[Federal Register Volume 62, Number 28 (Tuesday, February 11, 1997)]
[Notices]
[Pages 6189-6215]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3356]



[[Page 6189]]

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DEPARTMENT OF COMMERCE
[A-570-601]


Tapered Roller Bearings and Parts Thereof, Finished and 
Unfinished, From the People's Republic of China; Final Results of 
Antidumping Duty Administrative Review and Revocation in Part of 
Antidumping Duty Order

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

ACTION: Final results of antidumping duty administrative review and 
revocation in part of antidumping duty order on tapered roller bearings 
and parts thereof, finished and unfinished, from the People's Republic 
of China.

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SUMMARY: On September 26, 1995, the Department of Commerce (the 
Department) published the preliminary results of its administrative 
review of the antidumping duty order on tapered roller bearings (TRBs) 
and parts thereof, finished and unfinished, from the People's Republic 
of China (PRC). The period of review (POR) is June 1, 1993, through May 
31, 1994.
    Based on our analysis of comments received, we have made changes to 
the margin calculations, including corrections of certain clerical 
errors. Therefore, the final results differ from the preliminary 
results. The final weighted-average dumping margins are listed below in 
the section entitled ``Final Results of Review.''
    We have determined that sales have been made below foreign market 
value (FMV) during the period of review. Accordingly, we will instruct 
the U.S. Customs Service to assess antidumping duties on all 
appropriate entries.
    We have also determined that one company has demonstrated that it 
has made sales at not less than fair value for three consecutive review 
periods. Therefore, we are revoking the order in part with respect to 
this firm.

EFFECTIVE DATE: February 11, 1997.

FOR FURTHER INFORMATION CONTACT: Charles Riggle, Hermes Pinilla, Andrea 
Chu, Kristie Strecker, or Kris Campbell, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution, Avenue N.W., Washington, D.C. 20230; telephone 
(202) 482-4733.

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

SUPPLEMENTARY INFORMATION:

Background

    On September 26, 1995, the Department published in the Federal 
Register the preliminary results of its administrative review of the 
antidumping duty order on TRBs from the PRC. See Tapered Roller 
Bearings and Parts Thereof, Finished and Unfinished, From the People's 
Republic of China; Preliminary Results of Antidumping Duty 
Administrative Reviews, 60 FR 49572 (September 26, 1995) (Preliminary 
Results). We gave interested parties an opportunity to comment on our 
preliminary results and held a public hearing on November 29, 1995. The 
following parties submitted comments: The Timken Company (Petitioner); 
Shanghai General Bearing Company, Limited (Shanghai); Guizhou Machinery 
Import and Export Corporation (Guizhou Machinery), Henan Machinery and 
Equipment Import and Export Corporation (Henan), Jilin Province 
Machinery Import and Export Corporation (Jilin), Liaoning MEC Group 
Company Limited (Liaoning), China National Machinery Import and Export 
Corporation (CMC), and Wafangdian Bearing Industry Corporation 
(Wafangdian) (collectively referred to as Guizhou Machinery et al.); 
Premier Bearing and Equipment Limited (Premier); Peer Bearing Company/
Chin Jun Industrial Limited (Chin Jun); Transcom, Incorporated 
(Transcom); and L&S Bearing Company/LSB Industries (L&S).
    On June 30, 1994, Shanghai submitted a request, in accordance with 
19 CFR 353.25(b), that the antidumping duty order be revoked with 
respect to Shanghai's sales of this merchandise. In accordance with 19 
CFR 353.25(a)(2)(iii), this request was accompanied by certifications 
from the firm that it had sold subject merchandise at not less than FMV 
for a three-year period, including this review period, and would not do 
so in the future. Shanghai also agreed to its immediate reinstatement 
in the antidumping duty order, as long as any firm is subject to this 
order, if the Department concludes under 19 CFR 353.22(f) that, 
subsequent to revocation, it sold the subject merchandise at less than 
FMV.
    On March 13, 1996, we published in the Federal Register our notice 
of intent to revoke the order in part. See Tapered Roller Bearings and 
Parts Thereof, Finished and Unfinished, From the People's Republic of 
China; Intent to Revoke the Order (In Part), 61 FR 10314 (March 13, 
1996). We gave interested parties an opportunity to comment on our 
intent to revoke in part. Petitioner submitted comments; Shanghai 
submitted rebuttal comments.
    We have conducted this administrative review in accordance with 
section 751(a)(1) of the Tariff Act of 1930, as amended (the Act), and 
19 CFR 353.22.

Scope of Reviews

    Imports covered by these reviews are shipments of TRBs and parts 
thereof, finished and unfinished, from the PRC. This merchandise is 
classifiable under the Harmonized Tariff Schedule (HTS) item numbers 
8482.20.00, 8482.91.00.60, 8482.99.30, 8483.20.40, 8483.20.80, 
8483.30.80, 8483.90.20, 8483.90.30 and 8483.90.80. Although the HTS 
item numbers are provided for convenience and customs purposes, our 
written description of the scope of this proceeding is dispositive.

Best Information Available

    In accordance with section 776(c) of the Act, we have determined 
that the use of the best information available (BIA) is appropriate for 
a number of firms. For certain firms, total BIA was necessary, while 
for other firms only partial BIA was applied. Our application of BIA is 
discussed further in the Analysis of Comments Received section of this 
notice.

Analysis of Comments Received

Comment 1

    Petitioner argues that the Department's preliminary finding that 
there are 11 independent Chinese TRB producers entitled to separate 
antidumping duty rates is inconsistent with the preliminary 
determination that the TRB industry is not sufficiently market-oriented 
to allow for the use of home market prices. Petitioner states that, 
where the government retains significant control over an entire 
industry, there is sufficient direct, or indirect, control to warrant 
treating all of the producers as ``related'' for purposes of section 
773(e)(4)(F) of the Act and also to calculate only a single margin for 
these companies. Petitioner notes that, in analyzing de facto state 
control, the Department considers whether the plants have independent 
authority to set prices and the ability to retain profits. However, 
Petitioner insists, where input and factor prices are established by 
state control and where ownership of the company and the concept of 
profits are unclear, there is no truly independent authority to set 
prices and retain profits. Petitioner cites the April 25, 1995 public 
version of Jilin's supplemental questionnaire

[[Page 6190]]

response which states, at 3, that Jilin's profits may be used, inter 
alia, ``for employee bonuses and welfare.'' Petitioner claims that, in 
market-oriented companies, employee bonuses and welfare would be 
regarded as expenses, not profits (citing Compact Ductile Iron 
Waterworks Fittings and Accessories from the People's Republic of 
China, 58 FR 37908, 37910 (July 14, 1993) (CDIW)).
    Petitioner contends that, if the Department calculates separate 
rates, there is a strong incentive to channel U.S. exports through 
exporters with the lowest margins, and that the record establishes that 
various TRB producers not only market their own bearings but also 
perform sales and marketing functions with respect to TRB models 
produced by other companies. Petitioner argues that new importations 
will inevitably be channeled through companies with the lowest margins, 
adding that such behavior is a manifestation of the state control that 
permeates the industry and the economy.
    Petitioner contends further that the Department's de jure and de 
facto separate-rates analysis places an impossible burden of proof on 
domestic interested parties due to the fact that a state-controlled 
economy can amend its laws and regulations without in fact 
relinquishing control. Petitioner claims that the state can simply 
delete any evidence of de jure control from laws, regulations, 
corporate charters and other documents. That being the case, Petitioner 
argues, the domestic industry, as well as the Department itself, are 
confronted with the requirement that they prove a negative without 
having access to information that would indicate continuing control 
over production and pricing decisions by the state. Thus, Petitioner 
states, claims made by plant managers, themselves interested in 
obtaining separate rates, become the basis for the Department's de 
facto analysis. Finally, Petitioner argues that domestic interested 
parties do not have access to information that might allow them to 
rebut the claims of de facto independence, causing irrational results 
and defeating the purpose of the statute (citing Rhone Poulenc (page 
cite omitted) and The Timken Co. v. United States, 11 CIT 786, 804, 673 
F. Supp. 495, 513 (1987)).
    Guizhou Machinery et al. acknowledge that in CDIW the Department 
determined that it would not consider a request for separate rates for 
any state-owned company on the basis that no state-owned company could 
be independent enough of state control to be entitled to separate 
rates. However, Guizhou Machinery et al. note, citing Final 
Determination of Sales at Less Than Fair Value: Silicon Carbide From 
the People's Republic of China, 59 FR 22585 (May 2, 1994) (Silicon 
Carbide), that the Department subsequently departed from the CDIW 
decision and returned to its former practice, with some modifications, 
and argue that, in the preliminary results, the Department properly 
employed its more recent separate-rates analysis methodology from 
Silicon Carbide.
    Guizhou Machinery et al. add that the Department has rejected 
Petitioner's claim that separate rates should only be applied to 
companies which are also found to be part of a market-oriented 
industry. Guizhou Machinery et al. note that the Department has 
previously stated that the separate-rates analysis and the market-
oriented-industry (MOI) test should not be linked in the manner 
Petitioner appears to be suggesting (citing Final Determination of 
Sales at Less Than Fair Value: Disposable Pocket Lighters From the 
People's Republic of China, 60 FR 22359, 22363 (May 5, 1995) 
(Disposable Lighters)).
    Shanghai concurs with Guizhou Machinery et al. that an MOI 
determination and the separate-rates methodology are not synonymous and 
that a negative determination with respect to the former cannot 
rationally dictate a negative determination with respect to the latter. 
Shanghai asserts that the Department properly determined that Shanghai 
was entitled to a separate rate notwithstanding the determination that 
the TRB industry in the PRC is not an MOI. Shanghai states that the 
separate-rates analysis involves an assessment different from the 
determination of whether an MOI exists and that to prove an industry in 
the PRC is market-oriented would require proof negating the existence 
of any state influence over any factor of production throughout all 
segments of an industry, potentially involving hundreds of business 
units. Shanghai argues that such a task would be virtually impossible 
to achieve--even for the U.S. TRB industry.
    Shanghai claims that this is particularly true with respect to 
itself, a joint-venture company created under a law guaranteeing that 
it operates as a market-oriented producer. Shanghai states that record 
evidence shows it operates according to market influences, with all 
input-purchase decisions based on its own assessment of production and 
quality requirements and with all price negotiations conducted at arm's 
length. Shanghai states that the PRC government exercises no control 
over the prices of inputs, the type or volume of production, product 
prices or distribution of profits. Shanghai adds that there are no 
restrictions on its uses of revenues and profits, it has exclusive 
control over and access to its bank accounts, and it can earn foreign 
currency and retain as much of the foreign currency as it desires. 
Therefore, Shanghai asserts that, regardless of the Department's 
conclusion that the TRB industry in China is not market-oriented, it is 
entitled to a separate rate.

Department's Position

    We agree with respondents that MOI determinations and separate-rate 
determinations differ with respect to both the analysis we perform and 
the pact of the decision. We also agree with Guizhou Machinery et al. 
that we have departed, where appropriate, from the CDIW decision. In 
CDIW, we took the position that state ownership (i.e., ``ownership by 
all the people'') ``provides the central government the opportunity to 
manipulate the exporter's prices, whether or not it has taken advantage 
of that opportunity during the period of investigation.'' Thus, we 
concluded in CDIW that state-owned enterprises would not be eligible 
for separate rates.
    However, we have modified our separate-rates policy as set forth in 
CDIW. We subsequently determined that ownership ``by all the people'' 
in and of itself cannot be considered as dispositive in establishing 
whether a company can receive a separate rate. See Silicon Carbide at 
22585. It is our policy that a PRC-based respondent is entitled to a 
separate rate if it demonstrates on a de jure and a de facto basis that 
there is an absence of government control over its export activities.
    A separate-rate determination does not presume to speak to more 
than an individual company's independence in its export activities. The 
analysis is narrowly focused and the result, if independence is found, 
is resultingly narrow--the Department analyzes that single company's 
U.S. sales separately and calculates a company-specific antidumping 
rate. Thus, for purposes of calculating margins, we analyze whether 
specific exporters are free of government control over their export 
activities, using the criteria set forth in Silicon Carbide at 22585. 
Those exporters who establish their independence from government 
control are entitled to a separate margin calculation.
    Thus, a finding that a company is entitled to a separate rate 
indicates that the company has sufficient control over its export 
activities to prevent the manipulation of such activities by a

[[Page 6191]]

government seeking to channel exports through companies with relatively 
low dumping rates. See Disposable Lighters at 22363. A market-oriented-
industry determination, by way of contrast, focusses on overall control 
of the domestic industry, rather than simply on its export activities, 
and therefore leads to a decision as to whether home market or third-
country prices within the industry are sufficiently market-driven that 
such prices may be used to establish FMV.
    Petitioner's argument that there is sufficient direct or indirect 
government control to treat all exporters as ``related'' is unsupported 
by the record and is not dispositive, since our separate-rates inquiry 
focuses on the extent of a respondent's independence with respect to 
export activities. The PRC companies that responded to our 
questionnaire submitted information indicating a lack of both de jure 
and de facto control over their export activities. Contrary to 
Petitioner's claim that the necessary information concerning the de 
facto portion of the analysis is inaccessible to both Petitioner and to 
the Department, such information was in fact subject to verification 
and was discussed in the relevant verification reports. Based on our 
analysis of the Silicon Carbide factors, the verified information on 
the record supports our determination that these 11 respondents are, 
both in law and in fact, free of government control over their export 
activities. Thus, it would be inappropriate to treat these firms as a 
single enterprise and assign them a single margin. Accordingly, we have 
continued to calculate separate margins for these companies. See 
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, 
From the People's Republic of China; Final Results of Antidumping Duty 
Administrative Reviews (TRBs IV-VI), 61 FR 65527, 65528 (December 13, 
1996).

Comment 2

    Petitioner argues that the Department should base the values of all 
factors of production (FOP) on the annual report of SKF India (SKF). 
Petitioner notes that, for the preliminary results, the Department used 
the SKF report to value three factors (overhead; selling, general, and 
administrative expenses (SG&A); and profit), whereas the Department 
derived values for the direct labor and raw material factors from two 
other, unrelated sources (Investing, Licensing & Trading Conditions 
Abroad, India (IL&T India) statistics and Indian import statistics, 
respectively). Petitioner argues that the annual report of SKF is the 
only record source that yields values for all five factors and that, as 
such, the SKF report is a single, coherent source that includes 
segregated information on each of the principal FOP and other costs 
necessary to construct FMV. Petitioner contends that the statute 
instructs the Department to value FOP based on the best information 
regarding the values of such factors in a market-economy country or 
countries that are (A) at a level of economic development comparable to 
that of the non-market-economy (NME) country, and (B) significant 
producers of comparable merchandise (citing sections 773(c) (1) and (4) 
of the Act). Petitioner further claims that the Department's use of 
other sources to value labor and raw materials, while using SKF's labor 
and raw materials information to derive overhead, SG&A and profit, is 
inherently distortive, given the ratios the Department calculated from 
these figures.
    Petitioner states that the use of the SKF report for all FOP values 
is consistent with the importance the courts attach to internal 
coherence and the use of a single source when possible (citing Timken 
Co. v. United States, 12 CIT 955, 962, 963, 699 F. Supp. 300, 306, 307 
(1988), affirmed 894 F.2d 385 (Fed. Cir. 1990) (collectively Timken)). 
Petitioner suggests that the SKF report most nearly approximates a 
verified, surrogate questionnaire response of the type the Department 
formerly sought from producers in potential surrogate countries.
    Petitioner further contends that, whereas SKF's costs and expenses 
represent those of a producer of the class or kind of merchandise 
subject to review, the surrogate data for direct labor and raw 
materials the Department used cover a broad range of industries and 
products. Petitioner claims that the direct labor classification the 
Department used covers, in addition to bearings producers, hundreds of 
industry sectors under broad headings unrelated to bearings production 
and argues that there is no rational basis for using such a non-
specific source as a surrogate. Petitioner claims that the IL&T India 
labor costs cover an aggregate of all Indian industries without 
distinction and that the IL&T India report itself points out (at 45) 
that wages and fringe benefits ``vary considerably by industry, company 
size and region.'' Therefore, Petitioner argues, it is not rational to 
view the IL&T India information as representative of labor costs in 
bearing production in India.
    Petitioner asserts that the ``other'' alloy steel category from the 
Indian import statistics, which the Department used to value material 
costs for the preliminary results, is similarly broad and may or may 
not include imports of the steel used to produce bearings. However, 
even if included, Petitioner claims that bearing steel represents only 
a part of steel imports in the basket category.
    Petitioner notes that record evidence (referencing the SKF India 
report, a 1989-1990 report of Asian Bearing, an Indian TRB producer, 
and the results of a remand in the original less-than-fair-value (LTFV) 
investigation) shows the costs of raw materials and labor incurred by 
actual bearings producers in India to be consistently higher than the 
trade statistics values the Department used in the preliminary results, 
either because the industries or product categories covered by the 
labor and raw materials sources are overly broad or because domestic 
prices are different from those of imports.
    Petitioner argues in the alternative that, in the event that the 
Department does not use the SKF report to value all FOP, the Department 
must adjust the overhead and SG&A rates to reflect the use of lower 
materials and labor values from the separate sources. Petitioner claims 
it would be distortive to include SKF's full materials and labor costs 
in the cost of manufacture (COM) denominator of the overhead and SG&A 
calculations unless they are also the basis for valuing the raw 
materials and direct labor factors in the constructed value (CV) 
calculation. Petitioner proposes that the Department multiply the total 
weight of materials for SKF by the average value of steel that it uses 
in the final results and multiply the total number of hours worked at 
SKF by the IL&T India labor value used for the material and labor 
figures the Department included in the overhead and SG&A calculations.
    Petitioner states that the most obvious adjustment needed to the 
materials element of the overhead and SG&A calculations is due to the 
Department's use of Indian steel values free of duties; specifically, 
because the Indian import data the Department applied in the 
preliminary results are based on pre-duty import values, it is 
inappropriate to use an SKF materials value that includes duties in the 
overhead and SG&A calculations. Petitioner suggests that, if the 
Department does not apply the proposed adjustment (i.e., total SKF 
material weight times the Indian value used), the amount of duties paid 
by SKF on imported materials, as indicated in the SKF report, must be 
segregated from the materials total in the overhead and SG&A 
calculations in order to derive apples-to-apples ratios.

