[Federal Register Volume 62, Number 49 (Thursday, March 13, 1997)]
[Notices]
[Pages 11825-11843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-6375]
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DEPARTMENT OF COMMERCE
[A-588-604, A-588-054]
Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or
Less in Outside Diameter, and Components Thereof, From Japan; Final
Results of Antidumping Duty Administrative Reviews and Termination in
Part
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty administrative
reviews and termination in part.
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SUMMARY: On November 6, 1996, the Department of Commerce (the
Department) published the preliminary results of its 1994-95
administrative reviews of the antidumping duty order on tapered roller
bearings (TRBs) and parts thereof, finished and unfinished, from Japan
(A-588-604), and of the finding on TRBs, four inches or less in outside
diameter, and components thereof, from Japan (A-588-054). The review of
the A-588-054 finding covers one manufacturer/exporter and seven
resellers/exporters of the subject merchandise to the United States
during the period October 1, 1994, through September 30, 1995. The
review of the A-588-604 order covers two manufacturers/exporters, seven
resellers/exporters, four firms identified by the petitioner in this
case as forging producers, and the period October 1, 1994, through
September 30, 1995.
We gave interested parties an opportunity to comment on our
[[Page 11826]]
preliminary results. Based upon our analysis of the comments received
we have changed the results from those presented in our preliminary
results of review.
EFFECTIVE DATE: March 13, 1997.
FOR FURTHER INFORMATION CONTACT: Valerie Owenby or John Kugelman,
Office of AD/CVD Enforcement III, Office 8, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, N.W., Washington, D.C. 20230,
telephone: (202) 482-0145 or 482-0649, respectively.
SUPPLEMENTARY INFORMATION:
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are in
reference to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to the Department's regulations are to the
current regulations, as amended by the interim regulations published in
the Federal Register on May 11, 1995 (60 FR 25130).
Background
On August 18, 1976, the Treasury Department published in the
Federal Register (41 FR 34974) the antidumping finding on TRBs from
Japan, and on October 6, 1987, the Department published the antidumping
duty order on TRBs from Japan (52 FR 37352). On October 5, 1995 (60 FR
52149), the Department published the notice of ``Opportunity to Request
an Administrative Review'' for both TRBs cases. The petitioner, the
Timken Company (Timken), and two respondents requested administrative
reviews. We initiated the A-588-054 and A-588-604 administrative
reviews for the period October 1, 1994, through September 30, 1995, on
November 11, 1995 (60 FR 57573). On November 6, 1996, we published in
the Federal Register the preliminary results of the 1994-95
administrative reviews of the antidumping duty order and finding on
TRBs from Japan (see, Tapered Roller Bearings and Parts Thereof,
Finished and Unfinished, from Japan, and Tapered Roller Bearings, Four
Inches or Less in Outside Diameter, and Components Thereof, from Japan;
Preliminary Results of Antidumping Duty Administrative Reviews and
Termination in Part, 61 FR 57391 (November 6, 1996) (1994-95 TRB
Prelim)). We held a hearing for the 1994-95 administrative reviews of
both the A-588-054 and A-588-604 TRBs cases on December 20, 1996. The
Department has now completed these reviews in accordance with section
751 of the Act, as amended.
Scope of the Review
Imports covered by the A-588-054 finding are sales or entries of
TRBs, four inches or less in outside diameter when assembled, including
inner race or cone assemblies and outer races or cups, sold either as a
unit or separately. This merchandise is classified under the Harmonized
Tariff Schedule (HTS) item numbers 8482.20.00 and 8482.99.30.
Imports covered by the A-588-604 order include TRBs and parts
thereof, finished and unfinished, which are flange, take-up cartridge,
and hanger units incorporating TRBs, and tapered roller housings
(except pillow blocks) incorporating tapered rollers, with or without
spindles, whether or not for automotive use. Products subject to the A-
588-054 finding are not included within the scope of this order, except
for those manufactured by NTN Corporation (NTN). This merchandise is
currently classifiable under HTS item numbers 8482.99.30, 8483.20.40,
8482.20.20, 8483.20.80, 8482.91.00, 8484.30.80, 8483.90.20, 8483.90.30,
and 8483.90.60. These HTS item numbers and those for the A-588-054
finding are provided for convenience and Customs purposes. The written
description remains dispositive.
