[Federal Register Volume 62, Number 25 (Thursday, February 6, 1997)]
[Notices]
[Pages 5592-5612]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-2877]


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DEPARTMENT OF COMMERCE
[A-588-703]


Certain Internal-Combustion Industrial Forklift Trucks From 
Japan; Final Results of Antidumping Duty Administrative Review

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

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

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SUMMARY: On August 2, 1996, the Department of Commerce published the 
preliminary results of administrative review of the antidumping duty 
order on certain internal-combustion industrial forklift trucks from 
Japan. The review covers three manufacturers/exporters. The period of 
review is June 1, 1994 through May 31, 1995.
    Based on our analysis of the comments received, we have made 
changes, including corrections of certain inadvertent programming and 
clerical errors, in the margin calculation for Toyota Motor 
Corporation. Therefore, the final results differ from the preliminary 
results. The final weighted-average dumping margins for the reviewed 
firms are listed below in the section entitled ``Final Results of the 
Review.''

EFFECTIVE DATE: Febraury 6, 1997.

FOR FURTHER INFORMATION CONTACT: Thomas O. Barlow, Davina Hashmi or 
Kris Campbell, at Import Administration, International Trade 
Administration, U.S. Department of Commerce, Washington, D.C. 20230; 
telephone: (202) 482-4733.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (the Act), are references to the provisions effective 
January 1, 1995, the effective date of the amendments made to the Act 
by the Uruguay Round Agreements Act (URAA). In addition, unless 
otherwise indicated, all citations to the Department's regulations are 
to the current regulations, as amended by the interim regulations 
published in the Federal Register on May 11, 1995 (60 FR 25130).

Background

    On August 2, 1996, the Department of Commerce (the Department) 
published the preliminary results of administrative review of the 
antidumping duty order on certain internal-combustion industrial 
forklift trucks from Japan (61 FR 40400)(Preliminary Results). The 
review covers three manufacturers/exporters. The period of review (the 
POR) is June 1, 1994, through May 31, 1995. We invited parties to 
comment on our Preliminary Results. We received briefs and rebuttal 
briefs on behalf of NACCO Materials Handling Group, Inc. (petitioners), 
and Toyota Motor Corporation and Toyota Motor Sales, U.S.A., Inc. 
(Toyota). At the request of Toyota, a hearing was scheduled but was 
subsequently canceled at Toyota's request. The Department has conducted 
this administrative review in accordance with section 751 of the Act.

Scope of Review

    The products covered by this review are certain internal-
combustion, industrial forklift trucks, with lifting capacity of 2,000 
to 15,000 pounds. The products covered by this review are further 
described as follows: Assembled, not assembled, and less than complete, 
finished and not finished, operator-riding forklift trucks powered by 
gasoline, propane, or diesel fuel internal-combustion engines of off-
the-highway types used in factories, warehouses, or transportation 
terminals for short-distance transport, towing, or handling of 
articles. Less-than-complete forklift trucks are defined as imports 
which include a frame by itself or a frame assembled with one or more 
component parts. Component parts of the subject forklift trucks which 
are not assembled with a frame are not covered by this order.
    Imports of these products are classified under the following 
Harmonized Tariff Schedules (HTS) subheadings: 8427.20.00, 8427.90.00, 
and 8431.20.00. The HTS item numbers are provided for convenience and 
Customs purposes. The written descriptions remain dispositive.
    This review covers the following firms: Toyota, Nissan Motor 
Company (Nissan), and Toyo Umpanki Company, Ltd. (Toyo).

Use of Facts Available

    In accordance with section 776 of the Act, we have determined that 
the use of facts available is appropriate for certain portions of our 
analysis of Toyota's data. For a discussion of our application of facts 
available, see Comments 1 through 3, below.

[[Page 5593]]

Changes Since the Preliminary Results

    Based on our analysis of comments received, we have made certain 
corrections that changed our results. We have corrected certain 
programming and clerical errors in our Preliminary Results, where 
applicable; they are discussed in the relevant comment sections below.

Analysis of Comments and Responses

    Issues raised in the case and rebuttal briefs by parties to this 
administrative review are addressed below.

Toyota's Comments

Comment 1
    Toyota provided the following general comments regarding the 
Department's use of the facts available in this review.1 Toyota 
asserts that the Department's use of facts available for the 
Preliminary Results is punitive and is disproportionate to any 
perceived deficiencies at verification. Toyota suggests that the facts 
available are not corroborated--and in fact are contradicted--by 
available evidence, contrary to law and Department precedent.
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    \1\ We address Toyota's specific comments regarding the use of 
facts available with regard to certain selling expenses and home 
market credit revenue in Comments 2 and 3, respectively.
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    Toyota asserts that the Department's use of facts available is 
governed by a two-step inquiry (citing Preliminary Results of 
Antidumping Duty Administrative Review: Certain Welded Carbon Steel 
Pipe and Tube From Turkey, 61 FR 35188, 35189 (1996), and Final 
Determination of Sales at Less Than Fair Value: Certain Pasta from 
Turkey, 61 FR 30309, 30312) (Pasta from Turkey)). First, Toyota states 
that section 776(a)(2)(D) of the Act allows use of facts otherwise 
available if an interested party provided information but it cannot be 
verified and notes that the SAA directs that such facts available must 
be ``reasonable to use under the circumstances'' (citing the SAA at 
869). Second, Toyota states that section 776(b) provides that, in 
selecting from facts available, adverse inferences may be drawn only if 
the ``interested party has failed to cooperate by not acting to the 
best of its ability to comply with a request for information * * *.'' 
Toyota argues that perceived deficiencies in the verification of its 
reported information are not sufficient to allow the Department to 
resort to disproportionately punitive adverse inferences, given that 
Toyota's deficiencies are far from a general failure to cooperate with 
requests for information.
    Toyota asserts that it responded fully and timely to questionnaires 
in this review, prepared a substantial amount of documentation for the 
verification, and made every effort to provide requested documents. 
Toyota asserts that the Department has no basis for concluding that 
Toyota failed to cooperate and the Department should not use adverse 
inferences and punitive facts available.
    Toyota states that a comparison of the perceived deficiencies in 
Toyota's responses with past occasions in which the Department has been 
confronted with deficiencies, but did not draw adverse inferences, 
illustrates that the use of adverse facts available against Toyota was 
unwarranted (citing, among others, Chrome-Plated Lug Nuts From Taiwan; 
Preliminary Results of Antidumping Duty Administrative Review and 
Termination in Part, 61 FR 35724, 35725 (1996)).
    Toyota further states that a comparison of the perceived 
deficiencies in its response with past occasions where the Department 
has drawn adverse inferences against interested parties also 
illustrates that adverse inferences against Toyota in this case were 
unwarranted. First, Toyota asserts that it did not fail to submit a 
questionnaire response (citing adverse inferences drawn as a result of 
failure to submit a response in, among others, Final Determination of 
Sales at Less Than Fair Value: Large Newspaper Printing Presses and 
Components Thereof, Whether Assembled or Unassembled, From Germany, 61 
FR 38166, 38167 (1996) (LNPP from Germany)).
    Second, Toyota notes that its response was not wholly unverifiable 
(citing adverse inferences drawn as a result of the complete failure of 
verification in Antifriction Bearings (Other Than Tapered Roller 
Bearings) and Parts Thereof From France, et al; Preliminary Results of 
Antidumping Duty Administrative Reviews, Termination of Administrative 
Reviews, and Partial Termination of Administrative Reviews, 61 FR 
35713, 31716 (1996)).
    Third, Toyota states that it has never refused to provide 
information to the Department (citing adverse inferences drawn due to a 
respondent's refusal to provide information in Pasta from Turkey, 61 FR 
30309, 30312 (1996).
    Toyota concludes that, given these facts and precedent, neither the 
statute nor the Department's practice permit the use of adverse 
inferences against Toyota; therefore, to the extent the Department uses 
facts available, the Department must select facts which are reasonable 
under the circumstances (citing LNPP from Germany, 61 FR at 38179, and 
the SAA at 869).
    Petitioners respond that the record indicates clearly that the 
Department was unable to verify a substantial portion of Toyota's home 
market sales questionnaire response. Petitioners assert that, by the 
express terms of the statute, if the Department could not verify 
Toyota's data, the Department was not permitted by law to rely on the 
information to calculate Toyota's dumping margins (citing section 776 
of the Act). Petitioners contend that the Department, therefore, must 
base its determination on the facts otherwise available.
    Petitioners argue that the cases Toyota cites as instances where 
the Department applied adverse inferences do not support Toyota's claim 
that the Department was overly punitive in this case. Petitioners 
assert that, in those instances, the Department generally selected the 
highest rate from another respondent or prior review; conversely, in 
this case the Department did not completely reject Toyota's response 
even though it could not verify a substantial portion of it. 
Petitioners assert that, under these circumstances, the Department was 
not making an adverse inference but instead was simply following the 
requirements of the statute. Petitioners conclude that Toyota's claim 
that the Department made an unnecessarily punitive adverse inference 
when it relied on the facts otherwise available is not valid.
Department's Position
    We disagree with Toyota with respect to its general comments 
regarding the use of the facts available in this review. Our 
determination in this regard is consistent with the statute and our 
practice. We determined, in accordance with section 776(a) of the Act, 
that the use of facts available for certain home market selling 
expenses and home market credit revenue is appropriate for Toyota 
because we were unable to verify the accuracy of the information Toyota 
submitted. As our discussions in response to Comments 2 and 3, below, 
make clear, despite our efforts at verification, we were unable to 
verify the information in question sufficiently to accept it for our 
analysis.
    In addition, we have determined that, by not providing certain 
basic verification documents that were essential to the establishment 
of the accuracy of the data submitted (e.g., expense ledgers for 
certain selling expenses and an affiliated company's (Toyota Finance 
Corporation, ``TFC'') financial statements), Toyota did not cooperate 
to the best of its ability to

[[Page 5594]]

comply with our requests for such information. Accordingly, our resort 
to an adverse inference with respect to these items is appropriate and 
fully in accord with law. See section 776(b) of the Act.
    Contrary to Toyota's contention that this result is overly 
punitive, we have used in our analysis all data submitted by the 
company that we were able to verify. While we have determined that 
Toyota has not cooperated to the best of its ability with respect to 
the selling expense and credit revenue items, we find that the nature 
and extent of the deficiencies in Toyota's information do not undermine 
the credibility of other information that it submitted during this 
review. Accordingly, we have calculated Toyota's dumping rate using all 
data it submitted except for the specific information that we were 
unable to verify.
    The cases Toyota cites do not demonstrate that we have departed 
from our practice in applying the facts available in this review. These 
cases illustrate that, consistent with the SAA, we resolve such matters 
on a case-by-case basis by examining the nature and extent of any 
deficiencies and the level of cooperation by respondent (see SAA at 
868-870). After such an examination we determine whether to apply 
adverse inferences. Neither the statute nor our practice limits our use 
of adverse inferences to completely unresponsive firms. Rather, we may 
draw such inferences whenever a party fails to cooperate by not acting 
to the best of its ability to comply with a request for information. As 
discussed below, the information requests at issue were routine 
verification requests that in no way constituted an unreasonable burden 
on Toyota and, therefore, we determined that an adverse application of 
facts available is appropriate for these items.
Comment 2
    Toyota asserts that the Department's use of the facts available 
with respect to the company's reported home market indirect selling 
expenses, home market direct advertising, and U.S. direct selling 
expenses incurred in Japan is inappropriately punitive. Toyota notes 
that, with regard to home market indirect selling expenses and direct 
advertising, Toyota prepared the necessary documentation in support of 
the expenses, and the Department verified the expenses with no 
discrepancies, but Toyota was simply unable to provide further details 
requested on site. With regard to direct U.S. selling expenses incurred 
in Japan, Toyota notes that it only had sufficient time to correct an 
error it detected in preparing for verification and did not have 
sufficient time to prepare the reconciliation between the actual 
expenses and its financial statements.
    Toyota claims that it has gone through two successful verifications 
and states that it prepared for verification in this review in light of 
the information and level of documentation examined at previous 
verifications. Toyota contends that, when the Department requested 
additional documentation not anticipated by Toyota, the company was not 
always able to obtain the requested documents in the time permitted. 
Toyota argues that, where a company prepares a substantial amount of 
information for verification and acts to the best of its ability to 
obtain documents requested at verification, but is unable to obtain 
such in the limited time-frame of verification, it is not appropriate 
to penalize the company through use of punitive facts available.
    Toyota claims that its home market expenses are significant and 
states that the Department's level-of-trade analysis confirms that the 
company performs extensive selling functions and incurs significant 
selling expenses in connection with sales in the home market. Toyota 
asserts that the Department's analysis for the Preliminary Results 
pretends these significant expenses do not exist only in those parts of 
the analysis when it is detrimental to Toyota, while assuming they do 
exist whenever such an assumption is detrimental to the company. Toyota 
states that this resulted in the following significant punitive and 
compounding adjustments: (1) By not adjusting normal value (NV) 
downward by the amount of these expenses, dumping duties were increased 
on each U.S. truck equivalent to these expenses; (2) by not including 
these expenses in the calculation of the company-wide profit used in 
the constructed export price (CEP) profit calculation, the resulting 
CEP profit was increased; (3) by including these expenses in the 
calculation of constructed value (CV) and then deducting from CV only 
the much smaller amount of direct and indirect selling expenses in 
deriving the adjusted CV for comparison to CEP, the CV was increased; 
and (4) by deducting these expenses from the home market prices used in 
the cost test, the number of sales found to be below cost increased. 
Toyota contends that these calculations demonstrate that, without 
regard to any reasonable determination about the accuracy of the 
expenses, at various steps in its calculations the Department applied 
whatever number was adverse to Toyota, effectively compounding the 
penalty several times through internally inconsistent applications of 
the adjustments. Toyota argues that this is an excessive and 
duplicative penalty out of proportion with perceived deficiencies, 
particularly since the Department reviewed substantial documents that 
supported the reported expenses at verification.
    Petitioners contend that the Department's decision to reject a 
certain portion of Toyota's selling expenses was not punitive and notes 
that Toyota has proposed no reasonable alternatives. Petitioners note 
that the Department cannot accept Toyota's data simply because the 
company attempted to comply with requests for information and, given 
there were no other reasonable options to take, the Department 
correctly rejected the claimed expenses.
    Petitioners argue that the Department's reliance on the reported 
expenses for purposes of conducting the cost test and calculating CV 
was proper and that Toyota cannot expect to benefit from its inability 
to pass verification. Furthermore, the alteration of Toyota's cost of 
production (COP) data in a way to benefit Toyota as a result of a 
failed verification would be grossly unfair and would contradict the 
fundamental purpose of the verification provisions of the statute.
Department's Position
    We disagree with Toyota. In light of Toyota's inability to 
establish the accuracy of the data that it submitted regarding its home 
market direct advertising and home market indirect selling expenses, we 
were unable to include these reported expenses as adjustments to home 
market price in determining the NV. However, we included these expenses 
in our analysis for purposes of establishing the adjusted home market 
price for use in the cost test and in the calculation of CV, and we 
used Toyota's reported direct advertising expenses incurred on U.S. 
sales in our calculation of CEP, because by not doing so we would have 
rewarded Toyota for its failure to establish the accuracy of these 
expenses at verification.
    This approach is consistent with the Department's practice in other 
cases. For instance, in Antifriction Bearings (Other Than Tapered 
Roller Bearings) and Parts Thereof From France, et al: Final Results of 
Antidumping Duty Administrative Reviews, 62 FR 2081, 2090-2092 (January 
15, 1997) (AFBs 6), we stated, ``Where we have found that a company has 
not acted to the best of its ability in reporting the adjustment

