proportional basis.
    SKF Germany argues that its reported cash discounts are typically 
taken by SKF Germany's customers by submitting a single discounted 
payment covering multiple invoices. SKF Germany claims that, because it 
grants the cash discount against a bundle of invoices, it is

[[Page 66500]]

impossible to report these discounts more narrowly than by customer 
number. SKF Germany recognizes the CIT has determined that SKF 
Germany's allocation approach is unacceptable, but argues that the 
Court has imposed an excessively stringent test of requiring SKF 
Germany to prove that no adjustments on non-subject merchandise appear 
in any of these customer-number-specific allocations.
    Department's Position: We agree with Torrington. According to our 
guidelines as stated above, we have disallowed SKF Germany's cash 
discounts because SKF Germany did not report these discounts on a 
transaction-specific basis or as a fixed and constant percentage of 
sales price for each transaction on which the company incurred this 
expense. See Torrington I, AFBs IV (at 10932), and Comment 1, above.
    Comment 4: Torrington argues that the Department should disallow a 
discount paid by SKF Italy to one customer for 1994 transactions 
because the supporting documentation submitted by SKF Italy was limited 
to 1993 sales to this customer.
    SKF Italy argues that, as proof of the availability and amount of 
the cash discount for the entire POR, it submitted a copy of a letter 
confirming the discount to this customer for 1993 sales. SKF Italy 
states that this is the same type of information the Department 
verified and upon which it allowed a cash discount for all sales in the 
relevant POR in prior reviews (citing AFBs IV at 10963). SKF Italy 
offers to provide, upon request by the Department, copies of the cash 
discount documentation for sales made to this customer in 1994.
    Department's Position: We disagree with Torrington. While SKF Italy 
provided supporting documentation only with respect to discounts given 
to the customer for 1993 sales, we are satisfied that the documentation 
is representative of discounts paid for the entire POR. Had we 
suspected a possible error or misrepresentation with regard to this 
matter in SKF Italy's response, we would have asked SKF Italy to 
provide additional documentation.
    Comment 5: SKF Germany claims the Department inconsistently treated 
its ``Other Discounts'' field as an ISE in deriving HMP for price-to-
price comparisons, while treating it as a direct adjustment in deriving 
the adjusted HMP used in the COP test. SKF Germany states that, in 
fact, ``Other Discounts'' are indirect and the Department should treat 
them as such in the cost test.
    Torrington argues that these cash discounts are direct in nature 
since they are earned on an invoice-by-invoice basis and go directly to 
actual price. Torrington recommends that they be treated as such for 
COP purposes. Torrington asserts that the fact that SKF Germany failed 
to report these discounts on a sale-by-sale basis should not alter 
their treatment as direct expenses in deriving the adjusted price for 
the cost test. Hence, Torrington claims that the Department should 
treat these as direct for COP purposes but should treat them as 
indirect for the FMV calculation due to SKF Germany's deficiency in 
reporting.
    Department's Position: We disagree with SKF Germany. SKF Germany 
reported this field using customer-specific allocations. Accordingly, 
we are disallowing these HM discounts for the purpose of deriving the 
FMV in price-to-price comparisons. However, we are treating them as 
direct adjustments to the adjusted HMP used in the cost comparison 
because to do otherwise (i.e. to make no adjustment to HMP for these 
discounts) would provide respondents with an adjustment that is 
preferable to the adjustment that would be made if this expense was 
reported as incurred (on a transaction-specific basis).
    Comment 6: FAG Germany argues that the Department should not treat 
HM third-party payments and early-payment discounts as an ISE. FAG 
Germany argues that it reported these expenses on a transaction-
specific basis and they are tied directly to the sales for which they 
are reported. FAG Germany contends that the Department should treat 
these expenses as direct adjustments to FMV.
    Torrington argues that the Department should require FAG Germany to 
submit additional data to substantiate its claims that it reported 
these expenses on a transaction-specific basis. Torrington argues that, 
if FAG Germany cannot tie these expenses to specific transactions, the 
Department should treat these expenses as indirect for the final 
results.
    Department's Position: We agree with FAG Germany with regard to 
early-payment discounts, but we disagree with FAG Germany with regard 
to third-party payments. With regard to early-payment discounts, 
information that FAG Germany submitted in its supplemental 
questionnaire response indicates that the company grants, tracks, and 
reports such discounts on a transaction-specific basis. Because FAG 
Germany has tied early-payment discounts to individual transactions, we 
have treated these discounts as a direct expense.
    However, the evidence submitted by FAG Germany does not demonstrate 
that the company's third-party payments are directly related to the 
products under review. Contrary to FAG Germany's assertions in its 
brief, the company failed to provide information demonstrating how it 
ties its third-party payments directly to the sale by FAG Germany to 
the distributor, which is the sale we use for comparison purposes. 
Further, the information on the record does not clearly indicate that 
the amount of this expense varies with the quantity of merchandise sold 
from FAG Germany to the distributor.
    In this respect, FAG Germany's third-party payments are akin to a 
promotional expense. See discussion of NSK's stock transfer commission, 
item 3.C, supra. As with NSK's stock transfer commission, it is evident 
from the record that FAG Germany's third-party payment expense is not 
related directly to sales by FAG Germany to its customers and is 
properly treated as an indirect selling expense adjustment. This item 
does not relate to any particular sale by FAG Germany and does not vary 
with the quantity of merchandise that FAG Germany sells. See Zenith 
Electronics v. United States, 77 F.3d 426, 431 (Fed. Cir. 1996). 
Accordingly, as this program was equally available with respect to both 
kinds of merchandise, and was not associated with any particular sale, 
we have treated FAG Germany's third-party payments as an ISE for the 
final results.
    Comment 7: Torrington agrees with the Department's decision to 
disallow NSK's early-payment discounts to distributors (OTHDISH) 
because NSK failed to demonstrate that it calculated such discounts on 
the basis of sale of in-scope merchandise only.
    NSK argues that, regardless of the mix of scope and non-scope 
merchandise that a distributor might have purchased in any one month, 
the early-payment discount for that month applies as a fixed percentage 
equally to both the scope and non-scope sales. Citing AFBs IV (at 
10935), NSK asserts that proof of stable payment patterns for all early 
payment discount customers is adequate to prove a direct expense. NSK 
argues, further, that the Department verified that NSK incurred this 
expense with respect to sales of scope merchandise to specific 
customers and on equal percentages for both scope and non-scope sales. 
NSK claims that the process of reporting and verification are intended 
to determine whether the respondent's methods accurately represent the 
facts. NSK notes that the Department verified NSK's HM early-payment 
discounts for this review and noted in the verification report that it 
found no discrepancies.

[[Page 66501]]

    Department's Position: We agree with NSK. In accordance with our 
guidelines, as stated above, since these early payment discounts were 
granted as a fixed percentage of all purchases by a given customer, we 
have allowed these early payment discounts as a direct adjustment to 
price.
    Comment 8: Torrington claims that, because NTN used an aggregate 
method of reporting some billing adjustments rather than reporting HM 
billing adjustments on a transaction-specific basis, the Department 
should reject the billing adjustments or, in the absence of outright 
rejection, treat the adjustments as indirect expenses. Torrington 
contends that respondents must tie FMV adjustments to sales of subject 
merchandise, rather than simply allocate them over all sales. 
Torrington also asserts that certain discounts NTN claimed do not 
qualify as direct adjustments to price because they are not 
transaction-specific or constant across all sales. Petitioner asserts 
that NTN did not report the discounts on a transaction-specific basis 
and it provided no evidence that it granted discounts as a fixed 
percentage of all HM sales. Torrington recommends that the Department 
reject the claimed discounts.
    NTN contends that it reported the billing adjustments on a 
customer- and product-specific basis and that, in the vast majority of 
cases, the reporting was transaction specific. NTN notes that only in a 
very few cases are adjustments only customer- and product-specific.
    Department's Position: We agree, in part, with Torrington. As 
stated above, we allow direct adjustments for discounts and price 
adjustments if they are reported on a transaction-specific basis 
(rather than allocated) or if they were granted and reported as a fixed 
and constant percentage on all sales to a customer. NTN reported its 
discounts on product- and customer-specific bases, not on a 
transaction-specific basis, and did not grant and report such discounts 
as a fixed and constant percentage of sales. Accordingly, we have 
disallowed those discounts because NTN did not report them on a 
transaction-specific basis.
    However, we disagree with Torrington that we should reject NTN's 
billing adjustments. During verification, we examined NTN's HM sales, 
and found no reason to believe or suspect that NTN failed to report its 
HM billing adjustments accurately and completely. In addition, we found 
that the great majority of adjustments were transaction-specific; the 
number of instances of non-transaction-specific reporting is so slight 
as to not render the billing adjustments distortive. Accordingly, we 
have treated NTN's reported HM billing adjustments as direct 
adjustments to price for these final results.

Rebates

    Comment 9: Torrington contends that the Department should not 
accept SKF Sweden's reported HM rebates (REBATE1H) because SKF Sweden 
only describes the available rebate programs in vague, general terms 
and does not explain how the rebates are reported on a transaction-
specific basis. Further, Torrington states, SKF Sweden reported imputed 
rebates for the first four months of 1994 but did not elaborate on the 
precise methodology it employed to impute these rebate amounts. 
Torrington also states that SKF Sweden does not have a rebate schedule 
and therefore has no straightforward mathematical calculation to 
determine rebates. As a result of the absence of a rebate schedule, 
Torrington argues the rebates SKF Sweden gives will vary based on 
numerous factors, and SKF Sweden's customers may not know the rebate 
terms at the time of sale. Torrington also asserts that SKF Sweden did 
not limit its reporting of rebates to in-scope merchandise. Torrington 
states that, for these reasons, the Department should not make any 
adjustment to FMV for the claimed HM rebates.
    SKF Sweden responds that it granted and reported its rebates as 
fixed-percentage rebates and they should therefore qualify as direct 
price adjustments. SKF Sweden asserts that this reporting is consistent 
with the Department's guidelines for reporting rebates and with the 
CIT's decision in Torrington II (at 390). SKF Sweden also contends that 
it described the rebates in full in its questionnaire response, and 
that it only reported rebates for those transactions for which 
customers received the rebates. SKF Sweden contends that the fixed-
percentage rebate is not distorted by PSPAs paid on sales of out-of-
scope merchandise, if the rebates or PSPAs paid to each customer are 
the same for each sale of in-scope and out-of-scope merchandise that 
occurred during the POR, citing Federal Mogul III. With respect to the 
issue of imputed rebate amounts for sales made in the first four months 
of 1994, SKF Sweden argues that it reported imputed rebate amounts for 
those customers who qualified for the rebate in 1993. SKF Sweden states 
that the Department previously verified SKF Sweden's rebates and SKF 
Sweden has not changed its methodology for reporting rebates in this 
review. Thus, SKF Sweden asserts, the price methodology for imputing 
rebates for 1994 is in the record, and the Department should reject 
Torrington's assertion that SKF Sweden did not elaborate on its pricing 
methodology.
    Department's Position: We agree with SKF Sweden. As noted above, we 
make direct adjustments for reported rebates if they are granted as a 
fixed and constant percentage of sales on all transactions for which 
they are reported. SKF Sweden reported its rebates as a fixed 
percentage of sales, and maintained the fixed-rebate percentage granted 
to its customers throughout the POR. The fact that SKF Sweden did not 
provide a rebate schedule in its response does not mandate rejection of 
the reported rebates. Absent verification, it is the Department's 
practice to accept the information respondent submits as factual unless 
it has reason to believe otherwise. There is nothing on the record to 
demonstrate that SKF Sweden's customers did not know the HM rebates 
terms at the time of sale.
    SKF Sweden granted its HM rebates for the following: (1) certain 
customers and certain product codes; (2) certain customers achieving 
specified sales levels; and (3) certain customers for all sales. In 
each of these situations, SKF Sweden applied a fixed-percentage rebate 
to those sales of in-scope merchandise that received a fixed-percentage 
rebate. Under this methodology, SKF Sweden has not distorted the rebate 
amounts in its response.
    With respect to imputed HM rebates, SKF Sweden explained that it 
did not know the total amount of rebates its qualified customers 
received when it was preparing its response and, therefore, SKF Sweden 
imputed this amount based on historical experience. We find that the 
manner in which it imputed HM rebates for qualified customers was 
reasonable, and we have accepted and used the imputed HM rebates for 
the final results of this review.
    Comment 10: Torrington argues that the Department should reject SNR 
France's HM rebates. Torrington asserts that rebates are not an 
allowable adjustment unless the terms of the rebate are set forth at 
the time of the sale, therefore, the rebate schedules must be known at 
the time of the sale for a reported rebate to be allowable. Torrington 
states that the record evidence suggests that SNR France determines its 
rebate schedules after a year of sales has occurred. Torrington 
suggests that, under this program, SNR France could choose to pay 
rebates as it anticipates dumping margins, thereby

[[Page 66502]]

providing funds to customers rather than paying antidumping duties.
    SNR France responds that, although it does not have a rebate policy 
for all customers, the company grants rebate payments, as the 
Department verified, to its customers periodically throughout the year. 
SNR France emphasizes that it calculates rebates on a customer-specific 
basis and its rebate programs are granted and paid as a part of the 
company's standard business practice. Therefore, SNR France contends, 
it does not use the rebate programs to anticipate dumping margins as 
speculated by petitioner. SNR France notes that the Department has 
verified in past reviews that SNR France's rebate methodology is part 
of SNR France's standard business practice, and cites AFBs II (at 
28401-02) to support its argument that the Department's policy is to 
accept rebate programs that are granted and paid as part of the 
respondent's standard business practice.
    Department's Position: We agree with SNR France. Information 
submitted by SNR France, as well as our findings at verification, 
indicates that SNR France granted these rebates as a fixed and constant 
percentage of price and reported them as such. Moreover, SNR France's 
submission and the documentation that it provided at verification 
support a conclusion that the adjustments it claimed were customary and 
in the ordinary course of trade and, thus, were known to SNR France's 
customers at the time of sale. Therefore, we have allowed SNR France's 
HM rebate adjustments for our final results.
    Comment 11: Torrington argues that the Department should disallow 
SKF Germany's reported HM rebate 2 because these payments were lump-sum 
amounts to compensate customers for inadequate profits. Torrington 
claims that SKF Germany claimed amounts on the basis of broad 
allocations that included sales of non-subject merchandise but it did 
not demonstrate that resales of subject merchandise caused the rebates 
to be earned.
    SKF Germany argues that its rebate 2 calculation aggregates rebate 
payments made to certain of SKF Germany's dealer/distributor customers 
to compensate them for competitive conditions in the German market. SKF 
Germany states that these rebates are based on sales by SKF Germany's 
customers rather than to SKF Germany's customers and payment can only 
be allocated over the entire sales base to the dealer/distributor. SKF 
Germany recognizes the CIT's decision that SKF Germany's allocation is 
not acceptable, but argues that the court has imposed an excessively 
stringent test in requiring SKF Germany to prove that no adjustments on 
non- subject merchandise appear in any of these customer-number 
specific allocations.
    Department's Position: We disagree with Torrington. As is the case 
with NSK's stock transfer commission (see Item 3.C, Comment 1) and FAG 
Germany's third-party payments (see Item 5, Comment 6) this expense is 
not related directly to sales by SKF Germany to its customers, and is 
properly treated as an indirect selling expense adjustment. This item 
is a promotional expense that does not relate to any particular sale by 
SKF Germany and does not vary with the quantity of merchandise that SKF 
Germany sells. See Zenith Electronics v. United States, 77 F.3d 426, 
431 (Fed. Cir. 1996).
    Comment 12: Torrington contends that the Department should not 
accept certain of SKF Italy's rebate claims. Torrington argues that 
these claimed adjustments were allocated on a customer-specific basis 
and that SKF Italy has not demonstrated that it did not allocate 
rebates it paid on out-of-scope merchandise to in-scope merchandise. 
Torrington suggests that, as partial BIA, the Department should 
disallow these rebate claims for the final results, with the exception 
that, if the claim increases FMV, the Department should keep the claim 
so that the respondent does not benefit from failure to report 
appropriate information.
    SKF Italy argues that Torrington has mischaracterized its rebate 
programs and states that it granted and reported both its rebates as 
fixed-percentage rebates, and that they therefore qualify as direct 
price adjustments.
    Department's Position: We disagree with Torrington. SKF Italy 
demonstrated that it pays both types of rebates to individual customers 
based on a fixed percentage of all sales to the customer. Therefore, 
because SKF Italy granted these rebates on a fixed and constant basis, 
SKF Italy qualifies for a direct price adjustment to FMV for its HM 
rebate programs.
    Comment 13: Torrington claims that FAG Germany based its claimed HM 
rebates on broad allocations that included out-of-scope merchandise, 
and that FAG Germany has not demonstrated that resales of in-scope 
bearings caused the rebates to be earned or that straightforward 
mathematical apportionment yielded accurate amounts. Torrington argues 
that the Department should reject FAG Germany's claimed rebates.
    FAG Germany states that it granted such rebates on the basis of a 
fixed percentage of all sales of merchandise, whether in-scope or non-
scope, to a customer during the POR. FAG Germany contends that its 
methodology directly ties the rebates it paid to individual 
transactions.
    Department's Position: We agree with FAG Germany. Because FAG 
Germany granted and reported rebates based on a fixed percentage of all 
sales to a customer during the year, we have allowed FAG Germany's 
claimed rebates as a direct adjustment to FMV for the final results.
    Comment 14: Torrington argues that the Department should not adjust 
FMV using FAG Italy's reported HM rebates. Torrington states that 
rebates are not an allowable adjustment unless the terms of the rebate 
are set forth at the time of the sale. Torrington contends that FAG 
Italy's HM rebate schedules were not negotiated until after the sales 
occurred, based on FAG Italy's questionnaire responses. In addition, 
Torrington asserts that FAG Italy's rebate program suggests that its 
rebates are reported on a customer-specific basis only and do not 
account for non-scope merchandise.
    FAG Italy responds that Torrington misunderstands the nature of its 
rebate programs. FAG Italy states that its rebates are not determined 
at the end of the year depending upon the achievement of certain sales 
volumes, but are instead negotiated at the beginning of the year and, 
if the requisite sales volume is met by the end of that year, the 
rebate is then paid or credited as a fixed percentage applicable to all 
covered sales. FAG Italy notes that, for a reported rebate to be 
allowable, the rebate schedule (i.e., specific rebate percentages or 
amounts associated with specific levels of sales or other factors) must 
be known at the time of the sale. FAG Italy holds that its rebate 
program meets the Department's standard for the allowance of HM 
rebates.
    With respect to Torrington's argument regarding non-scope 
merchandise, FAG Italy claims that Torrington has misinterpreted 
established case law. FAG Italy states that, pursuant to specific CIT 
direction, PSPAs and rebates are permitted if granted on a fixed-
percentage basis on all sales of merchandise (in-scope and out-of-
scope) to a customer during the POR. FAG Italy claims that it grants 
its rebates in this fashion, i.e., they are fixed-percentage rebates, 
negotiated at the beginning of the year, and applied to total sales of 
all merchandise to a customer where the customer has met the agreed-
upon requisite sales volume.
    Department's Position: We agree with FAG Italy. We are satisfied 
from the