The period for each review is October 1, 1994, through September
30, 1995. The A-588-054 reviews cover TRB sales by one TRB
manufacturer/exporter (Koyo Seiko Ltd. (Koyo)), and seven resellers/
exporters (Honda Motor Corporation (Honda), Fuji Heavy Industries
(Fuji), Kawasaki Heavy Industries (Kawasaki), Yamaha Motor Company Ltd.
(Yamaha), Nigata Convertor Co. Ltd. (Nigata), Suzuki Motor Company Ltd.
(Suzuki), and Toyosha Company Ltd. (Toyosha)). The reviews of the A-
588-604 case cover TRB sales by two manufacturers/exporters (Koyo and
NTN), seven resellers/exporters (Honda, Fuji, Yamaha, Kawasaki, Nigata,
Suzuki, and Toyosha), and four firms identified by the petitioner as
forging producers (Nittetsu Bolten (Nittetsu), Showa Seiko Company Ltd.
(Showa), Ichiyanagi Tekko (Ichiyanagi), and Sumikin Seiatsu (Sumiken)).
As explained in our preliminary results of review, we have
terminated the A-588-054 review for Honda and Toyosha, and the A-588-
604 review for NTN, Koyo, Ichiyanagi, Sumikin, and Toyosha (see 1994-95
TRB Prelim at 7392). As also explained in our preliminary results, we
have used 47.63 percent in the A-588-054 case and 40.37 percent in the
A-588-604 case as total adverse facts available for Yamaha, Kawasaki,
Nigata, and Suzuki (see id.). In addition, because Fuji, Honda, Showa,
and Nittetsu had no shipments in the A-588-604 review, for the reasons
explained in our notice of preliminary results, we have not assigned a
rate to these firms for these final results (see id.). The period of
review (POR) for both cases is October 1, 1994, through September 30,
1995.
Analysis of Comments Received
We received case briefs from Koyo, Fuji, and Timken on December 6,
1996. We received rebuttal briefs from the same three parties on
December 13, 1996. In addition, on December 20, 1996, we reopened the
record for the A-588-054 review for Koyo in order to receive additional
comments from Koyo and Timken concerning Koyo's downward adjustment to
its U.S. indirect selling expenses for those imputed interest expenses
it incurred when financing antidumping duty cash deposits. We received
these additional comments from Koyo on December 27, 1996, and from
Timken on January 3, 1997. These comments, as well as those which were
contained in all of the case and rebuttal briefs we received, are
addressed below in the following order:
1. Adjustments to United States Price
2. Adjustments to Normal Value
3. Cost of Production and Constructed Value
4. Miscellaneous Comments Related to Assessment, Level of Trade, the
Arm's-Length Test, and the 20% Difference-in-Merchandise Test
5. Clerical Errors
1. Adjustments to United States Price
Comment 1: Timken argues that the Department's preliminary results
decision to accept Koyo's downward adjustment to its U.S. indirect
selling expenses for interest expenses incurred when financing cash
deposits is unclear. Timken asserts that the Department did not address
issues concerning the exact nature of the calculation, such as (1) how
long a respondent may adjust its expenses for a given duty deposit, (2)
whether a respondent may deduct for interest on duty deposits for as
long as the order exists, (3) whether liquidation and the conversion of
the deposits into actual payments terminates the right to claim the
adjustment, and, if so, why, (4) whether the fact that a respondent
expenses its payments on duty deposits in the year they occur has any
bearing on the issue, and (5) if the respondent
[[Page 11827]]
is subject to more than one order, whether interest payments on duty
deposits on entries subject to some other order may be allocated as an
adjustment to expenses for imports under the subject order.
Timken further contends that, as a result, the Department has
provided no idea of what information is required from a respondent to
justify this adjustment. For example, Timken states, (1) if the
Department allows the adjustment only for interest on deposits made
during the POR, the record must contain information on what deposits
the respondent made during the POR, (2) if the Department allows the
adjustment for all deposits previously made, the record must contain
the sum of these deposits, (3) if liquidation ends the right to the
adjustment, the record must allow the Department to determine which
entries have been liquidated and which deposits were converted to
actual payments so that such deposits are not included in the sum for
which the interest expenses are calculated, and (4) if only interest on
deposits made for subject merchandise is allowed, the record must
indicate that any importer of merchandise subject to more than one
order properly separated its interest claims. Because the Department
has failed to address these issues, Timken argues, it is unable to
comment on the reasonableness of the Department's policy.