[[Page 5595]]

* * *, we have made an adverse inference in using the facts available 
with respect to this adjustment, pursuant to section 776(b) of the 
Tariff Act * * *. The treatment of positive [home market] billing 
adjustments as direct adjustments is appropriate because disallowing 
such adjustments would provide an incentive to report positive billing 
adjustments on an unacceptably broad basis in order to reduce NV and 
margins.'' This approach is clearly sanctioned by the SAA at 870: 
``Where a party has not cooperated, Commerce * * * may employ adverse 
inferences about the missing information to ensure that the party does 
not obtain a more favorable result by failing to cooperate than if it 
had cooperated fully. In employing adverse inferences, one factor the 
agencies will consider is the extent to which a party may benefit from 
its own lack of cooperation.''
    The same approach with respect to Toyota's selling expenses is 
appropriate, given Toyota's failure to provide basic source 
documentation at verification. The expenses at issue concern Toyota's 
reported home market indirect selling expenses, home market direct 
advertising and direct advertising expenses incurred in Japan 
attributable to U.S. sales. The verification report states clearly 
that, with regard to its claimed indirect selling expenses and direct 
advertising expenses, Toyota could not go below the level of a semi-
annual detail report to support its claimed expenses (Verification of 
Home Market and Certain U.S. Sales, August 12, 1996, at 2 (Report)). 
With regard to its direct U.S. selling expenses incurred in Japan, the 
report states ``Toyota could not provide supporting documentation as a 
bridge between the * * * expenses * * * and its financial statements.'' 
Report at 2. It is standard Department practice to review source 
documentation at a level of detail greater than a semi-annual report 
and to require documentation that ties reported expenses to a company's 
financial statements. Accordingly, we were unable to verify the 
accuracy of these claimed expenses.
    Our verification report reveals that, while Toyota succeeded in 
providing detailed support documentation for other expenses, it was 
unprepared to provide sufficient and necessary documentation to support 
the expenses at issue. Our verification report also discusses Toyota's 
lack of preparation which resulted in delays in completing certain 
segments, even though we extended our verification in an attempt to 
cover as many topics as possible. Report at 3.
    Thus, as we made clear in the report, Toyota was unprepared to 
provide support for certain claimed expenses. This is true despite 
clear instructions in the Department's verification outline of the need 
to be prepared to provide such documentation. Accordingly, we do not 
find persuasive Toyota's statements that it prepared for verification 
based on the information and level of documentation examined at 
previous verifications and that the company was unfairly surprised by 
the Department's information requests. Each review is a separate, 
independent segment of the proceeding; what may or may not be required 
at a particular verification does not override the verification outline 
and does not govern what is expected of a respondent at a subsequent 
verification. The verification outline we provided to Toyota for this 
review made very clear that certain documents would be required (see 
Sales Verification Outline, Toyota Motor Corporation, Toyota Motor 
Sales, USA, Inc., May 1, 1996).
    As noted in response to Comment 1, because we could not verify the 
relevant information, the use of facts available for these expenses is 
an appropriate measure in this review. In addition, in light of 
Toyota's failure to provide basic source documentation regarding the 
expenses at issue, along with the fact that the company was given 
sufficient notice that such documentation would be required at 
verification, we have determined that Toyota has failed to cooperate by 
not acting to the best of its ability to comply with our requests for 
information. Therefore, we have resorted to adverse facts available 
with regard to these expenses. Because we have no other reasonable 
options under these circumstances, we have maintained our treatment of 
these expenses for purposes of the final results. Accordingly, we have 
denied the relevant expenses as adjustments to NV and have used the 
expenses as reported for purposes of establishing the adjusted home 
market price used in the cost test and for the calculation of CV. In 
addition, we have used the reported direct advertising expenses 
incurred in Japan attributable to U.S. sales in our calculation of CEP.
    Finally, because Toyota provided this information in this 
administrative review and it is, therefore, not secondary information, 
we are not required to corroborate this information (see section 776(c) 
of the Act).
Comment 3
    Toyota contends that the Department was wrong to impute to home 
market sales, as facts available, an amount for credit revenue because 
Toyota did not earn such revenue and because it cooperated to the best 
of its ability at verification in establishing the absence of such 
revenue. Toyota also contends that, even if the Department is justified 
in imputing credit revenue, the amount imputed is excessive. (In the 
Preliminary Results, the Department added, as facts available, the 
total credit revenue earned on relevant U.S. sales to NV.)
    Toyota states that materials and oral information presented to the 
Department at verification support the fact that TFC, an affiliated 
company, did not provide financing for the sale of subject merchandise 
to Toyota's customers in Japan. Toyota claims that the verification 
report indicates that TFC officials were unable, not unwilling, to 
provide a copy of TFC's financial statements, which the Department 
requested in order to verify the absence of credit revenue earned by 
Toyota or its affiliates on home market sales. Toyota states that it 
was not given any advance notice that TFC's financial statements would 
have to be provided at verification but that these documents were 
simply requested at verification. Toyota asserts that TFC is a separate 
corporation, TFC has no involvement in the sales under consideration, 
and TFC was unable to obtain necessary clearances to release these 
confidential documents in the time available, but it was able to make 
its officials and certain other documents available on short notice. 
Consequently, the Department was wrong to penalize Toyota.
    Toyota also argues that it is improper to impute any credit revenue 
to home market sales, particularly since under the new law any profit 
earned by Toyota Motor Sales U.S.A., Inc. (TMS) on its credit revenue 
is deducted from CEP and, given that the new law already neutralizes to 
a degree any impact of credit revenue earned in the United States, 
there is no need for the Department to make any adjustments to NV to 
accomplish this purpose.
    Toyota suggests that, even if the Department insists on adjusting 
home market prices upward, the adjustment is punitive to a degree that 
is disproportionate to the inability to provide TFC's financial 
statements. Toyota points out that the adjustment goes beyond simply 
neutralizing the benefit of U.S. credit revenue because (i) the credit 
total revenue on relevant U.S. sales was offset to a significant degree 
by a credit expense, and (ii) because the Department calculated the 
profit to deduct from CEP without regard to the substantial credit 
expenses associated with the credit revenues, the

[[Page 5596]]

Department's approach resulted in additional duties.
    Petitioners respond that there is no dispute that the Department 
requested TFC's financial statements and did not receive them. 
Petitioners cite the verification outline and their pre-verification 
comments to support their claim that Toyota should have been well aware 
that a document as basic as TFC's financial statements would be 
required at verification. Petitioners claim that Toyota's apparent 
inability to produce such a basic document cannot absolve it of facing 
the consequences of this omission.
    Petitioners dispute Toyota's contention that the Department 
responded to Toyota's failure to produce the financial statements with 
an adverse inference by claiming that if the Department was drawing an 
adverse inference, it would have made an adjustment to NV based on the 
largest credit revenue reported on any U.S. sale, which it did not do. 
Petitioners also argue that the Department should not adjust the U.S. 
gross revenue applied to relevant home market sales with an offsetting 
adjustment for the associated U.S. credit expense because the 
Department already made an adjustment for credit expense in the home 
market in its analysis and such an adjustment would provide Toyota with 
a double deduction.
Department's Position
    We disagree with Toyota. Toyota reported that it did not earn 
credit revenue on home market sales. Whether Toyota in fact earned such 
revenue was a legitimate inquiry for us to pursue at verification. As 
discussed further below, based on the verification outline, 
petitioners' pre-verification comments, and our specific requests at 
verification, Toyota should have been prepared to provide us with TFC's 
financial statements, a basic source document necessary to explore this 
issue. By not providing Department officials with the financial 
statements, Toyota did not provide the Department with the opportunity 
to ascertain for itself whether the financial statements contained 
information relevant to our inquiry.
    Where an interested party fails to cooperate by withholding 
information that we have requested, we may resort to the use of the 
facts available, drawing inferences adverse to the party. See sections 
776(a)(2)(A) and 776(b) of the Act. Because Toyota failed to provide us 
with TFC's financial statements, we have determined that Toyota failed 
to act to the best of its ability with respect to this issue by 
withholding information. Therefore, we have relied on an inference that 
is adverse to the interests of Toyota. Accordingly, as facts available, 
we applied the transaction-specific gross revenue earned by Toyota 
Motor Credit Corporation (TMCC) on relevant U.S. sales (revenue without 
the corresponding offsetting credit expense) to the weighted-average 
home market price of matched sales.
    Based on the record of this review, Toyota cannot reasonably claim 
that it had no advance notice that we would not request an examination 
of TFC's financial statements. The verification outline clearly 
indicated that this type of document would be subject to review. Given 
that TFC is a consolidated subsidiary of TMC, Toyota should have made 
such a document available to Department officials for inspection. In 
addition, petitioners' pre-verification comments included a request 
that the Department review TFC's financial statements (see Petitioners' 
Comments, May 9, 1996 at 10). While such pre-verification comments do 
not direct the Department's inquiry at verification, the issue of TFC's 
involvement in home market transactions has been a recurring one in 
administrative reviews of this order, and petitioners' request provided 
Toyota with additional notice that the issue was subject to inquiry.
    We note that the information Toyota provided at verification did 
not allow us to establish the accuracy of Toyota's claim that it did 
not earn credit revenue on home market sales. The written material it 
provided at verification, and to which Toyota refers in its comments, 
is limited to ``a brochure given to dealers which describes the 
activities provided by TFC to dealers.'' Report at 11. This brochure is 
the only written material Toyota provided at verification. The TFC 
officials we interviewed to discuss the relevant issue, as the 
verification report indicates, ``were unable to provide us with TFC's 
financial statements nor any other documentation to show the breakout 
of activities engaged in by TFC.'' Report at 11. Therefore, the 
interview was of limited value in establishing the accuracy of Toyota's 
claim that TFC is not involved in the financing of merchandise in the 
home market.
    We further note that our purpose is not to neutralize the benefit 
Toyota obtained on financing certain U.S. sales, but rather is a 
response to Toyota's failure to comply with a specific request to 
produce a document that would permit us to ascertain whether TFC was 
involved in home market transactions. Toyota's arguments that the new 
law accounts for profits earned and that it was required to report 
revenue earned on U.S. sales are irrelevant, given our purpose for 
applying adverse facts available. Finally, we agree with petitioners 
that adjusting the U.S. gross revenue for the credit expense portion of 
the U.S. sale would provide Toyota with two adjustments for credit 
expense because we have a credit expense already in our calculation of 
NV.
Comment 4
    Toyota contends that the Department applied the cost test on an 
overly narrow product basis by performing a separate 80-20 
``substantial quantities'' test for each individual forklift sold in 
the home market instead of performing it on the group or category of 
products that are under consideration for the determination of normal 
value. Toyota asserts that, as a result of this misapplication of the 
80-20 test, if any single truck was found to be below cost, it was 
automatically excluded from the database because 100 percent of the 
home market sales of that truck were below cost. Toyota argues that 
applying the test to each individual truck makes no sense and 
effectively writes the ``substantial quantities'' provisions of section 
773(b) out of the law.
    Toyota claims that the law favors price-to-price comparisons over 
CV. Toyota asserts that the Department's current practice is to apply 
the test on a model-specific basis (citing the SAA at 832). Toyota 
further asserts that the Department has defined ``model'' as the such 
or similar merchandise as defined under section 771(16) of the Act, and 
claims that this indicates that the Department should not treat each 
truck as a unique model. Toyota notes that the Department applied the 
cost test on a broader category in prior reviews. Toyota concludes that 
the Department should apply the 80-20 test to all home market trucks 
within each of the load-capacity categories defined by the 
questionnaire because these are the categories from which similar 
merchandise is selected as a basis for NV.
    Petitioners respond that, based on its practice for the past 
several years, the Department properly applied the 80-20 test not on 
the basis of broad such or similar categories but on the basis of the 
comparison products (i.e., the products that would actually be used to 
calculate NV). Petitioners acknowledge that the Department applied the 
test to a broader category of products in the 1989-90 administrative 
review, but assert that it has since altered its approach and applies 
the test on the basis of the comparison products even when there are 
very few or even a single comparison model available (citing

[[Page 5597]]

Certain Cut-to-Length Steel Plate from Sweden; Final Results of 
Antidumping Review of Antidumping Duty Order, 61 FR 15772, 15775 (April 
9, 1996)). Petitioners conclude that, based on established practice, 
the Department properly applied the 80-20 test to the comparison models 
and assert that this practice should be maintained for the final 
results.
Department's Position
    We disagree with Toyota that we should apply the cost test to a 
broader category of product than to each unique model for this 
administrative review. While we recognize that, in the 1989-90 review, 
we applied the cost test on a broader basis, upon reconsideration we 
have determined that it is more appropriate to apply the cost test, as 
set forth in section 773(b) of the Act, to each unique model sold in 
the home market. This methodology is in accordance with our current 
practice and the SAA (at 832) and with our practice of applying the 
cost test to unique models regardless of the potential for a particular 
model to be grouped in a ``family'' for calculation of NV. See 
generally AFBs. The statute does not require that we employ a different 
methodology where, as here, each of the reported home market sales 
involved a unique product.
    We note further that it would neither be appropriate to base the 
test on all selected comparison models (all models identified in the 
concordance) or each of the individual comparison groups selected in 
accordance with section 771(16) of the Act for each U.S. model, as both 
would encompass more than a single model. We disagree that we have 
defined a ``model'' as those products selected for comparison under 
section 771(16). In addition, basing the test on the individual 
comparison groups could result in testing one model two or more times. 
A given home market model could be an appropriate match to more than 
one U.S. sale, in which case it would be included in more than one home 
market comparison group on the concordance. In such cases administering 
the cost test on a ``comparison group'' basis could result in the home 
market model being excluded as below cost with respect to one U.S. sale 
(if more than 20 percent of the relevant comparison group sales are 
below cost) but included with respect to a different U.S. sale (if less 
than 20 percent of the comparison group sales are below cost). 
Therefore, in order to avoid such an anomolous result and in accordance 
with our practice, we have applied the cost test to each unique model 
sold in the home market.
Comment 5
    Toyota asserts that, where the Department removed home market sales 
that failed the below-cost test from the concordance, so that the 
concordance contained no remaining matches to a given U.S. sale, the 
Department improperly resorted to CV instead of attempting to find 
other price-based matches within the contemporaneity period which 
Toyota reported on the home market sales database. Toyota claims that 
resorting to CV when acceptable above-cost sales exist in the home 
market sales database and are available as a basis for establishing NV, 
is contrary to the statute. Toyota argues that the concordance 
contained the best, but not the only, NV candidates based on the 
Department's matching method. Toyota concludes that the appropriate 
solution is to apply the cost test to each foreign like product group, 
as defined in the questionnaire, and to match to similar above-cost 
sales as listed in the home market database before resorting to CV.
    Petitioners respond that the law does not require that, where 100 
percent of the comparison-model sales are below cost, the Department 
must seek out less similar sales before resorting to CV. Rather, 
petitioners claim, the law simply requires the Department to use any 
above-cost sales that are most similar to the U.S. sale (citing Notice 
of Proposed Rulemaking and Request for Public Comments, 61 FR 7308, 
7338, 7339) (Proposed Regulations)). Petitioners conclude that, under 
the old and new laws, when the Department rejects all of the most 
similar home market sales because they were below cost, it is required 
to rely on CV rather than seek a sale of a less similar model, a 
practice that has been upheld by the CIT and should be maintained.
Department's Position
    We disagree with Toyota. In those situations where we disregarded 
all of the most similar matches, as identified on the concordance file, 
as below-cost sales, we properly resorted to CV without attempting to 
find other, less appropriate, matches remaining in the home market 
database.
    Due to the nature of this product, which involves unique models, 
and the resulting complexity of determining appropriate home market and 
U.S. matches, we have developed a detailed set of instructions in our 
reviews of this order regarding the development of the concordance 
file. These instructions ensure the accurate reporting of information 
while minimizing, to the extent possible, the reporting burdens on the 
parties. We developed the product-matching criteria with input from 
parties, including Toyota, in prior segments of this proceeding. In our 
questionnaire in this review, we permitted Toyota to limit its 
concordance matches to the most similar home market sales made in the 
closest month in the contemporaneity window as that of each U.S. sale. 
We did not require Toyota to provide further matches in the 
contemporaneous period. Otherwise, the matching analysis that Toyota 
would have had to perform would constitute a significant burden on the 
company without substantially increasing the accuracy of our analysis 
since, relative to total U.S. sales, the number of U.S. sales for which 
we resorted to CV (because we had disregarded the selected model as 
below cost) was extremely small. Such an approach clearly assisted 
Toyota in preparing its response. Toyota in fact acknowledges in its 
comments in this review, that analyzing large databases can be costly 
and inefficient. For these reasons, we have maintained our approach for 
the final results.
Comment 6
    Toyota contends that, because the Department improperly disregarded 
certain sales as below cost by applying the 20-percent ``substantial 
quantity'' threshold on an overly narrow product basis, the CV-profit 
calculation, which includes only sales that did not fail the cost test, 
is also flawed. Toyota claims that the Department should include in the 
CV-profit calculation sales that it improperly disregarded as below 
cost.
    Petitioners respond that the Department properly applied the cost 
test and that the SAA specifically provides that CV profit should be 
based only on the amount incurred in connection with sales in the 
ordinary course of trade. Therefore, petitioners conclude, in keeping 
with the SAA the Department properly excluded all below-cost sales when 
calculating CV profit.
Department's Position
    We disagree with Toyota. Our application of the 20-percent 
``substantial quantities'' threshold portion of the cost test was in 
accordance with law and our practice. Based on our application of this 
test, we disregarded certain home market sales as below-cost sales, 
which the statute considers to be outside the ordinary course of trade. 
See section 771(15) of the Act. Therefore, because we must calculate CV 
profit using only sales made within the ordinary course of trade, in 
accordance with section