[[Page 66503]]

record that FAG Italy sets the terms of its rebates at or before the 
time of sale. Consistent with our standards for allowable rebate 
adjustments (above), we have accepted FAG Italy's rebate adjustments 
because it grants the rebates as a fixed and constant percentage of all 
sales of merchandise to a customer.
    Comment 15: NSK argues that the Department incorrectly treated its 
return rebate as an ISE (NSK pays return rebates to its distributors if 
the distributors resell the bearings to certain customers approved in 
advance by NSK). NSK explains that it has improved its methodology from 
prior AFB reviews and is able to match exactly the reported rebate 
amounts paid to distributors during the POR to the number of pieces 
actually sold to the distributor during the POR and to those that were 
resold by the distributor to the approved customers. NSK contends that, 
at the verification for this review, NSK demonstrated that its return 
rebate is transaction-specific and that it calculated it at the part-
number and customer level. NSK argues that the Department should treat 
this rebate as a direct adjustment to price for the final results.
    Torrington responds that NSK's narrative response in its 
supplemental response contradicts NSK's claim that it reported return 
rebates on a transaction-specific basis: ``* * * NSK * * * cannot tie 
specific return rebates to specific sales because there is nothing in 
its computer records to tie the two transactions together,'' citing 
NSK's supplemental response of November 30, 1994 at 23-24. Torrington 
argues that the Department correctly determined not to treat NSK's 
return rebates as a direct adjustment to price. Torrington argues, 
further, that the Department should have disallowed the return rebates 
rather than treat them as ISEs since these rebates are price 
adjustments, not selling expenses.
    Department's Position: We agree with NSK. We consider NSK's return 
rebates to be a promotional expense as opposed to a price adjustment 
because NSK grants these rebates to promote sales made by distributors. 
NSK has demonstrated that it incurs, and has reported, this expense on 
a model-specific basis. Because NSK has tied this promotional expense 
to the subject merchandise, we consider it to be a direct selling 
expense.
    Comment 16: Torrington contends that the Department properly 
disallowed NSK's distributor incentives (REBATEH2) because NSK did not 
demonstrate that this rebate does not include rebates paid on non-scope 
merchandise, citing AFBs IV (at 10935).
    NSK argues that the Department's treatment of this rebate in this 
review is totally at odds with its recently issued remand in the 1990-
91 review of these orders. NSK contends that the Department defended 
its findings in its response to comments parties filed in the remand 
determination that this rebate ``was granted as a straight percentage 
of sales and, therefore, treated as a direct expense.'' NSK argues that 
the record before the Department in this review is virtually identical 
to the earlier record.
    Department's Position: Since NSK's distributor incentive rebates 
were granted as a fixed percentage of the sales on which they were 
reported, we have allowed them as direct expenses.
    Comment 17: NSK contends that the Department should treat its 
PSPAs, which NSK reported in its REBATEH3 and REBATEH5 fields, as 
direct adjustments to FMV. NSK argues that it is able to match the 
PSPAs recorded as REBATEH3 or REBATEH5 to underlying transactions. NSK 
claims that these PSPAs are incurred, calculated, and reported with 
respect to sales of individual part numbers to individual customers. 
NSK contends that it did not allocate them across models or customers 
and, as they are part-number specific, they are by definition limited 
to scope merchandise. NSK claims that it determined the exact quantity 
of sales to which the PSPA applied and it applied the PSPA to that 
quantity of sales, working backwards from the date the price change was 
recorded in its computer system. In this way, NSK contends, it reported 
only the pieces that generated the PSPA as having received a REBATEH3 
or REBATEH5. NSK argues that the Department should treat these rebates 
as direct adjustments to FMV.
    Torrington argues that NSK, in its description of its PSPAs in its 
response, states that it was not able to tie its PSPAs to the specific 
transactions on which they were incurred. Torrington argues that the 
Department determined correctly in its preliminary results not to treat 
NSK's PSPAs, recorded as REBATEH3 or REBATEH5, as direct adjustments to 
price. Furthermore, Torrington argues, this adjustment is a price 
adjustment by nature, not a selling expense and should, therefore, be 
disallowed completely rather than be treated as an indirect expense.
    Department's Position: We agree with NSK. We have allowed NSK's 
PSPAs because NSK's methodology matches PSPAs to particular underlying 
transactions using product and customer codes as they were originally 
paid.
    Comment 18: Torrington argues that, although the Department treated 
NSK's lump-sum PSPA as an HM ISE, the Department should disallow it 
because there is no evidence to link such adjustments to in-scope 
merchandise.
    NSK contends that its lump sum rebates were claimed as an indirect 
expense adjustment because they were granted on a customer-specific 
basis, not a product-specific or sale-specific basis. NSK further 
claims that, although the customer negotiations leading up to these 
rebates proceed from a base of sales, the end result represents 
negotiation and compromise, and cannot be said to specific sales. NSK 
argues that what is relevant is whether the methodology used by NSK to 
apportion the lump-sum rebates between scope and non-scope merchandise 
is fair and non-distortive. NSK states that it used an allocation 
method based on the percentage of scope to non-scope merchandise for 
those customers accounting for a significant percent of the total lump-
sum rebates granted during the POR. NSK also states that it 
demonstrated the stability of the purchasing patterns of these 
customers at verification.
    Department's Position: We agree with Torrington. We have disallowed 
this adjustment because it is a direct price adjustment and NSK did not 
tie these adjustments to the particular sales affected by the 
adjustment. Based on NSK's description, it grants lump-sum discounts as 
a fixed percentage of a discrete group of sales. However, instead of 
tying the discount to the particular transactions covered by the base 
of sales, NSK allocated the lump-sum discounts by the proportion of 
scope and non-scope merchandise purchased by certain customers, i.e., 
NSK allocated this expense across a broader base of sales than those on 
which it granted the rebates. Accordingly, we have disallowed these 
expenses for these final results.
    Comment 19: Torrington claims that NTN and NTN Germany used an 
improper allocation methodology to attribute U.S. rebates to sales. 
Torrington contends that NTN and NTN Germany allocated rebates to sales 
that were not eligible for the rebates, thereby diluting the rebate 
amounts for sales that were eligible. Torrington urges the Department 
to apply some form of BIA to the U.S. rebates.
    Department's Position: We disagree with Torrington. NTN's and NTN 
Germany's U.S. rebates were customer-specific, were not tied to 
specific invoices, and were granted on a fixed basis for sales of all 
merchandise. NTN and NTN Germany have demonstrated

[[Page 66504]]

that they offered rebates to certain U.S. customers who attained 
specified target sales volumes, and granted the rebate amounts based on 
the total sales volume goals. NTN and NTN Germany reported these 
rebates as a fixed and constant percentage across all eligible sales to 
each customer. Therefore, we have treated these rebates as direct 
adjustments to FMV for these final results.

6. Further Manufacturing and Roller Chain

    Section 772(e)(3) of the Tariff Act requires that we reduce ESP by 
the amount of any increased value to the subject merchandise resulting 
from further manufacturing performed after importation in the United 
States and prior to sale to the unrelated U.S. customer. Based on this 
section of the Tariff Act and the applicable legislative history, we 
have 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 value of 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 and 39737. This practice has come to be known as the ``Roller 
Chain'' principle after the first case in which we articulated this 
convention. See Roller Chain, Other Than Bicycle, from Japan, 48 FR 
51801, 51804 (November 14, 1983).
    Comment 1: Torrington argues that the Department should reconsider 
and discontinue application of the ``Roller Chain'' principle. 
Torrington contends that the Uruguay Round Agreements Act (URAA) 
clarifies that Congress never intended to limit the antidumping law to 
imports accounting for a ``significant percentage'' of the value of the 
completed product via the Roller Chain principle. Torrington asserts 
that Congress intends that the Department determine USP for such 
products on the basis of the ``price of identical merchandise sold * * 
*  to an unaffiliated person,'' the price of ``other subject 
merchandise sold,'' or ``any other reasonable means,'' citing the URAA 
amendments to section 772 of the Tariff Act.
    Torrington argues that there is no concern over retroactive 
application of the law because Congress always intended that the 
Department resort to alternative bases to determine USP rather than 
exclude the imports. Torrington asserts the following: (1) excluding 
such imports vitiates Congress' purpose to ensure that ``imported 
merchandise for which an exporter's sales price calculation must be 
made will not escape the purview of the Tariff Act by virtue of its 
being further processed or manufactured subsequent to its importation 
but before its sale to the first purchaser in the United States 
unrelated to the foreign exporter,'' citing S. Rep. No. 1298, 93d 
Cong., 2d Sess. 172-3; (2) when enacting the further-manufacturing 
provision of the statute, Congress intended that existing Department of 
Treasury regulations, which do not exempt such merchandise, would apply 
to this section; and (3) the pre-1995 GATT Antidumping Code does not 
exempt such imports. Torrington concludes, therefore, that applying 
this new-law provision to respondents would not be a retroactive 
application of the law, but would implement the law as Congress had 
originally intended.
    Torrington argues in the alternative that, if the Department 
continues to use the Roller Chain principle, it should revisit the 
methodology it uses to apply the one-percent test. Torrington contends 
that the Department's current practice is improper because the value of 
the imported bearings may be based on entered value, which can be 
artificially lowered through low-cost transfer pricing. Torrington 
argues that, through low-cost pricing, respondents are able to 
manipulate entered values such that, as a result of its current test, 
the Department will disregard transactions and circumvention of the 
order will occur. Torrington contends that, instead of entered value, 
the value of imported bearings should be based upon the ESP or PP of 
such or similar bearings sold at arm's-length prices. Torrington 
suggests that the Department compare this value 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, Torrington asserts that the Department 
should base the USPs for the model in question on sales by another 
manufacturer or the manufacturer who produced the model in question.
    NSK responds that it agrees with Torrington that the Department 
must, under certain circumstances, assess dumping duties on further-
manufactured imports based on the weighted-average margin for the 
remainder of goods in the class or kind. NSK states, however, that the 
circumstances under which this is appropriate are where the imported 
merchandise is further manufactured into finished products of the same 
class or kind of the imported product (e.g., BBs, CRBs, SPBs). NSK 
states that the further-manufacturing provision of the statute does not 
apply to such situations, and the Department must therefore discontinue 
its further-manufacturing analysis of bearing parts made into bearings. 
NSK contends that the Department must use its sampling authority to 
estimate the dumping duties applicable to these imported parts.
    NTN argues that Torrington is attempting to apply the URAA 
amendments retroactively. NTN contends that the Statement of 
Administrative Action (SAA) states that the elimination of the Roller 
Chain principle is a change in the law, thus confirming the validity of 
the Roller Chain principle under prior law.
    Koyo argues that the Department's treatment of further-manufactured 
merchandise has been used in every review of the AFB orders and that 
the CIT has affirmed this treatment. Koyo also contends that Congress 
intended that the further-processing provisions not apply unless the 
product ultimately sold to an unrelated purchaser contains a 
significant amount by quantity or value of the imported product. Koyo 
notes that the SAA indicates that the law has changed with respect to 
further-manufactured merchandise and the new approach is not a mere 
clarification.
    Koyo further argues that the Department's methodology in its one-
percent test is correct. Koyo claims that the purpose is to compare the 
value of the component as imported to the value of the non-scope 
merchandise as ultimately sold to an unrelated purchaser.
    Department's Position: We disagree with Torrington. As NTN and Koyo 
note, the SAA clearly indicates that the new law represents a change, 
not merely a clarification, in the treatment of imported merchandise 
that does not constitute a significant portion of the value of the 
product into which it is further manufactured. The SAA notes that 
``under existing law, in some situations, Commerce has been left with 
no choice but to exempt imported components from the assessment of 
antidumping duties.'' See SAA at 155-156.
    Our approach in following the Roller Chain principle in this review 
is identical to our approach and practice in previous reviews of these 
orders. Moreover, this practice has been affirmed by the CIT. See 
Torrington III at 645. As we stated in AFBs IV, 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

[[Page 66505]]

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. 
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).
    In situations such as this, 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. 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 
a proper use of the Department's discretion. Inasmuch as our statutory 
interpretation is not an unalterable rule, it does not constitute rule-
making within the meaning of the Administrative Procedure Act. See 
Zenith Elec. Corp. v. United States, 988 F.2d 1573, 1583 (CAFC 1993).
    We disagree with Torrington's assertion that the Roller Chain 
principle 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, assessment of antidumping duties is 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.
    With regard to Torrington's argument that we should base the 
numerator of the ``one-percent test'' ratio on arm's-length prices of 
identical or similar merchandise, we agree with Koyo that entered value 
is the best reflection of the value of the component as it is imported. 
The price of identical or similar imported components sold to 
unaffiliated customers without being further manufactured in the United 
States will invariably reflect certain costs, such as advertising, that 
are not normally incurred on products sold to affiliates. Therefore, to 
use the price to an unaffiliated party would overstate the numerator of 
the ``one-percent test'' ratio. In addition, our reliance on 
respondents' reported entered values which, in ESP situations, are 
generally based on transfer price, is not misplaced. Antidumping 
proceedings are only one of the forces applicable to a respondent's 
transfer pricing practices, and such prices are subject to Internal 
Revenue Service audits for U.S. tax purposes. Finally, as noted above, 
our practice has been affirmed by the CIT. Accordingly, we have not 
modified our treatment of minor components further manufactured in the 
United States or our methodology for determining whether a component is 
minor for the final results.
    Regarding NSK's comment, please see Comment 2 and our response, 
below.
    Comment 2: NSK argues that the Department lacks a statutory basis 
for conducting a further-manufacturing analysis with respect to 
imported bearings that are further processed into merchandise that 
remains within the class or kind of merchandise covered by the order. 
NSK contends that the legislative history to the further-manufacturing 
provision of section 772(e)(3) of the Tariff Act limits this provision 
clearly to imports ``changed by further process or manufacture so as to 
remove it from the class or kind of merchandise involved in the 
proceeding before it is sold to an unrelated purchaser,'' citing H.R. 
Rep't No. 571, 93rd Cong., 1st Sess. 70 (1973). NSK states that the 
Department excluded such merchandise correctly from the further-
manufacturing analysis in the original investigation and in the 88/90 
administrative review, assigning a margin to such merchandise based on 
the margins calculated for imports of complete bearings, but that it 
has wrongly deviated from this approach in subsequent reviews.
    NSK acknowledges that the CIT has rejected its previous challenges 
to the Department's further-manufacturing methodology, citing the CIT's 
decision on AFBs II in NSK I and the CIT's decision on AFBs III in NSK 
II. NSK contends, however, that the CIT has not ruled on the particular 
argument NSK is making in this segment of the proceeding. NSK concludes 
that the CIT has affirmed that the Department is not required to review 
every U.S. sale, citing NSK II at 1270.
    Torrington responds that the statute, administrative practice, and 
judicial precedent support the Department's application of a further-
manufacturing analysis to NSK's further-manufactured sales, pursuant to 
section 772(e)(3) of the Tariff Act. Torrington notes that the CIT has 
held that, where the imported parts at issue are covered by the 
antidumping order, they ``are not eligible for automatic exclusion from 
Commerce's analysis,'' citing NSK II at 1270. Torrington notes that the 
CIT excepted from the further-manufacturing analysis only 
``manufactured or assembled products which contain less than a 
significant amount of the imported merchandise,'' citing Id., and did 
not exempt imported parts that are further manufactured into products 
that remain within the scope of the order.
    Department's Position: We disagree with NSK that we should not 
calculate dumping margins for merchandise which NSK further 
manufactured (but which stayed within the class or kind) in the United 
States. As we have explained in previous reviews (see AFBs II at 28360, 
AFBs III at 39737, and AFBs IV at 10939), we disregard antidumping 
duties only 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, pursuant to the Roller Chain 
principle (see our description above). Because imported merchandise 
that has been further manufactured is subject to antidumping duties, 
the Department cannot disregard sales of this merchandise in its 
analysis or the