[[Page 6192]]

    Guizhou Machinery et al. respond by arguing that it is irrelevant 
whether the SKF report represents a single, coherent source for valuing 
all FOP components and note that the Department consistently uses 
multiple sources of information for surrogate data in NME cases (citing 
Final Determination of Sales at Less Than Fair Value: Sebacic Acid from 
the People's Republic of China, 59 FR 28053 (May 31, 1994) (Sebacic 
Acid), and Final Determination of Sales at Less Than Fair Value: 
Certain Cased Pencils from the People's Republic of China, 59 FR 55625 
(November 8, 1994)), selecting the best source for each element of the 
FOP. Guizhou Machinery et al. add that Petitioner's citation to Timken 
is misplaced and state that, in that instance, the Department was not 
criticized for the use of different sources but for the disparity 
between the ratios resulting from the Department's calculation and 
other ratios on the record. Shanghai concurs that, in the past, the 
Department has not required the use of a ``single, coherent source'' 
for all FOP information when that source is a single, private company, 
particularly one engaged in lines of business other than the 
manufacture of subject merchandise. Shanghai states that the Department 
correctly calculated surrogate labor costs and that the IL&T India data 
represent a better choice than the SKF report. Shanghai explains that 
the SKF data constitutes unverified data covering several different 
product lines of a single producer and that there is a much greater 
risk of unacceptable distortions and aberrations in data derived from 
one producer with disparate products than could exist with aggregate 
national data.
    Guizhou Machinery et al. further state that the fact that the SKF 
report contains costs and expenses incurred by a producer of the class 
or kind of merchandise subject to review does not make the report a 
better source of surrogate data. On the contrary, Guizhou Machinery et 
al. state, whereas there is no evidence to indicate that SKF used the 
same type of steel as respondents, the Indian import statistics enable 
the Department to pinpoint a particular type of steel.
    With respect to Petitioner's argument that the overhead and SG&A 
rates must be adjusted to reflect the use of lower materials and labor 
values from separate sources, Guizhou Machinery et al. cite Final 
Determination of Sales at Less Than Fair Value: Coumarin From the 
People's Republic of China, 59 FR 66895 (December 28, 1994) (Coumarin), 
in which the Department calculated materials costs from various sources 
and used the Reserve Bank of India Bulletin (RBI) data to calculate 
SG&A but did not adjust SG&A and overhead costs simply because it did 
not use the same source as material costs. Shanghai adds that, in the 
event that the Department rejects the use of SKF materials, labor and 
other costs except overhead, profit and SG&A, the Department should not 
further adjust overhead and SG&A as suggested by Petitioner's 
alternative argument. Shanghai notes that the SKF report indicates 
that, in addition to TRB production, SKF has other lines of business, 
including the manufacture of textile machine components and other types 
of bearings. Shanghai contends that the report does not allow for the 
allocation of labor or materials to TRB production for SKF's overhead 
and SG&A and there is insufficient information on which to base 
adjustments to overhead and SG&A based on different valuations of 
materials and labor used for TRB production. Guizhou Machinery et al. 
state that the Department's use of data contained in SKF's annual 
report to establish percentages or ratios to be used for determination 
of surrogate value for overhead and SG&A is fully consistent with the 
Department's standard surrogate methodology.
    Guizhou Machinery et al. state that the Department's NME/surrogate-
country methodology is based upon the application of reliable and 
representative ratios and input values selected from multiple sources 
and that the Department does not typically ``adjust'' the component 
values used to derive SG&A and overhead ratios in the manner proffered 
by Petitioner. Consequently, Guizhou Machinery et al. argue, the 
Department should not adjust the expenses taken from the SKF report, as 
suggested by Petitioner, in determining representative ratios for use 
in determining actual amounts for overhead and SG&A.
    Guizhou Machinery et al. argue further that Petitioner's assertion 
that the Department must deduct import duties from the materials 
elements of the overhead and SG&A rate calculation is based on the 
assumption that steel inputs were imported, but Petitioner has provided 
no evidence regarding which particular materials were imported. Guizhou 
Machinery et al. claim that the annual report itself contradicts 
Petitioner's suggestion because it shows that almost half of the 
materials purchased by SKF India were from local sources, which would 
suggest that the effect of import duties would not affect the entire 
materials component of the calculation. Additionally, Guizhou Machinery 
et al. claim that Petitioner has not accounted for the fact that Indian 
producers are entitled to duty drawback upon exportation of finished 
products that incorporate imported materials, which further reduces the 
effect of import duties. Shanghai suggests that, because the SKF report 
contains no information concerning the proportion of materials 
represented by TRB steel costs, what portion of SKF's steel was 
imported, or how much was paid in duties, if the Department continues 
to use the SKF report for overhead and SG&A, it should make no further 
adjustment to the rate it used for the preliminary results.
    In response to Petitioner's argument that it is inherently 
distortive to use the SKF report for overhead, SG&A and profit but not 
for materials and labor, Guizhou Machinery et al. and Chin Jun argue 
that the use of the SKF report for the materials component would be 
more distortive than the import statistics used by the Department due 
to a lack of detail regarding the types of steel SKF used. Chin Jun 
notes that the SKF report does not provide separate prices for bar, rod 
or steel sheet but instead provides a single value for all steel used 
in the factory, including steel used in the production of non-subject 
merchandise. Chin Jun submits that the Petitioner, the Department, and 
respondents have no idea what types of steel were included in SKF's 
material-cost calculation. Guizhou Machinery et al. add that Petitioner 
has provided no information demonstrating that the SKF report covers 
the specific steel inputs relevant to subject merchandise. Chin Jun 
suggests that the steel referenced in the SKF report could be tube 
steel (instead of bar steel), stainless steel (a much more expensive 
product), already machined ``green parts'' supplied by SKF India's many 
related companies, or innumerable other types of steel.
    Guizhou Machinery et al. and Chin Jun also dismiss Petitioner's 
claim that the SKF report most nearly approximates a verified surrogate 
questionnaire response. Respondents state that an annual report, though 
perhaps audited, is not verified and note that the Department has a 
preference for verifiable, public information (citing Sebacic Acid, 
Final Determination of Sales at Less Than Fair Value: Manganese 
Sulphate from the People's Republic of China, 60 FR 52155 (October 5, 
1995) (Manganese Sulphate), and Final Determination of Sales at Less 
Than Fair Value: Certain Carbon Steel Butt-Weld Pipe Fittings from the 
People's Republic of China, 58 FR 21058 (May 18, 1992)). Chin Jun adds 
that the SKF report has data only through March 1991 and this review

[[Page 6193]]

includes 1993-94 transactions. Therefore, Chin Jun reasons, the SKF 
data is so stale that the use of it would not be proper. Chin Jun 
states that the Department's preference is to use data which is 
contemporaneous to the period of review.
    Guizhou Machinery et al. respond to Petitioner's contention that 
the cost of direct materials of actual bearings producers in India is 
shown to be consistently higher than the trade-statistic values used in 
the preliminary results by stating that such a fact does not render the 
trade statistics incorrect and that, furthermore, there is nothing in 
the law requiring the Department to use the highest value in choosing 
surrogate values.
    Transcom submits that the Department should rely on the Indian 
import statistics in factor valuation, rather than on the company-
specific data contained in the SKF report, because the Indian data are 
contemporaneous with the period of review, while the SKF data are 
outdated. Transcom agrees with Chin Jun and Guizhou Machinery et al. 
that the import data provide a more detailed description, and therefore 
more exact valuation, of steel used by the Chinese producers, whereas 
the SKF report does not provide sufficient information concerning the 
type of steel for which costs are reported and provides no guidance in 
determining a surrogate valuation of the FOP used in producing bearings 
in China.
    Petitioner responds to Chin Jun's argument that the use of SKF data 
is inappropriate as SKF is typical of neither China nor India by 
stating that the report is consistent with that of Asian Bearing, 
another producer in India, which the Department declined to use. 
Petitioner claims that the Department did not use data from SKF Sweden 
or consolidated data from the SKF Group, but data from SKF India, which 
reflect the operating conditions of an Indian bearing company.

Department's Position

    We agree with respondents. Section 773(c)(1) of the Act states 
that, for purposes of determining FMV in a NME, ``the valuation of the 
FOP shall be based on the best available information regarding the 
values of such factors. * * *'' Our preference is to value factors 
using published information (PI) that is most closely concurrent to the 
specific POR. See Final Determination of Sales at Less Than Fair Value: 
Certain Partial-Extension Drawer Slides From the People's Republic of 
China, 60 FR 54472, 54476 (October 24, 1995). Based on the record 
evidence we have determined that surrogate country import statistics 
(Indonesian for valuing steel used to produce cups and cones, Indian 
for steel used to produce rollers and cages), exclusive of import 
duties, comprise the best available information for valuing raw 
material costs. Our reasons for preferring data for Indonesia, rather 
than for our primary surrogate, India, for valuing steel used to 
produce cups and cones are set forth in our response to Comment 3.
    We prefer published surrogate import data to the SKF data in 
valuing the material FOP for the following reasons. First, we are able 
to obtain data specific to the POR, which more closely reflect the 
costs to producers during the POR. Second, the raw material costs from 
the SKF report do not specify the types of steel purchased by SKF. The 
record does not indicate whether SKF purchased bar steel (the type used 
by the Chinese manufacturers) or more expensive tube steel to produce 
bearings parts. Third, although we agree with Petitioner's point that 
SKF is a producer of subject merchandise, the report also identifies 
other products it manufactures. From the information contained in the 
SKF report, we are unable to allocate direct labor and raw materials 
expenses to the production of subject merchandise. For these reasons, 
we have valued the material FOP using surrogate import data.
    Furthermore, we agree with respondents that Petitioner's citation 
to Timken for the proposition that we must use a single surrogate 
source when possible is misplaced. That case, which criticized the 
Department's failure to justify its choice between adjustment factors, 
does not state that all factors must be valued in the same surrogate 
country. Indeed, the opinion in Timken explicitly states that 
``Commerce may avail itself with data from a country other than the 
designated conduit, adoption of such an inter-surrogate methodology 
[although departing from the normal practice at that time] remains 
within the scope of Commerce's discretionary powers.'' 12 CIT at 959.
    The fact that the 1989-90 report of Indian producer Asian Bearing, 
like the SKF data, shows higher raw materials costs than the import 
data we used in the preliminary results does not compel the conclusion 
that we must use some domestic Indian data source. In addition to being 
stale, the Asian Bearing data suffers from the same defects as the SKF 
data. The purpose of the NME factor methodology is not to construct the 
cost of manufacturing the subject merchandise in India per se but to 
use data from one or more surrogate countries to construct what the 
cost of production would have been in China, were China a market-
economy country. See Sulfanilic Acid from the People's Republic of 
China; Final Results and Partial Recession of Antidumping Duty 
Administrative Review, 61 FR 53702, 53710 (Comment 12) (Oct. 15, 1996).
    We also disagree with Petitioner's contention that we should adjust 
the overhead and SG&A rates if we continue to use the SKF report to 
value these rates while valuing the material and labor FOP using other 
sources. As noted above, we prefer to base our factors information on 
industry-wide PI. Because such information is not available regarding 
overhead and SG&A rates for producers of subject merchandise during the 
POR, we used the overhead and SG&A rates applicable to SKF India, a 
company that produces subject and non-subject merchandise.
    In deriving these rates, we used the SKF India data both with 
respect to the numerators (total overhead and SG&A expenses, 
respectively) and denominator (total cost of manufacturing). This 
methodology allowed us to derive ratios of SKF India's overhead and 
SG&A expenses. These ratios, when multiplied by the FOP we used in our 
analysis, thereby constitute the best available information concerning 
the overhead and SG&A expenses that would be incurred by a bearings 
producer given such FOP. Petitioner's recommended adjustment would 
affect (reduce) the denominator, but it would leave the overhead and 
SG&A expenses in the numerator unchanged. As such, we find that this 
adjustment would itself distort the resulting ratio, rather than curing 
the alleged distortion in our calculations.
    Finally, with respect to Petitioner's assertion that the overhead, 
SG&A, and profit denominators we used in the preliminary results 
improperly included import duties paid, we note that Petitioner has not 
provided any information regarding the amount of import duties that are 
included nor has Petitioner provided a means of identifying and 
eliminating such duties from our calculations. Although we would not 
include duties paid on the importation of merchandise by SKF, we have 
no evidence as to the amount of duties, if any, that are included in 
SKF's raw materials costs. Therefore, we did not subtract any amount 
for import duties in our calculation of overhead and SG&A percentages. 
See TRBs IV-VI at 65529-65530.

Comment 3

    Shanghai and Chin Jun submitted comments regarding the appropriate 
Indian import classification number(s)

[[Page 6194]]

to be used in valuing the steel that comprises the raw materials factor 
of production. Chin Jun argues that category 7228.30.19, which the 
Department used to value steel used to manufacture cups and cones, 
contains a wide variety of steel products and a correspondingly wide 
range of prices. Chin Jun points out that the average price per metric 
ton of steel contained in this category ranges from $610 to $3,087. 
Chin Jun further argues that, as bearing-quality steel is available 
throughout the world at prices less than $800 per metric ton, the 
Department should, if it uses category 7228.30.19 to value hot-rolled 
alloy steel bar, exclude steel prices in excess of $1,000 per metric 
ton as being not reflective of the price of bearing-quality steel.
    Shanghai states that, although the Indian Trade Classification 
system is derived from the international harmonized schedules, it does 
not entirely duplicate the harmonized schedules. Nevertheless, Shanghai 
contends, the eight-digit subdivisions of the International Trade 
Commission (ITC) are described with sufficiently familiar terminology 
to determine which subdivisions are likely to include steel similar to 
or the same as the steel used in the production of cups and cones. 
Shanghai asserts that the Department should select an eight-digit 
subdivision covering imports of types of steel which most closely match 
the qualities of the steel used to produce the product at issue, citing 
Sigma Corp. v. United States, CIT, No. 91-02-00154, Slip Op. 93-230, 
December 8, 1993 (15 ITRD 2500), and Tehnoimportexport v. United 
States, 16 CIT 13, 783 F. Supp. 1401 (1992). Furthermore, given the 
lack of a specific harmonization of the Indian Trade Classification 
System at the eight-digit subdivision level, Chin Jun and Shanghai both 
argue that the Department should, as it has previously, test the 
reliability of whichever subdivision it chooses by comparing the values 
within that subdivision with world steel prices from other available 
information (citing Certain Partial-Extension Steel Drawer Slides with 
Rollers from the People's Republic of China (Drawer Slides), 60 FR 
54472, 54475 (October 24, 1995), and Heavy Forged Hand Tools From the 
People's Republic of China (Hand Tools) 60 FR 49251, 49254 (September 
22, 1995), as examples). Shanghai claims that the aberrationally high 
values of the steel included in category 7228.30.19, in comparison with 
world steel prices on the record in this review, compel the conclusion 
that it should not be used.
    Shanghai submits that categories 7227.90.30 and 7228.30.01 more 
accurately reflect the steel used to manufacture cups and cones than 
does the residual category, 7228.30.19, which the Department used. 
Shanghai states that there is a category reported under 7227.90, 
``Other Hot-Rolled Bars & Rods of Other Alloy Steel in Irregularly 
Wound Coils,'' which is consistent with U.S. HTS 7227.90.30 which 
contains ball-bearing-grade steel.
    Shanghai suggests that the fact that an eight-digit category 
comparable to the U.S. HTS listing for ball-bearing-quality steel bars 
does not exist in the Indian import statistics probably reflects the 
absence of imports of that type of steel into India. Therefore, 
Shanghai argues, it would be unreasonable and arbitrary to assume ball-
bearing-grade steel enters under the residual category 7228.30.19. 
Instead, Shanghai says that other eight-digit subdivisions among the 
Indian import statistics do describe types of steel closely correlated 
to the type of steel used to produce bearings.
    Shanghai suggests that the Department use category 7227.90.11, 
speculating that the type of ball-bearing steel used by Chinese 
producers might enter India under this category number. Differences 
between steel included in this category and the steel used to produce 
TRBs is, Shanghai states, insignificant. Alternatively, Shanghai 
suggests use of category 7228.30.01, ``Bright Bars of Alloy Tool 
Steel,'' noting that ball bearing steel is a ``tool'' steel as defined 
by its carbon content. Shanghai claims that this category and U.S. HTS 
category 7228.30.20.001, ``Other Bars and Rods of Other Alloy Steel * * 
* *, Not Further Worked than Hot-Rolled * * * of Ball Bearing Steel,'' 
share the particular characteristics of the type of steel used to 
manufacture cups and cones. Shanghai adds that, notwithstanding use of 
the term ``bright,'' category 7228.30.01 is, by definition, not further 
worked than hot-rolled, hot-drawn or extruded steel and, therefore, is 
not further worked with respect to any of a number of surface 
treatments, i.e., polishing and burnishing, lacquering, enameling, 
painting, varnishing, etc. Accordingly, Shanghai concludes that the 
``bright steel'' cannot be steel with a finish inappropriate for 
bearing manufacture. In contrast to these two categories, Shanghai 
states, the residual category contains unknown types of steel.
    Shanghai states that the values of steel covered by category 
7228.30.19 are aberrationally high and should not be used. Shanghai 
explains that the Department's use of import statistics as surrogate 
information has been affirmed in the past only where the import 
categories accurately reflect the material used to produce the product 
at issue and argues that the clearly greater cost of the steel covered 
by category 7228.30.19 indicates that the types of steel in this 
category are not representative of bearing-grade steel. Thus, Shanghai 
claims, the steel values included in category 7228.30.19 are clearly 
aberrational, rendering the Department's surrogate steel costs for cups 
and cones an inaccurate representation of the actual experience of 
Chinese producers. Because of the lack of specific harmonization of the 
Indian Trade Classification system at the eight-digit subdivision 
levels, Shanghai urges the Department to weigh the reliability of 
whichever subdivision it proposes to use by comparing the values within 
that subdivision with other available information on world steel 
prices. Citing Drawer Slides, Shanghai claims that in the past the 
Department has tested the reliability of Indian import values by 
comparing them with other record data. In Hand Tools, Shanghai quotes 
the Department as saying, ``where we have other sources of market value 
such as Indonesian import statistics or U.S. import statistics, we have 
compared the Indian import statistics to these sources of market value 
to determine whether the Indian import values are aberrational, i.e., 
too high or too low'' (at 49251). Accordingly, Shanghai suggests that 
the Department compare the values reported in category 7228.30.19 with 
the substantial evidence of relevant world steel prices already in the 
record of this administrative review. The high values in category 
722.30.19 should not be used, respondent argues, because they are 
aberrational; the import values reported in either category 7227.90.11 
or category 7228.30.01 are more consistent with world steel prices and 
should be used instead.
    Chin Jun also claims that the Department's calculation of the value 
of category 7228.30.19 contains apparent clerical errors, adding that, 
aside from the apparent clerical errors, the price for said category 
far exceeds the value of steel used to produce TRBs. With regard to the 
calculation, Chin Jun argues that the Department apparently double-
counted by adding the subtotal for category 7228.30.19 with the total 
of all steel under heading 7228.30. Regarding its second point, Chin 
Jun argues that the Department has previously concluded that it must 
compare surrogate steel prices with world prices in order to determine 
if the proposed surrogate values are aberrational (citing Hand Tools). 
Chin Jun claims that a

[[Page 6195]]

comparison of the Indian import statistics with other sources, e.g., 
U.S. import data, will confirm that the Indian import data are 
aberrational and must be adjusted.
    Petitioner contends that Shanghai's discussion of the steel 
category to be used for cups and cones is largely based on speculation 
unsupported by record evidence and is, to a large extent, factually 
wrong. First, Petitioner notes Shanghai's assertion that the absence in 
the Indian import statistics of a specific subdivision for bearing-
quality steel indicates only a lack of imports of this type of steel 
during the period covered by the statistics. Petitioner claims that 
there is no basis for such speculation.
    Second, with respect to Shanghai's argument that the exact type of 
bearing steel used by PRC-based producers could enter India under 
category 7227.90.11, Petitioner notes that category 7227.90.11 refers 
to bars and rods of bearing-quality steel in coils. Petitioner argues 
that Shanghai does not cite any record evidence to suggest that any 
respondent uses bar in coil. Petitioner adds that bar steel not in coil 
could not be entered into India under category 7227.90.11.
    Petitioner contends that Shanghai's claim regarding category 
7228.30.01 as the proper category of Indian steel imports for the type 
of steel used in the production of cups and cones is inappropriate 
because category 7228.30.01 represents bright bars. Petitioner claims 
that, to the best of its knowledge, no one has ever before suggested in 
the course of this or any other proceeding that bright bars are used to 
manufacture bearings. Petitioner states that the distinguishing feature 
of ``bright bars'' is a bright, smooth finish and such bars are not 
used in the manufacture of TRBs, as the high finish would be destroyed, 
given the cutting and grinding involved in TRB production. Furthermore, 
whereas Shanghai argues that the term ``bright'' in Indian subcategory 
7228.30.01 does not denote bright, high-finish surfaces which would 
indicate the product was further worked so as to fall outside that 
category, Petitioner claims that Shanghai's only support for such 
argument is to cite a definition in the U.S. HTS. Petitioner argues 
that such a definition has no application or relevance to the Indian 
schedules. Rather, Petitioner observes, the definition is listed among 
``Additional U.S. Notes'' as opposed to the internationally accepted 
``Notes'' to Chapter 72.
    Petitioner also argues that Shanghai's assertion that category 
7228.30.19 includes steel other than alloy tool steel is wrong, 
contending that the ``other'' in category 7228.30.19 refers to ``other 
than'' any other subheading under heading 7228. Petitioner states that, 
by excluding not only category 7228.30.01 but any other specific eight-
digit categories which are known to not include bearing steel, i.e., 
``bright bars of other steel'' (7228.30.09), ``bars and rods of spring 
steel'' (7228.30.12), and ``bars and rods of tool and die steel'' 
(7228.30.14), category 7228.30.19 remains the only category under 
heading 7228 that would contain bearing steel.
    Finally, Petitioner responds to Shanghai's argument that the steel 
values included in category 7228.30.19 are aberrational and are not 
representative of the cost of bearing-grade steel. Petitioner claims 
that Shanghai is arguing, without any factual support, that the lowest 
price in the basket category is for bearing steel and that anything 
else is aberrational. Petitioner further states that Shanghai attempted 
to support its argument that the value assigned to steel used to 
manufacture cups and cones is too high in comparison with relevant 
world steel prices, without attempting to define ``world steel prices'' 
or how Shanghai decided the comparison prices were appropriate.
    Petitioner states that Chin Jun's argument that the value of steel 
in category 7228.30.19 used in the preliminary results far exceeds the 
value of steel used to manufacture TRBs is incorrect. Petitioner 
suggests that the available information concerning actual prices of 
bearing steel in India contradicts Chin Jun's statement (citing 
Petitioner's February 21, 1995 submission containing worksheets for the 
Results of Remand of Final Determination of Sales at Less Than Fair 
Value: Tapered Roller Bearings From the People's Republic of China 
(February 15, 1989), as well as data in the annual reports for SKF and 
Asian Bearing). Based on such data, Petitioner claims that the 
surrogate value of the steel used to manufacture cups and cones is too 
low to be representative of bearing-steel prices in India. Petitioner 
adds that the costs or prices in a market-economy country at a 
comparable level of development to the PRC, i.e., India, are at issue--
not world prices.