[[Page 5598]]

773(e)(2)(A) of the Act, we excluded sales that failed the cost test 
from our calculation of CV profit.
Comment 7
    Toyota contends that the Department should base CV profit on sales 
of large trucks (over 7,000-pound load capacity) only and should 
exclude small trucks from its CV-profit analysis. Toyota asserts that 
profit and selling expenses calculated for CV should not be based on 
the entire universe of home market sales, i.e., ``class or kind'', but 
on a subset of this universe--the class of products in the home market 
that is most similar to the U.S. sale, i.e., ``foreign like product'' 
under the new law or ``such or similar'' of the pre-1995 law (citing 
section 773(e)(2)(A) of the Act). Toyota states that the Department did 
not follow this provision for the preliminary results when it 
calculated profit and selling expenses for CV using all home market 
merchandise regardless of whether the merchandise was ``like'' the 
merchandise sold in the United States.
    Toyota asserts that it sold only large trucks in the United States 
and that, while it sold large trucks in the home market, it sold many 
more small trucks in that market. Therefore, Toyota argues, because the 
profit on small trucks differs from the profit on large trucks, the CV 
profit was unfairly inflated.
    Petitioners respond that the Department has addressed the issue 
raised by Toyota in its proposed regulations (citing Proposed 
Regulations at 61 FR 7335). Petitioners assert that it is the 
Department's practice to use aggregate figures to calculate profit and 
SG&A, based on an average of the profits of foreign like products sold 
in the ordinary course of trade. Therefore, petitioners contend, the 
Department properly calculated profit based on the profits of all like 
products sold in the ordinary course of trade in the home market and 
should maintain this methodology for purposes of the final results.
Department's Position
    We disagree with Toyota. The foreign like product in this case 
consists of all potential matches to U.S. sales. That is, for purposes 
of calculating profit (and SG&A) for CV, we generally use, as we have 
here, aggregate data that encompasses all foreign like products under 
consideration for determining NV. During the POR, Toyota sold both 
small and large trucks in the United States. While only a small 
quantity of small trucks were sold in the United States, home market 
sales of trucks in this category are nonetheless potential matches. 
Accordingly, both small and large trucks are a foreign like product. 
Therefore, we have included the small capacity trucks in the 
calculation of CV profit for the final results.
Comment 8
    Toyota contends that, contrary to the directives of the statute, 
the Department calculated a CEP profit amount that is 
disproportionately based on profit on home market, not U.S., sales. 
Toyota acknowledges that the Department applied the CEP-profit formula 
in section 772(f) of the Act literally, but argues that, where the 
application of the formula to a particular set of facts leads to an 
absurd result directly at odds with the stated goal of the statute, the 
Department should exercise its discretion by limiting the CEP profit to 
the actual profit for U.S. sales.
    Toyota argues in the alternative that, in the event that the 
Department continues to calculate profit as it did in the preliminary 
results, it should exercise its well-established authority under 
section 773(6)(iii) of the Act to make adjustments to NV for other 
differences in circumstances of sale. Toyota states that the difference 
in circumstance of sale would be the profit differential between the 
United States and home market. Toyota notes that, under the pre-URAA 
law, the Department used its discretionary authority to avoid unfair 
results in the context of the creation and application of the 
exporter's sales price (ESP) offset and asserts that a similar 
adjustment should be made in this review (citing Brother Industries, 
Ltd. v. United States, 3 CIT 125, 540 F.Supp. 1341 (1982), aff'd 713 
F.2d 1568 (Fed.Cir. 1983), cert. denied, 465 U.S. 1022 (1984) 
(Brother)).
    Petitioners respond that Toyota admits the plain language of the 
statute requires the Department to base CEP profit on total actual 
profit, which includes the profit on both home market and U.S. sales. 
Therefore, petitioners argue, the Department does not have the 
discretion Toyota proposes and the Department applied the explicit 
requirements of the statute properly when calculating CEP profit.
    Petitioners further assert that Toyota is incorrect in suggesting 
in the alternative that, based on Brother, the Department should make a 
circumstances of sale (COS) adjustment to NV to account for differences 
between U.S. and home market profit. Petitioners contend that, in so 
doing, the Department would first be calculating CEP profit using the 
methodology required by the statute, then nullifying the explicit 
statutory requirement by making an offsetting adjustment to NV. 
Petitioners assert that the Department cannot implement a procedure 
that would lead to a result in conflict with the requirements of the 
statute. Petitioners add that Toyota's analogy to the ESP offset is 
incorrect because, unlike Toyota's recommendations regarding CEP 
profit, the ESP offset was designed to correct a perceived omission in 
the statute.
Department's Position
    We agree with petitioners. Section 772(d)(3) of the Act directs us 
to deduct an amount of allocated profit in deriving the CEP. Section 
772(f) describes in detail the methodology for calculating the profit, 
which Toyota acknowledges we followed. In particular, the statute 
explicitly directs us to calculate a ``total actual profit'' amount, 
where possible, based on both sales of the foreign like product in the 
comparison market and on U.S. sales. See sections 772(f)(2) (C) and 
(D). The statute then directs us to allocate a portion of this total 
actual profit to CEP sales based on the level of U.S. selling and 
further-processing expenses. Toyota's proposal to calculate profit in a 
different manner would be in clear conflict with this provision of the 
statute.
    We also decline to make a COS adjustment in the manner suggested by 
Toyota to account for the allegedly disproportionate influence of home 
market profits on the total actual profit calculation. As noted above, 
the CEP-profit provision in the statute provides a detailed methodology 
for the calculation of total actual profit. Given the detailed nature 
of this provision, it is not appropriate to impute a ``disproportionate 
home market profit'' standard on the calculation of total actual 
profit, such that we must make an adjustment to account for such 
alleged disproportionality. Moreover, differences in profits are not 
differences in the circumstances of sale. Profit differentials, if any, 
are what remain after different circumstances of sale have been 
accounted for. Therefore, we have not changed our CEP-profit 
calculation for the final results.
Comment 9
    Toyota argues that the Department should calculate CEP profit based 
on the prices and expenses of large trucks (over 7,000-pound load 
capacity) only, not large and small trucks, because large trucks were 
the only merchandise Toyota sold in the United States during the POR. 
Toyota contends that section 772(d) of the Act requires that total 
actual profit be calculated based on sales of subject merchandise sold 
in the United States and the foreign like

[[Page 5599]]

product sold in the exporting country. Toyota cites to the statutory 
definition of foreign like product in section 771(16) of the statute in 
arguing that ``foreign like product'' corresponds to the ``such or 
similar'' category of the pre-URAA law and not to the broader ``class 
or kind'' of merchandise category. Toyota argues that the foreign like 
product in this case is limited to large trucks because, with the 
exception of a de minimis number of small trucks, it sold only large 
trucks to the United States. (Toyota states that its request in this 
Comment pertains only to the profit calculation for U.S. sales of large 
trucks and does not pertain to the profit calculated on the de minimis 
U.S. sales of small trucks.) Toyota argues that, because the profit on 
smaller trucks is greater than the profit on large trucks and because 
many more small trucks than large trucks were sold in the home market, 
significant distortions in the calculation are created by including the 
smaller trucks.
    Toyota argues that, while the Department recently denied a 
respondent's request to calculate profit derived from ``different rates 
for different pools of products within the foreign like product'' 
(citing Notice of Final Determination of Sales at Less Than Fair Value: 
Large Newspaper Printing Presses and Components Thereof, Whether 
Assembled or Unassembled, from Japan, 61 FR 38139, 38146 (1996) (LNPP 
from Japan)), in this case it is proper to calculate profit based upon 
the foreign like product as defined by load capacity because: (1) The 
Department has conducted its entire review on the premise that foreign 
like product was defined by several load capacity ranges, and (2) 
Toyota has not asked the Department to change its determination of 
foreign like product, as respondent did in LNPP from Japan.
    Petitioners respond that, in keeping with the explicit requirements 
of the statute, the Department properly based CEP profit on the total 
actual profit realized on all of Toyota's sales of the subject 
merchandise, which includes large and small trucks.
Department's Position
    We disagree with Toyota. In accordance with our practice as 
described in the Proposed Regulations (at 7382), we have used the 
aggregate of expenses and profit for all subject merchandise sold in 
the United States and all foreign like products sold in the exporting 
country. During the POR, Toyota sold both small and large trucks in the 
United States. While only a small quantity of small trucks were sold in 
the United States, home market sales of trucks of these categories are 
nonetheless potential matches. Accordingly, the foreign like product in 
this review encompasses both small and large trucks. Therefore, we have 
included the small capacity trucks in the calculation of CEP profit for 
the final results.
    The statute does not require separate CEP-profit calculation based 
on the narrow interpretation of the term ``foreign like product'' 
advanced by Toyota. As we noted in AFBs 6, ``[n]either the statute nor 
the SAA require us to calculate CEP profit on a basis more specific 
than the subject merchandise as a whole. Indeed, while we cannot at 
this time rule out the possibility that the facts of a particular case 
may require division of CEP profit, the statute and SAA, by referring 
to `the' profit, `total actual profit' and `total expenses,' imply that 
we should prefer calculating a single profit figure.'' AFBs 6 at 2125-
2126. Further, such a subdivision as Toyota proposes would be more 
susceptible to manipulation of the profit rate, a particular concern 
noted by Congress. See Id. and S. Rep. 103-412, 103d Cong., 2d Sess. at 
66-67.
Comment 10
    Toyota asserts that, notwithstanding the methodological CEP-profit 
calculation issues it has already addressed, the Department incorrectly 
calculated the CEP-profit amount by: (1) Including all home market 
sales revenue while excluding certain home market selling expenses, and 
(2) calculating the total actual profit without regard to imputed 
expenses while allocating a portion of this amount to CEP sales using a 
U.S. selling expense pool that includes imputed expenses.
    With respect to the first issue, Toyota claims that the home market 
values for the CEP-profit calculation incorrectly excludes the home 
market selling expenses the Department disallowed as an adjustment to 
NV because of perceived difficulties at verification. Toyota states 
that this results in a higher home market profit, which becomes part of 
the total actual profit, a portion of which, in turn, is allocated as 
CEP profit and deducted from the starting price used to derive the CEP. 
With respect to the second issue, Toyota asserts that it is 
mathematically incorrect to apply an ``actual cost'' profit ratio to a 
U.S. selling expense pool that includes actual plus imputed costs 
because this methodology allocates substantially more profit to U.S. 
sales than exists, particularly with respect to transactions with 
significant imputed credit and inventory carrying costs.
    Petitioners respond that the Department correctly included imputed 
credit and inventory carrying costs in the U.S. selling expense pool 
used to calculate CEP profit for individual U.S. sales. Petitioners 
note that the Department calculated total profit for Toyota's sales 
based on the difference between the total revenues and total expenses 
and that the Department omitted imputed credit and inventory carrying 
costs from the total profit amount because the expense amounts the 
Department used in the total actual profit calculation include an 
amount for actual interest expenses. Petitioners assert that, if the 
Department included imputed expenses in the total actual profit 
calculation, the result would double-count Toyota's interest costs. 
Petitioners further note that CEP selling expenses do not include an 
amount for actual interest expense and, thus, if the Department does 
not include imputed credit and inventory carrying costs in the formula 
it uses to calculate CEP profit for Toyota's individual U.S. sales, the 
CEP-profit figure would not account for the profit attributable to the 
expenses Toyota incurred to carry forklifts in inventory in the United 
States or to extend credit to its U.S. customers. Therefore, 
petitioners argue, the Department should continue to include imputed 
credit and inventory carrying expenses in the CEP selling expenses used 
to calculate CEP profit for Toyota's U.S. sales.
Department's Position
    We disagree with Toyota. With respect to Toyota's argument that the 
home market values for the CEP-profit calculation improperly exclude 
selling expenses we disallowed due to problems encountered at 
verification, as we stated in its response to Comment 2, we properly 
employed an adverse inference regarding information with respect to 
which Toyota failed to act to the best of its ability to provide. This 
ensures that Toyota does not obtain a more favorable result by failing 
to cooperate fully. See SAA at 870.
    Regarding Toyota's claim that we treated imputed expenses 
inconsistently in calculating CEP profit, we addressed this issue in 
detail in AFBs 6 at 2126-2127 as follows:

    Sections 772(f)(1) and 772(f)(2)(D) of the Act state that the 
per-unit profit amount shall be an amount determined by multiplying 
the actual profit by the applicable percentage (ratio of total U.S. 
expenses to total expenses) and that the total actual profit means 
the total profit earned by the foreign producer, exporter, and 
affiliated parties. In accordance with the statute, we base the 
calculation of the total actual profit used in calculating the

[[Page 5600]]

per-unit profit amount for CEP sales on actual revenues and expenses 
recognized by the company. In calculating the per-unit cost of the 
U.S. sales, we have included net interest expense. Therefore, we do 
not need to include imputed interest expenses in the ``total actual 
profit'' calculation since we have already accounted for actual 
interest in computing this amount under 772(f)(1). When we allocated 
a portion of the actual profit to each CEP sale, we have included 
imputed credit and inventory carrying costs as part of the total 
U.S. expense allocation factor. This methodology is consistent with 
section 772(f)(1) of the statute which defines ``total United States 
Expense'' as the total expenses described under section 772(d)(1) 
and (2). Such expenses include both imputed credit and inventory 
carrying costs. See Certain Stainless Wire Rods from France, 61 FR 
47874, 47882 (September 11, 1996).