[[Page 66506]]

adjustments to USP provided for in section 772(e)(3) of the Tariff Act.
    The purpose of section 772(e)(3) is to include within the 
Department's antidumping margin calculations subject merchandise that 
is further-processed in the United States, with the proviso that the 
USP of such merchandise must not include value added in the United 
States prior to sale to the first unrelated buyer. While NSK argues 
that this provision only applies to merchandise that is transformed by 
the U.S. affiliate into non-subject merchandise prior to sale to the 
first unrelated buyer, the plain language of section 772(e)(3) makes no 
distinction between subject merchandise which is transformed by a 
related party in the United States into non-subject merchandise, and 
subject merchandise which is further-processed by a related party in 
the United States into merchandise which is still within the class or 
kind subject to the order. Section 772(e)(3) states that, ``[f]or 
purposes of this section, the exporter's sales price shall also be 
adjusted by being reduced by the amount, if any of--* * * (3) any 
increased value, including additional material and labor, resulting 
from a process of manufacture or assembly performed on the imported 
merchandise after the importation of the merchandise and before its 
sale to a person who is not the exporter of the merchandise.''
    Contrary to NSK's argument, the legislative history did not 
unambiguously alter the plain language of the provision. It is true 
that the House Report that accompanied the Trade and Tariff Act of 1974 
seems to focus on merchandise which continues to be subject merchandise 
after processing by a related party in the United States. See H.R. Rep. 
No. 571, 93d Cong., 1st Sess. 70 (1973). The Senate Report that 
accompanied the Trade and Tariff Act of 1974, however, was in 
accordance with the plain language of the statute and made no 
distinction between merchandise which was ultimately sold as subject 
merchandise and merchandise which was ultimately sold as non-subject 
merchandise. The relevant paragraph stated:

    The first amendment would codify existing Treasury regulations 
in providing that imported merchandise for which an exporter's sales 
price calculation must be made will not escape the purview of the 
Act by virtue of its being further processed or manufactured 
subsequent to its importation but before its sale to the first 
purchaser in the United States unrelated to the foreign exporter. 
Under the amendment, adjustments to the prices at which the article 
is ultimately sold to an unrelated purchaser would be made in order 
to subtract out the value added to the merchandise after 
importation.

S. Rep. No. 1298, 93d Cong., 2d Sess. 172, 173 (1974).

    Comment 3: NSK/RHP argues that the Department should not apply BIA 
to calculate the FMV for those bearings that the Department has agreed 
are not subject to a further-manufacturing analysis. NSK/RHP contends 
that, through a series of conversations with the Department, it 
confirmed that reporting further-manufacturing data for ``first 
category'' bearings (e.g., bearings that involve greasing, change of 
preload, or etching) was not necessary. Moreover, NSK/RHP asserts that 
the Department never asked the company to change its response to 
include further-manufacturing cost data for first category bearings. 
NSK/RHP states that it should not be penalized because it responded 
correctly to the Department's request for information.
    Torrington argues that the Department should continue to classify 
NSK/RHP's first category bearings as subject to a further-manufacturing 
analysis. Torrington asserts that the record indicates that the first 
category bearings were in fact subject to further manufacturing in the 
United States. Torrington contends that the burden is properly placed 
on the respondent to provide all data the Department requests in its 
questionnaire. For these reasons, Torrington argues, the Department 
should apply BIA to calculate the FMV for the first category bearings.
    Department's Position: We agree with NSK/RHP. We determined that 
NSK/RHP's first category bearings do not require a further-
manufacturing analysis because such bearings entered the U.S. market as 
complete bearings (first category) and underwent minor alterations that 
did not significantly change the costs of these bearings. See NSK/RHP's 
February 1, 1995 questionnaire response. Further, Torrington has not 
provided any evidence to suggest otherwise. Therefore, for these final 
results, we did not apply BIA to calculate the FMV for the first 
category bearings NSK exported to the United States.
    Comment 4: Torrington argues that the Department should include 
group administrative expenses in FAG Germany's further-manufacturing 
response. Torrington states that FAG Germany did not report such 
expenses and that FAG Germany stated that such expenses are typically 
recovered by way of transfer prices and distribution of profit. Citing 
Color Picture Tubes from Japan, 52 FR 44171, 44174 (November 18, 1987), 
and Certain Carbon Steel Butt-Weld Pipe Fittings from the United 
Kingdom, 60 FR 1558, 10561 (February 27, 1995), Torrington contends 
that group-level headquarters expenses and broadly based R&D benefit 
all group members, including U.S. subsidiaries engaged in adding value. 
Torrington also claims that another respondent in this proceeding, SKF, 
reported such costs in its further-manufacturing response. Torrington 
argues that the Department should restate FAG Germany's further-
manufacturing costs so that they include group administrative expenses.
    FAG Germany states that it included the portion of group 
administrative expense related to production in its CV for further-
manufactured parts, but it did not include the portion of the expense 
related to sales. Citing Brass Sheet and Strip from the Federal 
Republic of Germany; Final Results of Administrative Review, 56 FR 
60087 (November 27, 1991), FAG Germany argues that the statute 
authorizes a deduction from ESP of increased value resulting from a 
process of manufacture or assembly performed on the imported 
merchandise after importation of the merchandise, and that the 
Department has held that headquarters G&A expense incurred abroad to 
support U.S. sales is not within this definition of value added. FAG 
Germany also states that its methodology is consistent with the cases 
petitioner cites in support of its argument.
    Department's Position: We agree with Torrington that group-level 
headquarters expenses and broadly based R&D benefit all group members, 
including U.S. subsidiaries engaged in adding value. While FAG Germany 
reported such expenses for the cost of the parts imported, it did not 
include such expenses in the cost of further processing in the United 
States. In addition, we consider these expenses to affect the 
processing cost in the United States as well as support sales. 
Therefore, we have recalculated the G&A expenses for further processing 
in the United States to include group-level headquarters expenses and 
broadly based R&D expenses.
    In addition, we discovered that we erred in our calculation of 
further manufacturing performed in the United States by calculating the 
further manufacturing based on COM instead of COP. We have corrected 
this error for the final results.
    Comment 5: Torrington asserts that Koyo incorrectly used weighted 
averages of entered value rather than an arm's-length price for resale 
at the same LOT as the finished goods in its ``Roller Chain'' 
calculations. Torrington claims

[[Page 66507]]

that using a weighted-average entered total value for all models, i.e., 
including non-scope (U.S.-made) bearings, rather than a separate 
average for each bearing model, distorts the Roller Chain calculation. 
Torrington contends that the Department should reject Koyo's request 
for exclusion from reporting full further-manufacturing information. 
Torrington also contends that there is insufficient documentation to 
support Koyo's use of estimated resale prices in its calculations and 
that the Department did not verify these estimated prices. Torrington 
argues that the Department should use the highest Koyo margin as BIA 
for each entry that is further manufactured.
    Koyo contends that Torrington has raised these same challenges to 
its Roller Chain calculations in past AFB reviews and the Department 
has rejected them in every such review. Koyo claims that Torrington's 
argument that, instead of using the entered value of the imported scope 
merchandise as the numerator of the Roller Chain calculation (to 
determine whether the value of the imports is less than one percent of 
the value of the non-scope merchandise that is sold to the unrelated 
customer and hence should be excluded from the antidumping order), the 
Department should use the price at which the scope imports are sold to 
unrelated customers in the United States, is contrary to the whole 
thrust of the Roller Chain one-percent test which is to determine the 
value of the scope product as imported in relation to the value of the 
non-scope merchandise as sold to an unrelated customer. Koyo argues 
that Torrington has no evidence to support its claim that Koyo may have 
manipulated entered value, and notes that it is required to report all 
entered values to the Customs Service at the time of entry of its 
imports and is subject to severe penalties for improper reporting. 
Since there is no way for Koyo to know which units of a model were used 
in the production of particular units of the non-scope merchandise, 
Koyo asserts that the use of a weighted average is perfectly 
reasonable. Finally, Koyo explains that it used estimated resale values 
for the finished non-scope merchandise not out of choice but because 
the so-called ``affiliates'' that produced that merchandise refused to 
provide Koyo with the necessary pricing information. Koyo asserts that 
the CIT specifically upheld this aspect of Koyo's methodology in 
Torrington III (at 645).
    Koyo claims that, according to the legislative history of the 1974 
Act, when Congress enacted the provision of the antidumping law 
authorizing the Department to deduct further- processing expenses 
incurred in the United States in ESP situations, 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. Moreover, Koyo 
points out that the CIT has affirmed the Department's use of the Roller 
Chain methodology, in finding ``Commerce's decision to accept the 
estimates and allocations for the calculation of the `Roller Chain' 
percentage [to be] reasonable and supported by substantial evidence and 
in accordance with law,'' citing Torrington III (at 645).
    Department's Position: We disagree with Torrington. We addressed 
this in detail in AFBs IV at 10937-10938. Koyo provided sufficient 
information in its letter of November 27, 1994, to demonstrate the 
applicability of the Roller Chain principle to certain identified 
sales. Notably, Koyo submitted examples of all calculations necessary 
to determine that the value of this imported merchandise was below the 
one-percent threshold. Furthermore, there is no evidence on the record 
to indicate that the estimated resale prices Koyo submitted are 
unreliable.
    Comment 6: Torrington argues that Koyo's U.S. sales database is 
incomplete with respect to sales of products further-processed into 
non-scope merchandise. Torrington contends that since the Department, 
not Koyo, determines what, if any, merchandise is excluded on the basis 
of the Roller Chain principle, the Department should apply a BIA rate 
to all models where Koyo refused to report on the grounds that further 
manufacturing produced non-scope merchandise.
    Koyo states that the Department rejected this identical argument in 
the prior review. Koyo also states that the Department has specified in 
this review, as in all prior reviews, the threshold for determining 
which merchandise is to be excluded, i.e., merchandise that passes the 
one-percent test. Koyo contends that, as in all past reviews, it has 
provided the data to demonstrate which models satisfy that test. Koyo 
explains that, once it had determined that certain sales should be 
excluded from the order on the basis of the Roller Chain principle, it 
deleted those sales from its U.S. sales database, as it did for any 
other sale of non-scope merchandise. Finally, Koyo explains that, in 
two previous reviews the Department applied BIA to certain of Koyo's 
Roller Chain sales where Koyo's calculations indicated that these 
bearing models failed the Roller Chain test. Koyo concludes that, 
because none of its products failed the one-percent test in this 
review, the issue is moot.
    Department's Position: We disagree with Torrington. 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.

7. Level of Trade

    Comment 1: Torrington contends that the Department should 
reclassify SKF France's SOS (an SKF subsidiary) sales as distributor/
aftermarket sales rather than as consumer sales. Torrington states that 
SOS is strictly a sales organization in France whose purpose is to 
offer a complete line of bearing products to its customers on an 
emergency basis. Torrington argues, further, that the Department 
determined in AFBs I that SOS and the other SKF France affiliates all 
sell to the same customers. Torrington concludes that the fact that SOS 
promotes faster delivery does not demonstrate that its customers 
function at a different LOT from SKF France's other customers and, as a 
result, the Department should not treat its sales separately. 
Torrington claims that the Department should classify such sales as 
distributor/aftermarket sales.
    SKF France claims that SOS serves a specialized function in the 
French market in its resale of bearings on an emergency basis and the 
Department has considered similar factors in other cases recently which 
led it to recognize differences in LOT. SKF France claims that, in 
Stainless Steel Bar From Spain, 59 FR 66931 (1994), the Department 
recognized a different LOT for products involving a shorter lead time 
and comprising relatively small orders filled from inventory of already 
manufactured products. SKF France states that, because SOS sells on 
average less than ten percent the number of units per transaction than 
the other SKF France companies in the HM, and because these sales 
constitute a unique niche in SOS's selling practices, the Department 
properly allowed SKF France's distinct customer categorization of SOS 
sales.
    SKF France also comments that the CIT overturned the Department's 
AFBs I decision regarding SKF France's claim of two levels of ISEs on 
SOS sales, supporting SKF's position that SOS sales incur additional 
expenses.
    Department's Position: We agree with Torrington and have 
reclassified the claimed consumer-level sales as distributor/
aftermarket sales. As we stated in AFBs I, the fact that SOS may 
provide fast delivery of bearings and incurs higher selling expenses 
does not

[[Page 66508]]