Department Position

    We agree that none of the eight-digit tariff categories within the 
7228.30 steel group correspond specifically to bearing-quality steel 
used to manufacture cups and cones, but we do not agree with Petitioner 
that the best recourse is to the eight-digit ``others'' category 
(7228.30.19) within this group.
    We have determined that the use of Indian import data is not 
appropriate to value cups and cones in this case because, as noted in 
the arguments above and as shown below, we are unable to isolate an 
Indian import value for bearing-quality steel and, for the reasons 
discussed below, the steel values in the Indian import data are not 
reliable. See Drawer Slides at 54475-76; TRBs IV-VI at 65532.
    We have examined each of the eight-digit categories within the 
Indian 7228.30 group and have found that, although bearing-quality 
steel used to manufacture cups and cones is most likely contained 
within this basket category, there is no eight-digit sub-category that 
is reasonably specific to this type of steel. We eliminated the 
specific categories of alloy steel, identified by Petitioner and 
respondents, that are clearly not bearing-quality steel as follows. 
Under the Indian tariff system, bearing-quality steel used to 
manufacture cups and cones is contained within the broad category 
7228.30 (Other Bars & Rods, Hot-Rolled, Hot-Drawn & Extruded). However, 
none of the named sub-categories of this grouping (7228.30.01--bright 
bars of alloy tool steel; 7228.30.09--bright bars of other steel; 
7228.30.12--bars and rods of spring steel; and 7228.30.14--bars and 
rods of tool and die steel) contains steel used in the production of 
subject merchandise. This leaves an ``others'' category of steel, 
7228.30.19. However, we have no information concerning what this 
category contains, and none of the parties in this proceeding has 
suggested that this category specifically isolates bearing-quality 
steel. Further, the value of steel in this eight-digit residual 
category is greater than the value of the general six-digit basket 
category (7228.30), which in turn is valued too high to be considered a 
reliable indicator of the price of bearing-quality steel, as shown 
below.
    Where questions have been raised about PI with respect to 
particular material inputs in a chosen surrogate country, it is the 
Department's responsibility to examine that PI. See Drawer Slides at 
54475-76 and Cased Pencils, 59 FR 55633, 55629 (1994). Because all 
parties raised questions about the validity of the Indian import data 
used to value cups and cones in the preliminary results, we compared 
the value of Indian imports in category 7228.30 with the only record 
source that specifically isolates bearing-quality steel used to 
manufacture cups and cones: import data regarding U.S. tariff

[[Page 6196]]

category 7228.20.30 (``bearing-quality steel''). We found that, for the 
time period covered by the POR, the value of the Indian basket category 
7228.30 was significantly higher than the bearing-quality steel 
imported into the United States. It was also significantly higher in 
comparison with E.U. import statistics.1 The Indian eight-digit 
``others'' category recommended by Petitioner, valued higher than the 
broad six-digit heading, was even more unreliable in comparison with 
the value of bearing-quality steel.
---------------------------------------------------------------------------

    \1\  Although the E.U. import data do not explicitly identify 
``bearing quality steel,'' the relevant subheading (7228.30.40) 
provides a narrative description that closely matches to the 
chemical composition of the bar steel that the PRC respondents used 
to produce cups and cones. See Memorandum from Analyst to File: 
Factors of Production for the Final Results of the 1993-94 
Administrative Review of TRBs from the PRC, February 3, 1997.
---------------------------------------------------------------------------

    In light of these findings, we have determined that the Indian 
import data that we used to value cups and cones in the preliminary 
results are not reliable. For these final results, we are using import 
data from a secondary surrogate, Indonesia, a producer of merchandise 
comparable to TRBs, to value steel used to produce these components. As 
with the Indian data, we were unable to isolate the value of bearing-
quality steel or identify an eight-digit category containing such steel 
imported into Indonesia; however, unlike the Indian data, the 
Indonesian six-digit category 7228.30 closely approximates the value of 
U.S. imports of bearing-quality steel, as well as the comparable six-
digit category in the United States. Thus, we have determined that 
Indonesian category 7228.30, which is the narrowest category we can 
determine would contain bearing-quality steel, is the best available 
information for valuing steel used to produce cups and cones. Although 
Indonesia is not the first-choice surrogate country in this review, in 
past cases the Department has used values from other surrogate 
countries for inputs where the value for the first-choice surrogate 
country was determined to be unreliable. See Drawer Slides at 54475-76, 
Cased Pencils at 55629, and Lock Washers at 48835. Furthermore, 
Indonesia has previously been used as a source of surrogate data in 
cases involving the PRC. Because we are valuing the steel used to 
produce cups and cones using Indonesian import data, we are valuing the 
scrap offset to this steel value using the same source.
    We also disagree with Shanghai regarding the appropriateness of 
Indian category 7227.90.11 as the steel type for cups and cones. 
Respondents reported that they use hot-rolled steel bar to manufacture 
cups and cones. Category 7227.90.11 is coil steel and is necessarily 
produced by a different mill than bar steel. No respondent reported 
using coil steel to manufacture cups and cones. In addition, during 
factory tours of various PRC-based bearings producers we found no 
evidence that any producer uses coil steel to manufacture cups and 
cones. Finally, we disagree with Shanghai regarding the use of category 
7228.30.01, bright bars of alloy tool steel. No party has suggested 
that such steel is used for the production of bearings.
    Although we acknowledge the clerical errors noted by Chin Jun in 
our calculation of the value of steel used to manufacture cups and 
cones, we have changed our surrogate source for the value of this steel 
as explained above. Therefore, no recalculation is necessary.

Comment 4

    Shanghai argues that the prices it actually pays for steel are 
sufficiently market-driven to be used instead of surrogate values. 
Shanghai states that the domestic steel producers from whom Shanghai 
purchased steel compete against steel producers from market-economy 
countries. Shanghai takes the position that the Department should not 
employ surrogate methodology in NME cases when the producer is a 
foreign-invested joint-venture company, adding that the Department's 
current methodology does not recognize the special status accorded such 
companies under PRC law. Shanghai also notes that there are no import 
restrictions limiting its ability to purchase either domestic or 
imported steel based on rational business decisions. Shanghai claims 
that under PRC joint-venture law it has the legal right to purchase 
steel from any suppliers in the world and states that the prices at 
which it purchased steel from domestic suppliers during this POR were 
consistent with world steel prices for comparable types of steel.
    Shanghai argues that, where input prices and production costs of 
merchandise under investigation are subject to free-market forces 
sufficient enough to allow their use in determining FMV, the Department 
should apply its normal methodology (citing S. Rep. No. 100-71, 100th 
Cong., 1st Sess., at 108 (1987)). Shanghai claims that the Department 
has stated that the presumption that no domestic factor of production 
is valued on market principles ``can be overcome for individual factors 
by individual respondents with a showing that a particular NME value is 
market driven'' (quoting Ceiling Fans).
    Petitioner counters that there is no basis for adopting Shanghai's 
claim that its actual domestic steel purchases were market-driven, 
claiming that steel purchased in the PRC is not free of the effects of 
state controls on labor, energy, input and infrastructure prices. 
Petitioner states that Shanghai has offered no basis for concluding 
that either the PRC bearings industry or the PRC steel industry meet 
the Department's criteria for being deemed a MOI. Petitioner adds that 
the participation of a market-economy investor will not purge the PRC 
inputs of the effects of state control.

Department's Position

    We agree with Petitioner. Shanghai has provided no evidence to 
support its contention that either the steel industry or the bearings 
industry in the PRC is an MOI. To the extent that Shanghai is free to 
source its steel either domestically or from imports, the fact that it 
purchased only domestic steel confirms only that domestic steel was 
consistently priced lower than steel available on the world market. 
This does not support a claim that PRC steel is provided at market 
prices. In Ceiling Fans, as in this case, we considered values of FOP 
to be market-driven when sufficient evidence exists to demonstrate that 
such factors were purchased from a market-economy supplier and paid for 
with a convertible currency. Absent such evidence from Shanghai, we 
have valued Shanghai's PRC-sourced steel inputs using surrogate values.

Comment 5

    Petitioner notes that in the preliminary results the Department 
valued scrap using the Indian tariff headings 7204.29 for alloy-steel 
scrap and 7204.49 for non-alloy-steel scrap. Petitioner contends that 
both headings are wrong and that the Department should use subheadings 
7204.29.09 and 7204.41.00, respectively, as it did in the preliminary 
results of the three previous reviews.
    Petitioner claims that using the entire heading 7204.29 is wrong 
because it includes ``waste and scrap of high speed steel'' under 
subheading 7204.29.01 and such steel is not used to produce bearings. 
Petitioner states that the category of 7204.29.09, ``waste and scrap of 
other alloy steel,'' includes bearing steel.
    Petitioner argues that heading 7204.49 is wrong because it excludes 
``turnings, shavings, chips, milling waste, sawdust, filings, trimmings 
and stampings, whether or not in bundles'' (heading 7204.41). 
Petitioner claims that these excluded types of scrap are precisely the

[[Page 6197]]

types of scrap generated in bearing production. Furthermore, Petitioner 
states, the category used by the Department in the preliminary results 
is largely composed of ``defective sheet of iron and steel'' 
(subheading 7204.49.01). Petitioner argues that inclusion of 
``defective sheet'' in cage production is inappropriate because scrap 
generated during cage production is in the nature of stampings, 
trimmings, shavings, chips, milling waste or filings. Finally, 
Petitioner claims that inclusion of defective sheet is incorrect 
because it leads to the result that the value obtained by the 
Department for this non-alloy-steel scrap is somewhat higher in value 
than the value found for alloy-steel scrap.
    Guizhou Machinery et al. respond that Petitioner provides no 
evidence to support its arguments. For instance, Guizhou Machinery et 
al. claim, Petitioner provides no evidence to support its assertion 
that ``high-speed'' steel is not used for bearings. Instead, Guizhou 
Machinery et al. argue, inclusion of the high-speed steel is reasonable 
given the fact that respondents use high-quality steel in the 
production of bearings, cups and cones. In addition, Guizhou Machinery 
et al. state that the U.S. HTS does not even segregate heading 7204.29 
between high-speed and other alloy-steel scrap, suggesting that the 
differences between the types of scrap are not significant.
    With respect to category 7204.49, Guizhou Machinery et al. state 
that Petitioner provides no evidence of its argument that this category 
is inappropriate because it excludes turnings, shavings, chips, milling 
waste, sawdust, filings, trimmings and stampings, whether or not in 
bundles, which Petitioner claims are precisely the kinds of scrap 
generated in bearing production--or that it includes defective sheet of 
iron and steel. Guizhou Machinery et al. state that scrap types such as 
sawdust, which are unrecoverable, do not enter into the calculation of 
scrap credit. Rather, respondents contend the calculation is based on 
scrap that was sold or reused. Furthermore, respondents claim that the 
scrap for which the Department gave credit did include defective steel, 
citing a verification report.

Department's Position

    We used Indian import statistics to value the steel for cages and 
rollers and, therefore, we have used Indian import statistics to value 
scrap for these components. In the same manner, we used Indonesian 
statistics to value both the steel and scrap for cups and cones. We 
agree with Petitioner that, in order to determine the best category by 
which to value scrap, it is appropriate to set aside those specific 
categories that did not include bearing steel.
    Consistent with our previous reviews, we agree with Petitioner 
that, for the Indian scrap values, categories 7204.41.00 and 7204.29.09 
best capture the types of residues generated as scrap. Category 
7204.41.00 describes the types of scrap created during production of 
cages, i.e., turnings, shavings, chips, trimmings, stampings, etc. 
Similarly, category 7204.29.09 (Waste and Scrap of Other Alloy Steel) 
includes bearing steel which is applicable to other bearing components. 
Therefore, we used category 7204.41.00 from the Indian import 
statistics to value scrap for cages and category 7204.29.09 from the 
Indian import statistics to value scrap for rollers.
    The Indonesian statistics do not provide a category comparable to 
Indian category 7204.29.09 for which to value scrap. We have chosen a 
comparable category, 7204.29.00 (Other Waste and Scrap), and used the 
Indonesian import statistics from this HTS number to value scrap for 
cups and cones (see our response to Comment 3).

Comment 6

    Petitioner contends that the steel import prices the Department 
used in the preliminary results do not reflect market-economy 
transactions. (For certain steel inputs for certain respondents, the 
Department used the actual values at which Chinese trading companies 
imported the steel into the PRC and paid in convertible currencies.) 
Petitioner notes that steel is a ``controlled commodity'' in the PRC 
and that China Foreign Trade Development Companies, Inc., is generally 
the PRC importer. Petitioner insists that, given this fact pattern 
involving contracts for a controlled commodity, the purchase of which 
must be carried out through the mandatory intervention of a state 
trading company, any such purchase cannot rationally be considered an 
arm's-length transaction reflecting uncontrolled market prices. 
Petitioner claims that the Department departs from using surrogate 
values only when the actual imports from a market economy reflect 
market-economy practices and prices, citing Final Determination of 
Sales at Less Than Fair Value: Oscillating Fans and Ceiling Fans From 
the People's Republic of China, 56 FR 55271 (October 25, 1991) (Ceiling 
Fans). Petitioner contends that, under the circumstances of this case, 
the state-controlled trading company is by law given a leading role in 
negotiating the terms of sale and that such trading companies, acting 
as coordinators of steel purchases for the entire Chinese economy, 
would enjoy such market power as to enable them to obtain better prices 
than any individual bearings producer in a market economy.
    Petitioner suggests, in addition, that steel supplied by the China 
Foreign Trade Development Companies to PRC producers might be part of, 
or related to, broader deals between those producers and the trading 
companies which, for reasons unrelated to the factors that would govern 
normal purchases directly from a market-economy company, could affect 
the prices paid by the producers for reasons unrelated to the factors 
that would govern normal commercial transactions between market-
oriented companies.
    Guizhou Machinery et al. respond that, consistent with section 
773(c) of the Act and with 19 CFR 353.52, the Department has 
established a practice of using actual import prices if they are from 
market-economy countries. Guizhou Machinery et al. contend that the 
``Department practice allows for the valuation of inputs in NME cases 
based on market prices paid by the manufacturer for goods obtained from 
a market-economy source because these prices reflect commercial 
reality'' (citing Coumarin at 66895). Guizhou Machinery et al. state 
that Petitioner's assertion that the contracts do not reflect market-
economy transactions because steel is a ``controlled commodity'' and 
because the contracts involved a ``state trading company'' is 
irrelevant because such arguments do not negate the fact that the 
sellers, who establish the sales prices, are market-economy companies 
(citing Hand Tools and Final Determination of Sales at Less Than Fair 
Value: Saccharin from the People's Republic of China, 59 FR 58818 
(November 15, 1994) (Saccharin)). In addition, Guizhou Machinery et al. 
contend that Petitioner's statement that steel supplied to PRC-based 
producers from the PRC trading company might have been part of related 
or broader deals is merely speculation with no support on the 
administrative record. Guizhou Machinery et al. discuss Petitioner's 
reference to Timken from Comment 2, stating that the Court of 
International Trade (CIT) and the Court of Appeals for the Federal 
Circuit (CAFC) did not rule that the Department cannot use different 
sources to obtain surrogate values for the various CV components but, 
rather, that the Department cannot use surrogate-value data which yield 
distortive results and which are inconsistent with other record 
evidence. Guizhou Machinery et al. assert that Petitioner has not shown

[[Page 6198]]

that the use of market-oriented import prices combined with the use of 
Indian import statistics for scrap yields distortive or inconsistent 
results; in respondents'' view, both represent ``market-oriented'' 
prices. Guizhou Machinery et al. claim that the Department has used 
different sources to obtain surrogate values for input materials in 
many cases and that the Department should not abandon its use of 
market-oriented import prices or alter its calculations in the final 
results.

Department's Position

    Although we agree with respondents that we do not need to value all 
factors of production in a single surrogate country, we agree with 
Petitioner that we should not use purchases of steel from PRC trading 
companies in this review. Our established policy allows for the 
valuation of inputs in NME cases based on market prices paid by the 
manufacturer for inputs purchased from a market-economy source because 
those prices reflect commercial reality. See Saccharin at 58822-23. 
Therefore, where the manufacturer obtained the input from the trading 
company--a PRC source rather than a market-economy source--and paid for 
the input in PRC currency, we determine that the prices paid by the 
producers for these inputs do not reflect market prices. In such 
situations, the price paid by the trading company is not the relevant 
inquiry. We note that Guizhou Machinery et al. misread Coumarin. In 
that case, as in this case, we did not use purchases from market-
economy suppliers but instead applied surrogate values because 
producers obtained the input from a PRC trading company. See Coumarin 
at 66900. See also TRBs IV-VI at 65533.

Comment 7

    Shanghai argues that the Department should calculate all of 
Shanghai's relevant steel costs on the basis of steel purchases 
Shanghai made directly from market-economy countries during the POR. 
For certain components Shanghai used PRC-sourced steel as well as steel 
purchased from market-economy countries during the POR. Shanghai argues 
that the Department's use of a weighted-average of PRC-sourced and 
imported steel was improper and that the Department should have based 
Shanghai's constructed steel values solely on the verified costs of 
Shanghai's market-economy-sourced steel imports. Actual market costs 
incurred during the POR for the exact type and grade of steel used for 
the production of subject merchandise are, Shanghai contends, the best 
evidence of the market cost of steel. Shanghai cites S. Rep. No. 93-
1298, 93d Cong., 2d Sess. 174 (1974), in support of its view that 
surrogate values are meant to be applied only when market-based values 
are unavailable. Shanghai claims that the surrogate methodology is 
meant as a way to ascertain what the prices or costs of an NME producer 
would be if set by the market.
    Citing Ceiling Fans (at 55274), Shanghai states that its actual 
cost for the imported steel are the most reliable and accurate data for 
determining the value of steel inputs. Not using these verified costs 
would, Shanghai argues, defeat the statutory intent and undermine the 
accuracy, fairness and predictability of the FMV calculations.
    Petitioner argues that, contrary to Shanghai's assertion, the 
Department should disregard import prices because those prices are 
subject to state-controlled influences and, therefore, are unreliable. 
Petitioner suggests that the Department should rely on the Indian 
prices to value all of Shanghai's steel usage. Petitioner argues that 
steel is not traded freely in China and most bearing producers must 
purchase their imported inputs through state-controlled trading 
companies. Petitioner claims these imports are incorporated directly 
into the state-controlled system and, because they are 
indistinguishable from other Chinese domestic prices and are inherently 
suspect, they must be disregarded in the final results.
    Whereas Shanghai argues that import prices should be used for all 
its steel inputs, Petitioner, citing 19 CFR 353.52, says that such 
argument disregards the statutory requirement that, when normal 
valuation cannot be used because of state-controlled-economy 
influences, the Department is to base the value on its FOP methodology, 
deriving values for each factor from prices or costs in a surrogate 
country. Petitioner contends that the Department should use, for the 
final results, prices of imported steel only for acquisitions that are 
shown to be free of state-controlled influences. Petitioner further 
contends that, in this review, no such acquisitions exist and, 
therefore, the Department should use Indian surrogate values to value 
all steel inputs in this review.

Department's Position

    We agree with Shanghai with respect to steel sourced directly from 
market-economy suppliers. Accuracy is enhanced when the NME producer's 
actual costs can be used. We verified that a portion of Shanghai's 
steel inputs during the POR were sourced from market-economy countries 
and were paid for in a market-economy currency. Shanghai's imports were 
purchased directly from the market-economy supplier and did not involve 
PRC-based trading companies. See Verification Report at 4. Therefore, 
we have not calculated weighted-average steel costs based on PRC-
sourced and imported steel for Shanghai for these final results.