As this statement of our practice makes clear, our calculation of CEP 
profit is in accordance with the statute and the SAA. Therefore, we 
have maintained our treatment for the final results.
Comment 11
    Toyota argues that the Department should exclude certain ``used'' 
forklifts sold in the United States from its analysis or, in the 
alternative, the Department should adjust its calculations to avoid the 
distortions created by the comparison of these used trucks with new 
trucks sold in the home market. Toyota asserts that there were a small 
number of U.S. sales of used merchandise, sold out of the ordinary 
course of trade at significant discounts and under ``fire sale'' 
conditions due to their use as demonstration units. Toyota asserts that 
all of the trucks were imported new but were in ``used'' condition when 
sold to the first unaffiliated purchaser in the United States. Toyota 
asserts that, in the less-than-fair-value (LTFV) investigation, 
petitioners explicitly excluded imports of used trucks from the 
investigation and argues that the principle that a used truck is 
excluded should not change because the truck was used not in Japan, but 
in the United States, before being sold.
    Toyota argues in the alternative that the Department should adjust 
the margin calculation to avoid the distortions created by the 
comparison of the used trucks with new trucks sold in the home market. 
Toyota asserts that, otherwise, the comparison is unreasonable and 
amounts to an undeserved adverse inference against Toyota (citing, 
among others, Porcelain-on-Steel Cooking Ware From Mexico; Final 
Results of Antidumping Duty Administrative Review, 58 FR 43327, 43328 
(1993) (Cookware)). Toyota asserts that, because there are no sales of 
similarly used trucks in the home market, the Department should look to 
facts otherwise available in making an adjustment that will allow for 
reasonable comparisons and proposes several ways to make such an 
adjustment.
    Petitioners respond that Toyota's claim should be rejected for a 
variety of reasons. First, Toyota has admitted the trucks were new when 
imported and the scope of the order excludes only trucks that were used 
at the time of entry. Petitioners add that the exact nature and 
disposition of the trucks is unclear from Toyota's questionnaire 
responses. Petitioners note that, in Toyota's initial questionnaire 
response, it reported that some of the trucks were used, others were 
damaged, and others were mistakenly ordered with unsalable 
specifications, while in its brief Toyota only discusses used trucks. 
Therefore, petitioners assert, even if the Department decided to 
exclude ``used'' trucks as opposed to other ``off-spec'' trucks, the 
Department would be unable to do so because Toyota failed to 
distinguish between used trucks and off-spec trucks in its sales 
listing.
    Second, petitioners assert that the Department has made clear that 
it will not exclude any U.S. sales that involve a transfer of ownership 
even if the sales are aberrational and states that the age or condition 
of a truck is not relevant to whether the product has been dumped 
(citing Polyethylene Terephthalate Film, Sheet, and Strip from the 
Republic of Korea: Final Results of Antidumping Duty Administrative 
Review, 60 FR 42835 (Aug. 17, 1995), comment 29).
    With respect to Toyota's alternative argument that the Department 
should make an adjustment to the margin calculation if it includes such 
``used'' trucks in the dumping analysis, petitioners assert that the 
cases Toyota cited to support such an adjustment are factually distinct 
from the situation in this case because, unlike those cases, the 
merchandise at issue is not scrap, seconds or substandard. Petitioners 
add that in the cited cases the Department did not make an adjustment 
to account for differences in quality but instead sought to match U.S. 
sales of inferior quality to merchandise of similar quality in the home 
market (citing Cookware at 43328). Petitioners argue that, if 
merchandise with similar specifications had been sold in the home 
market, the model-match methodology would have resulted in a match of 
similar off-spec trucks. Furthermore, petitioners assert, Toyota never 
specifically identified whether any home market sales were similarly 
off-spec and could have been matched and conclude that any deficiency 
in matching is solely Toyota's fault.
Department's Position
    We agree with petitioners. The scope of the order only excludes 
trucks that were ``used'' at the time of entry. The order does not 
exclude trucks that are damaged, ``off-spec,'' or used after 
importation. We noted in our Preliminary Results analysis memorandum 
that ``trucks imported new and used by the importer prior to sale'' are 
not excluded from the scope of the order. Memo, July 26, 1996, at 6. In 
the LTFV investigation we determined that a forklift could be 
considered ``used'' and excluded from the order if, at the time of 
entry into the United States, the importer can demonstrate to the 
satisfaction of the U.S. Customs Service that the forklift was 
manufactured in a calendar year at least three years prior to the year 
of entry into the United States. Final Determination of Sales at Less 
Than Fair Value; Certain Internal-Combustion Industrial Forklift Trucks 
From Japan, 53 FR 12552 (April 15, 1988). Toyota admits the relevant 
trucks were imported new. Therefore, they are properly subject to 
review and we cannot exclude them from our analysis based on this 
exclusion.
    Moreover, Toyota has not established the trucks were used to an 
extent that an adjustment is warranted nor provided information that 
would permit us to quantify and make such an adjustment. Therefore, our 
treatment of these trucks remains unchanged from the preliminary 
results.
Comment 12
    Toyota claims that the Department incorrectly classified the 
reported indirect selling expenses that Toyota's U.S. affiliate, TMCC, 
incurred in financing sales of subject merchandise as direct expenses. 
Toyota asserts that the selling expenses are indirect because they are 
fixed and are incurred regardless of whether a particular sale is made.
    Petitioners respond that, while they do not believe the Department 
should make any adjustment for credit revenue TMCC earned, if the 
Department decides credit revenue is related directly to the sale, it 
must also recognize that expenses TMCC incurred may also be related 
directly to the sale. Petitioners assert that Toyota did not meet its 
burden of proof that these expenses are not directly related to the 
sales (citing 19 CFR 353.54). Petitioners suggest that, although Toyota 
now alleges that these expenses are fixed and are incurred by TMCC 
regardless of

[[Page 5601]]

whether a sale is made, there is nothing in Toyota's questionnaire 
response to support such a claim. Petitioners conclude that Toyota's 
description of these expenses is not sufficiently detailed to allow the 
Department to determine the exact nature of the expenses and, 
accordingly, the Department should treat these expenses as direct 
selling expenses for the final results.
Department's Position
    We agree with Toyota and have treated these expenses as indirect 
expenses for the final results. In reporting sales where payment was 
made through TMCC, Toyota reported a sale-specific credit revenue and a 
sale-specific credit expense. Toyota also allocated a portion of TMCC's 
overhead to the sales as indirect selling expenses. With respect to 
direct U.S. selling expenses that TMCC incurred, Toyota stated that 
TMCC ``does not pay commissions to its employees related to financing, 
and does not incur variable expenses for credit investigations or for 
preparing and processing documents.'' Supplemental Sales Questionnaire 
at 58-60. In addition, Toyota disclosed that TMCC incurred a filing fee 
for a number of transactions which the Department treated as direct in 
the Preliminary Results. Because the record reveals that the relevant 
expenses are fixed expenses (not variable) and because it is clear that 
Toyota reported those expenses that were variable and associated with 
sales of subject merchandise, we have treated TMCC's reported expenses 
as indirect expenses for the final results.
Comment 13
    Toyota asserts that the Department's proposed method for assessing 
duties will result in the calculation and assessment of duties on lease 
transactions, despite the Department's determination that Toyota's 
operating leases are not subject to review. Toyota notes that the 
Preliminary Results indicate that the Department calculated an 
importer-specific ad valorem duty assessment rate, based on the ratio 
of the total amount of duties calculated for the examined sales during 
the POR to the total customs value of the sales used to calculate the 
duties, which the Customs Service will assess uniformly on all entries 
during the POR. Toyota asserts that the Department should calculate an 
assessment rate with respect to all merchandise reported by taking the 
total antidumping duties for sold and leased trucks (which will be zero 
for the latter) divided by the total customs value of the sold and 
leased trucks, which Customs should then apply to all forklift trucks 
entered during the POR.
    Petitioners assert that Toyota misconstrues the purpose of the 
proposed assessment method, which is to eliminate the problems caused 
by assessing duties on individual entries through the creation of a 
``master list.'' Petitioners assert that lowering overall duties on 
subject trucks would defeat the purpose of the antidumping law to 
assess duties to offset the unfair trade practice with respect to sales 
subject to the order, which would not be accomplished if the Department 
decreased the assessment on products covered while imposing duties on 
merchandise not covered by the order. Petitioners contend that lowering 
the assessment duty rate would allow a respondent to manipulate the 
prices of entries that would never be subject to analysis so as to lead 
to a total lower assessment of antidumping duties.
    Petitioners assert that the solution to any perceived problem is to 
ensure that the Department only assesses duties on trucks subject to 
review and Toyota is aware of which trucks were sold and which were 
leased. Petitioners contend that the Department could eliminate the 
total entered value of leased trucks from the total entered value of 
all trucks to arrive at the total entered value for trucks subject to 
the order in its calculation of the appraisement rate, which Customs 
can then apply to the total entered value for trucks subject to the 
order. Petitioners further assert that, regardless of the method the 
Department uses to accomplish the task, it should make no change in its 
calculation of the cash deposit rate.
Department's Position
    We agree with petitioners that, by using an assessment-rate 
methodology, we are able to eliminate the problems caused by assessing 
duties on individual entries through the creation of master lists. 
However, we agree with Toyota that, short of creating a master list, 
its proposal is reasonable and in accordance with our practice. In 
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, 
From Japan and Tapered Roller Bearings, Four Inches or Less in Outside 
Diameter, and Components Thereof, From Japan; Final Results of 
Antidumping Duty Administrative Reviews and Revocation in Part of an 
Antidumping Finding (61 FR 57629 (November 7, 1996) (TRBs)), we were 
confronted with the issue of establishing an assessment rate for 
bearings where some bearings were not subject to assessment under the 
principles formulated in Roller Chain Other Than Bicycle From Japan, 48 
FR 51804 (November 14, 1983). Given that leased trucks are potentially 
subject to assessment of antidumping duties upon entry, a similar 
treatment is appropriate here. In TRBs we determined that the 
assessment rate should take into account the value of ``Roller Chain'' 
merchandise. Accordingly, we included the value of the ``Roller Chain'' 
merchandise in the denominator when we calculated an assessment rate. 
Likewise, in this case, we have included the customs value of the 
leased trucks in the denominator. While this will have the effect of 
reducing the percentage assessment relative to the rate that we would 
calculate by excluding these values, this lower assessment rate, when 
applied against all POR entries, will allow Customs to collect the 
appropriate amount of antidumping duties due and will effectively 
exclude the lease trucks from assessment. Finally, we agree with 
petitioners that a change in the calculation of the cash deposit rate 
is not appropriate.

Petitioners' Comments

Comment 1
    Petitioners assert that the Department is required by statute to 
verify all of the information it relies on in reaching its final 
results and, therefore, the Department should have verified Toyota's 
cost data, difference-in-merchandise data (difmer), U.S. sales data, 
and U.S. value-added data. Petitioners assert that, while the 
Department may not be required to verify every item of data submitted, 
it cannot simply eliminate whole sections of a questionnaire response 
when conducting verification.
    Petitioners add that, beyond the statutory requirement for a 
complete verification, the following two reasons make verification of 
the above items essential: (1) The Department found major problems with 
Toyota's home market sales data, and (2) the record reveals glaring 
deficiencies with Toyota's cost data, which have never been verified, 
and its U.S. sales data.
    With regard to Toyota's cost data, petitioners allege the following 
problems with Toyota's data which warrant complete verification: In 
reporting difmer data, Toyota used different costs for its home market 
than for its U.S. merchandise; there are differences between Toyota's 
difmer data and its COP data; Toyota failed to demonstrate adequately 
that its transactions with affiliated suppliers were at arm's length; 
and Toyota gave

[[Page 5602]]