demonstrate a LOT distinct from other SKF France selling units which 
service distributors. Therefore, we have considered SOS sales to be at 
the same LOT as that of the other SKF France selling units which sell 
to distributors. Further, the CIT's decision in SKF, to allow the ISEs 
SKF France incurred on sales to SOS as an adjustment to SOS's sales to 
unrelated parties, does not affect our decision to consider SOS's sales 
to be made at the distributor/aftermarket level, because the CIT did 
not address the issue of the nature of the sales from SOS to their 
unrelated customers in its decision. In addition, the fact that SKF 
France incurs differing expenses on different sales does not 
necessarily mean that those sales are made at different levels of 
trade.
    Comment 2: Torrington argues that the Department should reject FAG 
Italy's separate treatment of government sales and reclassify them as 
OEM sales. Torrington contends that LOT classifications are based on 
the function of the class of customers, citing AFBs III (at 39767). 
Torrington states that FAG Italy has offered no evidence that its 
government customers perform a different function than other OEM 
customers and notes that the Department specifically rejected similar 
arguments INA raised in AFBs III. Torrington requests that the 
Department reclassify FAG Italy's government sales as OEM sales.
    FAG Italy notes that, pursuant to Section 1335 of the Omnibus Trade 
and Competitiveness Act of 1988, the Department will exclude those U.S. 
sales from its margin calculation that have no substantial non-military 
use and are made pursuant to an existing Memorandum of Understanding 
(MOU), citing AFBs I at 31713. FAG Italy claims that it has properly 
identified Government sales made pursuant to the U.S.-Italian MOU that 
have no substantial non-military use. FAG Italy states that these sales 
are properly categorized as a separate LOT and have been correctly 
excluded from the U.S. sales database for purposes of calculating FAG 
Italy's dumping margin. FAG Italy notes that Torrington has raised 
similar arguments in prior reviews and the Department has rejected 
Torrington's position on each occasion.
    Department's Position: We agree with Torrington that FAG Italy's 
U.S. government sales should not be classified as a separate LOT from 
OEM sales. According to the record, FAG Italy's government customers 
function as end-users, just like OEMs. Therefore, absent any evidence 
to the contrary, we would classify FAG Italy's OEM sales and sales to 
government customers as the same LOT. However, the LOT classification 
of FAG Italy's government sales is irrelevant to the Department's 
margin analysis in this review. The United States and Italian 
Governments maintain a current MOU covering the AFBs subject to these 
orders and, in accordance with section 1335 of the Omnibus Trade and 
Competitiveness Act of 1988, we have excluded FAG Italy's government 
sales from the U.S. sales database used for the margin analysis.
    Comment 3: NTN argues that the Department should make a LOT 
adjustment to its FMV based on differences in price to distinct levels 
in the HM. Respondent cites NTN I, in which the Court agreed that NTN 
incurred different expenses at different LOTs. NTN also claims that the 
changes to the antidumping laws under the URAA, which directs the use 
of a LOT adjustment based on differences in prices, should be applied 
in these reviews.
    Department's Position: We disagree with NTN that we should make a 
price-based LOT adjustment. We note that the standards established in 
the antidumping laws under the URAA are not controlling in these 
reviews. For pre-URAA reviews, we have an established standard 
requiring that respondents correlate the degree to which differences in 
prices are due to differences in LOT or to any other factors that might 
affect prices. As we said in AFBs III (at 39767-68), ``(r)espondents 
must quantify any price differentials that are directly attributable to 
differences in levels of trade.'' During the course of this 
administrative review, NTN made no attempt to quantify the degree to 
which differences in prices were attributable wholly or partly to 
differences in levels of trade. Consequently, we are unable to consider 
a LOT adjustment based on differences in price. The CIT has upheld this 
line of reasoning in NTN II.
    Comment 4: Torrington contends that respondents bear the burden of 
demonstrating that reported LOTs are proper and NTN has failed to 
demonstrate that AM sales are a distinct LOT. Torrington asserts that 
allowing NTN to classify sales as AM would permit NTN to circumvent the 
selection of such or similar merchandise. Torrington also states that 
inaccuracies in the designation of customer category for certain 
customers in NTN's response make the acceptance of the AM customer 
category untenable. Petitioner urges the Department to reclassify NTN's 
AM sales as OEM sales.
    Department's Position: We disagree with Torrington. We have an 
established practice of applying a ``functional test'' to determine 
whether different levels of trade exist. This functional test involves 
an examination of the type of customer and customer functions 
respondents report, which reporting is subject to verification. See, 
e.g., Disposable Pocket Lighters from Thailand, 60 FR 14263, 14264 
(1995), and Certain Carbon and Alloy Steel Wire Rod from Canada, 59 FR 
18791, 18794 (1994). When, through the application of the functional 
test, we find different levels of trade, we may make price comparisons 
at these levels of trade. Our practice has been that satisfaction of 
the functional test creates an economic presumption that LOT has an 
impact on price and, therefore, the comparability of the sales. 
Notably, this presumption exists regardless of which party (respondent 
or petitioner) supports or opposes the finding of distinct LOTs.
    Once the functional test has been satisfied, a party opposed to 
reliance on the resulting LOTs for matching purposes bears the burden 
of rebutting the presumption that the distinct LOTs have an impact on 
price. That rebuttal may be made by presenting information to 
demonstrate a lack of correlation between selling prices or selling 
expenses and LOTs. If rebuttal information is presented, we conduct a 
correlation test and, if appropriate, disregard LOTs when comparing 
U.S. and foreign market prices. See, e.g., Certain Stainless Steel 
Butt-Weld Pipe and Tube Fittings From Japan, 59 FR 12240, 12241 (1994).
    In 1992, we articulated this practice by announcement in Import 
Administration Policy Bulletin 92/1. Therein, we summarized our 
practice, stating:

(i)n our questionnaire we will request that respondents list the 
levels of trade at which they sell the merchandise under 
investigation. The respondent will also be asked to explain what 
function each level of trade performs. Initially, the analyst will 
have to determine, based on the reported functions, if the 
respondent sells to distinct, discernable levels of trade. Either 
party will have an opportunity to contest the reported levels of 
trade by presenting evidence that there is not a significant 
correlation between prices and selling expenses on one hand, and 
levels of trade on the other. The information on level of trade will 
be subject to the same verification requirements as other 
information presented to the Department. * * * If a party wishes to 
contest matching at LOT, the party will either have to rebut the 
claim that there are discernable functions or will have to show that 
there is no correlation between prices and selling expenses on the 
one hand, and LOT on the other.

    In other words, our practice is to create the presumption after the

[[Page 66509]]

application of the functional test. Our policy, based on established 
practice, has been that the correlation test need not be performed in 
order to recognize sales at distinct LOTs. Rather, the correlation test 
need only be applied when a party opposed to recognition of the LOTs 
presents information calling into question those LOTs established by 
the application of the functional test. Certain Stainless Steel Butt-
Weld Pipe and Tube Fittings From Japan, 59 FR 12240, 12241 (1994). Only 
then will we examine whether there is a correlation between selling 
prices, selling expenses, and LOTs.
     In applying the functional test in this instance, we note that NTN 
was unable to adequately attribute ISEs to LOTs. However, an 
examination of direct selling expenses and prices shows distinct 
differences in NTN's three LOTs. We disagree with Torrington that NTN's 
designations for customer category are unreliable, although we have 
redesignated one customer. Torrington provided no other information 
calling into question the LOTs NTN reported and which we tested. 
Therefore, for the final results we have continued to recognize NTN's 
three LOTs.

8. Packing and Movement Expenses

    Comment 1: SNR Germany claims that the Department intended to 
subtract movement expenses from unit price, including domestic inland 
insurance expense, from unit price as indicated in the Department's 
December 1, 1995, ``Preliminary Results Analysis Memorandum,'' but the 
Department inadvertently added domestic inland insurance to net price.
    Department's Position: We agree with SNR Germany that we should 
have subtracted domestic inland insurance expense from unit price. 
Accordingly, we have made appropriate changes to the calculation of net 
price for the final results.
    Comment 2: Torrington asserts that, because FAG/Barden failed to 
report its air freight separately from its ocean freight expenses for 
its FAG U.S. sales, and because it failed to report air freight 
expenses on a transaction-specific basis for its Barden sales, the 
Department should apply partial BIA for these expenses in the final 
results. Torrington argues that the record indicates that FAG/Barden 
was able to report air freight expenses on a transaction-specific 
basis. Torrington further states that FAG U.S.'s claim that its 
internal record-keeping precludes segregating the two types of freight 
charges is inconsistent with other record evidence.
    FAG/Barden responds that this argument is not applicable to ESP 
sales because of the inability to tie shipments to the United States to 
sales by the subsidiary in the United States. FAG/Barden contends that 
this can only be relevant to PP sales. FAG/Barden suggests that 
Torrington's claim that the factual record supports such a transaction-
specific methodology is unfounded since, contrary to Torrington's 
statement, nowhere is there any indication that Barden can trace 
imports to sales and thus report ocean freight expenses on a sale- or 
transaction-specific basis. FAG/Barden states that, even if 
Torrington's argument were applicable to ESP sales, there is no 
commingling of air and ocean expenses in Barden's calculation such that 
the ocean freight factor could be skewed or unrepresentative.
    Department's Position: We agree with FAG/Barden. We verified that 
FAG/Barden's records do not allow the company to link its entries to 
its ESP sales. The Department has long recognized this common problem 
with respect to this generally fungible commodity product. See AFBs I 
at 31700 and AFBs IV at 10942-43. Additionally, the Department has 
recognized that allocation is appropriate for freight expenses, which 
are often not incurred on a transaction-specific basis. See AFBs II at 
28398; See also Certain Steel Flat Products from Japan, 58 FR 37154, 
37163 (1993). The record evidence discussed by Torrington demonstrates 
that it may have been possible for FAG/Barden to link freight expenses 
with specific entries; however it does not indicate that FAG/Barden 
could link freight expenses with ESP sales to unrelated customers. 
Given that verified inability, FAG/Barden's allocation of ocean and air 
freight expenses was in accordance with the Department's instructions 
and was reasonable.
    Comment 3: Torrington asserts that RHP did not properly report its 
air freight expenses for U.S. sales. Torrington states that, because 
RHP failed to provide separate figures for its air freight and its 
ocean freight expenses, the Department should not accept RHP's 
reporting methodology pertaining to ocean and air freight expenses for 
the final results. Torrington requests that the Department apply 
partial BIA to U.S. sales for these expenses in the final results.
    NSK/RHP argues that there is nothing to support Torrington's 
argument that, because NSK did not divide its ocean freight expense 
variable into air- and sea-freight portions, the Department should 
apply BIA to NSK/RHP. NSK/RHP contends that the Department never 
requested that NSK/RHP segregate the two freight expenses and that, in 
fact, the company is unable to do so due to the lack of a direct link 
between entries and ESP sales to the unrelated U.S. customer. NSK/RHP 
states that, since it cannot link individual ocean freight costs to 
specific U.S. sales, it cannot link groupings of such costs (e.g., 
ocean freight, air freight) with specific U.S. sales.
    In addition, NSK/RHP suggests that Torrington's request is not 
timely, because it did not raise this issue in its deficiency comments 
during the ``fact finding'' stage of the proceeding.
    Department's Position: We disagree with Torrington. In the case of 
NSK/RHP's ESP transactions, the respondent explained in its section B 
response, and the Department verified, that its records did not permit 
it to tie specific shipments to specific resales. As noted in Comment 
2, above, the Department has long recognized that few AFB producers can 
link their entries to their resales in ESP situations. See AFBs I at 
31700 and AFBs IV at 10942-43. It follows that respondents will be 
unable to tie freight expenses on entries to specific resales. In past 
reviews the Department has permitted respondents to allocate air and 
ocean freight. See AFBs IV at 10942. The Department found no evidence 
at verification that NSK/RHP could link its air freight expenses to 
specific sales or customers.
    The Department has also recognized that freight expenses are often 
not incurred on a transaction-specific basis. Therefore, the Department 
does not require transaction-specific reporting of this expense, but 
rather permits reasonable allocations. See AFBs II at 28398; See also 
Certain Steel Flat Products from Japan, 58 FR 37154, 37163 (1993). In 
accordance with the Department's instructions, because NSK/RHP incurred 
its freight expenses on the basis of weight, it allocated those 
expenses on the same basis in its section B response.
    Comment 4: NSK/RHP requests that the Department calculate a packing 
expense factor for bearings manufactured by RHP Aerospace (a division 
within NSK/RHP) and deduct this packing expense from the FMV as a 
direct expense. NSK/RHP states that it does not maintain these expenses 
as separate components of standard cost in RHP Aerospace's standard COP 
overhead, although it made every effort to identify material and labor 
costs for packing from RHP Aerospace's standard COP overhead. NSK/RHP 
requests that the Department use this information in the final results 
as the most accurate

[[Page 66510]]

cost calculation of packing for bearings manufactured by RHP Aerospace. 
NSK/RHP contends that the Department confirmed the accuracy of the 
information in its verification of NSK/RHP.
    Torrington responds that, given that NSK/RHP's normal business 
records do not document or otherwise support NSK/RHP's estimated 
packing expenses, the Department should not deduct this estimated 
expense from FMV. In addition, Torrington contends that NSK/RHP has not 
adequately demonstrated that its attempt to segregate this expense from 
RHP Aerospace's standard COP overhead reflects its actual experience. 
For the reasons stated above, Torrington request that the Department 
not make an adjustment to FMV for packing expenses (materials and 
labor) for bearings manufactured by RHP Aerospace.
    Department's Position: We agree with NSK/RHP. Prior to 
verification, NSK/RHP identified, in its supplemental response, those 
expenses in RHP Aerospace's standard COP overhead associated with 
packing material costs and packing labor costs. See NSK/RHP's January 
19, 1995 supplemental questionnaire response. We verified the accuracy 
of these expenses and found no discrepancies. We also verified that 
packing expenses were included in RHP Aerospace's COM and CV. 
Therefore, we have accepted NSK/RHP's packing material costs and 
packing labor costs data and have deducted packing expenses from FMV 
calculated for bearings manufactured by RHP Aerospace for these final 
results.
    Comment 5: NSK/RHP argues that the Department should split domestic 
inland freight for all RHP-brand bearings, other than those 
manufactured by RHP Aerospace, into pre-sale freight and post-sale 
freight components, and should deduct post-sale domestic inland freight 
from FMV as a direct expense. NSK/RHP states that it did its best to 
comply with the Department's request to segregate these costs by 
calculating two expenses based on available transport records from the 
months May-December 1994 for RHP-brand products delivered to and from a 
specific warehouse.
    Furthermore, NSK/RHP argues, the Department should separately 
calculate a post-sale domestic inland freight factor for bearings 
manufactured by RHP Aerospace and deduct that post-sale domestic inland 
freight from FMV as a direct expense. NSK/RHP asserts that it complied 
with the Department's request and, as noted above, identified those 
expenses within the Material Control Department (a division of the 
standard COP overhead) associated with post-sale domestic inland 
freight. NSK/RHP states that, if the Department decides to take this 
action, then it must also reduce RHP Aerospace's COM and CV by the same 
expense factor to avoid double counting.
    Torrington responds that the Department should not adjust FMV for 
these estimated post-sale domestic inland freight expenses. Torrington 
asserts that NSK/RHP has not adequately demonstrated that its estimated 
calculations are reflective of actual costs, nor has it demonstrated 
that its attempt to isolate post-sale domestic inland freight expense 
from RHP Aerospace's standard COP overhead reflects its actual costs. 
Torrington further states that, given that NSK/RHP's normal business 
records do not document or otherwise support NSK/RHP's estimated 
amounts for pre-sale freight and post-sale freight and post-sale 
freight for bearings manufactured by RHP Aerospace, the Department 
should not deduct the estimated pre-sale/post-sale domestic inland 
freight expense and post-sale domestic inland freight expense from 
bearings manufactured by RHP Aerospace from FMV. Torrington also argues 
that NSK/RHP has not adequately demonstrated that the months it 
selected for its estimates were representative of its actual 
experience. Finally, Torrington contends that, while the Department 
examined NSK-RHP's calculation of domestic inland freight expenses at 
verification, it did not specifically examine the estimated split 
between post-sale and pre-sale domestic inland freight.
    Additionally, with respect to RHP-brand bearings manufactured by 
RHP Aerospace, Torrington argues that if the Department permits such an 
adjustment, it should not reduce RHP's Aerospace COM and CV by the same 
expense factor. Torrington takes issue with NSK/RHP's argument that not 
to do so would be double-counting, stating that NSK/RHP has not 
demonstrated that post-sale domestic inland freight expenses were 
actually included in RHP Aerospace's COM and CV. For these reasons, the 
Department should not deduct these estimated expenses from FMV.
    Department's Position: We agree with NSK/RHP, in part. Prior to 
verification, NSK/RHP, in its supplemental response, presented 
calculations of pre-sale and post-sale expenses based on available 
transport records for the months May-December 1994 and stated that a 
separate break-out for domestic inland freight did not exist for RHP 
Aerospace in the normal course of business but was included within the 
standard COP overhead. NSK/RHP identified those expenses associated 
with post-sale domestic inland freight for RHP Aerospace. See NSK/RHP's 
January 19, 1995 supplemental questionnaire response. We verified the 
accuracy of NSK/RHP's domestic freight methodology and noted no 
discrepancies. Therefore, for these final results, we have accepted 
NSK/RHP's pre-sale/post-sale domestic-freight methodology and have 
deducted post-sale domestic inland freight from FMV for all 
transactions except those involving bearings manufactured by RHP 
Aerospace. We have also accepted NSK/RHP's calculated post-sale 
domestic inland freight for bearings manufactured by RHP Aerospace.
    We disagree with NSK/RHP's contention that, if the Department 
accepts NSK/RHP's post-sale domestic inland freight calculation for 
bearings manufactured by RHP Aerospace, it must also reduce RHP 
Aerospace's COM and CV by the same expense factor. Since we cannot 
determine from NSK/RHP's questionnaire response whether post-sale 
domestic inland freight expenses were actually included in RHP 
Aerospace's COM and CV, we will not reduce RHP Aerospace's COM and CV 
by the post-sale domestic inland freight factor that NSK/RHP 
calculated.
    Comment 6: Torrington argues that the Department has improperly 
allowed Koyo to report aggregated air- and ocean-freight expenses. 
Torrington claims that Koyo has allocated air-freight expenses over all 
bearings shipped from Japan rather than reporting these expenses on a 
transaction-specific basis. Torrington cites examples in the 
verification report, stating that Koyo maintains records that enable it 
to calculate air-freight adjustments on a transaction-specific basis 
and, if it refuses to do so, the Department should apply a partial BIA 
rate, i.e., the highest movement expenses reported by any Japanese 
respondent.
    Koyo responds that the Department's verification report for this 
review specifically notes that there were no discrepancies in Koyo's 
reporting of air-freight expenses. According to Koyo, the verification 
report supports its contention that, although it tracks its air-freight 
costs, Koyo is unable to tie individual air shipments to particular 
sales to unrelated customers in the United States. Finally, Koyo 
contends that it has treated its air-freight expenses in this review as 
it has in every past review of the orders on TRBs and AFBs, and the 
Department should continue to accept Koyo's methodology for reporting 
its air-freight expenses.