Nevertheless, for the purpose of further discussion, Timken
presumes that the Department's apparent policy is to allow interest
expenses attributable to deposits on subject merchandise until the
entries associated with such deposits have been liquidated, and makes
the following arguments:
First, Timken states that, under this approach, the act of
liquidation transforms duty deposits from an ongoing burden to the
importer in the form of interest payments into actual expenses which
can be written off the importer's books. Timken contends that this is
contrary to the 1979 legislation, in which Congress changed the
antidumping law to require the payment of cash deposits and the payment
of interest on underdeposits. Timken claims that it was Congress'
intent that no party benefit from any delay in payment and, as a
result, it made it clear that actual antidumping duties must be paid at
the time of import and that subsequent adjustments for over-or under-
payment should be coupled with interest payments to approximate as
closely as possible the payment of actual duties at the time of import.
Timken contends that by accepting an adjustment for the interest
expenses attributable to all cash deposits previous to the POR, the
Department, in essence, is treating cash deposits as something other
than an actual payment of antidumping duties and is, therefore, acting
contrary to the expressed intent of Congress.
Second, Timken argues that, by allowing an adjustment for interest
expenses attributable to all previous cash deposits, the Department
provides respondents with a mechanism to mask dumping because the
adjustment has the effect of reducing the ad valorem duty deposit rate
over time. As a result, Timken asserts, the Department's policy will
encourage respondents to prolong and delay liquidation as long as
possible, knowing that as long as liquidation is delayed, they can
reduce the margin determined for any ongoing dumping.
Third, Timken argues that Koyo has failed to meet its obligation to
document its claimed adjustment. Therefore, Timken asserts, because
Koyo has not provided any information to support its adjustment, the
Department has limited information to determine whether Koyo's claim is
reasonable.
Finally, Timken argues that because the record demonstrates that
Koyo expensed this interest on cash deposits, Koyo is claiming an
adjustment for interest expenses which it has already written off for
accounting purposes. In addition, using information on the record,
Timken calculates a figure reflecting the actual amount of duty
deposits for which Koyo would have incurred interest and, based on the
fact that this figure does not correspond to the total cash deposits
Koyo reported in its financial statements, Timken concludes that Koyo's
claimed adjustment amount is inaccurate.
Koyo argues that the Department properly excluded those imputed
interest expenses Koyo incurred when financing its cash deposits. Koyo
asserts that, since the publication of the preliminary results for
these TRB reviews, the Department has clearly articulated a policy
concerning these interest expenses in the antifriction bearings (AFB)
case (Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, et. al.; Final Results of Antidumping Duty
Administrative Reviews and Partial Termination of Administrative
Reviews, 61 FR 66472 (December 17, 1996 ) (AFBs 93-94)) and in the
Department's September 20, 1996, final remand results pursuant to
Federal-Mogul Corp. and the Torrington Company v. United States, Slip
Op. 96-37 (February 13, 1996) (Federal-Mogul Final Remand Results)).
Koyo states that the Department has explained that the imputed expenses
in question are comparable to expenses for legal fees related to
antidumping proceedings because they were incurred only because of the
antidumping duty order. As a result, these expenses cannot be
categorized as selling expenses (AFBs 93-94 at 66488 and Federal-Mogul
Remand Results at Comment 5). Koyo argues that this policy is in
accordance with section 751(d)(1) of the Act, which directs the
Department to deduct from USP only those expenses incurred in the
selling of the subject merchandise, and the Statement of Administrative
Action (SAA), which states that deposits of estimated antidumping
duties are not to be treated as a cost. Koyo asserts that if deposits
of antidumping duties are not to be treated as costs, the imputed
interest expenses incurred on financing these deposits likewise cannot
be considered as a cost.
Koyo further argues that exclusion of these interest expenses is
not in conflict with the intent of Congress'' 1979 change in the
antidumping duty law. Koyo contends that, since Koyo Corporation of the
United States (KCU), Koyo's U.S. subsidiary, has paid deposits at the
time of the entry of TRBs, it has in fact felt an immediate financial
effect at the time of import, which was precisely what Congress
anticipated in passing the 1979 Act.