Comment 8

    Petitioner claims that, if the Department uses the value of steel 
imported into the PRC, there are no available scrap values directly 
related to respondents' steel-acquisition costs. Petitioner notes that 
the net cost of raw materials inputs is based on the steel cost minus a 
value for scrap credit and argues that applying a value to the steel 
from one source and scrap credit from a different source is inherently 
distortive. Petitioner claims that the courts have ruled this practice 
to be unsupported, citing Timken. Petitioner notes that the Department 
addressed the issue on remand by using a single source to value both 
materials and scrap, a flat ratio of scrap equal to 20 percent of the 
value of the steel input. Petitioner states that the same principle 
should apply to this review, i.e., in order to avoid inherent 
distortions where the Department values steel and scrap using different 
sources, the Indian scrap value should be applied as a percentage 
rather than as an absolute amount.
    Guizhou Machinery et al. contend that, contrary to Petitioner's 
argument, the CIT and the CAFC did not rule in Timken that the 
Department cannot use different sources to obtain surrogate values for 
the various CV components but, rather, that the Department cannot use 
surrogate value data which yield distorted results and which are 
inconsistent with other record evidence. Guizhou Machinery et al. argue 
that Petitioner has not shown that the use of market-oriented import 
prices for steel with the use of Indian import statistics for scrap 
credit yields distorted results or that it is inconsistent with other 
information on the administrative record for this review. Guizhou 
Machinery et al also contest Petitioner's claim that the use of two 
different sources to value steel and scrap is ``inherently distorted'' 
and point out that in many cases the Department has used different 
sources to value input materials and scrap.
    Shanghai states that the Department may exercise its discretion to 
identify the best available information even if derived from different 
sources and that the Department's ``mix-and-match'' methodology is 
supported by the statute, citing Lasko Metal Products Inc. v. United 
States, No. 93-1242 (Fed. Cir.

[[Page 6199]]

Dec. 29, 1994). Shanghai suggests that Petitioner objects to the use of 
steel values based on PRC imports and scrap values based on Indian 
imports as another attack on the use of steel values based on PRC 
imports.

Department's Position

    We agree with respondents. Because Shanghai purchased inputs from a 
market-economy supplier and paid in a convertible currency, we valued 
those inputs using respondent's actual costs. The absence of a direct 
scrap-offset value should not prohibit us from using the actual market-
economy price paid in convertible currency by an NME manufacturer.
    In the Final Determination of Sales at Less Than Fair Value: 
Circular Welded Non-Alloy Steel Pipe From Romania, 61 FR 24274, 24277 
(May 14, 1996), we calculated a ratio of scrap value to steel value as 
suggested by Petitioner. However, in that instance, we had no public 
information by which to arrive at a scrap/steel ratio for our first-
choice surrogate country. Therefore, we calculated the ratio using 
scrap values and steel values from the second-choice surrogate country 
and applied the ratio to the surrogate steel values from the first-
choice surrogate country to determine a value for scrap.
    In this case, where producers have used PRC-sourced steel inputs, 
we have valued those inputs based on Indonesian import statistics for 
steel used to manufacture cups and cones and based on Indian import 
statistics for steel used to manufacture rollers and cages (see our 
response to Comment 5). In other words, we have valued saleable scrap 
for each component using the same respective source by applying 
Indonesian scrap values to cups and cones and Indian scrap values to 
rollers and cages. Because Shanghai used imported steel it purchased 
directly from a market-economy supplier and paid for with a market-
economy currency, we have valued Shanghai's steel inputs using the 
company's actual costs. In the absence of a corresponding scrap price, 
we valued the volume of scrap actually produced in Shanghai's 
production with cups and cones using Indonesian scrap values and valued 
the volume of scrap actually generated in Shanghai's production of 
rollers and cages using Indian scrap values.
    Petitioner's contention that using a steel value from one source 
and scrap credit value based on a different source is inherently 
distortive is unfounded. Petitioner has provided no evidence to 
indicate that the value of scrap is in any way tied to the cost of raw 
steel. Furthermore, this approach allows us to use the actual amounts 
of scrap generated by the Chinese production processes rather than the 
scrap ratios associated with Indian factories, which may be less 
accurate. Because we are using the same source to value scrap for all 
respondents, we do not agree that we should change our methodology 
simply because Shanghai's steel bar was valued using Shanghai's actual 
costs for its market-economy purchases. Accordingly, where steel inputs 
were based on actual costs of steel purchased directly from market-
economy sources, we have continued to value scrap using the surrogate 
sources noted above.

Comment 9

    Petitioner states that the Department's analysis memoranda for some 
respondents show a ``scrap input value'' included in valuing certain 
materials. Petitioner asserts that, to the extent raw materials from 
which certain TRBs or parts were manufactured were assigned a scrap 
value, the value of those materials was understated. In terms of 
acquisition cost, Petitioner contends, new material remains new 
throughout the production process. Petitioner contends that the only 
time a scrap value has any significance is when there is a 
demonstration that scrap from production was recovered and sold and 
notes that respondents do not deny that they paid full price for the 
raw materials they characterize as scrap inputs. Petitioner explains 
that the per-kilogram value of the raw-material input piece is the same 
whether the companies produce one or two finished pieces from the input 
piece and the only difference when two pieces are produced from a 
single input piece is that the amount of scrap at the end of the 
operation is less than if only one of the two pieces had been produced 
from the input. Petitioner claims that, by increasing the yield from 
the raw material input and reducing scrap, these producers have 
achieved economy of production.
    Petitioner asserts that the Department should revert to its 
position in the 1989-90 review, in which it did not value scrap steel 
input reused by one respondent at the cost of steel scrap (citing 
Tapered Roller Bearings from the People's Republic of China, 56 FR 
87590, 87596 (December 31, 1991) (TRBs)). At that time, Petitioner 
argues, the Department noted that the respondent had failed to raise 
the issue early enough to permit consideration of alternatives with 
which to value the reused steel input. Since then, Petitioner adds, 
respondents have not presented alternatives for taking account of their 
production of two pieces from one bar. Petitioner states that the 
reused steel retains its value in the production process fully as much 
as a new-steel bar. Petitioner claims that the fact that it may be sold 
as scrap is irrelevant because respondents did not sell it and paid 
full price when it was acquired.
    Guizhou Machinery et al. respond that, although the above-
referenced analysis memoranda suggest that ``scrap input'' was 
separately and differently valued from ``new'' steel input, the 
calculations show that the Department valued scrap input the same as 
new-steel input. Guizhou Machinery et al. assert that the Department 
should have valued scrap input at scrap values, not the same as new 
steel.
    Guizhou Machinery et al. state that some respondents accumulate 
scrap pieces, store them in their warehouse on site, and use large 
scrap pieces to manufacture smaller bearings. Guizhou Machinery et al. 
argue that, because scrap is actually used to manufacture these 
bearings, the input materials costs should appropriately account for 
the scrap value.
    Guizhou Machinery et al. claim that Petitioner's argument suggests 
that, even though scrap material was actually used to manufacture 
certain bearings, the Department should ignore this fact and 
essentially ``impute'' the material cost of new steel instead. Guizhou 
Machinery et al. state that, as evidenced by the record in this review, 
TRBs are manufactured from different steel inputs (i.e., type, grade, 
and quality) and that Petitioner's argument that new-steel costs should 
be used to value scrap input ignores the fact that different inputs are 
used in the manufacturing process and would be comparable to 
substituting the value of steel bar for steel sheet. Guizhou Machinery 
et al. claim that Petitioner's argument ignores the differences between 
steel bar and scrap because steel bar is a high-quality material which 
can be used as is, whereas scrap consists of leftover pieces which have 
already been ``stressed'' once. Guizhou Machinery et al. claim that 
Petitioner's argument should be rejected because its methodology would 
artificially inflate respondent's material costs and because steel 
scrap has a substantially lesser value than new steel bar, as evidenced 
by its sales prices in the marketplace. To avoid aberrational results 
for the TRB models using scrap input, Guizhou Machinery et al. 
recommend that the Department follow the methodology it used in the 
calculations for the preliminary results of the 1990-93 administrative 
reviews, which most accurately reflects the value of the actual inputs 
used for each particular model.

[[Page 6200]]

Department's Position

    We agree with Petitioner. The scrap input respondents used to 
produce certain TRBs was not purchased as scrap. Respondents paid the 
full purchase price for these inputs. Sales of bearings produced from 
scrap are indistinguishable from those produced from new steel in 
respondents' reported sales listing. Valuation of the input as scrap 
instead of as new steel would result, therefore, in an undervaluation 
of respondents'' FOP. Furthermore, for the final results in all 
previous reviews we valued scrap steel inputs as new steel. See TRBs 
IV-VI at 65533. Accordingly, we have valued the scrap-steel input as 
new steel for the final results.

Comment 10

    Petitioner argues that the direct-labor surrogate value should be 
based on the average for all industrial workers or, alternatively, on 
the average of skilled and unskilled labor rates in India. Petitioner 
notes that, although the Department had available wage rates for all 
industrial workers and for skilled, semi-skilled and unskilled labor in 
India, it only used the average of unskilled and semi-skilled labor. 
Petitioner claims this selection is arbitrary and is in direct conflict 
with the information provided by respondents on the record. Petitioner 
states that most respondents reported that the PRC manufacturers used 
skilled and unskilled labor as production workers, referring to the 
Public Questionnaire Responses of February 7, 1995. Petitioner argues 
that a reasonable use of the Department's source would be to select the 
average ``industrial worker'' wage or the average of the wage ranges 
for unskilled and skilled workers.
    Guizhou Machinery et al. argue that, although some respondents may 
have reported that they employ some skilled workers, the record clearly 
demonstrates that the manufacture of TRBs largely involves 
unsophisticated processes and unskilled labor and, thus, the 
Department's preliminary results are reasonable and should not be 
revised. Guizhou Machinery et al. claim that Petitioner's suggested 
calculation revisions are not supported by record evidence and would 
artificially inflate the surrogate-value labor rate. Additionally, 
Guizhou Machinery et al. argue that use of Petitioner's suggestion 
would value skilled labor to the same degree as unskilled labor, not 
taking into account the low-tech nature of the manufacturing process. 
Guizhou Machinery et al. state that Petitioner has not provided any 
evidence which shows that respondents have equal numbers of skilled and 
unskilled workers in the manufacturing process.

Department's Position

    We agree with Petitioner in part. We reject Petitioner's 
recommendation, however, that we use an average ``industrial worker'' 
wage rate, because it does not take into account unskilled labor. 
During the course of this review, we visited several TRB factories 
while verifying various companies and confirmed that the primary source 
of labor consists of unskilled personnel in the production process. 
See, e.g., Memorandum for the File From Case Analyst: Verification 
Report for Yantai CMC Bearing, Ltd. (September 21, 1995) and Memorandum 
for the File From Case Analyst: Verification Report for Shanghai 
General Bearing Co., Ltd. (September 21, 1995). The average 
``industrial worker'' wage rate does not indicate if, or to what 
extent, unskilled labor is included. The lowest wage rate in the 
average ``industrial worker'' category is at the level of the highest 
wage rate among the average wage rates for unskilled labor. Therefore, 
use of the ``industrial worker'' wage rate could distort significantly 
the wage-rate factor.
    We agree with Petitioner's alternative recommendation, however, 
that we calculate a wage rate between ``skilled'' and ``unskilled'' 
labor rates. Respondents reported that during the production process 
they employed certain amounts of both skilled and unskilled direct 
labor. Because we have average wage rates for both skilled and 
unskilled labor, we can more accurately value direct labor according to 
each respondent's own experience. Accordingly, we have calculated, for 
these final results, an average wage rate for skilled labor and an 
average wage rate for unskilled labor. We applied these rates to each 
respondent, weighted according to the reported amounts of skilled labor 
and unskilled labor.

Comment 11

    Petitioner argues that the Department should make allowance for 
vacation, sick leave and casual leave when calculating the number of 
weeks per month actually worked. Petitioner states that the Department 
calculated the hourly wage rate on the basis of 4.333 working weeks per 
month, based on a full 52-week year, which assumes that workers never 
get sick, take vacations or have other days off. Petitioner observes 
that IL&T India shows that mandatory benefits include one day of paid 
vacation for every 20 days worked, sick leave of seven days a year with 
full pay, and seven to ten days of casual leave. Petitioner claims that 
respondents have not allocated any portion of vacation or sick leave to 
the labor hours they reported as their factors of production. 
Petitioner states that the goal is to determine the cost to an employer 
of each hour that an employee is on the job and the denominator must 
include only time on the job. Petitioner suggests that the number of 
weeks per month should be recalculated to take into account at least 
the minimum benefits and derives a figure of 3.94 working weeks per 
month using this approach. Petitioner further suggests that it would be 
more reasonable to use the usual vacation time of 30 days as stated in 
the IL&T India data which the Department used, thus deriving a figure 
of 3.72 working weeks per month.
    Guizhou Machinery et al. state that the Department should reject 
the Petitioner's argument to adjust the calculated labor rate for 
vacation, sick leave and casual leave which the Department used in the 
preliminary results. Guizhou Machinery et al. claim that Petitioner 
provides no support for the statement that hourly labor costs should 
reflect only the expenses accrued to an employer for the time the 
employee is on the job. Guizhou Machinery et al. state that the real 
hourly cost to the employer reflects many factors, including fringe 
benefits such as paid vacation, sick leave, etc. Guizhou Machinery et 
al. suggest that the Department's calculations should include the cost 
of fringe benefits such as vacation and sick leave in the numerator 
and, because the numerator includes costs for fringe benefits, the 
denominator should likewise reflect these fringe benefits.

Department's Position

    We disagree with Petitioner. In our preliminary results we valued 
direct labor using rates reported in IL&T India, which states that 
fringe benefits normally add between 40 percent and 50 percent to base 
pay. See Memorandum to the file from Case Analyst: Factors of 
Production Values Used for the Seventh Antidumping Duty Administrative 
Review (Memorandum), September 1, 1995, attachment 5. Accordingly, we 
multiplied base pay by 1.45 in order to incorporate fringe benefits. 
Memorandum at 3-4.
    Whereas petitioner suggests we calculate a wage rate based only on 
time spent on the job, we find that paid holidays, vacation, sick 
leave, etc., belong in the calculation because the employer incurs the 
same expenses as if the employee were on the job. By adjusting the base 
pay to include such fringe benefits as vacation, sick leave, casual 
leave, etc., we calculated a direct-

[[Page 6201]]

labor rate which more accurately represents the actual direct-labor 
cost to the manufacturer.

Comment 12

    Petitioner claims that indirect labor is not reflected in the SG&A 
and overhead rates used in the preliminary results, notwithstanding the 
fact that, at 49575, the Preliminary Results state that ``indirect 
labor is reflected in the selling, general and administrative and 
overhead rates.'' Petitioner claims that no portion of the amount shown 
as ``payments to and provisions for employees'' in SKF's annual report 
is included in either the overhead or the SG&A calculation. Petitioner 
states that, consistent with the 1989-90 administrative review, 
indirect labor must be added to the CV.
    Petitioner contends further that the indirect-labor amounts 
supplied by respondents, reported as a percentage of direct-labor 
costs, are generally unsupported by explanation, calculations or 
documentation, and that the Department apparently made no attempt to 
verify the information. Petitioner suggests that the Department should 
use, as BIA, respondents' own indirect-labor rates--as was done in the 
1989-90 review--or, alternatively, the highest indirect-labor rate on 
the record in this review.
    Guizhou Machinery et al. note that the Department used the SKF 
annual report to calculate the SG&A rate and that, since that 
calculated rate was below the statutory minimum, the Department applied 
the statutory minimum of 10 percent in the calculation of CV. Guizhou 
Machinery et al. contend that there is no basis for asserting that the 
Department must add an amount to the statutory minimum for indirect 
SG&A labor since this is not the Department's practice.
    With respect to overhead, Guizhou Machinery et al. point out that 
the SKF report includes, under the category ``expenses for manufacture 
administration and selling,'' items designated as ``repairs to 
buildings'' and ``repairs to machinery.'' Guizhou Machinery et al. 
assert that the Department can reasonably conclude that the repair 
expenses indicated are inclusive of the labor associated with such 
activities. Respondents argue that, as such, the Department should not 
alter the SG&A and overhead portions of its calculations for the final 
results.

Department's Position

    We agree with Petitioner that we did not include indirect labor 
attributable to overhead and labor attributable to SG&A in the CV 
calculations in the preliminary results. For these final results, we 
calculated overhead and SG&A expenses using the line items in the SKF 
report which pertained to these expenses. The results of these 
calculations from the SKF report (see also our response to Comment 13) 
yielded an SG&A rate that exceeded the statutory minimum; therefore, we 
did not use the statutory minimum. We did not include any item from the 
SKF report specifically representing indirect-labor costs in 
calculating the overhead and SG&A expenses. We also did not include the 
item ``payments to and provisions for employees'' because this item 
does not allocate amounts between direct and indirect labor. Further, 
contrary to the suggestion by Guizhou Machinery et al., there is no 
evidence in the SKF report indicating that the line items we used to 
calculate these expenses were inclusive of indirect labor costs.
    However, we disagree with Petitioner that the indirect-labor 
amounts supplied by respondents are inadequate. The record evidence in 
this case, based on our initial and supplemental questionnaires as well 
as information we obtained at verification, does not indicate any 
misreporting of the indirect-labor ratios supplied by respondents. For 
these final results, we have calculated the expenses for indirect labor 
attributable to overhead and SG&A labor using the ratios of each as 
reported in the responses.

Comment 13

    Petitioner states that the Department did not include interest 
expenses incurred by SKF in the CV calculation. Petitioner contends 
that interest expenses and other financing charges are ordinarily 
incurred in market economies where companies rely on debt as well as 
equity as a source of capital. Petitioner states it should be included 
in the CV calculation as instructed by the Department's Antidumping 
Manual, Ch. 8 at 55 (7/93 ed.). Petitioner notes that Jilin and Henan 
identified ``loan interest'' in their itemized list of expenses and 
that, in the 1989-90 review, the Department included interest expense 
in SG&A for its CV calculations.
    Guizhou Machinery et al. state that Petitioner's argument should be 
rejected because the Department used the 10-percent statutory minimum 
SG&A. Guizhou Machinery et al. argue that Petitioner does not cite to 
any authority for adjusting the statutory 10-percent-minimum SG&A. In 
fact, Guizhou Machinery et al. argue, the statutory minimum SG&A 
includes an amount for financing charges, and any additional amount for 
this charge would result in double-counting. Respondents contend that 
Petitioner only cites legal authority for the proposition that SG&A 
should include an amount for interest expenses, which is already 
included within the statutory minimum for SG&A, such that Petitioner's 
claim as to this point is moot. Moreover, Guizhou Machinery et al. 
assert that Petitioner does not specify which charges from SKF's annual 
report should be included in the calculations.
    Shanghai responds that inventory financing costs are subsumed 
within the statutory minimum for SG&A as interest charges and to add a 
separate charge to CV would result in unacceptable double-counting of 
these charges.
    Chin Jun states that, whereas Petitioner argues that finance 
charges should be added, there is no record evidence regarding SKF's 
interest expenses which pertain exclusively to sales. Chin Jun argues 
that Petitioner fails to point out what surrogate finance costs should 
be applied and provides no evidence that SKF India, part of a huge 
multinational organization, would have financing charges representative 
of a normal Indian producer. Due to the foregoing, Chin Jun argues, the 
overhead rate should be reduced, not increased.

Department's Position

    We agree with Petitioner that, consistent with our practice, 
financing charges should be treated as ordinary business expenses. 
Therefore, we have included, in the general expenses for these final 
results, interest expenses as listed in SKF's report.
    As noted in our response to Comment 12, we calculated the SG&A 
expenses by adding each line item from the SKF report that pertained to 
such expenses. The line items we used in the preliminary results did 
not include interest expense. The recalculation of SG&A to include 
interest and the items discussed in Comment 12 exceeded the statutory 
minimum; therefore, the argument of Guizhou Machinery et al. and 
Shanghai regarding double-counting is moot.
    Concerning the comment by Guizhou Machinery et al. that Petitioner 
has not sufficiently demonstrated the representativeness of SKF's 
interest expense and Chin Jun's comment that no document demonstrates 
that SKF's interest expenses pertain exclusively to sales, we note that 
this source constitutes the best available information and that Guizhou 
Machinery et al. have provided no alternative source for the valuation 
of this expense. See TRBs IV-VI at 65534.