[[Page 66511]]

    Department's Position: We agree with Koyo. In the case of ESP 
transactions, there is often no direct link between shipments and 
resales. We agree with Koyo's characterization of its freight records 
as described in the verification report. In the one instance cited by 
Torrington, there is no evidence that Koyo was able to link the air-
freight costs associated with the shipment to subsequent sales of the 
bearings involved in this shipment, nor does it establish that Koyo's 
records generally allow it to link air-freight shipments to subsequent 
sales. We also agree with Koyo that the verification report establishes 
that, with respect to the example cited by Torrington, air freight was 
used to maintain inventory and was not incurred on direct shipments to 
the unrelated U.S. customer. Therefore, because we verified Koyo's air- 
and ocean-freight expenses and found them to have been reasonably 
allocated, we have accepted Koyo's freight-expense calculations.
    Comment 7: NTN claims that the Department identified HM pre-sale 
freight expenses erroneously as ISEs rather than as movement expenses 
in its calculations, and that the Department also failed to recognize 
the attribution of model-specific COP by customer category. NTN 
requests that the Department correct these clerical errors.
    Department's Position: We disagree that our identification of HM 
pre-sale freight expenses as ISEs is a clerical error. Our calculations 
are consistent with the methodology resulting from the CAFC's decision 
in Ad Hoc Comm. of AZ-NM-TX-FL Producers of Gray Portland Cement v. 
United States, 13 F.3d 398, 401-02 (CAFC 1994) . We also disagree that 
we should attribute model-specific COP to customer categories. As noted 
above, NTN was unable to adequately attribute ISEs to LOTs. Therefore 
we have used only a model-specific cost for our final calculations.

9. Related Parties

    Comment 1: SKF Sweden asserts that the customer numbers for which 
the Department applied an arm's-length test in the preliminary margin 
calculations do not correspond to the customer numbers SKF Sweden 
provided in its COP/CV supplemental questionnaire response. SKF Sweden 
states that the Department should use only those customer numbers 
reported in the COP/CV section of its supplemental questionnaire 
response.
    Torrington contends that the Department established the related-
party customer code properly in its calculations and should not adjust 
its calculations.
    Department's Position: We have examined the record and agree with 
SKF Sweden that we made an error in identifying which customers to 
include in the related-party arm's length test. Therefore we have 
modified the customer-code list in the arm's-length test to reflect 
only those customers SKF Sweden identified in its COP/CV supplemental 
questionnaire response.
    Comment 2: Torrington asserts that the Department should test SKF 
France's reported HMPs for differences in selling prices to related and 
unrelated customers as it did for other respondents in this review.
    SKF France contends that, pursuant to the Department's 
instructions, it excluded sales to related parties from the sales file, 
so no test is necessary.
    Department's Position: We disagree with Torrington. Because SKF 
France reported HM sales to unrelated customers only and did not 
request the Department to consider sales it made to related parties, 
there are no relevant related-party sales for which we need to conduct 
an arm's-length test.
    Comment 3: NTN objects to the Department's standards for 
eliminating related-party HM sales not made at arm's length. NTN 
contends that the Department's method of comparing sales prices by 
class, model, and customer category is inadequate to determine whether 
prices are comparable without consideration of other factors such as 
payment terms and quantities sold.
    Department's Position: We disagree with NTN. Section 353.45 our 
regulations provides that we will use related-party sales in the 
calculation of FMV ``only if satisfied that the price is comparable to 
the price at which the producer or reseller sold such merchandise to a 
person not related to the seller'' (emphasis added). The regulations 
direct us to focus on price. We have established a reasonable and 
objective standard for determining whether related-party-sales prices 
are comparable to unrelated-party-sales prices; if at least 99.5% of 
the volume of a related-party's sales are made at prices equal to, or 
greater than, prices to unrelated parties, then we consider those 
related-party sales to be reliable. We used this methodology in AFBs 
III and the CIT upheld it in NTN II.
    Further, we disagree with NTN that we do not consider payment 
terms. We take payment terms into account by adjusting prices for 
credit expenses. 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. See AFBs 
IV at 10946-47. Finally, with respect to NTN's contention that the 
related-party test does not adequately consider quantities sold, we 
note that NTN has not shown the affect, if any, that quantity 
differences had on its selling prices.

10. Samples, Prototypes, and Ordinary Course of Trade

    Although we may exclude sales from the home market database under 
section 773(a)(1) of the Tariff Act where we determine that those sales 
were not made in the ordinary course of trade, there is no parallel 
provision allowing for exclusion of such sales from the U.S. database. 
See Floral Trade Council of Davis, Cal. v. United States, 775 F. Supp. 
1492, 1503 n.18 (CIT 1991). As we have explained in past reviews, we do 
not exclude U.S. sales from our review merely because they are 
designated as 'samples'' or ``prototype.'' See AFBs II at 28395 and 
AFBs III at 39744. However, we will only exclude U.S. sales from our 
review in unusual situations, in which those sales are unrepresentative 
and extremely distortive. See, e.g., Chang Tieh Indus. Co. v. United 
States, 840 F. Supp. 141, 145-46 (CIT 1993) (exclusion of sales may be 
necessary to prevent fraud on the Department's proceedings).
    Contrary to the statements made by several parties, while we have 
acknowledged that we may exclude small quantities of sales in 
investigations, we do not follow the same policy in reviews. This is 
because, under the statute, the Department is required in an 
administrative review to calculate an amount of duties to be assessed 
on all entries of subject merchandise, and not merely to set a cash 
deposit rate.
    Our treatment of samples and prototypes was recently upheld by the 
CIT in FAG III. In that case, the CIT recognized the limitations on our 
authority to exclude U.S. sales in an administrative review. The CIT 
upheld our procedural requirements for establishing that a sale is a 
true sample, which require the respondents to establish that: (1) 
Ownership of the merchandise has not changed hands; and (2) the sample 
was returned to the respondent or destroyed in the testing process. Id. 
at 11, citing Granular Polytetrafluoroethylene Resin from Japan, 58 FR 
50343, 50345 (September 27, 1993).
    The fact that merchandise is sold at a very low price, or even 
priced at zero is not sufficient to establish that the sale is a 
sample. The reason for this policy is that a respondent could disguise

[[Page 66512]]

dumping by matching zero-priced sales, designated as ``samples,'' with 
sales above fair value. Although, on average, customers would be 
purchasing the merchandise below fair value, if we were to disregard 
the sales designated as ``samples,'' our calculations would find no 
dumping. For this reason, we require additional evidence that sales are 
true samples before they will be excluded from the U.S. sales database.
    Comment 1: Torrington asserts that the Department properly included 
in the preliminary results U.S. sales that SKF France had deemed sales 
of sample and prototype merchandise and requested excluded. Torrington 
claims that the statute mandates that the Department must analyze the 
USP of each entry of subject merchandise and assess antidumping duties 
on each entry, and the statute does not make an exception for sample or 
prototype sales. Torrington also claims that, in all previous reviews 
of these orders, the Department agreed with this position. Torrington 
states, in addition, that SKF France did not provide adequate factual 
information regarding the alleged samples or prototypes to support its 
position.
    SKF France argues that the Department may exclude U.S. sample or 
prototype sales from its margin calculation, as the Department 
explained in a recent brief to the CIT. See Defendant's Response Brief 
(December 15, 1995) in Ct. No. 95-03-00335-S at 16. According to SKF 
France, the Department cited three circumstances in which it can 
exclude certain U.S. sales, including where sample sales do not 
constitute true sales (citing Defendant's Response Brief, Dec. 15, 
1995, CT No. 95-03-00335-S at 16). SKF France contends that the statute 
sets forth general requirements for conducting administrative reviews 
and the general definition of dumping, but does not preclude the 
Department from exercising its discretion to exclude sales in which the 
failure to exclude such sales would result in an inaccurate margin 
calculation, citing NTN I. In addition, SKF France claims the 
Department has recognized its authority to exclude U.S. sample and 
prototype sales in administrative reviews. SKF France claims that it 
provided full cost information and sales prices for each of the 
reported sample and prototype sales.
    Department's Position: We agree with Torrington. As we explained in 
AFBs II (at 28395), other than for sampling, and except under the 
limited circumstances discussed above, there is neither a statutory nor 
a regulatory basis for excluding U.S. sales from review. The Department 
must examine all U.S. sales within the POR. See also Final Results of 
Antidumping Administrative Review; Color Television Receivers From the 
Republic of Korea, 56 FR 12701, 12709 (March 27, 1991).
    Comment 2: Torrington states that the Department should reject 
SNR's claims that it should exclude certain U.S. and HM sales from the 
dumping analysis. First, Torrington claims, the Department has no 
statutory authority to exclude any U.S. sales. With respect to HM 
sales, Torrington argues that SNR has recorded a separate product code 
for the sample models and it did not clarify how this affected the code 
reported in field IDNUM (which SNR claims should be used for matching 
purposes). Additionally, Torrington contends that SNR did not supply 
any documentation nor has it offered a description of the types or 
models involved. Therefore, the Department should deny SNR's requests 
for exclusions.
    SNR responds that Torrington is in error and that, in fact, the 
Department used all U.S. and HM sample sales in its analysis. SNR 
concludes that the Department does not need to make any changes in the 
margin program for the final results with regard to this comment.
    Department's Position: We agree with Torrington that we should not 
exclude any of SNR's U.S. and HM sample sales from our analysis. We 
also agree with SNR that we included all such sales in our preliminary 
margin calculations. Therefore, no change for the final results is 
necessary.
    Comment 3: Torrington contends that the Department should not 
exclude any of SKF Sweden's U.S. sample and prototype sales. Torrington 
cites section 751(a)(2)(A) in support of its position that any imports 
that are dumped should be subject to antidumping duty assessments. 
Torrington also cites AFBs I at 31713, AFBS II at 28394-95, AFBs III at 
39776, and AFBs IV at 10947 in noting the Department's practice of 
including all U.S. sales in these reviews. Torrington states that, 
although the Department will exclude sample sales in situations where 
there is no transfer of ownership between the exporter and the U.S. 
purchaser, SKF Sweden did not demonstrate that it retained ownership of 
its sample sales.
    In addition, Torrington states, because SKF Sweden did not provide 
any factual information regarding the sample or prototype sales, the 
Department should not exclude HM sales of samples and prototypes from 
its analysis. Furthermore, Torrington contends, in SKF Sweden's 
supplemental questionnaire response, SKF Sweden stated that there were 
no sales of samples and prototypes in the HM. Thus, since SKF Sweden 
claims that none of its HM sales were of samples or prototypes, there 
is no basis to exclude these sales from the HM database.
    SKF Sweden responds that the Department may, under certain 
circumstances, exclude sample or prototype U.S. sales from the margin 
calculation. SKF Sweden states that, in arguments before the CIT, the 
Department explained that it would exercise its authority to exclude 
certain U.S. sales when small quantities are sold, to prevent fraud in 
the proceeding, or where sample sales do not reflect true sales. SKF 
Sweden contends that the Department also has the discretion to exclude 
sales when the inclusion of such sales may result in an inaccurate 
margin calculation, citing NTN I at 1208. SKF Sweden also contends that 
the transfer of ownership between seller and purchaser is not a sole 
criterion upon which the Department bases its analysis. SKF Sweden 
asserts that the record demonstrates that its sample and prototype U.S. 
sales are not representative of the products sold within the ordinary 
course of trade and, therefore, they should be excluded from the margin 
calculations.
    SKF Sweden notes that its supplemental questionnaire response 
indicates that there were no HM sales of samples and prototypes, and 
states that Torrington's assertions regarding the inclusion of these 
sales in the Department's analysis are moot.
    Department's Position: We agree with Torrington. As noted above, we 
will only exclude U.S. sales from our review in unusual situations, 
i.e., where the sales are unrepresentative and extremely distortive. 
SKF Sweden has not submitted evidence sufficient to satisfy the 
criteria for excluding U.S. sample sales from our analysis. 
Specifically, SKF Sweden has failed to demonstrate that: (1) It 
maintains ownership of the subject merchandise after exportation to the 
United States, and (2) the customer destroyed the merchandise during 
testing or returned it to SKF Sweden.
    We also disagree with SKF Sweden's argument that we may exercise 
discretion to exclude sales in which the quantities are small. The case 
that SKF Sweden cites in support of its argument concerns an LTFV 
investigation. As noted above, we have the discretion to eliminate 
unusual U.S. sales in an investigative proceeding; we do not have the 
same discretion in an administrative review.
    SKF Sweden did not have HM sales of samples and prototypes. 
Therefore, Torrington's argument that the

[[Page 66513]]

Department should not exclude these sales from the HM database is moot.
    Comment 4: NSK/RHP argues that the Department should remove from 
the calculation of USP those transactions of bearings NSK/RHP gave away 
in the United States as samples. NSK/RHP states that the antidumping 
law applies only to sales of the subject merchandise in the United 
States and that, by including such samples in the U.S. database, the 
Department fails to acknowledge that consideration must be promised or 
paid by the buyer to the seller in order for the transaction to 
constitute a sale. NSK/RHP argues that the Department should revise its 
definition of the term ``sale'' to comport with a standard definition 
of this term.
    Torrington asserts that NSK/RHP's contention that alleged 
``sample'' sales made at ``zero prices'' should not be included in the 
U.S. sales database is contrary to the statute. Torrington argues that, 
in administrative reviews, the Department must analyze the USP of each 
entry of merchandise subject to the antidumping duty order and there is 
no exception to this categorical mandate for zero-price ``sample'' 
sales. Torrington argues that NSK/RHP's argument that the Department 
should revise its definition of the term ``sale'' to comport with an 
alleged non-legal ``standard'' definition of the term ``sale'' lacks 
merit because NSK/RHP has not demonstrated that its purported non-legal 
definition of the term ``sale'' comports with the definition of the 
term ``sample sale'' sanctioned by law and the courts.
    Department's Position: We agree with Torrington. NSK/RHP failed to 
demonstrate either of the two criteria, described above, which must be 
met for sample sales to be excluded from the U.S. sales database. 
Therefore, we have continued to review and calculate margins on the 
basis of NSK/RHP's claimed samples. With regard to NSK/RHP's argument 
that the ``samples'' are not true ``sales,'' we note that we cannot 
accept a sample sales claim simply on the basis of designation. 
Furthermore, as noted above, were we to accept NSK/RHP's argument that 
the alleged samples are not actually sales per se, we would be allowing 
a loophole that respondents could use to mask dumping.
    Comment 5: Torrington argues that the Department should not exclude 
SKF Italy's sample and prototype sales from the U.S. or HM databases. 
Torrington notes that the Department properly did not exclude such 
sales in its preliminary margin calculation.
    SKF Italy argues that the Department has the discretion to exclude 
sample sales from both the U.S. and HM databases. SKF Italy asserts 
that it has demonstrated that its reported sample sales in both the 
U.S. market and the HM are samples and, therefore, they should be 
excluded.
    Department's Position: We disagree with SKF Italy. As noted above, 
merely designating a sale as a ``sample'' does not entitle a respondent 
to exclusion of that sale from the database. The respondent must 
provide evidence to prove its claim that the designated sales are 
actually sample sales. Further, they must meet the criteria discussed 
above in order to merit the exclusion of U.S. sample sales, and must 
demonstrate that HM sample sales are outside the ordinary course of 
trade. In this instance, SKF Italy failed to provide any evidence to 
support its sample sale claims. Therefore, we have continued to review 
and calculate margins on the basis of SKF Italy's sample sales.
    Comment 6: Torrington requests that the Department examine all of 
FAG Italy's U.S. sales. Torrington argues that section 751(a)(2) of the 
Tariff Act requires that the Department analyze the USP of each entry 
of merchandise subject to the antidumping duty order. Petitioner states 
that there is no exception for zero-price sample or prototype sales.
    FAG Italy responds that the Department has consistently held that, 
where merchandise is not sold within the meaning of section 772 of the 
Tariff Act, the transaction is not a sale for antidumping purposes. FAG 
Italy contends that section 772 defines an ESP sale as the price at 
which merchandise is sold or agreed to be sold in the United States. In 
FAG Italy's case, respondent asserts, all sample transactions were 
zero-priced so there was no price at which merchandise was sold.
    FAG Italy argues that Torrington's reliance on section 751(a)(2)(A) 
of the Tariff Act is misplaced. Respondent contends that the provision 
requiring the Department to analyze the USP of each entry of 
merchandise subject to the antidumping duty order applies in its 
literal sense only to PP situations. In ESP situations, FAG Italy 
holds, the Department does not review any entries; it reviews sales. In 
conclusion, FAG Italy requests that the Department exclude sales of 
zero-priced sample/prototype merchandise from FAG Italy's U.S. sales 
database.
    Department's Position: We agree with Torrington. FAG Italy failed 
to substantiate its claims that the sales were actually sample sales or 
to demonstrate that either of the two criteria described above were 
met. Therefore, we have continued to review and calculate margins on 
the basis of FAG Italy's claimed sample sales.
    Comment 7: NSK argues that the Department should eliminate zero-
price sample transactions from the U.S. database because the record 
demonstrates that the provision of these samples are not sales but 
rather promotional expenses. NSK contends that the Department verified 
that NSK did not ``sell'' sample bearings in the United States during 
the review period, but rather supplied sample bearings to customers 
free of charge.
    Torrington argues that every entry is subject to review and that, 
if the Department excludes the zero-priced sample sales from the U.S. 
sales database, it will allow NSK to evade the antidumping law by 
providing zero-based sales coupled with higher-priced sales to yield 
lower weighted-average margins. Torrington contends that the Department 
should continue to include NSK's zero-priced sample sales in the U.S. 
sales database for the final results.
    Department's Position: We disagree with NSK. NSK failed to 
demonstrate either of the two criteria described above. Therefore, we 
have continued to review and calculate margins on the basis of NSK's 
claimed samples. With regard to NSK's argument that the ``samples'' are 
not true ``sales,'' we note that we cannot accept a sample sales claim 
simply on the basis of designation. Furthermore, as noted above, were 
we to accept NSK's argument that the alleged samples are not actually 
sales per se, we would be allowing a loophole that respondents could 
use to mask dumping.
    Comment 8: NTN argues that it identified certain HM sales as sample 
sales and that the Department erred in not excluding these sales from 
the calculation of weighted-average FMVs. NTN also asserts that the 
Department included certain other HM sales respondent had identified as 
not in the ordinary course of trade in the calculation of weighted-
average prices. NTN requests that the Department disregard these sales 
for the purposes of calculating FMV.
    Torrington believes that NTN has not met the burden of proving that 
sample sales are outside the ordinary course of trade. Torrington 
contends that respondents must meet a standard such as that affirmed in 
Murata Mfg. Co., Ltd v. United States, (820 F. Supp. 603, 606 (1993)), 
which establishes that, if sample sales are to be excluded, respondents 
must demonstrate different sales practices with respect to sample 
sales, such as negotiating sample-sales prices separately from standard 
sales