Koyo also maintains that the Department's policy does not mask
dumping, but, rather, neutralizes the impact on the calculation of
antidumping margins of having to borrow money to finance cash deposits
and ensures that antidumping duties are not artificially inflated. In
addition, Koyo contends that the Department's allowance of this
adjustment is in accordance with the CAFC's directive that the
antidumping statute is intended to be remedial, not punitive, in nature
(Federal Mogul Corp. v. United States, 63 F.3d 1572 (Fed. Cir. 1995)).
Furthermore, Koyo asserts, in the event that the Department has
questions concerning its calculation of this adjustment, at this late
date in this proceeding, it would be improper for the Department to
reject the adjustment altogether, particularly in light of the
Department's failure to ask for additional information in its
supplemental questionnaire. Rather, Koyo claims, the proper course of
action would be for the Department to reopen the record for the purpose
of gathering additional information from Koyo on this topic.
Finally, Koyo contends, Timken's suggestion that the adjustment is
improper because it was already
[[Page 11828]]
expensed confuses the difference between cash deposits and the imputed
interest incurred in financing these deposits, and overlooks the fact
that this interest expense is a real financial burden which is not
affected by the accounting convention of expensing deposits.
Department's Position: While we agree with Timken that, in our
preliminary results of review, we did not provide a detailed
explanation why we allowed Koyo's adjustment for those imputed interest
expenses it incurred when financing cash deposits, we disagree that we
have failed to articulate a clear policy on this issue. Shortly before
the publication of the 1994-95 TRB Prelim, we explained our policy
concerning this adjustment in detail in our September 20, 1996,
Federal-Mogul Final Remand Results, which were upheld by the CIT on
December 12, 1996 in Federal-Mogul Corp. v. United States, Slip Op. 96-
193 (CIT 1996). In addition, since the publication of our preliminary
results, we have clarified our position not only in AFBs 93-94 and
Antifriction Bearings (Other than Tapered Roller Bearings) and Parts
Thereof From France, et. al.; Final Results of Antidumping Duty
Administrative Review, 62 FR 2081 (January 15, 1997) (AFBs 94-95), but
also in our December 17, 1996, final remand results pursuant to The
Timken Company v. United States, Slip Op. 96-86 (May 31, 1996) (Timken
Final Remand Results). As explained in these determinations, it is
reasonable for a respondent to deduct from its reported U.S. indirect
selling expenses an amount which reflects those interest expenses it
incurred when financing cash deposits. Our decision is based on the
fact that the respondent incurred the interest expenses at issue as a
result of the need to pay antidumping duty cash deposits. Therefore, we
consider these interest expenses to be comparable to expenses for legal
fees related to antidumping proceedings in that they were incurred only
because of the existence of an antidumping duty order and a
respondent's involvement therein (see, e.g., AFBs 93-94 at 66488, AFBs
94-95 at 2104, Federal-Mogul Final Remand Results at Comment 5, and
Timken Final Remand Results at 23). In addition, it has been our
longstanding policy to not treat expenses related to antidumping
proceedings as selling expenses (see Color Television Receivers From
the Republic of Korea; Final Results of Administrative Review of
Antidumping Duty Order, 68 FR 50336). The CIT recognized this line of
reasoning in Daewoo Electronics Co. v. United States, 712 F. Supp. 931
(CIT 1989), when it recognized that legal fees are not selling expenses
subject to deduction from United States Price (USP), and concluded that
the classification of such expenses as selling expenses subject to
deduction from USP would ``create artificial dumping margins and might
encourage frivolous claims * * *which would result in increased
margins'' (see id. at 947).
We consider the interest expenses at issue in these final results
of review to be directly comparable. Koyo did not incur these interest
expenses in any effort to sell merchandise in the United States.
Rather, the expenses were incurred as part of the process attendant to
the antidumping duty order. Had the order not existed, Koyo would not
need to finance cash deposits, and the expenses would not have been
incurred. Section 772(d) of the Act states that ``* * * the price used
to establish constructed export price shall also be reduced by the
amount of any of the following expenses generally incurred by or for
the account of the producer or exporter, or the affiliated seller in
the United States in selling the subject merchandise.'' (Emphasis
added.) The statute therefore clearly provides that the expenses to be
deducted from USP are those borne, directly or indirectly, to sell the
subject merchandise in the United States. The interest expenses at
issue in these final results, like legal fees, are an expenditure which
Koyo actually incurred, but clearly did not incur in selling TRBs to
the United States.