only a cursory explanation of its method for accruing costs.
    Toyota responds that the Department fulfilled its obligation under 
section 782(i) of the Act to verify respondent's factual information. 
Toyota argues that petitioners'' position that the Department is 
required to verify every single piece of information submitted, and not 
just the factual information it deems relevant and sufficient, is 
untenable and would place the Department in an impossible situation. 
Toyota concludes such a construction of the law is unrealistic and 
unworkable.
    Citing Secs. 353.36(a)(2) and 353.36(c), Toyota asserts that the 
Department's regulations are clear that, it is not necessary for the 
Department to verify every piece of data. Toyota concludes that the law 
required verification of Toyota's response and the Department fulfilled 
this requirement, using its judgment as to the adequate level of 
examination.
    Toyota further asserts that petitioners'' claim that there is 
``contradictory and incomplete information'' in Toyota's cost and U.S. 
sales data are untrue. Toyota notes that its costs were verified 
thoroughly in the first administrative review. Toyota asserts that, as 
it explained in a prior submission to the Department, its material 
costs will differ for forklifts in Japan and the United States because: 
(1) They are built to different specifications (e.g., the parts used 
may conform to different specifications, such as a UL-Listing), and (2) 
the criteria used by the Department for its 21-point comparison do not 
define all aspects and features of all forklifts.
    Toyota asserts that petitioners'' comments concerning the accuracy 
of Toyota's data, particularly Toyota's difmer and cost data, are 
unfounded and, as the Department conducted the required verification, 
there is no basis for asserting the verification was legally 
inadequate.
Department's Position
    We disagree with petitioners. We have fulfilled the statutory 
requirement of a verification of Toyota's data in this review. Because 
we had not verified Toyota's data during the two immediately preceding 
reviews, we were required to conduct a verification of Toyota in this 
administrative review. See section 782(i) of the Act. Our verification 
concerned Toyota's home market sales response and portions of its U.S. 
sales response. Such a verification fulfills the statutory requirement 
regarding verification and, as noted below, is in conformity with our 
regulations and past practice. This practice reflects the reality that 
it is administratively impossible for the Department to verify at every 
site and on every topic.
    The Department's regulations provide for significant flexibility in 
conducting verifications by permitting the verification of a sample of 
respondents in a review and providing for the review of documents and 
personnel the Department considers relevant to factual information 
submitted. 19 CFR 353.36(a)(2) and (c). In addition, the CIT has long 
recognized the Department's discretion regarding the topics to be 
selected for verification. See, e.g., Monsanto Co. v. United States, 12 
CIT 937, 698 F.Supp. 275, 280 (citing Hercules, Inc. v. United States, 
11 CIT 710, 673 F.Supp. 454,469 (1987)) (``Verification is a spot check 
and is not intended to be an exhaustive examination of the respondent's 
business. ITA has considerable latitude in picking and choosing which 
items it will examine in detail.'); Bomont Industries, v. United 
States, 14 CIT 208, 209, 733 F. Supp. 1507 (1990) (``Of course, 
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.``).
    Contrary to petitioners' assertions, the problems we encountered at 
the home market verification with regard to certain portions of 
Toyota's response do not establish the necessity for a verification of 
additional portions of the response. Toyota did not fail its 
verification in this review; rather, it was unable to demonstrate the 
reliability of certain selling expenses and was unable to establish 
that it did not gain credit revenue on its home market sales. As a 
result, pursuant to our established practice regarding our verification 
findings, we have disallowed the adjustments in question and have 
calculated a home market credit revenue amount using the facts 
available. This is an appropriately tailored response to the problems 
we encountered at verification. Because we found that, other than the 
items cited above, the data submitted by Toyota was accurate, we have 
no reason to disregard the other portions of its response (e.g., 
Toyota's data regarding its material costs or its product liability 
expenses).
Comment 2
    Petitioners assert that Toyota's variable cost of manufacture 
(VCOM) difmer data, as reported on the U.S. and home market sales 
listings, are not acceptable because: (1) They are not consistent with 
Toyota's COP/CV data, and (2) they are based on costs for certain 
components and on price or market value for other components. 
Therefore, petitioners argue, the Department should reject Toyota's 
difmer data and use the VCOM amounts reported in the COP and CV data to 
make difmer adjustments for the final results.
    Petitioners claim that case precedent indicates that VCOM amounts 
reported for the difmer adjustment and for COP/CV should not differ 
(citing Notice of Final Determination of Sales at Less Than Fair Value: 
Stainless Steel Bar from Spain, 59 FR 66,931, 66938 (December 28, 
1994)). Petitioners further assert that the antidumping questionnaire 
and the SAA (at 828) indicate that any claimed difference-in-
merchandise adjustment should be limited to differences in variable 
costs, without regard to prices. Petitioners note that Toyota 
acknowledges the data are inconsistent.
    Petitioners state that allowing a respondent to report different 
VCOM amounts for purposes of the difmer adjustment and for COP/CV 
allows for the possibility of manipulation of the dumping analysis. For 
instance, if a respondent reports a higher home market VCOM for the 
difmer adjustment than for its COP reporting, adjustments to foreign 
market value will generally be downward, thereby providing respondent 
with a favorable adjustment when comparing home market sales to U.S. 
sales. Therefore, petitioners argue the Department should reject 
Toyota's difmer data and use the variable cost of manufacture data in 
Toyota's COP and CV database to determine the difmer adjustment.
    Toyota responds that petitioners' arguments are groundless. Toyota 
asserts that the Department specifically approved of Toyota's method of 
reporting difmer data in the original investigation and in the first 
and second administrative reviews. Toyota states that it reported 
difmer data consistent with its reporting in prior segments of the 
proceedings.
    Toyota states that the record is clear that, given its accounting 
system, it could submit the data in a form slightly different from that 
which the Department requested by including the invoice prices of 
certain options and attachments instead of their variable costs of 
production. Toyota asserts that 19 CFR 353.57 supports its approach as 
it states the Department ``normally will consider differences in the 
cost of production but, where appropriate, may also consider 
differences in the market value.'' Toyota indicates that, because the 
prices of the attachments are based

[[Page 5603]]

on uniform price lists, the differences in such prices represent 
differences in market value. Toyota disputes petitioners' assertion 
that such an approach is subject to manipulation and points out that 
the prices are published in Toyota's price list.
    Finally, Toyota notes that it used its difmer data to generate the 
concordance on which the Department relied for product matching and 
suggests that to change the values now would require Toyota to rematch 
its sales and revise the concordance. Toyota argues that, given that 
the difmer values are appropriate and accurate and reflect a 
methodology acceptable in prior reviews in selecting similar home 
market sales and adjusting those sales, there is no compelling reason 
to change these data now.
Department's Position
    We agree with petitioners, in part, and have utilized Toyota's 
reported cost information (COP and CV) to calculate the difmer 
adjustment for the final results. However, we do not agree with 
petitioners that it was inappropriate for Toyota to submit its difmer 
data, based in part on invoice prices, at the time of its original 
questionnaire submission, and we have used this data for matching 
purposes.
    When we issued the questionnaire, we had not yet initiated a cost 
investigation of Toyota. Therefore, based on prior experience with 
Toyota in the investigation and administrative reviews, in which we 
recognized the difficulties in collecting variable cost information for 
small attachments, we determined that it was acceptable for Toyota to 
derive and present its difmer data as it had presented the information 
in prior segments of this proceeding. However, unlike prior segments of 
this proceeding, in this review we initiated a cost investigation of 
Toyota's sales and obtained complete cost information, including costs 
for the attachments for which Toyota was previously only able to give 
prices.
    The VCOM data from the sales listing, which Toyota used to develop 
the concordance according to our instructions, is sufficiently precise 
to allow us to determine which U.S. and comparison-market merchandise 
``may reasonably be compared.'' See section 771(16)(C)(iii) of the Act. 
Further, Toyota calculated the VCOMs that we compared in making this 
determination using the same methodology for both markets, i.e., VCOMs 
that are generally cost-based with the exception of certain attachments 
that Toyota valued using invoice prices to its customers. Therefore, we 
have used the concordance Toyota submitted for sales-matching purposes 
and do not find it necessary to revise the concordance in order to take 
into account the COP/CV information.
    However, as a result of our cost investigation, we have more 
precise VCOM data, because Toyota provided cost-based values for its 
attachments. Accordingly, we have used the COP/CV data to make the 
difmer adjustment in our calculations. The difmer adjustment to NV is 
mandated by the statute to account for differences between the U.S. and 
home market products under comparison. See section 773(a)(6)(C) of the 
Act. Given that the more precise, cost-based information is on the 
record of this review, it is more appropriate to use the COP/CV data 
for the actual adjustment where sales of non-identical merchandise are 
compared. Therefore, in the final results we have used Toyota's 
reported VCOM data as reported in the COP and CV databases to adjust 
for physical differences in the merchandise.
Comment 3
    Petitioners claim that, in providing its cost data, Toyota failed 
to supply complete information that would demonstrate that its 
transactions with affiliated suppliers are at arm's length. Rather, 
petitioners claim, Toyota submitted costs for a single 
``representative'' model. Petitioners contend this is insufficient to 
demonstrate that Toyota's transactions with these affiliated suppliers 
are all at arm's length and cite to Hyster Co. v. United States, 848 
F.Supp. 178, 187 (CIT 1994) (Hyster).
    Petitioners assert that Toyota's claim that its transactions with 
affiliated suppliers are always at arm's length and that Toyota cannot 
obtain access to its supplier's cost data is directly contradicted by 
information the Department gathered in the investigation of New 
Minivans from Japan (Initiation of Antidumping Duty Investigation: New 
Minivans from Japan, 56 FR 29221 (June 26, 1991) (Minivans)). Citing 
the record in Minivans, petitioners state that Keiretsu have group 
members known to exchange information and to price transfers at below-
market levels to maximize profit. Thus, petitioners contend, Toyota's 
unsupported claims are in conflict with information the Department 
already possesses. Petitioner argues that, other than rejecting 
Toyota's questionnaire response, the Department must request 
supplemental information concerning its transfer prices and then verify 
the data.
    Toyota maintains that the information it submitted demonstrates 
that transactions between Toyoda Automatic Loom Works Ltd. (TAL) and 
its affiliated suppliers are at arm's length and that TAL engages in 
competitive bidding and negotiation processes with its suppliers. 
Toyota asserts that the statute does not mandate that evidence of an 
arm's-length transaction be derived exclusively from a respondent's 
suppliers' cost data and argues that Toyota has met its burden of 
demonstrating that TAL's transactions with its affiliated suppliers are 
at arm's length by providing detailed information on its competitive 
bidding and negotiation processes. Toyota contends that it properly 
based its COP calculations on prices TAL paid instead of on TAL's 
suppliers' COP. Toyota claims that TAL did not generally purchase 
identical parts during the same period from different suppliers and, 
because it engages in arm's-length negotiations with suppliers, it does 
not have access to information on sales or prices of identical parts by 
its suppliers to other parties or the suppliers' COP. Toyota describes 
the bidding process TAL used to source parts and provides examples of 
situations where it decided to source such components from unaffiliated 
suppliers instead of established affiliated suppliers after engaging in 
such competitive bidding.
    Toyota states that, despite its detailed explanation of why it 
cannot obtain its suppliers' cost data, petitioners continue to rely on 
a memorandum in the record of the Minivans investigation which, 
contrary to petitioners' assertions, does not contradict Toyota's 
statements that it cannot obtain access to its suppliers' cost data. 
Toyota further states that the memorandum is largely irrelevant to this 
administrative review of forklift trucks. Toyota concludes that, while 
TAL may be able to persuade these suppliers in which it holds majority 
ownership to provide cost information in a limited fashion for limited 
uses, TAL is not able to force its other related suppliers to provide 
such costs for any purpose.
Department's Position
    We do not agree with petitioners that Toyota failed to establish 
that TAL's transactions with its affiliated suppliers were at arm's-
length prices. With respect to major inputs, Toyota provided the 
transfer prices and cost information for each such input it used in the 
production of the trucks sold in the United States and home market. The 
information Toyota provided with regard to TAL's suppliers of major 
inputs is sufficient to determine that the

[[Page 5604]]

amount represented as the value of such input is not less than the cost 
of production of such input, as required by section 773(f)(3) of the 
Act. In addition, because these are unique inputs, there were no 
comparable purchases from unaffiliated suppliers. Accordingly, we have 
relied on Toyota's reported cost information based on transfer prices 
for the major inputs in our cost calculations.
    We have also determined that Toyota has established the arm's-
length nature of other (non-major) inputs supplied by TAL's affiliated 
suppliers. Section 773(f)(2) of the Act states that ``[a] transaction 
directly or indirectly between affiliated persons may be disregarded 
if, in the case of any element of value required to be considered, the 
amount representing that element does not fairly reflect the amount 
usually reflected in sales of merchandise under consideration in the 
market under consideration.'' For its affiliated suppliers of minor 
inputs, Toyota responded that it could not provide market-value sales 
prices between affiliated suppliers and third parties, or between TAL 
and unaffiliated parties of the same inputs because the information was 
not obtainable or such transactions did not exist. Toyota did, however, 
supply cost information for a number of minor inputs supplied by 
affiliated parties. It is the Department's practice to permit limited 
reporting in appropriate circumstances, such as a case like this where 
there are scores of parts used in the production of a forklift truck, 
there are no third-party transactions on which to rely, and the 
respondent is unable to obtain cost information or prices to other 
purchasers from its suppliers. We disagree with petitioner that Hyster 
requires the Department to obtain more complete cost information. 
Unlike Hyster, there is no information on the record that prompts the 
Department to make further inquiry. The court in Hyster did not appear 
to rule out completely our reliance on a representative sample of 
information. Id. at 187. In addition, to support its position that TAL 
deals with its suppliers at arm's length and, therefore, that the 
amount for the relevant input ``fairly reflect[s] the amount[s] usually 
reflected in sales of merchandise under consideration in the market 
under consideration,'' TAL provided internal documents that evidence 
competitive bidding practices on the part of its affiliated and 
unaffiliated suppliers. The documents establish that Toyota selects its 
suppliers using a competitive bidding process and that Toyota is not 
averse to switching from an affiliated supplier to an unaffiliated 
supplier based on price. This is further evidence that Toyota deals 
with suppliers, both affiliated and unaffiliated, at arm's length. We 
are satisfied that the information on inputs Toyota provided supports 
its claim that it deals with affiliated suppliers on an arm's-length 
basis.
    Finally, we agree with Toyota that the Minivans memorandum 
petitioners cite is not relevant to this proceeding. That dealt with a 
different case with a different record. The record in this review does 
not suggest that we draw any conclusions based on such observations.
Comment 4
    Petitioners allege that Toyota improperly reported its affiliated 
parties for purposes of the CV and COP calculations. Petitioners state 
that, as section 773(f)(2) of the Act makes clear, indirect 
affiliations as well as direct relationships may cause the Department 
to disregard transactions that are not at arm's length. Petitioners 
assert that, in identifying its affiliated suppliers, Toyota only 
identified the manufacturer's (TAL) affiliated suppliers and did not 
identify its indirect affiliation with suppliers through TMC. 
Petitioners argue that the interrelationship between TMC and TAL cannot 
be questioned and that any suppliers under the control of or affiliated 
with TMC should be considered affiliated with TAL.
    Toyota responds that it has complied with section 771(33) of the 
Act and Department practice with respect to providing information on 
suppliers who meet one of the statutory affiliation criteria with 
respect to TAL.
Department's Position
    We disagree with petitioners. Section 773(f)(2) states that, in 
calculating COP or CV, the Department may disregard ``a transaction 
directly or indirectly between affiliated persons.'' Thus, contrary to 
petitioners' argument, the direct/indirect language refers to the 
nature of the transaction, not the affiliation. Toyota has stated in 
this review that it applied the affiliated-party definition contained 
at section 771(33) of the Act, as requested in our questionnaire. 
During the home market verification, we examined Toyota's corporate 
structure and did not find any deficiencies in its reporting. Further, 
petitioners have not provided any information regarding other, 
unreported, affiliated parties. Accordingly, we have accepted Toyota's 
reporting of its affiliated parties for the final results.
Comment 5
    Petitioners claim that the Department should not include the 
interest income Toyota Motor Credit Corporation (TMCC), a separately 
incorporated U.S. affiliate of TMS, received for loans it made to 
dealers that purchased Toyota forklift trucks as an offset to the 
credit expense TMS incurred in selling trucks in the United States. 
Petitioners argue that the loan a customer obtained constitutes a 
separate transaction from the negotiation process related to the sale 
of a forklift truck and, therefore, under the express terms of the 
statute and the Department's longstanding practice, income earned or 
expenses incurred that are not related to the sales negotiation process 
cannot be taken into consideration in the dumping analysis.
    Petitioners provide a number of examples in Toyota's questionnaire 
response to support their position that payment terms are separate and 
have no impact on the sales negotiation process between TMS and the 
dealer. Petitioners also refer to certain business proprietary passages 
from TMS's financial statements which, they argue, conflict with 
Toyota's position that TMCC simply operates as an arm of TMS. 
Petitioners assert that the notes to the financial statements raise 
serious questions as to the accuracy of Toyota's calculation of the 
expense, given the possibility of prepayments and credit losses which 
may not have been factored into its calculations. For all the above 
stated reasons, therefore, the Department should reject Toyota's claim 
for an adjustment for interest income TMCC received.
    Toyota argues, first, that it is the Department's longstanding 
practice to include credit revenues and to deduct credit expenses in 
its calculation of CEP. Second, Toyota argues that it is nonsensical 
and irrelevant to claim that financing does not affect the selling 
price of a truck because the customer pays a price that includes credit 
revenue which TMCC earns. Toyota points to the record evidence that, in 
the relevant transactions, TMCC receives the payment from the first 
unrelated customer, which is a price that includes credit revenue, and 
TMS receives only an intra-party transfer from TMCC, a payment that can 
not serve as the basis for CEP under section 772(b) of the Act. Toyota 
states that the ``separate nature'' of the financing transaction is 
belied by the facts in Toyota's questionnaire response.
    Toyota maintains that it is irrelevant that TMCC is separately 
incorporated and uses its income for various purposes and, therefore, 
the