[[Page 66514]]

transactions, in order to have such sales excluded.
    Department's Position: We disagree with NTN that we should exclude 
certain sample sales from the calculation of FMV. Based on information 
we examined at verification we are satisfied that these sales were not 
made outside the ordinary course of trade. As the Department stated in 
AFBs III (at 39775), ``identify(ing) sales as sample * * * sales does 
not necessarily render such sales outside the ordinary course of trade. 
* * * Such evidence does not indicate that such sales were made outside 
the ordinary course of trade.'' We also disagree that we should 
disregard other sales NTN identified as not in the ordinary course of 
trade. NTN's standard of ``low volume of sales'' is inadequate as a 
definition of sales not in the ordinary course of trade. NTN has 
presented no other supporting information that identifies a low-volume 
sale as outside the ordinary course of trade. The Department has 
determined that ``(i)nfrequent sales of small quantities of certain 
models is insufficient evidence to establish that sales were made 
outside the ordinary course of trade.'' Id.

11. Taxes, Duties, and Drawback

    Comment 1: FAG/Barden claims that the Department inadvertently 
dropped the variable for ``other revenue'' in its calculation of 
adjusted USP at a certain point in its computer program. Further, FAG/
Barden argues that, in the calculation of VAT for HM sales, the 
Department should add the variable ``other revenue'' to the total unit 
price. FAG/Barden requests that the Department correct these clerical 
errors for the final results.
    Torrington disagrees with FAG/Barden's argument that, in the 
calculation of VAT for HM sales, the Department should add the variable 
``other revenue'' to the total unit price. Torrington argues that FAG/
Barden has not provided a narrative description of this field nor did 
FAG/Barden identify this in its narrative description of the VAT. 
Torrington argues that the Department should not make the revisions 
FAG/Barden requests.
    Department's Position: We disagree with FAG/Barden. FAG/Barden has 
misread the purpose of the language at a certain point in the 
Department's computer program. FAG/Barden contends that this language 
in the computer program refers to the calculation of adjusted USP. 
However, at the point in the computer program to which FAG/Barden 
refers, we adjust FMV for the application of the cost test, not for the 
adjustment of USP. Therefore, we have not made FAG/Barden's suggested 
changes to the computer program for these final results.
    With respect to FAG/Barden's second contention, that the Department 
should add the variable ``other revenue'' to the total unit price in 
the calculation of VAT for HM sales, we determined that, because FAG/
Barden did not provide a narrative description of this field in its 
questionnaire responses and did not identify this expense in its 
narrative description of VAT, we cannot accurately determine what the 
variable ``other revenue'' includes. Therefore, we have not adjusted 
VAT for HM sales to include the variable ``other revenue'' for these 
final results.
    Comment 2: SKF France claims that the Department failed to make 
adjustments for billing adjustments 2, freight revenue, and packing 
revenue to the taxable base on which it calculated VAT.
    Torrington argues that expenses for billing adjustments should not 
be an adjustment to the taxable base. Torrington contends that SKF 
France did not report this expense correctly because the reporting 
methodology does not isolate amounts incurred on in-scope sales. For 
freight revenue and packing revenue, Torrington contends that, for SOS 
sales, SKF France did not report these revenues on transaction-specific 
bases. Torrington asserts that the reporting methodology of these three 
expenses do not meet the standard that it claims the Court required in 
Torrington I at 1579.
    Department's Position: We agree with SKF France and have included 
its home market billing adjustment 2, except as noted below, packing 
revenue, and freight revenue amounts in the taxable base used to 
calculate VAT. Torrington acknowledges that a significant majority of 
SKF France's packing and freight revenues were reported on a 
transaction-specific basis and provides only a conclusory statement 
that SKF France allocated a small portion of its revenue amounts.
    We base the VAT adjustment on adjusted FMV; we factored these 
variables fully into FMV and have therefore included them in the VAT 
calculation. However, as noted in Discounts, Rebates, and Price 
Adjustments, above, we have disallowed SKF France's negative billing 
adjustment 2 amounts. Accordingly, we did not include negative billing 
adjustments in our VAT calculation.
    Comment 3: SKF Germany argues that the Department neglected to 
adjust the price upon which it calculated VAT for billing adjustment 2, 
freight revenue 2, and packing revenue. SKF Germany also states that 
the HMP on which the Department calculated the VAT includes these 
adjustments.
    Torrington argues that the Department should not adjust for billing 
adjustments because SKF Germany did not report them correctly, relying 
instead on a reporting methodology that does not isolate amounts 
incurred on in-scope sales. Torrington contends that freight revenues 
and packing revenues are also allocated amounts and these three 
expenses do not meet the CIT's allocation criteria since the expenses 
are allocated across sales that include non-subject merchandise.
    Department's Position: We agree with SKF Germany for the reasons 
provided in response to Comment 2, above, and have included its home 
market billing adjustment 2, packing revenue, and freight revenue 
amounts in the taxable base used to calculate VAT. Torrington 
acknowledges that a significant majority of SKF Germany's packing and 
freight revenues were reported on a transaction-specific basis and 
provides only a conclusory statement that SKF Germany allocated a small 
portion of its revenue amounts. However, as noted in Discounts, 
Rebates, and Price Adjustments, above, we have disallowed SKF Germany's 
negative billing adjustment 2 amounts. Accordingly, we did not include 
negative billing adjustments in our VAT calculation.
    Comment 4: SKF Italy argues that the Department should change its 
calculation of VAT by including packing revenue in the net price 
because the price on which VAT is actually assessed includes packing 
revenue.
    Torrington notes that packing revenue is described as a negotiated 
charge for packing, expressed as a percentage of invoice price and 
separately listed on the invoice, and that SKF Italy did not provide 
any further details. Torrington contends that, on the basis of the 
record evidence, the Department is not required to modify its 
methodology for the final results.
    Department's Position: We agree with SKF Italy. Because packing 
revenue is included in the price on which VAT is charged, the VAT we 
calculate for the HM sale should reflect packing revenue. We have made 
this change for the final results.
    Comment 5: Torrington argues that the Department should disallow 
the duty drawback SKF Italy claimed in connection with its U.S. sales. 
Torrington contends that SKF Italy failed to demonstrate the link 
between

[[Page 66515]]

the import duties it paid and the rebate it received, and that SKF 
Italy failed to demonstrate that there were sufficient imports of the 
imported material to account for the duty drawback it received for the 
export of the manufactured product.
    SKF Italy argues that its methodology for calculating duty drawback 
adjustment has not changed since the LTFV investigation and that the 
Department has accepted it in all segments of the proceeding. SKF Italy 
contends that the Italian legislation makes clear what is eligible for 
duty drawback and that the Department has verified the link between the 
legislation, SKF Italy's methodology, and SKF Italy's actual 
experience. SKF Italy observes that neither the legislation nor its 
methodology has changed since that verification. Finally, SKF Italy 
argues that its response demonstrates the sufficiency of imports of raw 
material inputs to account for the duty drawback it received on exports 
of finished goods.
    Department's Position: We disagree with Torrington. We apply a two-
part test to determine whether to grant a respondent's claimed 
adjustment to USP for duty drawback. In this test, a respondent must 
demonstrate that (1) a link exists between the import duties it paid 
and the rebate it received, and (2) there were sufficient imports of 
the imported material to account for the duty drawback it received for 
the export of the manufactured product. We applied this test in 
addressing the issue of SKF Italy's claimed duty drawback adjustment 
and, based on those verification findings, accepted the adjustment for 
the final results. See AFBs II at 28420. Thus, we have determined 
previously that, under the Italian duty drawback system, a sufficient 
link exists between the amount of duties paid and the amount of duty 
drawback claimed. In addition, as in prior reviews, we have reviewed 
SKF Italy's cost response and conclude that it purchased sufficient 
inputs from overseas related parties to support its claimed duty 
drawback adjustment. See Federal Mogul V, 924 F. Supp. 210 (CIT April 
19, 1996). Furthermore, SKF Italy submitted copies and English 
translations of the applicable laws and duty drawback rates, and we 
observed from this evidence that the factual situation has not changed 
since the 90/91 review. Therefore, because SKF Italy used the same 
method to report duty drawback in this review as it did in the previous 
reviews, and because the factual situation had not changed during this 
review or during previous reviews, we conclude that SKF Italy's duty 
drawback claim for this review satisfies both parts of our tests.

12. U.S. Price Methodology

    Comment 1: Torrington believes that the Department should reject 
NTN's and NTN Germany's allocation of certain U.S. expenses according 
to transfer price in favor of an allocation based on resale value. 
Torrington contends that NTN's and NTN Germany's reasoning that a 
transfer-price methodology eliminates distortions caused by profit 
margins on individual sales is not rational, since profit margins can 
only be determined after expenses have been allocated and deducted from 
each sale.
    NTN answers that Torrington's contention is only correct if the 
allocation of selling expenses is based on a pre-profit price, which 
essentially equates to a transfer price.
    Department's Position: We agree with Torrington. While transfer 
price is essentially equivalent to the cost of goods sold for an 
importing subsidiary, transfer price is not the same as cost of goods 
sold for the manufacturing parent if, for instance, transfer prices are 
below the manufacturing parent's COP. We consider resale prices to be 
the more reliable measure of value available to us, as we stated in 
AFBs IV (at 10919) that ``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 the value that is not subject to potential manipulation by 
respondents.'' Consequently, we have recalculated NTN's U.S. expenses 
according to resale prices.
    Comment 2: Torrington contends that the Department should 
reclassify NTN's and NTN Germany's U.S. advertising expenses as a 
direct selling expense based on a statement in both firms' responses 
that ``most of the advertising is general and promotes the company and 
not specific products,'' citing NTN's questionnaire response of 
September 6, 1994 at 21.
    Department's Position: We disagree with Torrington. Although we 
stated in AFBs IV (at 10909) that NTN tacitly acknowledged that it 
incurred some direct advertising expenses in the United States by 
claiming that most of its U.S. advertising expenses were indirect in 
nature, we did not conduct a U.S. verification to examine the issue 
further in that review. In our U.S. verification of NTN in this review, 
we determined that respondent's advertising and sales promotion was 
general in nature. Thus, the expenses are properly classified as 
indirect selling expenses. For these final results, we have treated 
U.S. advertising expenses as an indirect selling expense for NTN and 
NTN Germany.

13. Accuracy of HM Database

    Comment 1: Torrington claims that the Department should establish a 
rebuttable presumption that a sale is an export sale whenever the 
circumstances suggest that the sales are not in fact for HM 
consumption, and should remove those HM sales from respondents' HM 
sales listings . Torrington provides the following examples of such 
situations: (1) Sales to a home market customer with manufacturing 
facilities in the United States which include the bearings in a 
further-manufactured article (in which case Torrington recommends 
presuming sales of such bearings are U.S. sales), and (2) sales for 
which the manufacturer prepared export documents for the purchaser. 
Torrington suggests that respondents could rebut such presumptions by 
providing adequate evidence establishing that the sales are for home 
market consumption.
    Torrington acknowledges that the Department rejected this 
rebuttable presumption in AFBs IV. Torrington urges the Department to 
reconsider its policy and revise its approach regarding this issue.
    Koyo argues that the Department should reject Torrington's 
presumption. Koyo notes that the Department examined and verified 
whether respondents properly excluded export sales from the HM database 
in the current review and identified no problems. Koyo asserts that the 
dispositive question is whether respondents knew at the time of sale, 
when making price decisions, that the ultimate destination of the 
merchandise was the HM or some export destination. Koyo claims that 
requiring respondents to prove the ultimate destination of all HM sales 
is extremely burdensome and is of no relevance to the purpose of the 
antidumping statute, which is to prevent less-than-fair-value sales of 
merchandise in the United States. Koyo argues that the fact that some 
manufacturers do not know the ultimate destination of some of their 
merchandise guarantees that they are not engaging in price 
discrimination based on the markets in which they are selling their 
merchandise. Finally, Koyo states, Torrington litigated this issue at 
the CIT in its appeal of AFBs I and did not file an appeal after the 
court did not rule in its favor.
    NSK argues that, pursuant to section 773 of the Tariff Act, it 
reported sales that it knew were intended for export as export sales, 
and it reported sales that it knew were intended for domestic