[[Page 6202]]

Comment 14

    Petitioner argues that direct and indirect selling expenses 
incurred in the United States must be deducted from exporter's-sales-
price (ESP) transactions. Petitioner argues that section 772(e)(2) of 
the Act requires that expenses incurred ``by or on behalf of'' an 
``exporter'' in selling the subject merchandise in the United States 
must be deducted from ESP. Petitioner states that such expenses may not 
instead be added to CV or included in a consolidated SG&A expense, 
which is itself reported as an item of the FOP (citing Zenith 
Electronics Corp. v. United States, 10 CIT 268, 276, 633 F. Supp. 1382, 
1389 (1986)). Instead, Petitioner argues, expenses incurred with 
respect to the selling activities of affiliated importers must be 
separately identified and deducted from the ESP.
    Petitioner adds that the Department lacks the discretion to create 
an exception for selling expenses incurred by U.S. subsidiaries of 
companies in NME countries (citing Zenith Electronics Corp. v. United 
States, 988 F.2d 1573 (Fed. Cir. 1993), and Ad Hoc Comm. v. United 
States, 13 F.3d 398, 401 (Fed. Cir. 1994)), arguing that a major reason 
for the creation of the ``ESP offset'' at 19 CFR 353.56(b)(2) was the 
recognition that ESP, unlike purchase price, required the deduction of 
all direct and indirect selling expenses incurred on U.S. sales (citing 
Smith-Corona Group, SCM Corp. v. United States, 713 F2d 1568, 1578 
(Fed. Cir. 1983)). Petitioner argues that section 772 has never been 
amended to distinguish U.S. prices with respect to NME-produced 
imports; rather, the adjustments required to calculate dumping margins 
with respect to NME cases have been codified in section 773(c). 
Petitioner claims that Congress never intended that a different formula 
for ESP would be applied to related-party transactions in NME cases.
    Petitioner recognizes that the Department has declined to make ESP 
adjustments on the grounds that ``there is a lack of information on the 
record to make adjustment to both sides of the equation * * * '' 
(citing Ceiling Fans at 55276). However, Petitioner claims that there 
are two major distinctions which render the precedent set in Ceiling 
Fans inapposite to this review.
    First, Petitioner argues that the U.S. importers of TRBs function 
at a different level of trade from that derived in the Department's CV 
calculations, i.e., that the U.S. importers are resellers that function 
as distributor, whereas the CV does not include any SG&A expenses which 
represent expenses associated with reselling. Petitioner adds that, in 
the preliminary results, the Department relied on the statutory minimum 
SG&A expenses, in which case the minimum activities of the manufacturer 
are represented in the CV and, as such, there is no basis to conclude 
that CV requires any deduction similar to the statutory deduction 
required from ESP.
    Petitioner further distinguishes the current review from Ceiling 
Fans by arguing that the SKF report provides sufficient evidence to 
calculate the ESP-offset adjustment to FMV, if the Department chooses 
to make such an adjustment.
    With respect to deductions of selling expenses from FMV, Petitioner 
contends that, by using the SG&A expenses of SKF in the final results, 
the Department would exclude those expenses analogous to resale 
activities. Therefore, Petitioner contends, there is no basis to 
conclude that CV requires any deduction similar to the statutory 
deduction from ESP. Petitioner also asserts that the home market or 
third-country selling expenses of the foreign producer/U.S. importer 
are not relevant to the derivation of CV and that these expenses cannot 
therefore be deducted from the surrogate or statutory minimum SG&A 
expenses used in CV. Finally, Petitioner asserts, if the Department 
does choose to make an ESP offset, there is no basis on which to assume 
that an ESP offset would be equal to U.S. selling expenses; rather, the 
Department should subtract only that portion of SG&A attributable to 
indirect selling expenses.
    Shanghai states that the Department can make no adjustments to ESP 
because there is no information to distinguish between foreign direct 
and indirect selling expenses which would enable the Department to make 
corresponding adjustments to FMV and that the SKF report does not 
present any breakdown of selling expenses such as would be necessary to 
make the required adjustments.
    Shanghai claims that the Department has recognized that section 
772(e) of the statute does not require, nor does it anticipate, the 
unfair adjustment of U.S. price (USP) in ESP transactions without a 
corresponding adjustment to FMV (citing Ceiling Fans). Rather, Shanghai 
argues, the statute requires the Department to make fair comparisons 
between USP and FMV (citing The Budd Company v. United States, 746 F. 
Supp. 1093, 1098 (CIT 1990)). Shanghai asserts that such a fair 
comparison cannot be made if available information does not permit the 
corresponding FMV adjustment.
    Guizhou Machinery et al. state that an adjustment to ESP without 
the companion ESP offset to FMV would lead to distorted results. 
Guizhou Machinery et al. argue that, while deductions for U.S. selling 
expenses and the ESP offset can be made in market-economy cases without 
problems, those deductions cannot be made in NME cases because there is 
no equivalent market-based value for indirect selling expenses on the 
FMV side of the equation.
    Guizhou Machinery et al. cite Ceiling Fans as the Department's best 
explanation of the calculation problem and of why, traditionally, the 
Department has declined to make adjustments for U.S. selling expenses 
to either USP or FMV in an NME case. Guizhou Machinery et al. state 
that, while Petitioner acknowledges the Department's decision in 
Ceiling Fans, Petitioner fails to recognize that there is a direct 
precedent for the Department's treatment of selling expenses in this 
case (citing TRBs at 67591).
    Guizhou Machinery et al. take issue with Petitioner's argument that 
this case differs from Ceiling Fans because in this case the U.S. 
importers are ``resellers'' and operate at a different level of trade 
from that the Department derived for CV. Guizhou Machinery et al. state 
that the U.S. importers in Ceiling Fans, as in virtually every ESP 
case, were resellers and that this review cannot be distinguished from 
Ceiling Fans on that basis. In all such cases, Guizhou Machinery et al. 
argue, the Department has determined that respondents are entitled to 
an ESP offset; if none can be made, the Department does not deduct 
selling expenses from USP. Guizhou Machinery et al. note further that, 
for the preliminary results, the Department used the statutory minimum 
as a surrogate value. Guizhou Machinery et al. argue that the statutory 
minimum includes all selling expenses, including indirect selling 
expenses normally deducted from FMV with an ESP offset, but which 
cannot be separately identified. Guizhou Machinery et al. claim that 
Petitioner's argument does not deal with this element of the 
calculation.
    With respect to Petitioner's argument that, if necessary, there is 
record evidence that will allow for an ESP offset to FMV, Guizhou 
Machinery et al. contend that Petitioner's suggestion that the 
Department use SKF India's indirect selling expense as a surrogate ESP 
offset demonstrates the very reason why the Department avoids ESP 
offsets in NME cases. Guizhou Machinery et al. assert that the 
information in the SKF report does not provide a reasonable method

[[Page 6203]]

for determining a surrogate ESP-offset amount. Guizhou Machinery et al. 
refute Petitioner's argument as being incompatible with the 
Department's use of the 10-percent statutory minimum SG&A, which 
includes direct and indirect selling expenses. To adjust the 10-percent 
minimum SG&A expense by using an unsubstantiated surrogate value for an 
indirect ESP-offset amount would, Guizhou Machinery et al. claim, 
result in an apples-to-oranges comparison.

Department's Position

    We agree with Petitioner. We have re-evaluated our practice 
concerning the deduction of expenses incurred by U.S. affiliates of 
respondent companies in NME cases and have concluded that such 
deductions are explicitly required by the statute, which states that 
ESP shall be reduced by the amount of ``expenses generally incurred by 
or for the account of the exporter in the United States in selling 
identical or substantially identical merchandise.'' See Final 
Determination of Sales at Less Than Fair Value: Bicycles from the PRC, 
61 FR 19026, 19031 (April 30, 1996) (Bicycles), 2 and TRBs IV-VI 
at 65535. The statute provides no exceptions for cases involving NME 
countries. Therefore, we have subtracted direct and indirect selling 
expenses incurred by such U.S. affiliates in deriving the USP.
---------------------------------------------------------------------------

    \2\  Although the statutory citation in this case is to the law 
as it existed on December 31, 1994, whereas the relevant citation in 
Bicycles is to the law as it exists subsequent to that date, both 
versions of the provision explicitly require the deduction of 
expenses generally incurred by or for the account of the exporter in 
the United States.
---------------------------------------------------------------------------

    We have made an ESP offset to FMV which, in conformity with section 
353.56 of our regulations, is in an amount not to exceed indirect 
selling expenses incurred in the United States. We based this offset on 
the ``other expenses'' item from the SKF report and subtracted from 
this item the amount for debentures as indicated in a footnote to 
``other expenses'' in the SKF report. The SKF report notes that the 
general category of expenses containing the ``other expenses'' item 
includes ``selling expenses.'' However, none of the named items (e.g., 
``power and fuel'') pertain to selling expenses. We have concluded 
that, as suggested by Petitioner, the ``other expenses'' item, minus 
debentures, represents these ``selling expenses.''

Comment 15

    Petitioner claims that the Department incorrectly calculated 
freight rates by multiplying the surrogate freight rate by the net 
weight of each bearing rather than by the gross weight of the bearing 
as packaged for shipment. Petitioner states that a reasonable allowance 
for the weight of packaging materials should be made in calculating 
both ocean freight and inland freight expenses, arguing that packaging 
does not travel free of charge. Petitioner suggests that the Department 
could use, as a PI source on the record for this review, a packing list 
of CMC Guizhou, submitted by DSL Distribution Services, Ltd., on 
September 27, 1995. Petitioner states that the packing list shows both 
gross and net weights of pallets of several common TRB models and that 
the average weight difference is about eight percent. Therefore, 
Petitioner asserts, the Department should multiply the net weights by 
1.08 to reflect the weight of packaging.
    Guizhou Machinery et al. state that the Department's freight 
calculations based on net weight are entirely consistent with the 
methodology it used in the prior administrative reviews of this case 
and Petitioner has not proved any legal citation or support for its 
claim that the Department should use gross weight. Guizhou Machinery et 
al. argue further that there is no evidence in the sources the 
Department used to value ocean freight and inland freight which would 
indicate that the rates are based on gross weights.
    Guizhou Machinery et al. also state that the Department did not 
instruct the respondents to report freight expenses on a gross-weight 
basis. Guizhou Machinery et al. argue that the Department should not 
use, as Petitioner suggests, a public packing list of CMC Guizhou 
submitted on September 27, 1995, because, first, they are not aware of 
such a document being submitted on September 27, 1995, and second, even 
if it was submitted, it cannot be considered because it would have been 
untimely as this date is after the publication of the preliminary 
results.

Department's Position

    We agree with Petitioner that a cost is incurred with respect to 
shipment of packing materials. Upon reviewing the packing list of CMC 
Guizhou, we have determined that the packing document DSL Distribution 
Services submitted in the 1994-95 review is an independent and reliable 
source for such information. We have therefore added this public 
document to the record of this review. Accordingly, for the final 
results, we have calculated ocean-freight expenses by multiplying the 
net weight by 1.08 to reflect the gross weight.

Comment 16

    Petitioner states that the Department calculated ocean-freight 
rates based on freight rates per ton provided by the Federal Maritime 
Commission for shipments from Shanghai to Cincinnati via the U.S. West 
Coast and that, to calculate the distance, the Department added the 
distance between Shanghai and San Francisco in nautical miles with the 
overland distance between San Francisco and Cincinnati. Petitioner 
argues that one of the two distances should be converted into the other 
in order to obtain a consistent basis for the distance calculation. 
Petitioner also notes that, in the sample calculations in the Factors 
of Production Memorandum, the Department states that it obtained a 
freight rate per kilogram per kilometer, but the sample calculation 
does not demonstrate the conversion from miles to kilometers. 
Petitioner states that the Department made the same errors in the 
calculation of the insurance rate based on distance and should correct 
these errors.
    Guizhou Machinery et al. respond that, while Petitioner's argument 
appears to be correct, the Department should correct another clerical 
error regarding the conversion of miles to kilometers in its ocean-
freight calculation. Guizhou Machinery et al. claim that, although the 
Department's Factors of Production Memorandum states that it obtained a 
``per kilogram per kilometer'' ocean-freight rate, the calculation 
reveals that the Department obtained a ``kilogram per mile'' rate but 
neglected to convert the distance stated in kilometers into miles.

Department's Position:

    We agree that we made the clerical errors noted by Petitioner and 
by Guizhou Machinery et al. However, the issue is moot because we have 
changed the methodology for calculating ocean freight for the final 
results. We have calculated ocean-freight rates based on quotes from 
Maersk Inc., a U.S. shipping company. We prefer information from Maersk 
because it was able to provide port-specific information regarding 
shipping rates from the PRC to the United States. For these final 
results, we calculated average shipping rates for shipments to the east 
coast of the United States and west coast of the United States. We note 
that the differences among the east-coast ports and west-coast ports 
are minimal. Maersk provided the basic rates for both 20-foot and 40-
foot containers, destination surcharges, FAF fuel surcharge, and 
region-specific surcharges. Maersk reported that the maximum payloads

[[Page 6204]]

allowed for the 20-foot and the 40-foot containers were 48,000 pounds 
and 60,000 pounds, respectively. We converted the pounds to kilograms 
and divided the total cost of shipping the fully loaded container by 
the maximum payload weight in kilograms to derive a per-kilogram 
freight rate. We multiplied that rate by the net bearing weight in 
order to value ocean freight expenses.

Comment 17

    Petitioner states that the Department erroneously used the Indian 
wholesale-price index (WPI) to adjust for inflation of ocean-freight 
cost. As the ocean-freight costs were based on U.S. rates in U.S. 
dollars, Petitioner contends that any adjustment for inflation should 
be based on dollar inflation. Petitioner suggests that the Department 
adjust ocean-freight costs using the U.S. producer-price index for 
finished goods, the U.S. equivalent of a WPI, from the same source used 
to derive the Indian WPI.

Department's Position

    We agree with Petitioner that we should adjust ocean-freight costs 
using the U.S. producer-price index because ocean-freight costs are 
based on U.S. rates in U.S. dollars. For the final results, we deflated 
the July 1996 ocean-freight-rate quotes from Maersk Inc. using the U.S. 
producer-price index to reflect the POR costs.

Comment 18

    Petitioner contends that the Department has understated the marine-
insurance expense by applying an insurance rate per ton applicable to 
sulfur dyes from India. Petitioner argues that, absent any evidence 
that one ton of sulfur dyes would have a value even close to the value 
of one ton of bearings, there is no rational basis for the Department's 
approach, i.e., applying insurance on the basis of weight rather than 
of value. Petitioner asserts that, if a container of bearings were lost 
at sea, there is no basis to suppose that payment for the loss of one 
ton of sulfur dyes would have any relationship to the value of the 
bearings.
    Petitioner recommends that the Department calculate a marine-
insurance factor based on the ratio of the insurance charge per ton of 
sulfur dye divided by the value of sulfur dye per ton (based on U.S. 
Customs value) and apply this factor to the price of TRBs sold in the 
United States.
    Petitioner contends further that to correct the ocean-freight 
distance upon which it based the marine-insurance rate, the Department 
should recalculate marine insurance. However, Petitioner notes that the 
source the Department used deleted the destination in the public 
version and, therefore, the only information on the record is that the 
insurance covered shipments from somewhere in China to somewhere in the 
United States, which provides no basis for differentiating among 
shipments on the basis of distance.
    Guizhou Machinery et al. respond that it is not reasonable to 
assume that the difference in Indian marine-insurance rates applicable 
to sulfur dyes and TRBs can be measured accurately simply by comparing 
the difference in product values. Guizhou Machinery et al. assert 
further that Petitioner's argument is based on customs values obtained 
from the Sulfur Dyes petition, information which has not been 
previously submitted on the record for the current review (citing 19 
CFR 353.31). Guizhou Machinery et al. state that the Department's 
approach of using the marine-insurance rates from the sulfur-dyes 
investigation is consistent with its calculations in other NME cases, 
citing Coumarin, Sebacic Acid and Saccharin. Finally, Guizhou Machinery 
et al. argue that the Department did not understate but, rather, 
overstated the marine-insurance expenses due to ministerial errors in 
the Department's calculation. Guizhou Machinery et al. claim that the 
errors made by the Department include the failure to convert nautical 
miles into statute miles and then to kilometers in calculating per-unit 
marine-insurance rate and the failure to convert the per-unit amounts 
from rupees into U.S. dollars before deducting the marine-insurance 
expense from USP. Respondents urge the Department to reject 
Petitioner's request to make an upward adjustment to the marine-
insurance calculations and to correct the conversion errors.

Department's Position

    We disagree with Petitioner with respect to our use of the sulfur 
dyes data. We have relied on the public information on marine insurance 
for sulfur dyes that we used for the preliminary results, and we have 
used the same rate repeatedly for other PRC analyses. See Final Results 
of Administrative Review: Certain Helical Spring Lock Washers from the 
PRC, 61 FR 41994 (August 13, 1996) (Lock Washers), and TRBs IV-VI at 
65537.
    We agree with Petitioner that there is no basis for differentiating 
among shipments based on distance. The source we used for valuing 
marine insurance provides only a cost per ton. For the final results, 
we have applied marine insurance based on net weight, without making 
any allowance for distance shipped. Therefore, we are not correcting 
the clerical error alleged by Guizhou Machinery et al. with respect to 
the failure to convert nautical miles into statute miles and then into 
kilometers. We do agree, however, that we failed to convert marine 
insurance from rupees into dollars before deducting the expense from 
USP. For the final results, we converted the marine insurance into 
dollars using the exchange rate in effect on the date of sale.

Comment 19

    Petitioner states that Shanghai's bearing weights and scrap weights 
were unverifiable and that the Department should therefore resort to 
partial BIA by adjusting the reported amounts to reflect the highest 
actual materials or lowest actual scrap costs.
    Shanghai argues that the Department weighed actual bearings and 
scrap samples at verification and determined that any discrepancies 
found at verification were insignificant. Shanghai states that the 
Department has previously found no cause to resort to BIA on the basis 
of insignificant discrepancies (citing Silicon Carbide at 19749).

Department's Position

    We disagree with Petitioner. Although at verification we did find 
discrepancies in the reported weights, we determined these 
discrepancies to be insignificant. Therefore, they did not undermine 
the validity of Shanghai's responses. In addition, we found some 
discrepancies to be above reported weights and others to be below; we 
found no pattern of under-reporting.

Comment 20

    Petitioner argues that the Department reported that it was unable 
to verify the number of Shanghai's employees assigned to the production 
of TRBs, citing the verification report for this company. Petitioner 
claims that, as a result, the Department could not verify reported 
indirect labor nor was it able to determine the extent to which labor 
costs were understated by the omission of trained-employee hours from 
the direct-labor costs reported. Petitioner further argues that, given 
that overhead costs, SG&A and profit are all derived on the basis of 
materials and labor costs, the inability to verify labor hours is fatal 
to Shanghai's entire questionnaire response.
    Petitioner argues that, if the Department uses the partial 
information submitted by Shanghai, labor hours

[[Page 6205]]

should be adjusted to account for trained employees.
    Shanghai claims that Petitioner has misinterpreted the verification 
report. Rather than stating that the number of employees assigned to 
TRB production was unverifiable, Shanghai contends that the report 
noted that it was not verifiable from personnel department worksheets, 
which do not contain such information. Shanghai says that it did report 
the number of employees assigned to TRB production and that such 
information was verifiable through a variety of means. Shanghai further 
claims that its reported labor hours accounted for trained workers. 
Shanghai counters Petitioner's argument for use of BIA, stating that it 
did not refuse to provide information and it was able to produce, in a 
timely manner, any information requested by the Department.

Department's Position

    We agree with Shanghai's contention that Petitioner misinterpreted 
our verification report. In the report, we noted that there was nothing 
to which we could trace the numbers from a worksheet prepared for this 
administrative review in order to verify the number of employees 
assigned to the production of subject merchandise. However, based on 
company records we examined at verification, we determined that 
Shanghai reported the number of employees assigned to the production of 
TRBs accurately.
    We were able to verify the direct-labor hours from Shanghai's 
internal record-keeping from work tickets. We found at verification 
that by reporting direct labor from the work tickets Shanghai did not 
account for trained workers. To calculate direct labor for the 
preliminary results, we adjusted Shanghai's reported labor hours in 
order to account for trained workers by adding the direct-labor hours 
for trained workers to the direct-labor hours for skilled workers. We 
have applied this same methodology for these final results. Because we 
were able to verify Shanghai's direct labor and there was no evidence 
indicating that indirect labor was misreported, we have used the 
indirect labor as reported.