[[Page 5605]]

Department's determination to treat TMCC and TMS as a single entity was 
correct. Toyota further maintains that petitioners' argument that TMS 
and TMCC are ``separate legal entities'' is contradicted by the reality 
of the relationship, given that they are 100-percent affiliated 
entities, share a common address, and share certain operational 
structures. Toyota also claims its method of applying assets and income 
has no relevance at all to whether credit revenue Toyota received is 
properly part of CEP. Toyota adds, in conclusion, that petitioners' 
speculation that Toyota's credit revenue might not be accurate, based 
on broad statements in TMCC's financial statements, is unfounded.
Department's Position
    We disagree with petitioners that we should reject Toyota's claimed 
adjustment for credit revenue. We have addressed this issue in prior 
reviews and in our October 9, 1996, Final Results of Redetermination 
Pursuant To Court Remand, NACCO Materials Handling Group, Inc., v. 
United States, Slip Op. 96-99 (June 18, 1996) (NACCO), which we have 
put on the record of this review.
    In NACCO, we explained that, in our antidumping analysis, ``we 
examine thoroughly the corporate structure of respondents in order to 
capture all expenses and revenues incurred by related companies that 
pertain to sales of subject merchandise. In (NACCO), Toyota's revenue 
and expense pertain directly to the particular sales in question, 
whether deemed part of the same transaction or not, and must be 
included in our dumping analysis.'' Id. at 23-24. We further stated 
that ``[t]he inclusion of TMCC's credit expense and credit revenue in 
the dumping analysis is not dependent on whether or not ostensibly 
separate transactions are combined. Such inclusion is required because, 
otherwise, the Department would be unable to fulfill its statutory 
mandate to capture all U.S. selling expenses in its analysis, as 
required by section 772(d) of the Act.'' Id. at 26. The essential 
mechanics of the relevant transactions in this review do not differ 
materially from those in NACCO. Petitioners' arguments concerning the 
separateness of the transactions and the corporate separateness of the 
entities are irrelevant, given that ``the expenses and revenues that 
derive from the financing arrangement are related to the sales in 
question and are relevant, therefore, to the calculation'' of CEP. Id. 
at 31.
    References by petitioners to Toyota's description of the process 
(i.e., where a dealer may decide separately how it will pay, is not 
obligated to use payment terms offered by TMCC, etc.) do not alter the 
conclusion that, for purposes of section 772 of the Act, the revenues 
and expenses pertain directly to the particular sales in question and 
are appropriately part of our dumping analysis. As we concluded in 
NACCO, ``TMC, TMS, and TMCC together constitute the exporter and have 
provided financing services in selling the subject merchandise * * *, 
it is necessary to focus on the expenses that relate to sales of 
subject merchandise, regardless of which related entity incurs the 
expenses, in the interest of accuracy and in order to prevent the 
manipulation of the dumping analysis through shifting expenses to 
subsidiaries.'' Id. at 29. Although the statutory definition of 
``exporter'' applied in that remand has been repealed, TMC, TMS and 
TMCC are ``affiliated persons'' within the meaning of the new 
definition at section 771(33) of the Act. Therefore, we consider our 
analysis and conclusions in NACCO to be directly relevant to the facts 
of this review and petitioners have not advanced any argument that 
would alter this conclusion.
    Petitioners' arguments based on portions of TMS' financial 
statements are also not persuasive. As explained above, arguments 
concerning the corporate separateness based on certain descriptions of 
ostensibly independent activities in which the entities engage are not 
relevant and, therefore, whether TMCC simply operates as an arm of 
Toyota does not alter our analysis.
    Furthermore, petitioners' suggestion that, based on Toyota's 
financial statements, Toyota's reported credit revenue might not be 
accurate, because of the possibility of prepayment of leases and 
because Toyota might not have accounted for credit losses, constitutes 
unfounded speculation. Moreover, this speculation is irrelevant to 
petitioners' position that credit revenue should not be recognized 
because the transactions are separate. Nonetheless, with regard to 
whether it factored credit losses into its calculations, Toyota refers 
to a prior submission wherein it stated ``TMCC has an account for bad 
debts on its financing, which, if included in the indirect expenses of 
TMCC, increases these expenses slightly.'' February 29, 1996, 
submission at 8. Toyota later included this item in its calculations. 
In addition, nothing in the record contradicts Toyota's statement that 
prepayments are not relevant to forklift financing. In a February 8, 
1996, submission in the 1993-94 administrative review of this order, 
Toyota stated (at 4) that ``the referenced comment in Toyota's 
financial statements applies primarily to automobile installment 
contracts and leases, and not to forklift leases, which are rarely paid 
off early.'' This explanation supports our conclusion to accept 
Toyota's claimed adjustment for credit revenue.
Comment 6
    Petitioners claim that the payment terms for loans and leases can 
range from one to five years and thus constitute long-term, not short-
term, financing. Therefore, petitioners contend, the Department should 
consider the credit expense Toyota incurred as long-term debt and 
should not base the calculation on the short-term borrowing rate Toyota 
reported. Petitioners argue that, in the absence of information from 
Toyota on long-term interest rates, the Department should rely on facts 
otherwise available.
    Toyota argues that the Department has a well-established practice 
of using short-term interest rates to calculate credit expense and 
believes that the Department should adhere to this practice.
Department's Position
    We agree with Toyota. Maintaining our approach is reasonable and we 
have not altered our practice of using a company's short-term borrowing 
rate to calculate imputed credit expense. The Department's position is 
buttressed by the fact that ``TMCC's issuance of short-term commercial 
paper contributes to the pool of funds used to finance all 
transactions, regardless of credit term'' and that ``there are only ten 
occasions in which reported credit terms exceed one year'' (see 
Toyota's Submission, February 29, 1996, at 9). Therefore, we have not 
adjusted Toyota's reported credit expenses by using a long-term 
interest rate as petitioners propose.
Comment 7
    Petitioners maintain that it is the Department's consistent 
practice to use the date of the final results as the date of payment 
for U.S. sales where there is no reported date of payment (citing 
Certain Stainless Steel Wire Rods from France; Final Results of 
Antidumping Duty Administrative Review (September 3, 1996)). 
Petitioners suggest that, whenever Toyota has reported a payment date 
of March 31, 1996, the Department should instead use the date of the 
final results to calculate Toyota's credit expense.
    Toyota explains that, for certain U.S. sales for which it had not 
yet received payment by the time it was preparing its

[[Page 5606]]

supplemental questionnaire for filing on May 3, 1996, it reported a 
payment date of March 31, 1996, the closing date for the data in the 
supplemental response. Toyota asserts that the relevant transactions 
consist of sales with extended payment terms that include credit 
revenue. Toyota argues that, if the Department changes the reported 
date of payment to the date of the final results to recalculate the 
credit expense, the Department would likewise have to revise the 
calculation of credit revenue. Toyota contends that, because credit 
revenue is not calculated but is based on actual payments received, 
Toyota would have to submit these amounts to the Department. Toyota 
states that, although it has no objection in principle to revising both 
credit expense and revenue (given that Toyota would gain more in credit 
revenue than it loses in credit expense), due to the complications of 
resubmitting new information at this late stage of review, the company 
requests that the Department maintain the current ``default'' payment 
date.
Department's Position
    We disagree with petitioners. Use of the date of the final results 
to calculate credit expense and credit revenue for those sales for 
which payment has not yet been received is not appropriate because 
there is no evidence to suggest that this date will provide greater 
accuracy in the calculation of either credit expense or credit revenue. 
Due to the nature of the credit expense and credit revenue at issue, it 
is not possible to derive exact expense and revenue amounts for certain 
transactions within the time permitted for responding to our 
information requests. In addition, because Toyota calculated its credit 
expense and credit revenue using the same period, any adjustment to one 
will require a corresponding adjustment to the other. Accordingly, we 
have not adopted petitioners' proposal for the final results.
Comment 8
    Petitioners state that Toyota never stated for the record that all 
of its U.S. technical services were actually indirect expenses. 
Petitioners claim that Toyota reported the expenses as indirect 
expenses because Toyota was unable to segregate them from other 
expenses, and petitioners argue that Toyota cannot be allowed to 
benefit from its alleged inability to isolate these expenses. 
Petitioners assert that Toyota bears the burden of demonstrating that 
these expenses are indirect pursuant to 19 CFR 353.54 and argue that 
the Department should treat the expenses as direct selling expenses.
    Toyota disputes petitioners' assertion that it classified technical 
service expenses as ``indirect'' because the expenses could not be 
separately quantified. Toyota asserts that the record is clear that 
these expenses are all fixed and do not relate to specific sales.
Department's Position
    We disagree with petitioners. In Toyota's initial questionnaire 
response, the company reported that its ``[t]echnical services in the 
United States were allocated and included in selling expenses.'' Toyota 
also explained that ``[t]hese are not recorded separately in TMS's 
records, and, therefore, cannot be isolated.'' October 16, 1995 
Questionnaire Response at C-51. In response to our request that Toyota 
state whether any of the technical services it performed could be tied 
to specific sales and to report variable technical service expenses 
separately from fixed expenses, Toyota stated that its technical 
service expenses are all fixed expenses and do not relate to specific 
sales. Questionnaire Response at C-65-66. Based on the record of this 
review, we find no reason to dispute Toyota's characterization of its 
reported technical service expenses as indirect. The fact that Toyota 
is unable to break out a particular expense does not suggest that this 
characterization is inaccurate. Accordingly, we have maintained our 
treatment of these expenses as indirect selling expenses in the final 
results.
Comment 9
    Petitioners maintain that the Department's treatment of Toyota's 
U.S. servicing commissions as indirect selling expenses is not 
consistent with the statute or with the Department's practice in the 
1987-89 administrative review. Petitioners contend that these expenses 
are in fact value-added expenses. Petitioners state that section 772 of 
the Act provides that the Department will derive CEP by reducing the 
starting price by the cost of any further manufacture or assembly, but 
section 772 does not provide that U.S. value-added expenses be included 
in the pool of U.S. indirect selling expenses which, in turn, 
establishes the limit of the CEP offset. Petitioners claim further 
that, in the 1987-89 review, the Department included Toyota's servicing 
commission payments in U.S. value-added costs. Petitioners note that, 
in that review, the Department determined that Toyota's servicing 
``commissions'' are payments to a third party, the dealer, and 
considered them as a cost of further manufacturing because the expenses 
involved preparing, servicing, and delivering a forklift truck to the 
customer, all of which are operations that add value to the forklift.
    Toyota responds that these commissions are different from a direct 
payment to subcontracted value-added activities. Toyota asserts that 
the law and regulations describe how commissions are to be treated and 
that commissions are always paid to third parties to compensate for 
some service or activity. Toyota argues that the fact that some of 
these activities may involve certain servicing obligations does not 
render them value-added expenses.
Department's Position
    We agree with Toyota. Based on the record of this review, we do not 
consider these payments to be for specific further-manufacturing 
activity. Based on Toyota's description of the purpose of these 
payments, while they may potentially involve such activity or 
obligations, they are more akin to payments that we treat as 
commissions. In its sales questionnaire response Toyota stated that 
``these commissions are paid to unaffiliated forklift dealers for 
National Account transactions in their territories . * *  *'' October 
16, 1995 Questionnaire Response at C-40. In a January 30, 1996, 
submission to the Department, Toyota stated (at 11) that ``these 
commissions may or may not be related to modifying the truck--in fact, 
most are not-- and in any case do not relate to any activities 
performed by Toyota.'' Toyota's description of these payments indicates 
that they are generally not for further-manufacturing activities, but 
rather are primarily intended to compensate dealers for servicing 
obligations they may be called upon to provide.
    We have previously considered similar payments to be commissions. 
In TRBs (at 57638), respondent ``explained in its response that, as a 
means of compensating (its U.S. affiliate) for expenses it incurred 
with respect to services it provided for certain of (respondent's) 
purchase price sales, (respondent) made ``commission'' payments to (its 
U.S. affiliate).'' While the ``commission'' concerned payments to a 
related party on purchase price sales and were ultimately decided to 
not have been at arm's length, the case stands for the proposition that 
the Department will consider such payments to be commissions.
    There is nothing on the record to support petitioners'' position 
that these commissions were related directly to specific further-
manufacturing

[[Page 5607]]

activities. Therefore, for purposes of the final results, we have 
maintained our treatment of Toyota's servicing commissions as 
``commissions.''
Comment 10
    Petitioners note that, at verification, Toyota informed the 
Department that it miscalculated inland freight and proposed an 
alternate methodology to calculate the freight cost on the basis of 
units shipped rather than on the basis of weight. Petitioners assert 
that such a methodology is improper because it understates the amount 
of inland freight expense for larger trucks while allocating a 
disproportionately greater expense to smaller trucks. Petitioners 
propose an alternate methodology using the total weight of individual 
trucks and the freight factor Toyota provided in its May 3, 1996 
supplemental response.
    Toyota responds that petitioners misunderstand the issue because 
Toyota's yen/kg inland freight factor itself is incorrect. Toyota 
states that, contrary to its initial belief, there is no way to 
calculate a yen/kg inland freight factor because its records only 
permit the calculation of a per-unit amount for inland freight based on 
the total units shipped and the total payments made. Toyota asserts 
that this is an accurate way of allocating the expense because Toyota 
is charged by the truckload regardless of the number of trucks shipped.
Department's Position
    We agree with Toyota. Petitioners'' proposed methodology would be 
based on a freight factor that Toyota determined, in preparing for 
verification, was flawed. We verified that the original methodology was 
flawed. Toyota apprised the Department of this error prior to 
verification and calculated a per-unit expense by taking the total 
expense for the POR and allocating it over the total units it shipped. 
We verified the bases of Toyota's proposed methodology.
    This methodology is the most feasible manner in which Toyota can 
report this expense based on its records, which only permit the 
calculation of per-unit amounts using the total units shipped and total 
payments made. Further, we consider this to be an accurate and 
reasonable method of allocating the expense, given that Toyota is 
charged by the truckload, not by the weight. Accordingly, we have 
accepted Toyota's methodology for the final results.
Comment 11
    Petitioners assert that Toyota failed to provide verification 
documents to support its home market warranty payments, yet the 
Department inadvertently allowed Toyota an adjustment for home market 
warranty expense in the Preliminary Results. Petitioners argue that 
there is no basis to allow Toyota an adjustment for home market 
warranty expense given that Toyota failed to demonstrate that it made 
the warranty payments and, therefore, failed verification of this 
expense. Petitioners conclude that the Department should disallow an 
adjustment for Toyota's home market warranty expense for the final 
results.
    Toyota responds that petitioners are incorrect in recommending that 
the Department deny Toyota's home market warranty expense. Toyota notes 
that the Department's verification report and verification exhibits 
related to Toyota's claimed warranty expense show clearly that the 
verification of this expense, including traces to numerous documents 
supporting the fact that Toyota incurred and paid the reported 
warranties. Toyota claims that the only document it could not provide 
was one showing that it made a specific warranty payment to a dealer, a 
document that Toyota's accounting system does not produce. Toyota 
asserts that all of the documentation that Toyota does have, and which 
the Department examined, supports the fact that it made these payments. 
Therefore, Toyota contends, the Department was justified in determining 
the expenses were real. Toyota argues that any decision to deny this 
expense would be an inappropriate use of adverse facts available.
Department's Position
    We disagree with petitioners. We do not accept petitioners' 
assertions that we could not verify Toyota's reported home market 
warranty expense and that we inadvertently overlooked Toyota's failure 
to verify this expense in the Preliminary Results.
    While it is true that Toyota was unable to demonstrate that it made 
these warranty payments through the use of specific documents, e.g., a 
bank-funds transfer statement, the verification of this expense 
included the review of numerous other documents that supported the 
expense. See Report at 17-18. Unlike Toyota's failure to respond to the 
Department's requests with regard to the verification of certain 
selling expenses, Toyota was able to provide numerous interrelated 
documents to support the reported warranty expense. Therefore, we have 
allowed Toyota's home market warranty claim for the final results.
Comment 12
    Petitioners state that the Department has provided no justification 
for a departure from its standard practice for determining whether 
transactions with affiliated parties are at arm's length based on its 
99.5 percent test. Petitioners claim that they performed an affiliated-
party test and, given that the evidence of record indicates that 
Toyota's prices to its affiliated dealers are not at arm's length, the 
Department must require Toyota to submit complete home market sales 
data.
    Petitioners note that the Department confirmed at verification that 
TMC's price list makes no distinction between prices charged to 
affiliated and unaffiliated dealers, but argues that price lists alone 
cannot determine whether sales are at arm's length because certain 
affiliated dealers might receive higher rebates, better payment terms, 
or any other number of benefits that result in a lower net price than 
that which unaffiliated dealers pay.
    Toyota responds that the Department should not require Toyota to 
submit sales information on sales by affiliated dealers to unrelated 
end-users because all of its sales are at arm's length. Toyota adds 
that petitioners' own analysis demonstrates that sales to affiliated 
dealers are at arm's length, since this analysis reveals that 
affiliated dealers paid prices slightly above and slightly below the 
average price to unaffiliated dealers. Toyota states that this very 
narrow range of deviation from the average does not suggest that prices 
to affiliated dealers are not at arm's length and adds that the small 
deviation is created solely by a deficiency in petitioners' method of 
analysis, whereby petitioners adjusted the prices by the costs of the 
attachments and options. Toyota provides three examples indicating that 
differences in prices are attributable to differences in the number of 
options/attachments, credits for removal of certain equipment, and 
differences in the types of attachments. Toyota states that petitioners 
wrongly tried to compensate for the different attachments through cost 
adjustments; petitioners should have used the prices for the 
attachments which the Department verified were identical to affiliated 
and unaffiliated dealers. Toyota states that the Department has 
recognized in each of its prior reviews that Toyota's sales are all at 
arm's length and neither Toyota's business practices nor the law have 
changed and, therefore, there is no basis for the Department to alter 
its analysis for this review.