[[Page 66516]]

consumption as HM sales. NSK asserts that there is no statutory 
requirement that respondents seek or obtain propriety business 
information from unrelated customers in order to determine whether the 
customer may export a respondent's bearing at a later time. NSK 
contends that Torrington's argument, which assumes that certain, 
undefined classes of sales are export sales unless respondents can 
prove otherwise, has no support in the statute or case law.
    NTN argues that Torrington's proposed test would nullify the 
statutory and regulatory provisions concerning resellers, citing 
section 772 of the Tariff Act and 19 CFR 353.2(5) (1994). NTN contends 
that, under Torrington's test, antidumping margins could never be 
calculated based on the reseller's price since the manufacturer would 
always be deemed to have knowledge that the sales were destined for the 
United States.
    INA argues that Torrington's vague reference to ``circumstances 
suggesting that sales are not for HM consumption'' provides no guidance 
for determining to which sales the presumption would apply and would 
require respondents and the Department to make subjective judgments.
    FAG contends that Torrington neither recognizes the pure 
subjectivity nor the administrative burdens involved in applying a 
``circumstances suggest'' test for HM sales. FAG argues that only 
section 772(b) of the Tariff Act provides a basis for excluding sales 
from the HM database, and that it applies only to sales the Department 
characterizes as U.S. sales because the company knew at the time of 
sale that the merchandise would ultimately be destined for the United 
States. FAG Germany contends that section 772(b) of the Tariff Act 
requires that two standards must be met in order to exclude a sale from 
the home market database: (1) The Department must determine that 
knowledge of the export existed at the time of the sales and (2) the 
Department must establish that the export sale was made to the United 
States. With regard to the first criterion, FAG argues that the 
standard for imputing knowledge, as the Department has properly applied 
it in this case, is high. FAG contends that, even if it had reason to 
know that its customers would export the bearings, as long as it 
shipped the bearing to the customer in Germany, the sales should not be 
excluded from the sales database. FAG argues that, where the Department 
cannot say with objective certainty that all of a reseller's goods go 
to a known destination, the Department has not held that the supplier 
had reason to know the ultimate destination of those goods. FAG 
contends that, because the customer could dispose of the bearings in 
any manner it wished once the bearings were shipped to that customer, 
even if it believed the bearings would be exported, it cannot be sure 
of the ultimate disposition of the bearings. Therefore, FAG contends, 
the standard for imputing knowledge has not been met.
    With regard to the second criterion, FAG argues that the only 
statutory basis for excluding sales from the HM database is where the 
producer knew at the time of sale that the product was destined for the 
United States. FAG argues that, because the bearings sold to its 
customers cannot be shown to have been ultimately shipped to the United 
States, the Department cannot exclude any such sales.
    Department's Position: We disagree with Torrington regarding its 
proposal to establish rebuttable presumptions that certain home market 
sales were destined for export or, more specifically, destined to be 
exported to the United States. Indeed, in Federal-Mogul IV, Torrington 
unsuccessfully argued to the CIT that the Department should impose such 
a presumption. Instead, the Court held that, if we determined that 
certain information on the record provided evidence that respondents 
knew or should have known that certain sales were destined for the U.S. 
market, we must disregard those sales in calculating FMV. Id. Thus, we 
agree that home market sales made with knowledge of export should not 
be included in the home market database.
    As we noted in AFBs IV at 10952-53, 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 
examined the record closely with regard to every respondent and did not 
find sufficient evidence in these reviews to conclude that any alleged 
HM sales are in fact U.S. sales under section 772(b) of the Tariff Act. 
Furthermore, Torrington has not met its burden of proof of 
demonstrating, and the administrative record is lacking in evidence 
indicating, that our decision to use FAG Germany's home market sales is 
unreasonable. See Torrington III at 629 (holding that Torrington bears 
the burden of proving certain allegations concerning certain sales, 
including its allegation that they were not for home market 
consumption). Therefore, we have not reclassified any HM sales as U.S. 
sales in these reviews.
    Section 773(a) of the Tariff Act provides that we must base FMV 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 FAG 
Germany reported as HM sales by FAG Germany (see Comment 2, below), we 
did not find sufficient evidence to reasonably conclude that reported 
HM sales were not ``for home consumption'' as required by section 
773(a) of the Tariff Act.
    Comment 2: FAG Germany contends that the Department should not have 
excluded from the HM sales database sales to two customers in its 
preliminary results. FAG Germany argues that the Department gave no 
explanation for this exclusion and that there is nothing on the record 
to warrant such an exclusion. FAG Germany notes that, in AFBs IV, the 
Department excluded sales to these customers on the grounds that they 
were indirect exporters and that FAG Germany had reason to know that 
merchandise sold to these customers was to be exported. However, FAG 
Germany contends, there is nothing on the record in this review to 
justify such a conclusion. Citing Natural Bristle Paint Brushes from 
the People's Republic of China; Final Results of Antidumping 
Administrative Review, 55 FR 42599, 42600 (October 22, 1990) and Fuel 
Ethanol from Brazil; Final Determination of Sales at Less Than Fair 
Value, 51 FR 5572 (February 14, 1986), FAG argues that the standard for 
imputing that a respondent knew or had reason to know that merchandise 
it sold was not for home market consumption is high. FAG also argues, 
citing Television Receivers, Monochrome and Color, from Japan; Final 
Results of Antidumping Administrative Review, 58 FR 11211 (February 24, 
1993), and Oil Tubular Good from Canada; Final Results of Antidumping 
Administrative Review, 55 FR 50739 (December 10, 1990), that where the 
Department cannot say with objective certainty that 100 percent of a 
reseller's goods go to a known destination, then the Department has not 
held that the supplier ``should have known'' the disposition of the 
goods. FAG contends that, beyond having a very high standard for 
imputing knowledge that the manufacturer knew at the time of the sale 
that the goods were not for home market consumption, the Department 
requires objective information that can be corroborated by the 
administrative record. In light of

[[Page 66517]]

this, FAG Germany requests that the Department change its analysis of 
the sales to the two customers for its final results. FAG Germany also 
notes that one of the customer codes the Department excluded does not 
exist.
    Torrington contends that, if these two customers are the same two 
indirect exporters whose sales were excluded from the database in AFBs 
IV, the Department acted properly by excluding sales to these customers 
in the preliminary results. Torrington observes that, in AFBs IV, the 
Department found that FAG Germany misreported certain transactions 
after the Department and Torrington expended considerable time and 
effort to verify the factual situation. Torrington argues that this was 
necessary because the Department does not have power to compel evidence 
by legal process. Torrington contends that past findings of misreported 
sales should create presumptions in subsequent reviews, requiring 
respondents to demonstrate a change in the factual situation.
    Torrington argues that, with respect to FAG Germany's argument that 
the standard for imputing knowledge is high, this is not a normal case 
because the Department found sales to these customers to be misreported 
in AFBs IV. Torrington argues that the existence in this review of 
evidence of misreporting in the home market database for the 
immediately preceding review distinguishes the instant situation from 
the situations in the cases that FAG Germany cited.
    With respect to FAG Germany's argument that the Department can only 
exclude, from the HM sales database, sales of bearings which have been 
shown to have been ultimately shipped to the United States, Torrington 
contends that this interpretation could create a large legal loophole 
which would allow respondents to dump anywhere in the world through 
indirect exporters and then claim the sales as HM sales, thereby 
reducing FMV. Torrington observes that the Department has deemed that 
this would be improper and that such sales cannot be considered HM 
sales. Torrington argues that the Department has interpreted the 
statute reasonably with respect to the exclusion of sales improperly 
included in the HM database.
    Department's Position: We disagree with FAG Germany. Section 773(a) 
of the Tariff Act states that FMV must be based on the price ``at which 
such or similar merchandise is sold * * * in the principal markets of 
the country from which exported, in the usual commercial quantities and 
in the ordinary course of trade for home consumption'' (emphasis 
added). This indicates clearly that HM sales must consist of only those 
sales consumed in the HM.
    Only rarely will we be able to identify direct evidence of a 
respondent's knowledge with respect to the destination of merchandise. 
Therefore, we must impute whether knowledge existed based on the 
factual situation of each case. FAG Germany is correct in noting that, 
in deciding whether to impute knowledge that bearings sold to a HM 
customer were ultimately destined for the United States, the standard 
for imputing such knowledge is high. The cases FAG Germany cites to 
support this position state this clearly. FAG Germany overlooks the 
fact, however, that the statute establishes two separate tests for 
imputing knowledge. We use the first test, which FAG Germany discusses, 
to determine whether to treat a sale as a sale for exportation to the 
United States. We use a second test, which FAG Germany does not 
discuss, to determine whether to treat a sale as a sale for home 
consumption because the company had reason to know that the merchandise 
would be exported.
    The standard for imputing knowledge for the second test is not as 
high as the standard for the first test. Under the second test, 
established in section 773(a)(1), we merely need to determine whether 
the company had reason to know that the merchandise was not intended 
for HM consumption, and we do not need to determine the specific market 
for which the merchandise was destined.
    In addition, we note that section 773(a) does not require that the 
merchandise actually be consumed in the HM, but rather that it be sold 
for HM consumption. FAG Germany suggests that it only had to report 
sales it had certain knowledge would be exported because the customer 
might not actually export the merchandise. Under this interpretation of 
the statute, however, we would be required to trace HM sales in order 
to ensure that HM customers did not export the merchandise. Not only is 
FAG Germany's interpretation inconsistent with the statute but, 
assuming such an inquiry were possible, it would severely restrict the 
Department's ability to complete administrative reviews in a timely 
manner.
    With regard to our factual conclusions, FAG Germany argues that 
there is nothing on the record to justify our exclusion of these 
companies' sales from the HM database. However, we decided in AFBs IV 
that:

    With respect to FAG Germany, 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 
Germany referred to these customers as ``indirect exporters'' and 
that FAG Germany excluded sales to other ``indirect exporters'' 
based on its conclusion that these were export sales. In addition, 
one FAG Germany 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 Germany, 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 Germany's HM sales.

See AFBs IV at 10953.
    While some of the evidence which led to our factual conclusion in 
AFBs IV is not on the record of the current review, neither is there 
evidence on the record to show that the factual situation for these 
customers has changed since that POR, nor is there any new evidence 
about them on the record. In addition, FAG Germany has never challenged 
the factual situation underlying our conclusions in that review, but 
has only challenged our interpretation of the statute as applied to 
those facts. Therefore, in the absence of evidence demonstrating 
otherwise, we must assume that the factual situation in the immediately 
prior review still remains.
    In PPG Industries, Inc. v. United States, 978 F.2d 1232, 1242 (Fed. 
Cir.1992) (PPG Industries), the CAFC ruled that the Department was 
correct in treating a government program as not countervailable in the 
review in question. In that review, petitioner submitted factual 
evidence that it claimed demonstrated that the program was 
countervailable. The Department disagreed, stating that the information 
did not contradict its finding in the original investigation with 
regard to the program. Thus, the Department relied on its analysis and 
conclusions in a prior segment of the proceeding to make its 
determination in the review in question. The CAFC upheld this position, 
stating that the petitioner went astray ``in assuming that the ITA's 
determination * * * in this review is based on a `clean slate.' It is 
not.'' See PPG Industries at 1242. The CAFC also held that ``[b]ecause 
the allegedly new information was previously considered by the ITA * * 
* and because the allegedly new information does not cast substantial 
doubt on the ITA original determination, the ITA's conclusion that the 
new evidence submitted did not

[[Page 66518]]

justify a further investigation in this review cannot be an abuse of 
discretion and, therefore, must be affirmed.'' Id.
    In this review, FAG Germany has provided no evidence to disabuse us 
of our conclusion in AFBs IV that it had reason to know that bearings 
sold to the two customers in question would subsequently be exported. 
Therefore, in accordance with section 773(a)(1) of the Tariff Act, 
which states that HM sales must be sales for HM consumption, and our 
factual conclusions from AFBs IV, we have excluded sales to these two 
customers from the HM database for these final results.
    We note, however, that FAG Germany is correct that one of the 
customer codes we used in the computer program does not exist. This was 
a clerical error and we have corrected it for the final results.
    Comment 3: Torrington notes that the Department found in AFBs IV 
that FAG Germany mischaracterized certain HM sales. Torrington contends 
that the Department should examine FAG Germany's sales listings to be 
certain that respondent reported all sales accurately for purposes of 
this review.
    Department's Position: In the preliminary results, and in the final 
results, we have revised FAG Germany's HM sales database to exclude 
sales which were not for HM consumption. (see our response to Comment 2 
for a complete discussion of this issue).
    Comment 4: SKF Sweden states that it reported fewer than 2,000 
sales of CRBs to the Department. In light of the Department's practice 
of not treating transactions as sampled sales for purposes of our 
calculations in instances where a party has reported fewer than 2,000 
sales transactions, SKF Sweden contends that the Department should not 
treat these transactions as sampled sales in its calculations.
    Torrington notes that SKF Sweden reported in its questionnaire 
response that it had more than 2,000 transactions of Swedish CRBs in 
Italy. In addition, Torrington cites to the Department's Preliminary 
Analysis Memo which indicates that respondent reported sales of CRBs in 
the third country based on sample months. Thus, Torrington requests 
that the Department determine whether SKF Sweden reported complete data 
in its database of third-country sales for CRBs before making any 
adjustment to its calculations.
    Department's Position: We agree with SKF Sweden. While SKF Sweden 
reported that it had more than 2,000 transactions of Swedish CRBs in 
Italy, the sales data it submitted to us demonstrates otherwise. In 
fact, SKF Sweden also stated explicitly in its response that it 
reported all sales of CRBs and did not sample for purposes of reporting 
its data to us. Accordingly, for these final results of review, we made 
the necessary change to the margin calculation program as respondent 
suggested.
    Comment 5: Torrington asserts that FAG/Barden's HM database is 
incomplete. Torrington states that FAG purchased a minimal quantity of 
Barden-produced scope merchandise which FAG failed to report to the 
Department. Torrington states that accurate model matching and a 
complete database are essential to the Department's dumping analysis. 
Torrington contends that omission of this type of information should 
not be left to the discretion of the respondent. Torrington requests 
that, to the extent that FAG/Barden did not report all sales of Barden-
produced merchandise, the Department should apply BIA.
    FAG/Barden argues that it reported all HM sales correctly in its 
database. FAG/Barden argues that it reported all sales of subject 
merchandise, by month, in its initial database as required by the 
Department's questionnaire. FAG/Barden states that it reported all 
sales in the HM sample months of bearing families and part types 
corresponding to those bearings and part types reported in its U.S. 
sales listing, as instructed by the Department's questionnaire. 
Finally, FAG/Barden asserts that the Department verified Barden's HM 
database and it found no discrepancies or deficiencies. For the reasons 
discussed above, FAG/Barden contends that the Department should accept 
its HM database as reported and verified.
    Department's Position: We disagree with Torrington. We verified 
Barden's HM database and found no discrepancies. We agree with 
Torrington that accurate model matching and a complete database are 
important to our analysis. However, Torrington has not adequately 
supported its assertion that FAG/Barden's HM database excludes sales of 
subject merchandise which should have been included. Furthermore, our 
verification of FAG/Barden's HM database did not indicate that FAG/
Barden failed to provide complete sales information. We have 
determined, therefore, that application of BIA to FAG/Barden is not 
warranted for these final results. Thus, we have used FAG/Barden's 
reported data for our calculations.

14. Programming

    FAG/Barden, FAG Germany, FAG Italy, NSK/RHP, SKF Germany, SKF 
Sweden, and Torrington commented on alleged errors in the Department's 
computer programs. Where all parties agreed with a programming error 
allegation, we made the necessary changes to correct the error. Our 
final results analysis memoranda describe the programming errors and 
changes we made to correct the problems. The following comments address 
the programing error allegations, or rebuttals to such allegations, on 
which parties disagree.
    Comment 1: NSK/RHP contends that the Department erred by 
subtracting U.K. commissions from its calculation of HM direct expenses 
instead of adding them. NSK/RHP states that this error results in 
increasing FMV by the cost of the expense.
    Torrington argues that the Department had already accounted for HM 
commissions elsewhere in its computer program and disagrees with NSK/
RHP that the Department should correct a clerical error in the computer 
program as NSK/RHP describes it. Torrington argues that the Department 
should not make a direct addition to or subtraction from FMV for U.K. 
commissions, since these commissions are addressed in the commission 
offset step of the computer program.
    Department's Position: We agree with Torrington. We have accounted 
for U.K. commissions in the separate commission-offset step of the 
computer program. Therefore, we should not have included commissions in 
the HM direct expense calculation. We have changed the program as 
requested by Torrington to ensure that we adjust FMV properly for U.K. 
commissions.
    Comment 2: Torrington alleges that the Department made a clerical 
error that results in below-cost sales not being excluded from the HM 
database. SKF Italy agrees with Torrington.
    Department's Position: We disagree with Torrington and SKF Italy. 
For a complete discussion of this issue, see Comment 2 of Section 4.a. 
above, regarding a clerical error alleged by FAG Germany and 
Torrington. We did discover, however, that we inadvertently did not set 
the quantity and value of some of these transactions to zero as we 
should have. We have corrected this error for the final results.
    Comment 3: FAG Italy states that the Department's program appears 
to calculate U.S. corporate rebates deducted from USP using a BIA 
methodology the Department applied in the 92/93 review. FAG requests 
that the Department rely on the actual U.S. corporate rebate 
information FAG submitted for the current review period instead of BIA.
    Torrington argues that the Department's use of the BIA rate is a 
clerical error only if the Department did

[[Page 66519]]

not intend to apply BIA for this adjustment, and that the Department 
should first ascertain whether FAG correctly estimated and included 
1994 rebates on reported U.S. sales before making the change FAG Italy 
requests.
    Department's Position: We agree with FAG Italy. Because we 
determined that FAG Italy correctly estimated and included 1994 rebates 
on reported U.S. sales, we have corrected the program in order to use 
FAG Italy's reported U.S. corporate rebates for these final results.
    Comment 4: Torrington claims that the Department should assign a 
BIA value to certain U.S. sales for which FAG Italy did not submit 
similar merchandise information or CV data. Petitioner states that the 
rate the Department should apply to the U.S. sales with no matching 
data is the final rate it calculated for FAG Italy ball bearings in the 
LTFV investigation.
    In rebuttal, FAG Italy states that Torrington's argument is moot 
because no BIA sales should have appeared in the Department's margin 
analysis. FAG explains that the BIA sales involved the transfer of 
Italian-made parts to the United States for use in further-manufactured 
bearings. According to FAG Italy, due to an error in the Department's 
program, no further-manufacturing analysis was performed for these 
sales, and this resulted in transactions being identified as BIA sales. 
FAG Italy requests that the Department insert the appropriate 
programming language to combine further-manufacturing data with the 
U.S. sales database and perform the further-manufacturing analysis. FAG 
Italy contends that these changes will reveal that there are no U.S. 
sales with missing home market data.
    Department's Position: We disagree with Torrington. There is no 
need to assign a BIA value to certain U.S. sales because, as a result 
of making the programming changes requested by FAG Italy, there are no 
U.S. sales with missing home market data.
    Comment 5: FAG Italy argues that the Department made an inadvertent 
clerical error in its cost test. FAG Italy states that, due to a 
missing programming instruction, the Department aggregated observations 
that failed the cost test with observations that passed the cost test.
    Torrington agrees with FAG Italy that observations which failed the 
cost test are aggregated into a single database with observations that 
passed the cost test. However, Torrington contends that the Department 
intended to aggregate the observations in order to avoid price-to-price 
comparisons between HM below-cost sales of models and U.S. sales. 
Torrington explains that the sales of models that failed the cost test 
are retained in the database for matching the models' CVs to USPs. 
Torrington contends that, if the Department did not aggregate the sales 
into a single database and instead ``tossed'' the below-cost sales, the 
matching U.S. sales could be compared with prices of similar 
merchandise, instead of CV.
    Department's Position: We disagree with FAG Italy. Torrington's 
understanding of our programming is accurate. There is no clerical 
error as FAG Italy claimed and, therefore, we have not made the change.