Comment 21

    Petitioner asserts that the Department should apply BIA ocean-
freight and marine-insurance rates to all of Henan's U.S. sales through 
Central Equimpex because the record includes an invoice which shows 
that Henan made a sale on a CIF basis, although it stated in the 
submission that the terms of sale were not CIF.
    Henan claims that Petitioner's assertion is based on a 
misunderstanding of the transaction which was the subject of the 
invoice. Further, Henan states that the invoice does not relate to 
Henan's ESP sales through Central Equimpex but relates to one of 
Henan's direct purchase-price sales. Thus, Henan asserts, the 
Department can trace the sales quantity and price directly to Henan's 
purchase-price sales listing.

Department's Position

    We agree with respondent in part. The fact that the sale was a 
purchase-price transaction is not relevant to the deduction of ocean-
freight expenses from USP but, rather, whether ocean-freight expenses 
are included in the price. The record evidence is that ocean-freight 
expenses were included in the sale price. Moreover, because the sale in 
question is a purchase-price transaction and, therefore, is not related 
to sales made through Central Equimpex, there is no justification for 
applying BIA to all sales made through Central Equimpex. Furthermore, 
there is no evidence to support Petitioner's assertion that Henan's ESP 
sales listing does not reflect its transactions accurately. We have 
examined documentation related to the sale in question and have 
determined that ocean freight and marine insurance were provided by 
PRC-based companies. Accordingly, we have applied the surrogate ocean-
freight and insurance rates for this transaction.

Comment 22

    Shanghai argues that the Department must recalculate the estimated 
ocean-freight charges on its ESP transactions. Shanghai contends that 
the Department's estimated ocean-freight charges improperly included 
charges for U.S. inland freight and brokerage & handling which the 
Department deducted elsewhere from ESP. Specifically, Shanghai claims 
that charges for ``destination delivery charge'' included in the ocean 
freight rates the Department used were presumably for the costs of off-
loading and transporting the merchandise from the port of entry to the 
warehouse in the United States. Shanghai states that it reported such 
costs as U.S. inland freight and/or brokerage & handling charges and 
the Department deducted them from ESP accordingly.
    Petitioner responds that Shanghai misunderstood the Department's 
ocean-freight methodology. Petitioner contends that, notwithstanding 
other problems, the Department did not include expenses twice in its 
calculation of ocean freight. Petitioner argues that an examination of 
the component parts of the ocean-freight charge shows that the 
destination-delivery charge clearly covered the overland portion of the 
shipment, i.e., from Long Beach to Cincinnati, because all other 
portions of the charge are related to the ocean part of the voyage.

Department's Position

    Because we have changed our methodology to calculate ocean freight 
(see our response to Comment 16), this issue is moot.

Comment 23

    Shanghai argues that the Department erroneously added a surrogate-
based inland-freight charge to its purchases of steel imported from 
market-economy countries, improperly inflating the imported-steel 
values by double-counting freight costs. Thus, Shanghai argues, the 
Department should delete the surrogate-based freight charge from the 
costs of the imported steel.

Department's Position

    We agree with Shanghai that we double-counted freight costs when we 
added surrogate-based freight charges to respondent's imported-steel 
values. Because Shanghai incurred no inland-freight charges, these 
should not have been added. Furthermore, because we determined that it 
is more accurate to value all of Shanghai's hot-rolled-steel bar using 
the imported steel value (see our response to Comment 7), we have, for 
these final results, not included the surrogate-based freight cost in 
valuing Shanghai's hot-rolled-steel-bar material inputs.

Comment 24

    Shanghai states that the Department should not base the overhead 
rate on information contained in the SKF report because it is excessive 
and unrepresentative of Chinese producers. Shanghai and Chin Jun argue 
that, if the Department does use the SKF report to value overhead for 
the final results, it must recalculate the rate in order to correct 
several errors. In addition, Shanghai claims that the overhead rate the 
Department used in the preliminary results is based on Petitioner's 
analysis of the SKF report, an analysis which Shanghai claims contains 
several errors.
    Shanghai and Chin Jun argue the rate the Department used in the 
preliminary results improperly allocates the full amount of the 
depreciation expense to overhead and, as a result, the Department did 
not consider that certain depreciation expenses should be allocated 
instead to SG&A. Shanghai notes that, for the final results of the

[[Page 6206]]

1989-90 administrative review, the Department allocated a portion of 
depreciation to SG&A. Shanghai and Chin Jun argue that depreciation on 
office buildings, furniture, fixtures and office equipment, and 
vehicles should be allocated to SG&A. Shanghai calculates that, 
according to the SKF report, 7.3 percent of total depreciation pertains 
to SG&A assets. Shanghai argues that total current depreciation should 
be decreased by 7.3 percent for SG&A, thereby reducing the amount of 
depreciation allocable to overhead.
    Second, Shanghai notes that the SKF report does not identify to 
which items rent and lease expenses were applied. Shanghai points out 
that the line item for lease rental payments was not included under the 
same category as ``expenses for manufacture, administration and 
selling.'' Shanghai notes references to residential rental properties 
in the SKF report, adding that office space and housing for executives 
should be charged to SG&A and that these lease and rental payments, 
therefore, should be allocated to SG&A and not to overhead. Chin Jun 
adds that a portion of insurance should be applied to SG&A, as there is 
no evidence that these expenses are manufacturing expenses.
    Third, Shanghai and Chin Jun argue that, consistent with the final 
results of the 1989-90 review, the Department should apply the ``rates 
and taxes'' line item to SG&A. Shanghai states that it is not 
reasonable to allocate the total amount for ``rates and taxes'' to 
overhead, as they are not characterized as such in the SKF report.
    Chin Jun argues further that the overhead rate based on the SKF 
report is inappropriate because it is typical of neither China nor 
India. Chin Jun maintains that the Department has previously held that 
companies in less-developed countries, which normally use less-
sophisticated technology, have lower overhead rates than companies 
located in developed countries (citing the investigation for this case, 
52 FR 19748, 19749 (May 27, 1987)). Chin Jun and Shanghai both suggest 
that the Department use record evidence contained in a November 18, 
1994, submission by Chin Jun, which contains data compiled by the 
Reserve Bank of India (RBI) as a representative surrogate-overhead 
figure.
    Finally, Shanghai argues that, if the Department continues to use 
the SKF report to value overhead, the Department should adjust those 
rates so that they are more representative of overhead expenses of 
Chinese producers. Shanghai proposes that the Department adjust the 
overhead rate to include only those items included in Shanghai's 
overhead cost.
    Petitioner counters that depreciation is one of the items the 
statute intended to be included among factors of production, before 
non-factor-of-production items, such as SG&A and profit, were added 
(citing sections 773(e)(1) and (c)(3) of the Act). The only 
alternative, Petitioner claims, would be to add depreciation as a 
separate percentage, which would not alter the calculation. 
Furthermore, Petitioner argues, even if the Department decided to 
allocate a portion of depreciation and other expenses to SG&A, any such 
allocation would be arbitrary.
    Petitioner dismisses Shanghai's and Chin Jun's proposed alternative 
source--the RBI data--as covering an incredibly broad range of 
industries, of which the bearings industry would represent only a small 
part. Petitioner asserts that the SKF report provides information for a 
bearing producer in India and to reject it in favor of the RBI data 
would be unreasonable. Likewise, Petitioner rebuts Chin Jun's argument 
that SKF represents a modern company such as is found in developed 
countries, pointing out that the Department did not use data relevant 
to SKF Sweden nor consolidated data from the SKF Group but data from 
SKF India, which reflects the operating conditions of a bearings 
producer in India.
    Finally, Petitioner rejects Shanghai's suggestion that the SKF 
report be adjusted to include only those items included in Shanghai's 
overhead. Given the non-market nature of PRC-based companies, 
Petitioner asserts that those companies may not incur, itemize or 
segregate all of the expenses recognized in a market-economy producer's 
financial statement. Nevertheless, Petitioner insists, expenses of the 
type generally incurred in the production or sale of the merchandise, 
even if not itemized by the NME company, would have to be added into 
the CV calculation somewhere.

Department's Response

    We disagree with Shanghai and Chin Jun that we should use the RBI 
information instead of the SKF report for the calculation of the SG&A 
and the overhead rates. The information in this case published by RBI 
represents more than 600 companies in India from various industries. 
Because the extent to which companies incur overhead and SG&A expenses 
can differ so greatly between industries, we have based our overhead 
and SG&A surrogate values on the industry-specific experience closest 
to that of the merchandise under review, when appropriate industry-
specific data are available. See Final Determination of Sales at Less 
Than Fair Value; Polyvinyl Alcohol From the People's Republic of China 
(Polyvinyl Alcohol), 61 FR 14057, 14059 (March 29, 1996). We have 
overhead and SG&A information from SKF India, a producer of subject 
merchandise. Accordingly, for the final results, we have continued to 
calculate overhead and SG&A based on the information in the SKF report.
    We agree with Chin Jun and Shanghai, however, that certain 
adjustments to the calculation of overhead and SG&A are appropriate. 
For instance, we agree that it is improper to include all of SKF's 
depreciation in overhead because depreciation associated with office 
buildings and office equipment should be apportioned to SG&A expenses. 
Therefore, for the final results we have allocated depreciation costs 
to overhead and SG&A according to the function and value of the assets 
by including in overhead only the depreciation expenses allocated to 
manufacturing. We obtained the information pertaining to the function 
and value of SKF's assets from the SKF report.
    We also agree with Chin Jun and Shanghai that we should allocate 
``rates and taxes'' to SG&A and not to overhead. This allocation 
methodology is consistent with our practice in the 1989-90 
administrative review of this proceeding and with other recent PRC 
cases (see, e.g., TRBs IV-VI at 65540).
    With respect to lease rental expenses, we agree with Shanghai that 
the SKF report does not identify the nature of those expenses. However, 
we do not agree with Shanghai's contention that all of the lease rental 
expenses are for SG&A, as a portion of those expenses could be 
attributed to overhead as well. Accordingly, we allocated lease rental 
expenses equally to SG&A and overhead (i.e., 50 percent for SG&A and 50 
percent for overhead).

Comment 25

    Shanghai, assuming that the Department disclosed all observations 
with calculated margins, requests clarification as to how the reported 
margin for each observation correlates with the total margin the 
Department calculated. Shanghai asserts that, because the value for 
total dumping duties due exceeds the sum of the transaction-specific 
dumping margins, some error in the Department's calculations of the 
total dumping duties due has occurred.

Department's Position

    Shanghai is incorrect in assuming that all observations with 
calculated margins

[[Page 6207]]

were in the printouts we released after the preliminary results. In 
this case, where complete printouts are likely to be voluminous, we 
generally release printouts with a portion of respondent's 
transactions. Because a printout showing the margin calculations for 
all of Shanghai's sales would have been voluminous, we provided 
Shanghai with a printout showing the calculations for 50 percent of its 
sales during the POR. Upon review, other errors or corrections noted 
elsewhere notwithstanding, we have determined that our calculation of 
Shanghai's total margin is correct and reflects our analysis of 
Shanghai's data.

Comment 26

    Jilin states that the Department calculated a margin for one of 
Jilin's models based on an erroneous net weight which affected the 
calculation of ocean freight and marine insurance. The error appears to 
be due to a misplaced decimal point, Jilin explains, which incorrectly 
resulted in a reported net weight which is 10 times the actual weight. 
Jilin states that the error is obvious when compared to other 
information on the record. Jilin notes that it included the correct net 
weight in its FOP data as reported by the manufacturer.
    Jilin argues, first, that the size of the deduction to its USP for 
ocean-freight and marine-insurance expenses for that model is 
inconsistent with that of other respondents who sold the same model. 
Next, Jilin claims that a comparison of the net weight reported for 
that model by other respondents shows that the net-weight figure in 
Jilin's USP calculation is aberrational. Jilin refers to the same model 
number and the associated net weights reported by other respondents and 
points out that those net weights are consistent with each other, as 
well as with that reported in Jilin's FOP data. Jilin requests that the 
Department correct its calculations by using the net weight as reported 
in its sales listing but adjust the location of the decimal point to 
reflect the correct net weight.
    Petitioner points out that Department used the exact weights 
reported and affirmed by Jilin in its responses. Petitioner further 
notes that adjusting the decimal point backward one space does not 
result in the net weight in Jilin's reported U.S. sales list matching 
that which was in Jilin's reported FOP data, which Jilin argues is the 
correct net weight. Petitioner contends that Jilin's claim of an 
alleged clerical error is an attempt to submit new information after 
the preliminary results and to amend its response.

Department's Position

    In light of a decision by the CAFC, we have reevaluated our policy 
for correcting clerical errors of respondents. See NTN Bearing Corp. v. 
United States, Slip Op. 94-1186 (Fed. Cir. 1995) (NTN). As a result of 
the NTN decision, we now accept corrections of such clerical errors 
under the following conditions: (1) The error in question must be 
demonstrated to be a clerical error, not a methodological error, an 
error in judgement, or a substantive error; (2) we must be satisfied 
that the corrective documentation provided in support of the clerical 
error allegation is reliable; (3) the respondent must have availed 
itself of the earliest reasonable opportunity to correct the error; (4) 
the clerical-error allegation, and any corrective documentation, must 
be submitted to the Department no later than the due date for the 
respondent's administrative case brief; (5) the clerical error must not 
entail a substantial revision of the response; and (6) the respondent's 
corrective documentation must not contradict information previously 
determined to be accurate at verification. See Certain Fresh Cut 
Flowers From Colombia; Final Results of Antidumping Duty Administrative 
Reviews, 61 FR 42833, 42834 (August 19, 1996) (Colombian Flowers).
    The error in question, the incorrect placement of a decimal point, 
is clearly clerical in nature. We have analyzed this error using the 
criteria set forth as a result of the NTN decision and have determined 
that it meets the conditions under which we will accept corrections. We 
reviewed the responses submitted by other PRC-based bearing 
manufacturers, as well as information from Jilin's FOP data. The net 
weight for the same model number reported by other suppliers is about 
one tenth of the amount in Jilin's U.S. sales list. We note further 
that the FOP data were provided by the manufacturer, Jilin's supplier, 
not by Jilin itself, and that the FOP data were consistent with 
information provided by other manufacturers of the same model. Thus, we 
determined that the FOP data provided by Jilin's supplier were 
reliable. Furthermore, Jilin availed itself of the earliest opportunity 
to correct the error and submitted the request for this correction no 
later than the time of the case brief. Finally, correction of this 
clerical error does not entail a substantive revision of the response. 
Because we did not verify Jilin's response in this review, the last 
criterion does not apply.
    After adjusting the location of the decimal point, the net weight 
in Jilin's sales list is higher than that in its FOP data, and we have 
calculated adjustments to USP based on the higher figure from the sales 
list.

Comment 27

    Respondents Liaoning, Wafangdian, Guizhou Machinery, and Henan 
allege errors regarding model comparisons in the Department's margin 
calculations, arguing that in some instances the Department compared 
the price of a component to the CV of an assembled set, while in other 
instances it applied BIA to U.S. sales for which both sales and FOP 
data were available.
    Liaoning states that the Department compared sales of a cone (inner 
ring) to the CV of a cone assembly (inner ring, rollers and cage). 
Liaoning explains that the Department reduced the total CV for a 
complete set--consisting of a cone assembly and a cup (outer ring)--by 
excluding the cost for the cup, then compared the resulting cost of the 
cone assembly to the sale of a cone. Liaoning notes that the ``IR'' 
attached to the model number in its U.S. sales listing indicates 
``inner ring'' and argues that the Department should, for the final 
results, compare the sale of the model in question to the CV for the 
single designated component.
    Similarly, Wafangdian claims that the Department compared the U.S. 
sale of a cone assembly to the CV of a complete TRB set. Wafangdian 
states that the net weight of the model sold in the United States is 
consistent with the net weight reported in its February 6, 1994 FOP 
questionnaire response for a cone assembly.
    Guizhou Machinery and Henan claim that, for sales of certain 
models, the Department was not able to match the related sales and cost 
data because the model codes they reported contained a clerical error 
in the code prefixes. Guizhou Machinery and Henan explain that the 
model codes they reported in the sales and FOP responses are often used 
interchangeably in the industry, where the numerical codes remain the 
same but purchasers sometimes refer to the numerical code with a 
slightly different prefix attached. Guizhou Machinery and Henan state 
that, the difference in prefixes notwithstanding, the identical 
numerical codes indicate that the models are identical and argue that 
the sales and cost data of such models should be compared in the final 
results. Guizhou Machinery and Henan suggest that other respondents' 
data on the record indicate that the net weights are consistent between 
model numbers with identical numerical codes, supporting their 
contention that the models themselves are identical.

[[Page 6208]]

    Petitioner responds that these arguments are based on new facts not 
previously on the record and that only Wafangdian's argument warrants 
consideration by the Department.
    Petitioner notes that, whereas Guizhou Machinery and Henan argue 
that the prefix is meaningless regarding identification of certain 
models, Liaoning contends that the ``IR'' prefix denotes that the 
numerical code following it refers only to a cone and is of the utmost 
importance. Petitioner asserts that the argument that a prefix is 
unimportant and, therefore, to be ignored or, conversely, that a prefix 
is of utmost importance constitutes factual information too late to be 
considered. Petitioner argues that neither it nor the Department has 
been able to consider or evaluate this information through reference to 
other public factual data placed on the record. In any event, 
Petitioner argues the error in the CV the Department used is the fault 
of the individual respondent and not a clerical error on the part of 
the Department.
    Petitioner states that the same rates the Department used in the 
preliminary results should apply for the final results, except that, 
where BIA is used, it should represent the highest transaction rate.

Department's Position

    We disagree with Petitioner as to our ability to consider clerical 
errors of respondents after preliminary results. See NTN and Colombian 
Flowers. We have evaluated the respondents' clerical errors against the 
criteria set forth in our response to Comment 26, and we have 
determined that these errors meet the conditions under which we accept 
corrections. We note that, with the exception of Wafangdian, all of the 
respondents who experienced these model-matching problems were 
exporters. In this case, we received identifying model numbers from 
both the factory, which reports the FOP data, and the exporter, which 
reports the U.S. sale. Conceivably, the two attach different prefixes 
to the common numeric code.
    We compared record evidence among different companies as well as 
between respondents' FOP data and sales lists. We agree with 
respondents' contention that these data allow us to compare sales of 
specific models with corresponding CV figures. For sales of component 
parts, we have sufficient data on the record to apply CV for the 
corresponding part, and we have made the proper adjustments for the 
final results.

Comment 28

    CMC argues that the Department assigned the antidumping margin 
calculated for CMC incorrectly to a company identified as ``China 
National Machinery & Equipment Import & Export Corporation'' (CMEC). 
CMC notes that, in all documentation it submitted, the company referred 
to itself as CMC. CMC also contends that the administrative record 
shows that the 0.13-percent margin the Department calculated in the 
preliminary results was based on the sales and cost data CMC submitted 
and that, in its verification report and analysis memorandum in 
reference to this respondent, the Department identified the company as 
CMC. Therefore, for the final results, CMC requests the Department 
correct its error.

Department's Position

    We agree with CMC. We incorrectly identified this respondent in the 
Preliminary Results due to a clerical error. We verified data CMC 
submitted during this review. The 0.13-percent preliminary margin we 
calculated pertained to sales by CMC. For these final results of 
review, the final margin for CMC is 0.00 percent and the non-
cooperative BIA rate assigned to CMEC and all other non-responding 
companies is 25.56 percent.

Comment 29

    Guizhou Machinery et al. note that, for the preliminary results, 
the Department assigned to non-responsive companies a margin of 57.86 
percent. Respondents contend that such a margin is incorrect because it 
does not conform to the Department's two-tiered BIA formula as 
articulated in the Preliminary Results. Because the Department 
calculated a higher rate for Wafangdian, respondents contend, the 
Department effectively assigned a lower rate to non-responsive 
companies than it assigned to cooperative respondents, undermining the 
purpose of the two-tiered policy. Guizhou Machinery et al. request 
that, for the final results, the Department assign to any uncooperative 
respondents the highest margin calculated for any respondent in this 
review or any prior segment of the proceeding.

Department's Position

    As a result of changes to our calculations, Wafangdian's rate is 
1.28 percent. As noted in our response to Comment 28, above, the 
uncooperative BIA rate is 25.56 percent, which is the highest rate ever 
determined in this proceeding.