[[Page 5608]]

Department's Position
    We disagree with petitioners. As we stated in our verification 
report, Toyota's sales prices to affiliated and unaffiliated dealers in 
the home market, for the basic truck and parts, were based on published 
price lists. See Report at 11. At verification, we noted no deviation 
from the price lists for sales to affiliated or unaffiliated dealers 
for either the basic truck or parts.
    In addition, while petitioners claim that the arm's-length test 
they conducted appears to indicate that Toyota's sales to affiliated 
dealers fail our 99.5% arms-length-test, we note that, due the unique 
nature of this product, where differences between products beyond the 
basic truck (options, attachments, etc.) can be significant and where 
these differences are not always individually distinguished in the 
submitted data, an arm's-length test is not always feasible. 
Petitioners'' methodology in their arm's-length test for calculating 
average variances for options does not adequately account for all such 
differences. Therefore, based on the verified fact that both affiliated 
and unaffiliated dealers purchased trucks and parts based on the same 
price lists, we have determined that Toyota's sales to affiliated 
dealers in the home market form a proper basis for consideration and 
the calculation of NV.
Comment 13
    Petitioners argue that the Department's level-of-trade analysis is 
incorrect. Petitioners claim that, rather than examining the actual 
level of trade at which Toyota's sales to unaffiliated purchasers in 
the United States occurred, the Department began its level-of-trade 
analysis with a price reduced of expenses which Toyota's U.S. affiliate 
incurred. Petitioners assert that, by excluding these expenses, the 
Department failed to recognize that the CEP sales were at a more 
advanced level than Toyota's home market sales and, therefore, that an 
upward adjustment to NV was warranted.
    Petitioners assert that there is no legal justification for 
adjusting CEP prior to determining the level of trade of the U.S. sale. 
Petitioners claim that the statute requires the Department to make a 
comparison of CEP with NV at the same level of trade. Petitioners 
assert that nothing in the statute nor the SAA requires the Department 
to compare the level of trade of a CEP with an unadjusted home market 
price and that, in doing so, the Department has misinterpreted the law. 
Petitioners point to the Department's longstanding practice of 
comparing sales in the relevant markets at a common point in the chain 
of commerce (citing, among others, Cookware at 43330).
    Petitioners claim that the flaw in the Department's analysis is 
indicated by the results it reached in this case. Petitioners assert 
that the U.S. sales are accompanied by similar and more extensive 
selling activities than those in the home market, yet the Department 
created distinct and commercially unrealistic levels of trade in the 
two markets with its adjustments to CEP. Petitioners refer to other 
cases where the Department's analysis yielded anomalous results and 
artificial differences in levels of trade between markets (citing 
Stainless Steel Wire Rod from France, 61 FR 8915, 8916 (1996), and LNPP 
from Japan, at 38142).
    Petitioners conclude that the Department should begin its level-of-
trade analysis with an unadjusted CEP starting price. Once the 
Department does that it becomes apparent that Toyota's U.S. sales are 
at a more advanced level of trade than its home market sales and that 
an upward adjustment to NV for the difference in levels of trade is 
warranted.
    Toyota responds that petitioners'' argument that the Department 
should compare unadjusted prices is incorrect, contradicted by the 
statute, and premised upon a fundamental misperception of CEP. Toyota 
asserts that there is no such thing as an unadjusted CEP; CEP is by 
definition an adjusted price, while ``normal value'' is an unadjusted 
price. Toyota further asserts that the level-of-trade provision refers 
only to a comparison of NV with a CEP. Toyota concludes that use of an 
unadjusted CEP in determining the level of trade of the U.S. sale is 
contradicted by the definition of CEP at section 772(b), the definition 
of normal value at section 773(a)(1), and the level-of-trade provision 
at section 773(a)(7)(A) of the Act.
    Toyota notes that its U.S. sales are indisputably CEP sales. Toyota 
claims that the U.S. level of trade is a single, very-little-advanced 
level, from an exclusive distributor (TMC) to an affiliated purchaser 
in the United States (TMS). In contrast, all of its sales in Japan are 
at a more remote level, that of a distributor (TMC) to dealers. 
Consequently, there is no level of trade in Japan comparable to that of 
the U.S. sales and no information available in Japan on which to make 
the price-based level-of-trade adjustment anticipated by section 
773(a)(7)(A) of the Act. Therefore, the Department correctly made a 
CEP-offset adjustment as permitted by section 773(a)(7)(B) of the Act. 
Toyota adds that, since its home market level of trade is more remote, 
there is no justification for adjusting home market prices upwards. 
Toyota notes, in conclusion, that the Department refuted arguments 
identical to petitioners'' suggestions in its proposed regulations (at 
7347).

Department's Position

    We disagree with petitioners that our level-of-trade analysis must 
begin with the unadjusted price of the U.S. sales. We base the level of 
trade of CEP sales on the CEP, i.e., the price in the United States, 
net of the deductions required by the statute. It is that price, not 
the starting price, that is compared to the normal value. Petitioners' 
position is contrary to the SAA, the statute, and our practice under 
the URAA.
    We agree with Toyota that the statute is clear that the CEP by 
definition is an adjusted price while normal value in a level-of-trade 
analysis is based on an unadjusted price. Section 772(b) of the Act 
states that ``constructed export price'' means the price at which the 
subject merchandise is first sold * * *, as adjusted under subsections 
(c) and (d)'' (emphasis added). Normal value is defined as ``the price 
at which the foreign like product is first sold * * * for consumption 
in the exporting country * * * at the same level of trade as the * * * 
constructed export price.'' Section 773(a)(1)(B)(i) of the Act. The SAA 
similarly specifies that normal value will be calculated, to the extent 
practicable, at the same level of trade as the CEP. SAA at 827. Section 
773(7)(A) of the Act further indicates that ``[t]he price described in 
paragraph (1)(B) shall be increased or decreased to make due allowance 
for any difference (or lack thereof) between the * * * constructed 
export price and the price described in paragraph (1)(B) * * * that is 
shown to be wholly or partly due to a difference in level of trade 
between the * * * constructed export price and normal value * * *'' It 
is clear that the statute speaks of an adjusted price for CEP and an 
unadjusted price for NV.
    Our practice, in examining level of trade, has been to use an 
adjusted starting price (i.e., the CEP) in accordance with the statute. 
In LNPP from Japan, we stated ``[i]n those cases where [a level-of-
trade] comparison is warranted and possible, then for CEP sales the 
level of trade will be evaluated based on the price after adjustments 
are made under section 772(d) of the Act. As stated in Aramid Fiber 
``the level of trade of the U.S. sales is determined by the adjusted 
CEP rather than the starting price.'' ' LNPP from Japan at 38143 
(emphasis added).

[[Page 5609]]

    More recently, in AFBs 6, we stated:

[t]he statutory definition of `constructed export price' contained 
in section 772(d) of the Tariff Act indicates clearly that we are to 
base CEP on the U.S. resale price as adjusted for U.S. selling 
expenses and profit. As such, the CEP reflects a price exclusive of 
all selling expenses and profit associated with economic activities 
occurring in the United States. See SAA at 823. These adjustments 
are necessary in order to arrive at, as the term CEP makes clear, a 
`constructed' export price. The adjustments we make to the starting 
price, specifically those made pursuant to section 772(d) of the 
Tariff Act (``Additional Adjustments for Constructed Export 
Price''), normally change the level of trade. Accordingly, we must 
determine the level of trade of CEP sales exclusive of the expenses 
(and concomitant selling functions) that we deduct pursuant to this 
subsection.

AFBs 6 at 2107.
    Because the statute, the SAA, and our practice support our use of 
an adjusted CEP to determine level of trade, petitioners' comparisons 
between the activities provided for Toyota's home market sales and 
those provided for its U.S. sales to unaffiliated customers are not 
relevant. We consider the appropriate comparison of selling functions, 
selling expenses, and class of customer between markets to be sales 
determined by the adjusted starting price (constructed export price) 
for U.S. sales and the unadjusted starting price for home market sales 
(normal value) i.e., Toyota's sales to its U.S. affiliate and its home 
market sales to affiliated and unaffiliated dealers.
Comment 14
    Petitioners assert that, even if the Department begins the level-
of-trade analysis with an adjusted CEP, the evidence of record does not 
establish that different levels of trade exist in the home and U.S. 
markets. Petitioners claim that the selling functions provided on U.S. 
sales by TMC and TAL (exclusive of those provided by TMS) are 
sufficiently similar to the verified selling functions incurred on home 
market sales by TMC and TAL to consider the sales at the same level of 
trade.
    Petitioners note that the home market expenses the Department 
examined at verification included inland freight and insurance, 
rebates, discounts, warranties, direct advertising, credit, product 
liability, TAL home market indirect expenses (quality assurance) and 
TMC home market indirect expenses (incentives, indirect selling, 
indirect advertising, wage and salary and G&A and inventory carrying 
costs). Petitioners argue that rebates, discounts and incentives do not 
reflect selling activities and cannot serve as the basis for 
distinguishing levels of trade. Petitioners claim that the Department 
was unable to verify either home market direct or indirect advertising, 
part of the indirect selling expense claims, and Toyota's warranty 
claims and argue that, given this inability, the Department should 
neither adjust for, nor consider, these to be distinct functions in its 
level-of-trade analysis.
    Petitioners assert that other expenses applying to home market 
sales appear to be applicable to U.S. sales. In particular, petitioners 
claim that Toyota has focused only on selling functions TMC provided 
with respect to U.S. sales and has ignored those TAL provided (citing 
as examples TAL's quality assurance, engineering services and technical 
advice). Petitioners note that Toyota admits TAL incurs expenses 
related to the selling functions provided with respect to U.S. sales. 
Petitioners assert that the statute does not limit the selling 
functions to be examined to those provided by the exporter and notes 
that, while the degree of the particular service may vary on a given 
group of sales, the statute merely looks to whether the function 
provided is the same. Petitioners conclude that there are no verified 
bona fide selling expenses that were incurred in the home market that 
were not also incurred with respect to U.S. sales and, therefore, there 
is no rational basis for differentiating between levels of trade in 
this case.
    Toyota responds that petitioners ignore evidence of record 
establishing different levels of trade and maintains that the 
Department's disallowance of certain expenses was unwarranted. Toyota 
argues that, even if the Department's disallowance of these expenses 
was lawful, it does not follow that the selling functions which gave 
rise to the expenses should be eliminated from the level-of-trade 
analysis because the Department was able to verify the selling 
functions, if not the precise expense amounts. Toyota notes that the 
Department stated unequivocally in the preliminary results that it 
verified the presence of home market selling functions and that the 
home market level of trade constituted a more advanced stage of 
distribution than the level of the CEP.
    Toyota further asserts that petitioners' implication that TAL's 
provision of selling functions requires a finding that there are no 
differences in selling functions is not valid since: (1) The 
differences in TMC's selling functions in the two markets is sufficient 
to satisfy the Department's level-of-trade analysis, (2) the record 
states in several places that, while there was some overlap in the 
functions TAL performed in the two markets, there were nevertheless 
quantitative and qualitative differences in the functions performed, 
and (3) the Proposed Rules state that ``overlap between functions is 
not necessarily determinative of whether two levels of trade are 
distinct.'' Notice of Proposed Rulemaking and Request for Public 
Comments, 61 FR 7308, 7347 (February 27, 1996), citing SAA at 830. 
Toyota argues that the substantial differences in the degree of the 
performance of a similar function in the two markets constitute ``the 
performance of different selling activities'' pursuant to section 
773(a)(7)(A)(i) of the Act.
Department's Position
    We disagree with petitioners. In the course of this review, we 
obtained information concerning the selling functions Toyota performed 
for its respective markets. In addition, in the process of verifying 
this information, we interviewed company officials concerning the 
functions performed for the various markets. Based on our analysis of 
this information, we determined that TMC's and TAL's selling activities 
directed at the home market level of trade were more extensive. See 
Preliminary Results Analysis Memo, July 26, 1996, at 2-5; see also 
Report at 9-10. Our determination for the final results remains 
unchanged.
    We disagree with petitioners that rebates, discounts and incentives 
do not reflect selling activities and do not serve as a basis for 
distinguishing levels of trade. Contrary to petitioners' assertion, 
these expenses may involve selling functions that are appropriate for 
us to consider in our level-of-trade analysis and contribute to our 
level-of-trade determination. We further disagree with petitioners that 
we were unable to verify Toyota's claimed home market warranty expense 
(see comment 11).
    We also disagree with petitioners that Toyota failed to provide 
information on selling functions TAL performed with respect to sales to 
the respective markets. As we stated in our Preliminary Results 
Analysis Memo at 3-4, ``[i]n addition, the functions performed on 
behalf of U.S. sales by TAL, while similar in some instances to those 
provided in the home market, are much less extensive and limited to 
quality assurance, engineering services and technical advice.''
    Finally, we disagree with petitioners that our inability to 
substantiate certain selling expenses, by tracing reported amounts to 
the level of detail required for a successful verification of a topic, 
precludes us from recognizing that Toyota provided the functions for 
sales