15. Duty Absorption and Reimbursement

    Comment 1: Torrington requests that the Department reconsider its 
treatment of antidumping duties and deduct such duties from ESP as a 
selling cost. Torrington argues that the Department should recognize 
that, where a related U.S. importer absorbs antidumping duties as a 
cost of doing business, the duties themselves are selling expenses, 
just as are ordinary customs duties, movement expenses, or credit 
terms. As such, Torrington contends, they should be deducted from ESP 
pursuant to section 772(d)(2)(A) of the Tariff Act. Alternatively, 
Torrington argues, the Department should apply its reimbursement 
regulation, citing 19 CFR 353.26, where transfer prices between related 
parties are less than cost plus profit (or cost) and actual dumping 
margins are found.
    Koyo maintains that the Department's position on this issue is 
correct and has been upheld in court. Koyo urges the Department to 
reject Torrington's argument since Torrington does not provide 
sufficient reason for the Department to alter its methodology. Koyo 
adds that, if Torrington is suggesting that duties ultimately assessed 
on merchandise covered by the current review should be counted as 
expenses in the review during which they are paid, such expenses would 
bear no relation to pricing policies during the review period in which 
the final assessment of duties occurred. Furthermore, Koyo argues, 
because final liquidation and payment of duties occurs at lengthy, 
unpredictable time periods after the deposit rate is set, it would be 
extremely difficult for a respondent to anticipate when and at what 
rate its entries would finally be liquidated.
    NTN and FAG reject Torrington's arguments concerning both 
reimbursement and the deduction of antidumping duties from ESP and note 
that the Department has rejected Torrington's request in prior reviews, 
citing AFBs III at 39736 and AFBs IV at 10906-07.
    Department's Position: We disagree with Torrington that we should 
recognize that, where a related U.S. importer simply ``absorbs'' 
antidumping duties as a cost of doing business, the duties are 
themselves a selling expense, similar to ordinary customs duties, 
movement expenses, or credit terms, which we should deduct from ESP as 
a selling cost. Our position was upheld in Federal Mogul I. Moreover, 
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. See AFBs IV 
at 10907.
    On the separate issue of reimbursement, we will apply the 
reimbursement regulation if record evidence demonstrates that the 
exporter directly pays antidumping duties for the importer or 
reimburses the importer for such duties in PP or ESP situations, 
regardless of the relationship of the parties. See Color Television 
Receivers from the Republic of Korea; Final Results of Antidumping Duty 
Administrative Reviews, 61 FR 4408, 4410-11 (February 6, 1996), Brass 
Sheet and Strip from the Netherlands, 57 FR 9534, 9537 (March 19, 
1992), Brass Sheet and Strip from Sweden, 57 FR 2706, 2708 (January 23, 
1992), and Brass Sheet and Strip from Korea, 54 FR 33257, 33258 (August 
14, 1989). For example, we applied the reimbursement regulation in one 
case where we stated our position on the applicability of the 
reimbursement regulation to related-subsidiary situations and indeed 
made an affirmative determination based upon evidence demonstrating 
that the exporter reimbursed its related importer for antidumping 
duties. In these reviews, Torrington has not identified record evidence 
that there was reimbursement of antidumping duties, and we have not 
adjusted USP for the duties.
    However, we disagree with Torrington's argument that we should 
apply the reimbursement regulation where transfer prices between 
related parties are less than cost plus profit (or cost) and where we 
find actual dumping margins. These two factual situations do not, in 
and of themselves, constitute sufficient evidence for us to conclude 
that reimbursement is taking place. Therefore, we disagree with both of 
Torrington's arguments. See AFBs III at 39736 and AFBs IV at 10906-07.
    Comment 2: Torrington argues that Koyo reimburses Koyo Corporation 
of U.S.A. (KCU) for antidumping duties

[[Page 66520]]

through low transfer prices and direct and indirect transfers of funds 
and financial guarantees.
    Koyo responds that the Department stated in AFBs IV that 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. Koyo contends further that, 
since the Department treats related companies as a single consolidated 
entity, neither transfer prices between related parties nor the 
transfer of funds from one affiliate to another within such an entity 
are relevant for purposes of the antidumping law.
    Department's Position: We disagree with Torrington. As noted in our 
response to Comment 1 of this section, we do not find that facts of the 
kind Torrington alleges apply to Koyo, in and of themselves, constitute 
sufficient evidence for us to conclude that reimbursement is taking 
place. As there is not other record evidence to support Torrington's 
assertion that Koyo is reimbursing its U.S. affiliate for antidumping 
duties, we have not applied the reimbursement regulation with regard to 
Koyo.
    Comment 3: Torrington contends that since the Department continues 
to find significant dumping margins, it is clear that many respondents 
have adopted a strategy of simply absorbing antidumping duties rather 
than correcting their price discrimination. Therefore, Torrington 
argues, the Department should treat these duties as selling expenses to 
be deducted from gross price in calculating ESP. Torrington suggests, 
as an alternative, that the Department should consider that the foreign 
manufacturer is reimbursing the importer for the duties and deduct the 
duties under the Department's reimbursement regulation.
    Koyo argues that there is no legal basis for Torrington's argument 
that the Department should treat antidumping duties as selling expenses 
to be deducted from USP. Koyo argues further that Torrington's 
alternative proposal of applying the reimbursement regulation should be 
rejected as the record contains no evidence whatsoever of a pattern of 
reimbursement of antidumping duties. Koyo argues that this is a purely 
theoretical issue because none of its entries have yet been liquidated.
    Department's Position: We disagree with Torrington. As noted in our 
positions on comment 7 of section 11 and on comment 1 of this section, 
evidence of reimbursement is necessary before we can make an adjustment 
to USP. As no such evidence has been found in the context of this 
review for any respondent, we have not adjusted USP for antidumping 
duties.

16. Miscellaneous Issues

16A. Verification

    Comment: Torrington contends that the Department's cost 
verification did not resolve all issues regarding FAG Germany's cost 
response and asks that the Department re-verify to ensure that FAG 
Germany is not shifting costs from in-scope products to out-of-scope 
products.
    FAG Germany states that the petitioner's concern about the 
relationship of standard costs to actual costs has been addressed in 
verifications of FAG Germany's cost response in this review and in two 
prior reviews. In every case, FAG Germany claims, the Department found 
that its system of standard cost calculation was valid and reasonable, 
and that FAG Germany made the calculations on an accurate and 
consistent basis. FAG Germany contends that Torrington has provided 
nothing on the record of this review to controvert the Department's 
findings or to establish that cost-accounting distortions are present.
    Department's Position: As indicated in the verification report, we 
reconciled FAG Germany's actual and standard costs and did not find any 
discrepancies. We also reviewed production costs for both subject and 
non-subject merchandise. We did not note, in examining FAG Germany's 
accounting documents, that its standard cost calculation for both 
subject and non-subject merchandise was unreasonable or inconsistent 
with its submissions. Had we been unsatisfied with the accuracy of FAG 
Germany's cost reporting, we would either not have concluded the 
verification when we did, or else have rejected FAG Germany's cost 
response and resorted to BIA. Accordingly, we have not re-verified FAG 
Germany's cost response for this POR.

16B. Pre-Final Reviews

    Comment: Asahi contends that, in order to avoid potential problems 
such as ministerial errors prior to issuance of the final results of 
review, the Department should provide it with an opportunity to comment 
on any changes in methodology from the preliminary results.
    Department's Position: As noted in previous reviews (see AFBs III 
(at 39786) and AFBs IV (at 10957)), in the interest of issuing the 
final results in a timely manner, the Department cannot implement this 
step. Moreover, the regulations provide a procedure for correcting 
ministerial errors in the final results of review. See 19 CFR 353.28.

16C. No Sales During Period of Review

    Comment: Kaydon contends that the Department mistakenly determined 
that Hoesch and Rollix had no shipments during the POR. Kaydon states 
that the Department determined in a scope ruling that the products 
Hoesch sold to Consolidated Saw Mill Machinery International, Inc. 
(CSMI) are within the scope of the antidumping order on BBs from 
Germany, citing Final Scope Ruling: Certain Spring Steel Wires (or 
Rotor Bearing Wires) Imported by CSMI; Antifriction Bearings (Other 
than Tapered Roller Bearings) and Parts Thereof from the Federal 
Republic of Germany (May 2, 1995). Kaydon asserts that Hoesch may have 
known at the time of its sales to CSMI that the bearing parts were 
intended for the United States, as Hoesch stated in a letter to the 
Department on October 16, 1995. Kaydon comments that, in a letter to 
the Department on January 16, 1996, Hoesch asserted that it was not the 
manufacturer of the wire races sold to CSMI, but CSMI submitted a 
letter on June 23, 1994 in which it certified that a company official 
indicated that Hoesch produces the wire races. Kaydon argues that this 
alleged contradiction gives the Department reason to clarify this issue 
by requiring Hoesch to respond fully to the questionnaire.
    Department's Position: We disagree with Kaydon that we determined 
erroneously that Hoesch and Rollix had no shipments during the POR. We 
have confirmed through the U.S. Customs Service that no subject 
merchandise exported by Hoesch or Rollix entered 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. 
While we agree with Kaydon that the CSMI scope ruling found certain 
merchandise to be within the scope of the order, we confirmed with the 
U.S. Customs Service that, at the time we suspended liquidation of the 
entries of this merchandise, there was no record of shipment by Hoesch 
or Rollix.

16D. Certification of Conformance to Past Practice

    Comment: Torrington argues that the Department should require 
respondents to affirm that responses conform to prior Departmental 
determinations for reviews of these orders. Torrington

[[Page 66521]]

suggests that, at a minimum, respondents identify where they have 
continued to use any methodology that the Department rejected in a 
prior review, accompanied by a statement justifying the departure from 
established practice. Torrington proposes that, in such cases, the 
Department require respondents to supply data both in the format 
established by past practice and the manner that respondents hope will 
be acceptable to the Department despite the prior practice. Torrington 
suggests that, without such identification, the emergence of a 
consistent Departmental practice is dependent on the continued 
vigilance of the Department in analyzing responses and in the 
availability of funding for repeated verification. Torrington cites 
examples of respondents' unidentified use of reporting methodologies 
that do not conform to Department practice and which the Department has 
previously rejected.
    NTN responds that Torrington's suggestion is unfair and must be 
rejected on several grounds. First, NTN contends, respondents must 
submit information in the administrative review that conforms to their 
position regarding the appropriate reporting methodology or forfeit 
their judicial right to argue their position. Second, Torrington's 
suggestions that respondents maintain their right of appeal by 
preparing alternative data sets is not administratively feasible, since 
it would require respondents to prepare, and the Department to analyze 
and verify, multiple responses. Third, Torrington's argument ignores 
the fact that each review is a distinct segment of the proceeding.
    FAG agrees with NTN that each administrative review is a separate 
segment involving different sales, adjustments, and underlying facts, 
and that what transpired in previous AFBs reviews is not binding 
precedent in later reviews. FAG further argues that Torrington's 
proposal would place upon respondents the need to, in effect, provide 
in each succeeding review, a history over multiple prior reviews of the 
methodology they used for each field of data, the facts on which that 
methodology was based, and the Department's acceptance, rejection, or 
modification of that methodology (noting also that respondents would 
have to consider judicial review and overlapping proceedings in 
detailing their methodologies). FAG states that, as a practical matter, 
methodologies accepted by the Department in one review are generally 
used by respondents in subsequent reviews, and methodologies rejected 
by the Department are not perpetuated in later reviews.
    NSK contends that Torrington's suggestion is impossible because 
factual records differ from review to review, as do respondents' 
explanations of the information they submit. NSK argues in addition 
that, since the final results for a prior review may not be published 
until after submissions are entered and verifications are conducted for 
subsequent reviews, there is no way for respondents to determine in 
advance how current submissions differ from those final results.
    INA suggests that Torrington's proposal is unrealistic because the 
responses for this review have already been submitted, and reiterates 
NTN and NSK's concern for the administrative burden that would result 
from Torrington's proposal, as well as the difficulty in anticipating 
the Department's position in a given review.
    SKF adds that the appropriate standard for responding to the 
questionnaire should be that which is most consistent with 
respondents'' business records and the facts of the specific review.
    Department's Position: We disagree with Torrington that we should 
require that all respondents conform their submissions, their 
allocations, and their methodology to the Department's most recent 
prior determinations and rulings. We also disagree with Torrington that 
respondents should identify where they have continued to use any 
methodology that we rejected in a prior review and justify the 
departure from established practice. Each administrative review is a 
separate reviewable segment of the proceeding involving different 
sales, adjustments, and underlying facts. What transpired in previous 
reviews is not binding precedent in later reviews, and parties are 
entitled, at the risk of the Department's determining otherwise, to 
argue against a prior Department determination. As a practical matter, 
methodologies accepted by the Department in one review are generally 
used by respondents in subsequent reviews, and methodologies rejected 
by the Department are not perpetuated in later reviews. The Department, 
however, may reconsider its position on an issue during the course of 
the proceeding in light of facts and arguments presented by the 
parties.
16E. All-Others Rate
    Comment: SKF Italy requests that the Department correct the ``all 
others'' rate for ball bearings from Italy. SKF Italy contends that the 
rate given in the preliminary results is incorrect because it does not 
reflect changes resulting from judicial review. SKF argues that the 
correct ``all others'' rate should reflect the ``all others'' rate from 
the LTFV investigation with corrections resulting from judicial review.
    Torrington notes that SKF Italy has no apparent interest in what 
the ``all others'' rate is, since SKF Italy has its own rate. 
Torrington argues that SKF Italy should clarify its interest and that, 
barring such clarification, the Department is under no obligation to 
address this issue.
    Department's Position: We agree with SKF Italy that the ``all 
others'' rate should reflect corrections made to the LTFV margins as a 
result of judicial review. We note that this is true regardless of 
whether SKF Italy has any interest in the matter. The ``all others'' 
rate for BBs from Italy is 69.98 percent.
16F. Resellers
    Comment: Godo Kogyo states that the Department stated in the 
preliminary results that Godo Kogyo had no shipments or sales subject 
to the review. At the same time, the Department terminated reviews with 
respect to five companies who were resellers of Japanese-made bearings 
on the grounds that those firms were not resellers as defined in 19 CFR 
353.2(s) because all their suppliers had knowledge at the time of sale 
that the merchandise was destined for the United States. Godo Kogyo 
states that it reported in its questionnaire response that it sold 
subject AFBs in the United States during the POR. However, Godo Kogyo 
states that it did not produce any of the subject merchandise that it 
sold, but was a reseller of bearings produced by other unrelated firms. 
Therefore, as Godo Kogyo does not qualify as a reseller pursuant to 19 
CFR 353.2(s), it states that it requested that the Department 
discontinue the review with respect to Godo Kogyo and the Department 
determined in August 1994 that Godo Kogyo did not need to respond 
further to the questionnaire. Godo Kogyo requests that the Department's 
final results reflect that Godo Kogyo does not qualify as a reseller 
and that the Department terminate the review with respect to Godo 
Kogyo.
    Department's Position: We examined the information on the record 
and have determined that Godo Kogyo is not a reseller as defined in 19 
CFR 353.2(s) because all of its suppliers had knowledge at the time of 
sale that the merchandise was destined for the United States.
[FR Doc. 96-31753 Filed 12-16-96; 8:45 am]
BILLING CODE 3510-DS-P