Comment 30

    Premier contends that the Department based its dumping margin 
inappropriately on cooperative BIA for the period of review. Premier 
also states that the specific rate the Department assigned to Premier 
was 75.87 percent, while the Department assigned 57.86 percent to 
uncooperative respondents. Premier claims that, although the Department 
stated it was applying ``cooperative BIA'' to Premier, the practical 
effect of the preliminary results is to treat Premier as an 
uncooperative respondent. Premier notes that the Department stated two 
reasons for resorting to BIA: (1) Premier's inability to provide FOP 
data, and (2) errors in Premier's sales data. Premier claims that the 
verification errors were minor and contends that the Department itself 
did not consider these reasons supportive of an uncooperative finding.
    Premier states that it was unable to provide certain FOP 
information to the Department because such information resides with 
unrelated suppliers that compete with Premier. Respondent asserts that 
the Department's application of BIA under these circumstances 
constitutes an abuse of discretion since it amounts to penalizing a 
company for failing to provide information it does not have. Premier 
notes that in the 1989-90 review the Department did not disregard the 
entire response, which lacked factors data, and instead applied 
cooperative BIA only to those U.S. sales for which there was no 
identical foreign-market match.
    Premier states that, while the verification report notes certain 
discrepancies in Premier's data, the report does not state that the 
discrepancies were so significant to warrant complete rejection of 
Premier's data. Premier adds that some of the issues the Department 
cited as reasons for BIA were the result of Premier's inability to 
provide data related to its suppliers, e.g., that it was unable to 
identify the producers of the bearings it sold to the United States. 
For the same reasons related to its inability to provide FOP data, 
Premier claims that it should not be penalized. Premier states that it 
often does not deal with the factory but, rather, with a PRC trading 
company. Under these circumstances, Premier argues, the Department's 
decision to treat Premier as if it were an ``uncooperative'' respondent 
is unwarranted. Premier claims that it responded to every questionnaire 
and provided the requested information that was available to it.

[[Page 6209]]

    Premier states that, in numerous cases, the courts have held that 
the Department cannot penalize a company for failing to provide 
information it does not have, citing Olympic Adhesives v. United 
States, 899 F.2d 1565 (Fed. Cir. 1990) (Olympic Adhesives), and Allied-
Signal Aerospace Company v. United States, 996 F.2d 1185 (Fed. Cir. 
1993) (Allied-Signal). Premier notes that in Allied-Signal (page cite 
omitted) the court reversed the Department's application of a punitive 
BIA to a respondent who had ``supplied as much of the information as it 
could.'' While Premier acknowledges that the issue before the court in 
Allied-Signal was the Department's characterization of a respondent as 
uncooperative, Premier argues that the court's criticism of the 
Department's decision to apply punitive BIA is applicable to the 
circumstances in this review, in which Premier cooperated to the extent 
that it could. Premier contends that subsequent court decisions have 
followed the Olympic Adhesives rationale, ruling that the Department 
cannot apply adverse BIA when deficiencies in a respondent's data are 
due to factors outside its control (citing Usinor Sacilor v. United 
States, 872 F. Supp. 1000 (CIT 1994) (Usinor Sacilor), Zenith v. United 
States, Slip Op. 94-146 (September 19, 1994), and Hyster v. United 
States, 848 F. Supp. 178, 188 (CIT 1994)).
    Premier asserts further that the Department's BIA policy is not 
binding in all cases and that the Department has retreated from its 
policy when the facts warranted doing so. Premier argues that the 
Department has recognized that there are situations in which strict 
application of its BIA policy leads to results which are inconsistent 
with the purpose of the policy, i.e., to treat cooperative respondents 
less harshly than uncooperative respondents. Premier notes that the 
Department has modified its standard two-tiered approach in the past 
where strict application of this methodology would result in 
aberrational margins (citing Certain Steel Products from Mexico, 58 FR 
37352 (July 9, 1993), and Professional Electric Cutting Tools and 
Professional Electric Sanding Grinding Tools from Japan, 58 FR 30144 
(May 26, 1993)). Premier notes that, in Manifattura Emmepi S.p.A. v. 
United States, Slip Op. 93-183 (September 15, 1993), the court upheld 
the Department's decision to apply BIA based on the highest calculated 
rate in the immediately preceding review, when following its 
traditional two-tiered BIA approach would have resulted in a de minimis 
margin. Instead, Premier notes that the Department selected an 
alternative rate which was ``adverse enough.'' Premier claims that 
selecting a rate for a cooperative respondent that is the same as that 
for an uncooperative one will not serve the Department's BIA policy, as 
it would discourage cooperation.
    Premier suggests that, in this case, the Department could 
reasonably use alternatives to its two-tiered methodology. Premier 
proposes that, consistent with the Department's preference to consider 
a respondent's own prior rates when selecting BIA for a ``cooperative'' 
respondent, the Department could apply, as BIA, the highest rate 
calculated for Premier in any prior segment of the proceeding, 0.97 
percent from the 1987-88 and 1988-89 reviews, as well as the rate from 
the LTFV investigation. Premier suggests, alternatively, that the 
Department could select a rate which distinguishes properly between 
uncooperative and cooperative respondents, such that the BIA margin 
selected for ``cooperative'' respondents should not be the same as that 
for ``uncooperative'' respondents.
    Chin Jun states that the Department's application of punitive BIA 
to some of its sales is contrary to legal precedent. Chin Jun claims 
that, in accordance with section 773(e)(2) of the Act, the Department 
may use an adverse inference if it finds that a party has failed to 
cooperate by not acting to the best of its ability to comply with a 
request for information. Chin Jun argues that it has cooperated to the 
best of its ability and, despite its cooperation, the Department has 
drawn an adverse inference and applied punitive BIA. Chin Jun claims 
that, while the Department's preliminary results did not state that the 
BIA rate imposed against Chin Jun was punitive, it clearly was. Chin 
Jun states that the court reaffirmed that, `` in order for the agency's 
application of the best information rule to be properly characterized 
as ``punitive,'' the agency would have had to reject low margin 
information in favor of high margin information that was demonstrably 
less probative of current conditions,'' citing Allied-Signal (page cite 
omitted). Chin Jun claims that this is precisely the case here, in 
which the Department rejected low-margin information available in favor 
of high-margin BIA.
    Chin Jun notes that, while the Department has discretion as to the 
choice of BIA, this discretion must be exercised reasonably (citing 
Holmes Products Corp. v. United States, 795 F. Supp. 1205, 1207 (CIT 
1992)) (Holmes Products). Respondent contends that the Department is 
not permitted to take an overly sweeping view of the authority it is 
granted under section 773(e)(2), citing Olympic Adhesives.
    Chin Jun also claims that the regulations allow the Department to 
consider the degree of a particular respondent's cooperation in the 
administrative review as a factor in determining what constitutes the 
best information available. Chin Jun insists that it did not refuse to 
provide information nor did it significantly impede the review, but 
that it was simply unable to obtain certain FOP information from all of 
its unrelated suppliers. Chin Jun states that the court has ruled that, 
when deficiencies are beyond a respondent's control, the application of 
punitive BIA is improper, citing Usinor Sacilor.
    Chin Jun claims that, in Holmes Products, the Department improperly 
rejected the use of weighted-average information from the respondent 
and applied an adverse BIA rate. The court required the Department to 
use certain data supplied by the respondent, as that respondent had 
substantially complied with the Department's request and could not 
control the conduct of an uncooperative affiliate. Chin Jun adds that 
the court pointed out that use of averaged data for substantially 
complying parties has been approved and applied in other contexts.
    Chin Jun claims that its circumstances are even more compelling 
than those found in Usinor Sacilor and in Holmes Products. Chin Jun 
states that, in this case, the alleged lack of FMV data was a result of 
unrelated third parties'' failure to provide a response to the factors 
questionnaires. Chin Jun asserts that, in Usinor Sacilor and Holmes 
Products, the courts held that the Department cannot punish a 
respondent when a related, yet uncooperative, affiliate did not supply 
requested information and argues that it is even more inexcusable for 
the Department to punish Chin Jun when unrelated, uncooperative parties 
failed to provide certain information.
    Chin Jun states that it is important to view the Department's 
actions in the context of generally accepted litigation parameters such 
as those set forth in the Federal Rules of Civil Procedure. Chin Jun 
claims that Federal Rule of Civil Procedure 45 governing subpoenas only 
directs production of ``designated books, documents, or tangible things 
in the possession, custody or control of that person.'' While the 
Department may lack ``subpoena power'' in an antidumping duty review, 
Chin Jun argues, it is unreasonable for the Department to interpret its 
statutory

[[Page 6210]]

authority as extending beyond the bounds of authority granted by the 
Federal Rules of Civil Procedure. Chin Jun asserts that the Department 
is attempting to do what the courts cannot--punish parties for not 
providing information which is beyond their ``possession, custody or 
control.'' Therefore, Chin Jun reasons, the Department should not apply 
punitive BIA but should opt for a reasonable method to determine BIA.
    Chin Jun states that, for certain of its transactions, as BIA, the 
Department based FMV on the highest dumping margin found in the entire 
review. Chin Jun asserts that the law is well settled, as set out in 
its previous arguments, that the Department cannot apply an adverse BIA 
rate against Chin Jun because it cooperated to the best of its ability. 
Consistent with cited case precedence, Chin Jun states that the 
Department should apply a less-adverse BIA when there is a gap in the 
data or when the missing data are beyond the control of the respondent.
    Chin Jun suggests several options. Chin Jun recommends that the 
Department (1) apply a weighted-average margin based on all calculated 
rates for the other companies, (2) calculate margins for those Chin Jun 
sales using FMV based on data supplied by other respondents, or (3) use 
the weighted-average margin calculated on Chin Jun's sales for which 
FMV data were available. Chin Jun states that these alternatives are in 
accordance with case-law precedent and that the Department must employ 
a methodology that is reasonable, neutral, and non-adverse.
    Petitioner responds that the BIA rate the Department applied to 
Premier was not punitive but was, in fact, a cooperative rate under the 
Department's two-tiered methodology. Petitioner also contends that the 
deficiencies in Premier's response extend beyond a lack of supplier 
data and include significant errors in Premier's U.S. sales database. 
Petitioner argues that, in the event that cooperative and non-
cooperative BIA rates are different for the final results, the 
Department should apply a punitive, non-cooperative BIA rate to Premier 
based on the deficiencies within Premier's own submitted data.
    Petitioner claims that, whereas Chin Jun characterizes as 
``punitive'' the use of other respondents' margins in the period as 
BIA, this is an option in the non-punitive approach to BIA.
    Petitioner agrees that changes are necessary in applying BIA in the 
final results but, contrary to Chin Jun's suggestions, Petitioner 
argues that the Department should apply, as partial BIA, the highest 
margin of any individual transaction. Given a failure to respond to the 
questionnaire or the submission of an unusable response, Petitioner 
asserts that the Department should assume that the dumping margin for 
all relevant transactions is at least as high as the highest dumping 
margin on any other transaction. To do otherwise, Petitioner claims, 
would eliminate or reduce the incentive to comply with the agency's 
requests. Petitioner states that if the highest transaction margin is 
not applied as BIA, respondents are encouraged to selectively withhold 
relevant data, transaction-by-transaction, whenever doing so could 
cause the Department to select a lower ``best information'' margin. 
Thus, Petitioner states, only when Chin Jun's margin on any individual 
transaction is the highest margin for any company should Chin Jun's own 
margins be used as BIA.

Department's Position

    We are using a total BIA rate for Premier due to multiple failures 
on its part to supply information, including the failure to provide, at 
verification, certain information which was within Premier's control. 
In addition to its failure to provide factors information on a 
transaction-specific basis, Premier was unable to identify its 
suppliers accurately or provide the quantities of merchandise supplied 
to the company during the period of review. See Memorandum from 
Analysts to File: Verification Report for Premier Bearing and 
Equipment, Ltd. (October 31, 1995). Premier did not supply information 
necessary to connect its transaction-specific U.S. sales reporting with 
the appropriate FOP data necessary to establish FMV. However, we 
consider Premier to be a cooperative respondent in this review. We note 
that Premier provided timely responses to our initial and supplemental 
questionnaires and participated in a complete verification of all data 
that it submitted in this review. Therefore, we applied to all U.S. 
sales, as cooperative total BIA, the highest calculated rate in this 
review period.
    The Allied-Signal case Premier cites does not support its claim 
that the Department's choice of a BIA rate for Premier is improperly 
adverse. The Allied-Signal court noted in its opinion that the critical 
difference between first-tier (uncooperative) and second-tier 
(cooperative) BIA treatment lay in the range of LTFV margins subject to 
consideration for BIA purposes in the determination underlying the 
version of the two-tiered approach upheld in that case (see 996 F.2d at 
1191). Allied-Signal clearly permits a second-tier margin to be based 
on the highest margin for any respondent in the current review, even if 
a first-tier margin is also based on the same value.
    As indicated in our response to Comment 29, the fact that non-
responsive firms received a lower margin than Premier in the 
Preliminary Results was due to a clerical error. Non-responsive firms 
have not received a lower margin than the second-tier margin we have 
assigned to Premier in these final results.
    Chin Jun provided most of the information we requested but failed 
to provide FOP information with respect to certain models. We did not 
have publicly available FOP data which we could use for the models for 
which Chin Jun failed to supply such data. We do not accept Chin Jun's 
argument that, for these models, we should use factors data from a 
different PRC-based producer, as such data constitute business 
proprietary information. Further, using data from another producer 
might encourage respondents to withhold data on less-efficiently 
produced models in the expectation that the missing data would be 
provided based on the experience of more efficient producers of the 
same models. Therefore, we have determined that the it is appropriate 
to use BIA to establish the dumping margins for the U.S. sales affected 
by the lack of FOP data.
    Under section 776(c) of the Act, we have the authority to use BIA 
``whenever a party or any other person refuses or is unable to produce 
information requested. * * *'' Therefore, the Department can use BIA 
not only when a party ``refuses'' but also when a party is ``unable'' 
to provide information.
    Under our BIA methodology, there are two general types of BIA, 
i.e., ``total BIA'' and ``partial BIA.'' We use ``total BIA'' for a 
respondent whose reporting or verification failure is so extensive as 
to make its entire response unreliable; in this situation, we determine 
the respondent's entire dumping margin on the basis of BIA. We use 
partial BIA, as we have here for Chin Jun, when a party's responses are 
deficient in limited respects yet they are still reliable in most other 
respects. In a ``total BIA'' situation, the choice of a particular BIA 
rate is dependent on whether we consider the respondent to have been 
``cooperative'' or ``uncooperative'' during the review. In a ``partial 
BIA'' situation, in contrast, we regard the respondent as being 
cooperative and the flaws are not so significant or extensive that the 
response as a whole is unusable.

[[Page 6211]]

Instead, the level of partial BIA depends on the size and nature of the 
deficiency and the degree to which the deficiency affects the rest of 
the response.
    Regardless of the particular type of BIA we use, we do not apply a 
neutral figure as BIA, except where there is an inadvertent gap in the 
record or where a minor or insignificant adjustment is involved. None 
of these situations applies to Chin Jun in this case. BIA is intended 
to be adverse, even in a ``partial BIA'' situation, because one purpose 
of the BIA provision of the statute is to induce respondents to provide 
timely, complete and accurate information. Chin Jun's claim that we may 
use an adverse inference only if we have found that a party ``has 
failed to cooperate by not acting to the best of its ability to comply 
with a request for information'' (citing section 773(e)(2)) does not 
apply to this review because this review is being conducted under the 
Act as it stood on December 31, 1994, which did not contain this 
provision. Chin Jun's recourse to Allied-Signal is likewise misplaced. 
Although the Department's choice of BIA rejects the low-margin 
information Chin Jun proposes over higher-margin BIA, Chin Jun has not 
shown that the higher-margin information is ``demonstrably less 
probative of current conditions,'' as required by Allied-Signal. 
Because Chin Jun did not provide FOP information which would allow us 
to calculate margins for certain models, there are no data on record 
showing the actual rates for these models to be less than 25.56 
percent, which is the highest rate determined in this review. 
Therefore, as BIA, we have applied this rate to those U.S. sales 
affected by the missing FOP information.

Comment 31

    Chin Jun states that, for the preliminary results, the dumping 
margins and sales value for Wafangdian and Jilin are aberrational. Chin 
Jun notes that the number of sales that these two companies had 
compared to the total sales that the Department reviewed for this 
administrative review is small and that the highest rate calculated for 
any other exporter in the preliminary results for this review is 12.06 
percent while Wafangdian received a rate of 75.87 percent and Jilin 
received a rate of 60.91 percent. Moreover, Chin Jun presumes that it 
is probable that all companies, except Wafangdian and Jilin, will have 
final antidumping rates of less than 12 percent. As such, Chin Jun 
contends that Wafangdian's and Jilin's dumping margins are aberrational 
in all respects and should not be used as the basis for BIA for any of 
Chin Jun's transactions.

Department's Position

    As a result of corrections and changes noted elsewhere, we have 
recalculated respondents' margins for these final results. The highest 
rate for this review period is 25.56 percent. As we explained in our 
response to Comment 30, this is an appropriate cooperative-BIA rate for 
those U.S. sales for which Chin Jun was unable to supply factors data.

Comment 32

    Chin Jun claims that the Department applied BIA to certain sales of 
models for which it had provided FOP data. Therefore, Chin Jun argues, 
the Department should not use BIA to establish FMV for these models.

Department's Position

    We agree with Chin Jun. As discussed in our response to Comment 26, 
we have corrected clerical errors in the identifying model numbers. 
This allows us to compare sales data for the models in question with 
the corresponding factors data.

Comment 33

    Chin Jun notes that the Department used a profit rate of 10.85 
percent based on information contained in the SKF report. Chin Jun 
points out that SKF India is related to SKF Sweden and, therefore, the 
transfer prices and other related-party transactions between parent and 
subsidiary could radically affect profit margins. Thus, Chin Jun 
argues, the Department should use the statutory minimum of eight 
percent to establish a surrogate value for profit.
    Petitioner responds that it is not clear what Chin Jun's comments 
regarding SKF India's relationship to SKF Sweden are supposed to mean 
nor what results would obtain if the claim were true. In any event, 
Petitioner asserts, Chin Jun did not provide any evidence that related-
party transactions occurred or, if they did, that they affected SKF 
India's profits or other results in any way. Petitioner argues that the 
Department should use SKF India's actual profit in the final results, 
recalculated to reflect the changes to overhead and SG&A as asserted in 
Comment 2

Department's Position

    We agree with Petitioner. While calculating the profit ratio using 
the data provided in the SKF report, we noted that SKF India is related 
to SKF Sweden. Chin Jun did not provide any information to support its 
statement that the transactions between SKF India and its Swedish 
parent could radically affect profit margins. Therefore, for the final 
results, we have applied the calculated profit ratio based on the SKF 
India's Annual Report as the surrogate value for profit.