[[Page 5610]]

to the particular markets. We obtained confirmation that these 
functions were performed in other ways, e.g., through interviews with 
company officials and review of organizational charts. See, e.g., 
Report at 9-10.
Comment 15
    Petitioners argue that Toyota should be denied a CEP-offset 
adjustment to NV because it failed to provide information on a level-
of-trade adjustment (citing LNPP from Japan at 38142). Petitioners 
assert that Toyota has made no effort to quantify a level-of-trade 
adjustment but has assumed it is entitled automatically to a CEP 
offset. Petitioners assert that the SAA (at 830) provides that, where 
information on different levels of trade by the same company and same 
product is unavailable for the POR, the level-of-trade adjustment may 
be based on (i) sales of other products by the same company, (ii) the 
experience of other producers, or (iii) sales of the same product by 
the same company in different time periods. Petitioners claim that 
Toyota has not attempted to provide such information, given its 
assumption a CEP offset is automatic. Petitioners further assert that 
the Department found the information Toyota provided to quantify the 
CEP offset to be deficient and not verifiable.
    Toyota responds that, in the preliminary results, the Department 
properly determined that Toyota's sales in the home market were at a 
different, more advanced level of trade than its sales in the United 
States. Toyota claims that the wide range of selling activities to the 
home market level has an obvious and substantial effect on price 
comparability with the U.S. level of trade. Toyota asserts that, 
because it sells at only one level in the home market, it cannot 
demonstrate a ``consistent pattern of differences between levels of 
trade'' (citing Certain Stainless Steel Wire Rods From France; 
Preliminary Results of Antidumping Duty Administrative Review, 61 FR 
8915, 8916 (March 6, 1996)). Toyota claims that it provided all of the 
information necessary for the Department to calculate the CEP offset, 
and states that, in the preliminary results of review, the Department 
properly adjusted Toyota's home market prices due to differences in 
levels of trade through a CEP offset. Toyota asserts that the 
Department properly resorted to the CEP offset after analyzing other 
statutorily directed alternatives to account for the necessary 
adjustment for differences in levels of trade. Toyota states that 
petitioners' citation to LNPP from Japan is misleading because, in that 
case, the Department denied a CEP offset because a respondent provided 
no level-of-trade information.
Department's Position
    We disagree with petitioners. We agree that a respondent must 
establish entitlement to a level-of-trade adjustment. However, where 
the data necessary to calculate an adjustment is unavailable, the CEP 
offset is warranted. With respect to the quantification necessary for a 
level-of-trade adjustment, in this case the respondent sells to only 
one level in the home market and this level is at a more advanced stage 
of distribution than the level of the CEP. Therefore, neither we nor 
Toyota can quantify such an adjustment and there is no further 
requirement to establish entitlement to a CEP-offset adjustment.
Comment 16
    Petitioners claim that the Department's failure to deduct from CEP 
Toyota's indirect selling expenses incurred in the country of 
manufacture to sell the product to the United States, and Toyota's 
inventory carrying costs incurred from the time of production in the 
foreign country through the time of entry into the United States, was a 
direct violation of the statute and should be corrected in the final 
results.
    Petitioners contend that the plain meaning of section 772(d) of the 
Act indicates that the Department cannot limit adjustments to CEP based 
on the geographical area in which such expenses are incurred and that, 
when Congress amended the statute in the URAA, it did not change the 
operative language of section 772(e) by limiting the selling expenses 
the Department is to deduct. Petitioners further contend that, under 
prior law, the Department was required to deduct selling expenses from 
Exporter's Sales Price (ESP) regardless of where incurred 
geographically and, citing Silver Reed America, Inc. v. United States, 
683 F. Supp. 1393 (CIT 1988) (Silver Reed), state that the relevant 
question is whether the selling expenses relate to U.S. sales. 
Petitioners further state that the court recognized the loophole that 
would be created if expenses incurred abroad for U.S. sales were not 
deducted from ESP (the predecessor to CEP).
    Petitioners maintain that the Department should deduct these 
expenses from CEP because the record establishes that they relate 
explicitly to the U.S. economic activity. Petitioners cite in support 
of their position LNPP from Germany (at 38173-74), and Notice of Final 
Determination of Sales at Less Than Fair Value: Certain Pasta from 
Italy, 61 FR 30326, 30352 (June 14, 1996) (Pasta from Italy).
    Toyota answers that the petitioners would have the Department 
calculate a distorted CEP that is not the equivalent of what the export 
price would have been if the affiliated foreign seller and U.S. 
reseller were unaffiliated. Moreover, petitioners claim that the 
Department limited CEP deductions based on where they occurred is 
factually in error as the Department deducted from CEP direct 
advertising TMC incurred in Japan. Citing the Notice of Proposed 
Rulemaking and Request for Public Comments, 61 FR 7308, 7331 (February 
27, 1996), Toyota maintains the Department properly limited deductions 
by whether such expenses were selling expenses associated with economic 
activities in the United States, as required by the statute. Regarding 
the indirect selling expenses referred to by petitioners, these were 
not deducted because they are general in nature, do not relate 
specifically to U.S. commercial activity, and are incurred, if at all, 
with respect to the sale by an affiliated purchaser. To support its 
position, Toyota cites Calcium Aluminate Flux From France; Preliminary 
Results of Antidumping Duty Administrative Review, 61 FR 40396, 40397 
(August 2, 1996) (Calcium Aluminate Flux), and argues that the relevant 
expenses relate to commercial activity in Japan, not U.S. commercial 
activity and, therefore, the Department properly did not deduct them in 
calculating CEP.
Department's Position
    We disagree with petitioners. In accordance with the SAA, we 
deducted from CEP only those expenses associated with economic 
activities in the United States. The SAA indicates that ``constructed 
export price is now calculated to be, as closely as possible, a price 
corresponding to an export price between non-affiliated exporters and 
importers.'' SAA at 823. Therefore, we did not deduct either of the 
expenses referred to by petitioners from CEP. We have only deducted 
expenses associated with commercial activities in the United States in 
our calculation of CEP. Our proposed regulations reflect this logic at 
351.402(b): ``(t)he Secretary will make adjustments to constructed 
export price under 772(d) for expenses associated with commercial 
activities in the United States, no matter where incurred.'' Id. at 
179.
    With regard to the TMC and TAL export selling expenses Toyota 
allocated to U.S. sales, we consider these expenses not to be 
specifically related to economic activities in the United States.

[[Page 5611]]

As these figures cover salaries and fixed expenses, which expenses are 
general in nature and are not related specifically to commercial 
activity in the United States, they are not properly part of the 
calculation of CEP. In Calcium Aluminate Flux, at 40397, we declined to 
deduct indirect selling expenses (i.e., administrative expenses, 
inventory carrying costs, personnel costs for technicians) incurred in 
the country of manufacture because we deemed such expenses not to be 
specifically related to commercial activity in the United States. While 
these expenses arguably may be similar to those we deducted in LNPP 
from Germany, we have determined subsequently, as indicated by our 
position in Calcium Aluminate Flux, that such expenses are not 
specifically associated with commercial activities in the United 
States.
    Regarding petitioners' assertion that we should deduct Toyota's 
inventory carrying costs incurred in the country of manufacture, such 
inventory carrying costs are not associated with economic activities in 
the United States. See AFBs 6 at 2125. Therefore, we have not deducted 
either of these expenses for purposes of the final results because 
neither of the expenses is specifically associated with economic 
activities in the United States and, therefore, is not an appropriate 
deduction in calculating CEP.
Comment 17
    Petitioners argue that the Department's verification report and 
Toyota's supplemental questionnaire response indicate that Toyota 
misreported the date of sale for both its U.S. and home market sales. 
Petitioners note that Toyota explained in its supplemental 
questionnaire response that a dealer may modify an order by changing 
the configuration of the truck between 10-15 percent of the time, but 
that the Department determined at verification the frequency instead 
ranged from 4.3 to 7.5 percent. Petitioners assert that the low 
frequency of changes fails to justify Toyota's decision to base date of 
sale on date of shipment when the majority of sales are established on 
the order date; further, the changes to certain attachments do not 
alter the essential terms of sale between Toyota and its customer. 
Petitioners state that it is likely there would be a set price for the 
particular attachments or changes in configuration of the truck and, 
although a purchaser may request different attachments, the basic truck 
and negotiated price would not be altered after the order is placed.
    Toyota responds that the date the basic terms of the contract are 
agreed to is the date of shipment, which is generally on or about the 
date of invoice. Toyota notes that, under the Department's proposed 
regulations, the invoice date is considered the date of sale. Toyota 
contends that customers can request modifications in payment terms, 
configuration, and price up to the date of shipment. Toyota states, 
further, that the date of order is not a date of sale in Toyota's 
records, is not significant enough to record on a systematic basis and, 
even where recorded, the order may or may not describe the merchandise 
actually shipped. Toyota notes that this is not a case in which the 
date of sale is substantively significant to the final results, given 
that Toyota's sales are relatively even over the period and there are 
no factors such as hyperinflation that would cause the date of sale to 
affect the analysis. Consequently a different date of sale would shift 
the universe of reported sales slightly and not change the outcome 
particularly since the Department plans to assess duties on all trucks 
entered during the POR.
Department's Position
    We agree with Toyota. The date of shipment is the appropriate date 
of sale for home market sales in this case for the following reasons. 
First, the reported date of sale, which is based on shipment date, 
closely corresponds to invoice date in this case and is in accord with 
our current practice and with the date-of-sale methodology in our 
proposed regulations, where invoice date is considered the appropriate 
date of sale. Second, we verified that certain basic sales terms (such 
as configuration and price) can change up to the date of shipment. 
While Toyota initially reported that orders were changed 10-15 percent 
of the time and we determined at verification that the frequency of 
changes instead ranged from 4.3 to 7.5 percent, the potential for 
configurations and prices to change for the reported sales supports a 
sale date based on the shipment date. Third, Toyota records the date of 
shipment as the date of sale for financial reporting and internal 
purposes, and it records the sales transaction as complete upon 
shipment (e.g., payment is due from a dealers based on this date--see 
Report at 11-12, Sale Date, and 19, Credit Expense).
Comment 18
    Petitioners contend that the Department failed to deduct Toyota's 
U.S. inventory carrying costs (calculated from the date of entry to the 
date of shipment from the distribution facility in the United States) 
from CEP. Petitioners assert that these expenses are related to 
commercial activities in the United States and therefore, should be 
deducted.
    Toyota argues that the Department properly considered inventory 
carrying costs incurred in connection with Japanese exports to the 
United States to be general export expenses broadly attributable to the 
sale to the unaffiliated purchaser, which should not be deducted from 
CEP. Toyota notes, however, that to the extent the Department deducts 
any inventory carrying expenses from CEP, the expenses should also be 
included in U.S. indirect selling expenses and the Department should 
deduct corresponding home market inventory carrying costs from NV.
Department's Position
    We agree with petitioners. The inventory carrying costs Toyota 
incurred in the United States are an indirect expense related to 
commercial activity in the United States and, therefore, are 
appropriately deducted from the CEP starting price. Therefore, we have 
deducted the reported expense from the starting price and included it 
in U.S. indirect selling expenses for purposes of the final results.
Comment 19
    Petitioners note that, in the preliminary results, the Department 
treated Toyota's repacking costs as a circumstance-of-sale (COS) 
adjustment and added the sum of packing and repacking to NV in dollars. 
Petitioners argue that the statute directs the Department to adjust NV 
for costs and expenses incident to placing the subject merchandise in 
condition packed ready for shipment to the United States and, 
therefore, the Department should not include repacking costs in the 
adjustment for differences in packing, but rather should subtract them 
from Toyota's starting price as an adjustment to CEP (citing section 
772(d) and Federal-Mogul Corporation v. United States, Slip Op. 96-68 
at 25 (April 19, 1996)).
    Toyota asserts that section 772(c)(1)(A) provides that the 
Department should increase CEP by an amount for ``packing,'' and notes 
that this provision does not limit this term to home market packing. 
Toyota maintains, therefore, that the Department's approach was 
reasonable.
Department's Position
    We agree with petitioners. As noted in our response to comment 16, 
we deduct expenses related to economic activities in the United States 
in calculating CEP.

[[Page 5612]]

Because U.S. repacking costs are clearly related to such activities, we 
have deducted these expenses from the starting price to calculate CEP 
for the final results.
Comment 20
    Petitioners claim that the Department uniformly reduced Toyota's 
home market sales prices by reported inland freight expenses, which is 
inappropriate because Toyota's reported home market prices were 
exclusive of inland freight for certain sales. Petitioners assert that 
deducting these amounts resulted in an understatement of NV for those 
sales for which the price did not include delivery.
    Toyota responds that it reported, and the Department verified, 
inland freight amounts only where the prices were inclusive of inland 
freight. Toyota asserts that the Department's Preliminary Results 
accomplish exactly what petitioners claim is proper.
Department's Position
    We agree with petitioners. Toyota reported that its reported home 
market gross unit price ``includes inland freight only where the sales 
term is c.&f.'' (October 16, 1995 response at B-22) and indicated that 
for a particular sale ``the sales term is FOB, that is, it does not 
include charges for inland freight'' (May 3, 1996 supplemental response 
at Supp. 29). We have ensured that our calculations reflect the 
information Toyota provided in its response concerning this expense.
Final Results of Review
    We determine that the following weighted-average margins exist for 
the period June 1, 1994, through May 31, 1995:

------------------------------------------------------------------------
                                                                Margin  
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
Toyota.....................................................        50.34
Nissan.....................................................     \1\ 7.36
Toyo.......................................................     \1\ 4.48
------------------------------------------------------------------------
\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.                                                                

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. We have 
calculated an exporter/importer-specific assessment rate for Toyota. 
For Toyota's CEP sales we divided the total dumping margins for the 
reviewed sales by the total entered value of those reviewed sales and 
the entered value of leased trucks not subject to review (see our 
response to Toyota comment 10). We will direct Customs to assess the 
resulting percentage margin against the entered Customs values for the 
subject merchandise on each of Toyota's entries 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.
    Furthermore, the following deposit requirements will be effective 
upon publication of this notice of final results of administrative 
review for all shipments of forklift trucks entered, or withdrawn from 
warehouse, for consumption on or after the date of publication, as 
provided by section 751(a)(1) of the Act: (1) The cash deposit rates 
for the reviewed companies will be the rates shown above; (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 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 
be the ``All Others'' rate of 39.45 percent made effective by the final 
results of review in Certain Internal-Combustion Industrial Forklift 
Trucks From Japan; Final Results of Antidumping Duty Administrative 
Review, 59 FR 1374,1384 (January 10, 1994).
    These deposit requirements shall remain in effect until publication 
of the final results of the next administrative review.
    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.
    This administrative review and this notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.

    Dated: January 29, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-2877 Filed 2-5-97; 8:45 am]
BILLING CODE 3510-DS-P