In its comments to our preliminary results Timken further suggests
that because we did not specifically articulate within our 1994-95 TRB
Prelim our position concerning numerous issues related to a
respondent's calculation of the adjustment, it is unable to comment on
the reasonableness of our policy. We disagree: not only have we clearly
articulated a policy concerning this adjustment, as discussed above,
but it is our position that the exact calculation of the adjustment is
secondary to the numerous compelling reasons why the adjustment should
be allowed. In fact, the CIT has recognized a similar line of reasoning
in regard to antidumping legal expenses. In Zenith Electronics Corp. v.
United States, Slip Op. 91-66 (July 29, 1991) (Zenith), the CIT stated
that it is ``not a question of whether or not legal expenses can be
related to the time period of the importation of the merchandise under
review. Nor does it relate to the question of whether or not the legal
expenses have a tendency to ultimately aid the sale of merchandise in
the United States * * *. The fundamental reason for not allowing the
use of legal expenses related to antidumping is that the expenses of a
party's participation in legal proceedings provided by law should not
become an element in the decision of those selfsame proceedings.''
Nevertheless, because Timken has raised, for these final results,
issues specific to the calculation of this adjustment, we address the
detailed points of Timken's arguments below.
First, we do not agree with Timken that the adjustment should be
denied if it is a cumulative adjustment which reflects those interest
expenses incurred during the POR for cash deposits made prior to the
POR. Rather, we believe the adjustment should be allowed whether a
respondent (1) limits its calculation to only those interest expenses
incurred on cash deposits made during the period under review, (2)
calculates a cumulative adjustment which reflects not only the interest
expenses incurred on cash deposits made during the period being
reviewed, but also reflects the interest expenses incurred during the
POR on cash deposits from previous review periods as well, or, as Koyo
has done in the instant review, (3) calculates a cumulative adjustment
which reflects only those interest expenses incurred during the POR for
cash deposits paid in previous PORs. In its comments Timken argues
that, by accepting a cumulative adjustment amount, as a result of the
fact that the adjustment will ``eat away'' at a respondent's margin,
the Department allows respondents to ``mask'' dumping. Thus, Timken
argues, the Department provides respondents with the impetus to delay
litigation and liquidation. Timken's argument is, however, based on a
results-oriented rationale which overlooks the fundamental reasons for
allowing the adjustment, as discussed in detail above, and ignores the
fact that the adjustment reflects a genuine expense solely attributable
to the antidumping duty order.
As we explained in our Timken Final Remand Results, with the
exception of cost-of-production (COP) and constructed-value (CV)
calculations, it is the Department's practice to recognize an
adjustment for imputed expenses (e.g., inventory carrying costs and
credit) when the expenses reflect a real cost to the firm, but are
difficult to identify or isolate within a respondent's records. For
example, in Television Receivers, Monochrome and Color, From Japan;
Final Results of Antidumping Duty Administrative Review, 56 FR 38417
(August 13, 1991) we explained:
[[Page 11829]]
The Department imputes an interest expense for time in inventory
in order to adjust for the opportunity cost of holding the
merchandise in inventory. An opportunity cost arises because funds
could have been invested in alternative financial arrangements
yielding interest * * *. Since the interest expenses associated with
time in inventory cannot be isolated from other interest expenses,
the Department must impute this expense amount. However, the
Department's long-standing policy is to treat the opportunity cost
of holding inventory as a real expense.
In other words, we recognize that opportunity costs associated with an
activity like holding inventory or extending credit have a real
financial impact for the firm (see, e.g., Fujitsu General Ltd. v.
United States, 883 F.Supp 728, 737 (CIT 1995) (where the Department
calculated a respondent's imputed interest adjustment to exporter's
sales price (ESP) for time in inventory in order to adjust for ``missed
opportunity'' costs of maintaining merchandise in inventory and the CIT
found that the use of actual inventory periods to calculate imputed
interest expense was reasonable and in accordance with law)). Because
these costs are not readily identifiable, we allow the claimed
adjustment to be imputed. In addition, while a firm may choose to
finance its cash deposits by obtaining loans specifically for that
purpose, a firm may also choose to divert funds from other corporate
activities to pay cash deposits. By diverting funds for the purpose of
paying cash deposits, the firm is forgoing the income which could have
been earned had it used these funds for any number of other activities.