Comment 34

    Transcom Inc. (Transcom) and L&S Bearing Company (L&S), domestic 
importers of subject merchandise, argue that the Department's decision 
to apply what they consider to be punitive BIA appraisement and deposit 
rates to companies that were never part of the review is unlawful. 
Transcom and L&S state that, for this review, there were various 
companies from which they purchased subject merchandise, none of which 
received a questionnaire or was named in the notice of initiation of 
review. Transcom states that entries from each of the unnamed companies 
were subject to estimated antidumping duty deposits at the ``all 
others'' rate in effect at the time of entry and argues that the 
Department is precluded as a matter of law from either assessing final 
antidumping duties on the unreviewed companies at any rate other than 
that at which estimated antidumping duty deposits were made or imposing 
the new BIA-based deposit rate on shipments from unreviewed companies.
    In particular, Transcom says that it purchased bearings from Gold 
Hill International Trading and Services Company (Gold Hill), a Hong 
Kong-based company. Transcom contends that Gold Hill did not request a 
review, was not named in the notice of initiation for this review, and 
did not receive a questionnaire or any other request for information or 
participation in this review. Transcom claims that the Department 
appears to have imposed punitive assessment and deposit rates on Gold 
Hill by including Gold Hill's exports under the BIA rates for ``all 
other'' PRC exporters and argues that the Department is precluded as a 
matter of law from either assessing final antidumping duties on the 
unreviewed companies at any rate other than that at which estimated 
antidumping duty deposits were made or imposing the new BIA deposit 
rate on the unreviewed companies.
    Transcom and L&S, citing section 751(a) of the Act, state that the 
Department is directed to determine the amount of antidumping duties to 
be imposed pursuant to periodic reviews. They add that, in accordance 
with 19 CFR 353.22(e), unreviewed companies are subject to automatic 
assessment of antidumping duties and a deposit of estimated duties at 
the rate previously established. Transcom and L&S note

[[Page 6212]]

that the CIT has concluded that, in situations where a company's 
entries are not reviewed, the prior cash deposit rate from the LTFV 
investigation becomes the assessment rate, ``which must in turn become 
the new cash deposit rate for that company'' (citing Federal Mogul 
Corp. v. United States, 822 F. Supp. 782, 787-88 (CIT 1993) (Federal 
Mogul II)). Transcom and L&S claim that the CIT has affirmed this 
rationale in other, more recent, decisions as well, concluding that the 
Department's use of a new ``all other'' rate calculated during a 
particular administrative review as the new cash deposit rate for 
unreviewed companies which have previously received the ``all other'' 
rate is not in accordance with law (citing Federal Mogul Corp. v. 
United States, 862 F. Supp. 384 (CIT 1994), and UCF America, Inc. v. 
United States, 870 F. Supp. 1120, 1127-28 (CIT 1994) (UCF America)).
    Based on these CIT decisions, Transcom says that an exporter that 
is not under review would have no reason to anticipate that antidumping 
duties assessed on its merchandise would vary from the amount 
deposited. Transcom notes that Federal Mogul II (at 788) states that 
parties rely on the cash deposit rates in making their decision whether 
to request an administrative review of certain merchandise. In view of 
the Department's regulations, Transcom claims that the absence of any 
notice from the Department that unnamed companies faced the possibility 
of increased antidumping duty liability is fundamentally prejudicial to 
the unnamed companies. Transcom states that previous attempts by the 
Department to impose the BIA rate on an exporter neither named in the 
review request nor in the notice of initiation have been overturned, 
citing Sigma Corp. v. United States, 841 F. Supp. 1255 (CIT 1993) 
(Sigma Corp. I). In that case, Transcom contends, the CIT held that the 
Department was required to provide the company in question adequate 
notice to defend its interests and, because it failed to do so, ordered 
that the merchandise exported by that company was to be liquidated at 
the entered deposit rate.
    Transcom argues that the Department's statement that all exporters 
of subject merchandise are ``conditionally covered by this review'' 
(Initiation of Antidumping Duty Administrative Reviews and Request for 
Revocation in Part (Initiation Notice), 59 FR 43537, 43539 (August 24, 
1994)) is inadequate in that it fails to explain under what 
``conditions'' exporters are covered and whether such ``conditions'' 
were met. If the statement is meant to include unconditionally all 
unnamed exporters, Transcom asserts that it is contrary to the 
regulatory requirement at 19 CFR 353.22(a)(1) that the review cover 
``specified individual producers or resellers covered by an order.'' 
Because Gold Hill was never served notice that it was subject, 
conditionally or otherwise, to review, Transcom claims that the 
Department is precluded from applying a punitive rate to the company's 
exports.
    Transcom contends that, in accordance with section 776 of the Act, 
the Department must have requested and been unable to obtain 
information before applying punitive BIA. Transcom claims that the 
Department may not resort to BIA ``because of an alleged failure to 
provide further explanation when that additional explanation was never 
requested'' (quoting Olympic Adhesives at 1574 and citing Mitsui & Co., 
Ltd. v. United States, 18 CIT 185 (March 11, 1994), and Usinor).
    Transcom states that, if the Department assigns the unreviewed 
exporters the ``all other'' BIA rate, the Department should not apply 
this rate to exports of TRBs by Gold Hill, a private trading company 
located in Hong Kong. Transcom contends that there is no basis for 
assessing it with the punitive Chinese ``all other'' rate on the 
premise that it failed to demonstrate independence from the central 
Chinese government; as a Hong Kong company, it necessarily cannot be 
subject to such control.
    L&S requests that the Department liquidate the company's imports 
which came from companies that were not specifically reviewed at the 
entered rate rather than the punitive ``PRC-wide'' rate. L&S states 
that the prospective deposit rate for these unreviewed companies should 
be 2.96 percent--the ``all others'' rate in the initial investigation.
    Petitioner notes that the Preliminary Results state at 49576 that, 
``for other non-PRC exporters of subject merchandise from the PRC, the 
cash deposit rate will be the one applicable to the PRC supplier of 
that exporter.'' Petitioner claims that this situation clearly includes 
Gold Hill. Petitioner also states that it is its intention that all 
exporters are covered by this review and points out that the 
Department's notice of initiation at 43539 specified that all ``other 
exporters . . . are conditionally covered.'' Therefore, Petitioner 
argues, Gold Hill and all other suppliers of Transcom not entitled to a 
separate rate should be expressly listed in the final results as among 
those to which the ``PRC rate'' applies.

Department's Position

    We disagree with Transcom and L&S. It is our policy to treat all 
exporters of subject merchandise in NME countries as a single 
government-controlled enterprise and assign that enterprise a single 
rate, except for those exporters which demonstrate an absence of 
government control, both in law and in fact, with respect to exports. 
We discussed our guidelines concerning the de jure and de facto 
separate-rates analyses, as well as the company-specific separate-rates 
determinations, in the Preliminary Results at 49572-49573. We have 
determined that companies in the government-controlled enterprise 
failed to respond to our requests for information and, accordingly, we 
have established the rate applicable to such companies (the PRC rate) 
using uncooperative BIA. As discussed below, the Act mandates 
application of BIA for such companies because they were properly 
included in the review and did not respond to the Department's requests 
for information.
    Pursuant to our NME policy, all PRC exporters or producers that 
have not demonstrated that they are separate from PRC government 
control are presumed to belong to a single, state-controlled entity 
(the ``NME entity''), for which we must calculate a single rate (the 
``PRC rate'). The CIT has upheld our presumption of a single, state-
controlled entity in NME cases. See UCF America, Inc. v. United States, 
870 F. Supp. 1120, 1126 (CIT 1994), Sigma Corp I, and Tianjin Machinery 
Import & Export Corp. v. United States, 806 F. Supp. 1008, 1013-15 (CIT 
1992). Section 353.22(a) of our regulations allows interested parties 
to request an administrative review of an antidumping duty order once a 
year during the anniversary month. This regulation states specifically 
that interested parties must list the ``specified individual 
producers'' to be covered by the review (see 19 CFR 353.22(a) (1994)). 
In the context of NME cases, we interpret this regulation to mean that, 
if at least one named producer or exporter does not qualify for a 
separate rate, all exporters that are part of the NME entity are part 
of the review. On the other hand, if all named producers or exporters 
are entitled to separate rates, the NME entity is not represented in 
the review and, therefore, the NME rate remains unchanged (accord 
Federal-Mogul II at 788 (``(i)n a situation where a company's entries 
are unreviewed, the prior cash deposit rate from the LTFV investigation 
becomes the assessment rate, which must in turn

[[Page 6213]]

become the new cash deposit rate for that company'')).
    In these reviews, numerous companies named in the notice of 
initiation did not respond to our questionnaires. On July 26, 1994, we 
sent a letter to the PRC embassy in Washington and to the Ministry of 
Foreign Trade and Economic Cooperation (MOFTEC) in Beijing, requesting 
the identification of TRB producers and manufacturer, as well as 
information on the production of TRBs in the PRC and the sale of TRBs 
to the United States. MOFTEC informed us that the China Chamber of 
Commerce for Machinery and Electronics Products Import & Export (CCCME) 
was responsible for coordinating the TRBs case. MOFTEC also said it 
forwarded our letter and questionnaire to the CCCME. On August 31, 1994 
we sent a copy of our letter and the questionnaire directly to the 
CCCME, asking that the questionnaire be transmitted to all companies in 
the PRC that produced TRBs for export to the United States and to all 
companies that exported TRBs to the United States during the POR.
    Because we did not receive information concerning many of the 
companies named in the notice of initiation, we have presumed that 
these companies are under government control. In accordance with our 
NME policy, therefore, the government-controlled enterprise, which is 
comprised of all exporters of subject merchandise that have not 
demonstrated they are separate from PRC control, is part of this review 
and we must assign a ``PRC rate'' to that enterprise. As we did not 
receive responses from these exporters, we have based the PRC rate on 
BIA, pursuant to section 776(c) of the Act. This rate will form the 
basis of assessment for this review as well as the cash deposit rate 
for future entries.
    We acknowledge a recent CIT decision cited by Transcom and by L&S, 
UCF America Inc. v. United States, Slip Op. 96-42 (CIT Feb. 27, 1996), 
in which the Court affirmed the Department's remand results for 
reinstatement of the relevant cash deposit rate but expressed 
disagreement with the PRC-rate methodology which formed the underlying 
rationale for reinstatement. The Court raised various concerns with the 
Department's application of a PRC rate.
    The Court suggested that the Department lacks authority for 
applying a PRC rate in lieu of an ``all others'' rate. However, despite 
the concerns expressed by the Court, it is the Department's view that 
it has the authority to use the PRC rate in lieu of an ``all others'' 
rate. See Heavy Forged Hand Tools, Finished or Unfinished, With or 
Without Handles, from the People's Republic of China; Preliminary 
Results of Antidumping Duty Administrative Review, 61 FR 15218, 15221 
(April 5, 1996).
    The PRC rate is consistent with the statute and regulations. 
Section 751(a) requires the Department to determine individual dumping 
margins for each known exporter or producer. As discussed above, in NME 
cases, all producers and exporters which have not demonstrated their 
independence are deemed to comprise a single exporter. Thus, we assign 
the PRC rate to the NME entity just as we assign an individual rate to 
a single exporter or producer, or group of related exporters or 
producers, operating in a market economy. Because the PRC rate is the 
equivalent of a company-specific rate, it changes only when we review 
the NME entity. As noted above, all exporters or producers will either 
qualify for a separate company-specific rate or will be part of the NME 
enterprise and receive the PRC rate. Consequently, whenever the NME 
enterprise has been investigated or reviewed, calculation of an ``all 
others'' rate for PRC exporters is unnecessary.
    Thus, contrary to the argument by Transcom and L&S, the 
Department's automatic-assessment regulation (19 CFR 353.22(e)) does 
not apply to this review except in the case of companies that 
demonstrate that they are separate from PRC government control and are 
not part of this review, as discussed below.
    We also disagree with the assertion by Transcom and L&S that 
companies not named in the initiation notices did not have an 
opportunity to defend their interests by demonstrating their 
independence from the PRC entity. Any company that believes it is 
entitled to a separate rate may place evidence on the record supporting 
its claim. The company referenced by Transcom and L&S made no such 
showing, despite our efforts to transmit the questionnaire to all PRC 
companies that produce TRBs for export to the United States.
    Furthermore, Transcom's argument that the BIA-based PRC-wide rate 
cannot be applied to exports by Gold Hill because Gold Hill is a Hong 
Kong company rather than a PRC company are also unfounded. Because Gold 
Hill's Chinese suppliers did not respond to the Department's 
questionnaire, we were unable to determine, with respect to sales by 
Gold Hill, whether Gold Hill or the Chinese suppliers were the first 
sellers in the chain of distribution to know that the merchandise they 
sold was destined for the United States. See Yue Pak, Ltd. v. United 
States, Slip Op. 96-65, at 6 (CIT April 18, 1996)(citing section 
773(f)). When resellers choose to use uncooperative suppliers that are 
under a dumping order, they must bear the consequences. See Yue Pak at 
16. Otherwise, uncooperative PRC producers would be free to hide behind 
and continue exporting through low-rate Hong Kong exporters.

Comment 35

    Petitioner opposes revocation of the order with respect to 
Shanghai, claiming: (1) That it is unlikely the final results in the 
three reviews at issue would demonstrate consecutive periods of de 
minimis margins for Shanghai; (2) under the other circumstances of this 
case, it is likely that those persons will in future sell subject 
merchandise at less than FMV; and (3) Shanghai's three years of no 
dumping would be too remote in time to serve as a basis for revocation.
    Petitioner claims that the preliminary de minimis margin for 
Shanghai was based on results that contain serious and obvious errors. 
Petitioner contends that as a result of corrections and changes made 
due to such errors, which have been noted elsewhere, the final results 
will likely yield increased dumping margins.
    Petitioner also argues that, although a joint-venture company with 
a producer in a market-economy country, Shanghai is still mostly owned 
by the PRC-based partner and, thus, all of the people of the PRC. 
Therefore, Petitioner asserts, it would be irrational to ignore 
Shanghai's relationship to other producers and exporters for purposes 
of revocation. Petitioner notes that, in those instances in which the 
Department has revoked orders in NME cases, it has always done so in 
toto, citing Titanium Sponge From Georgia, Revocation of the 
Antidumping Finding, 60 FR 57219 (November 14, 1995), and Ceiling Fans 
From the People's Republic of China: Final Results of Changed 
Circumstances Review and Revocation of Antidumping Duty Order, 60 FR 
14420 (March 17, 1995). Petitioner argues that the Department has never 
revoked an order applicable to an NME country with respect to an 
individual company previously found to have dumped merchandise in the 
United States.
    Furthermore, Petitioner claims, the Department cannot reasonably 
predict that Shanghai is unlikely to make sales at less than FMV in the 
future. Because of recent legislative changes under the Uruguay Round 
Agreements, Petitioner argues, ESP adjustments (discussed in Comment 14 
above) will be mandated in

[[Page 6214]]

reviews subsequent to this review. Petitioner asserts that, even if the 
Department holds to the position taken in the preliminary results and 
makes no such adjustment in this review, mandatory adjustments in 
subsequent reviews are likely to result in higher margins.
    Finally, Petitioner insists that congressional intent is that the 
Department should always use the most up-to-date information available 
(citing Freeport Minerals, 776 F.2d at 1032, Al Tech Specialty Steel 
Corp. v. United States, 745 F.2d 632, 640, and H.R. Rep. No. 317, 96th 
Cong., 1st Sess. 77 (1979)). Given that the three reviews in question 
are behind schedule, Petitioner argues that a decision on revocation 
should not be made until after the final results of the 1994-95 review 
are known and have been verified.
    Shanghai replies that the Department has, pursuant to its 
regulations, the discretion to revoke the order with respect to 
producers in NME countries and that Petitioner is asking the Department 
to ignore the plain language of 19 CFR 353.25(a)(2)(i)-(iii). Shanghai 
adds that nothing in the Department's regulations authorizes the 
exclusion of NME producers from the scope of the revocation procedures.
    Shanghai argues that all available evidence establishes that sales 
at less than FMV are not likely in the future, asserting that, instead, 
there is a clear pattern of sales at not less than FMV. Shanghai points 
out that it has submitted written certification of its agreement to 
immediate reinstatement in the future if the Department concludes that 
Shanghai is engaged in sales at less than FMV. Shanghai also refutes 
Petitioner's argument that the nature of its ``relationship'' to all 
other PRC producers and exporters makes revocation of the order with 
respect to Shanghai irrational. Shanghai states that, where Petitioner 
assumes central planning and collaboration, the Department has found 
none, hence, its granting of separate rates to Shanghai and others.
    Finally, Shanghai argues, if the Department determines to revoke 
the order with respect to Shanghai, the decision will be based on the 
results of the three most recent reviews. Shanghai states that there is 
no more timely information on which to base this decision than the 
current and the two preceding reviews.

Department's Position

    We agree with Shanghai. The regulations do not distinguish between 
market-economy companies'' and NME companies'' eligibility for 
revocation. We have determined that Shanghai is entitled to a rate 
separate from other PRC producers and exporters. Further, Shanghai has 
complied with sections 353.25(b) and 353.25(a)(2)(iii) of the 
Department's regulations.
    Finally, although the three reviews in question have been delayed, 
it was not due to any fault on the part of Shanghai. Additionally, 
these reviews do represent the most up-to-date information on which to 
base this decision.

Final Results of Review

    As a result of our analysis of the comments we received, we 
determine the following weighted-average margins to exist:

------------------------------------------------------------------------
                                                                 Margin 
                    Manufacturer/exporter                      (percent)
------------------------------------------------------------------------
Premier Bearing and Equipment, Limited 1.....................      25.56
Guizhou Machinery Import and Export Corporation..............       1.22
Henan Machinery and Equipment Import and Export Corp.........       0.16
Luoyang Bearing Factory......................................       0.00
Shanghai General Bearing Company, Ltd........................       0.04
Jilin Machinery Import and Export Corporation................      25.56
Chin Jun Industrial Ltd......................................       4.28
Wafangdian Bearing Factory...................................       1.28
Liaoning Machinery Import and Export Corp....................       4.01
China National Machinery Import and Export Corp..............       0.00
China Nat'l Automotive Industry Import and Export Corp.......       0.46
Tianshui Hailin Import and Export Corp.......................       0.00
Zhejiang Machinery Import and Export Corp....................       4.32
PRC Rate 2...................................................      25.56
------------------------------------------------------------------------
\1\ As cooperative BIA, we assigned the higher of 1) the highest rate   
  ever applicable to that company in the investigation or any previous  
  review; or 2) the highest calculated margin for any respondent that   
  supplied an adequate response in this review.                         
\2\ Parties that were named in the initiation but are not listed above  
  did not respond to the questionnaire or did not respond to the        
  supplemental questionnaire; therefore, as uncooperative BIA, we       
  assigned the highest rate calculated in the investigation or in this  
  or any other review of sales of subject merchandise from the PRC. This
  does not constitute a separate-rate finding for the firms that        
  received the PRC rate.                                                

    We determine that, for the period June 1, 1993 through May 31, 
1994, Shanghai had a weighted-average antidumping duty margin of 0.04 
percent. We further determine that Shanghai has sold subject 
merchandise at not less than FMV for three consecutive review periods, 
including this review period, and Shanghai has made the appropriate 
certification. Therefore, the Department is revoking the order with 
respect to subject merchandise produced and exported by Shanghai in 
accordance with section 751(c) of the Act and 19 CFR 353.25.
    This revocation applies to all entries of subject merchandise 
entered, or withdrawn from warehouse, for consumption on or after June 
1, 1994. The Department will order the suspension of liquidation ended 
for all such entries and will instruct the Customs Service to release 
any cash deposit or bonds. The Department will further instruct the 
Customs Service to refund, with interest, any cash deposits on post-
June 1, 1994 Shanghai entries. In addition, the Department will 
terminate the review covering subject merchandise with respect to 
Shanghai's sales during the period June 1, 1994 through May 31, 1995, 
which was initiated August 16, 1995 (60 FR 42500). The Department will 
also terminate the review covering subject merchandise with respect to 
Shanghai's sales during the period June 1, 1995 through May 31, 1996 
which was initiated August 8, 1996 (61 FR 41373).
    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. Individual 
differences between USP and FMV may vary from the percentages stated 
above. The Department will issue appraisement instructions directly to 
the Customs Service.
    Furthermore, the following cash deposit requirements will be 
effective upon publication of these final results for all shipments of 
the subject merchandise entered, or withdrawn from warehouse, for 
consumption on or after the publication date, as provided for by 
section 751(a)(1) of the Act: (1) for the companies named above that 
have separate rates and were reviewed (Premier, Guizhou Machinery, 
Henan, Jilin, Luoyang, Liaoning, Chin Jun, Tianshui, Zhejiang, CMC, 
China National Automotive Industry Import and Export Guizhou, and 
Wafangdian), the cash deposit rates will be the rates for these firms 
established in these final results of review; (2) for Xiangfan 
International Trade Corporation, which we determine to be entitled to a 
separate rate, the rate will continue be that which currently applies 
(8.83 percent); (3) for all remaining PRC exporters, all of which were 
found not to be entitled to separate rates, the cash deposit will be 
25.56 percent; and (4) for other non-PRC exporters of subject 
merchandise from the PRC, the cash deposit rate will be the rate 
applicable to the PRC supplier of that exporter. These deposit 
requirements shall remain in effect until publication of the final 
results of the next administrative review.

[[Page 6215]]

    This notice serves as a reminder to importers of their 
responsibility under 19 CFR 353.26 to file a certificate regarding the 
reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This notice also serves as a reminder to parties subject to APOs of 
their responsibility concerning disposition of proprietary information 
disclosed under APO in accordance with 19 CFR 353.34(d). Timely written 
notification of the return/destruction of APO materials or conversion 
to judicial protective order is hereby requested. Failure to comply 
with the regulations and the terms of an APO is a sanctionable 
violation.
    This administrative review, revocation, and notice are in 
accordance with section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 
19 CFR 353.22 and 353.25.

    Dated: February 3, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-3356 Filed 2-10-97; 8:45 am]
BILLING CODE 3510-DS-P