In this way, an opportunity cost arises because the funds could have
been invested in alternative financial arrangements yielding interest
(i.e., interest-bearing accounts or loans to other parties at
interest). Therefore, it is not always the case that interest expenses
incurred when financing cash deposits will be easily identified.
Rather, when the cash deposits are funded through the diversion of
funds from another activity or investment vehicle, the expenses may not
be easily traced to a company's books and records or easily isolated
from the company's other interest expenses. However, the opportunity
costs associated with the diversion nevertheless reflect a real cost to
the firm in the same way the opportunity costs of extending credit and
holding inventory constitute real costs (see Timken Final Remand
Results at 26).
Because the monies used to fund cash deposits for a given POR are
unavailable until final antidumping duties are assessed for that POR,
this opportunity cost will accrue until liquidation. For example, if a
respondent pays cash deposits for TRB entries during the October 1,
1988, through September 30, 1989, TRB review period, but antidumping
duties are not assessed on entries during this period until November 1,
1992, the financing costs of funding the 1988-89 cash deposits will not
only be incurred in the 1988-89 POR, but will be incurred until actual
duties are assessed at the time of liquidation in 1992. As a result, an
interest expense associated with the 1988-89 cash deposits will be
incurred during the 1989-90, 1990-91, and 1991-92 review periods. While
a cumulative adjustment amount does affect a respondent's margin,
dumping cannot be ``masked'' when an adjustment is made for a genuine
expense attributable only to the order itself. In fact, if we fail to
allow the adjustment, we risk calculating margins which are overstated
due to our failure to take into account the fact that no such expense
would have been incurred absent the order. Furthermore, we have no
basis for suspecting that a large international corporation with
millions of dollars tied up in cash deposits would purposely choose to
delay assessment in order to realize a potential decrease in its
dumping margin at some indeterminate point in the future.
As also explained earlier, interest expenses incurred when
financing cash deposits are incurred solely due to the existence of the
antidumping order and, like antidumping legal expenses, these interest
expenses cannot be treated as U.S. selling expenses. It is irrelevant
whether the expenses relate to cash deposits made during the current
POR or a prior POR, as any such expenses are not selling expenses. Just
as we do not expect antidumping legal expenses to be limited to those
for the period under review, we do not expect interest expenses
incurred when funding cash deposits to be limited to only the expenses
for cash deposits made during the period under review. For example,
legal expenses incurred during one POR may reflect legal fees for
antidumping litigation from several previous reviews. Likewise, legal
expenses for a given POR will accrue from period to period until all
litigation for the period has ended. Therefore, because we conclude
that it is reasonable to treat interest on cash deposits in the same
way as we treat antidumping legal fees, it is reasonable not to limit
the interest expense adjustment to only interest expenses tied to
deposits made during the POR.
Timken also argues that we cannot accept a cumulative adjustment
amount because to do so would be contrary to the Congressional intent
of the 1979 change in the antidumping law. Timken's argument is based
on its assumption that cash deposits are actual antidumping duty
payments and, by allowing a cumulative adjustment, the Department is
treating them as something other than actual payments. The Department
has long maintained the position that ``duty deposits are not actual
antidumping duties but estimates of future dumping liability'' (see
Antifriction Bearings (Other than Tapered Roller Bearings) and Parts
Thereof From France, et. al.; Final Results of Antidumping Duty
Administrative Reviews, 60 FR 10900 (February 28, 1995). We have
expressed the identical position in the TRBs cases, stating that ``the
cash deposit requirements are estimates of antidumping duties. The
actual dumping margins applicable * * * will be reflected in final
assessment'' (see Tapered Roller Bearings, Four Inches or Less in
Outside Diameter, and Certain Components Thereof From Japan; Final
Results of Antidumping Administrative Review, 55 FR 38720 (September
20, 1990)). Furthermore, the CIT and Court of Appeals for the Federal
Circuit (CAFC) have consistently recognized that a distinction exists
between cash deposits and actual antidumping duties and that cash
deposits are only estimates of final antidumping duties. For example,
when ruling on the issue of whether the Department must calculate the
cash deposit and antidumping duty rates using an identical methodology,
the CAFC stated in The Torrington Company and Federal-Mogul Corp. v.
United States, 44 F. 3d 1572, 1578-79 (Fed. Cir. 1995):
Section 1675(a)(2) does not require the same methodology of
calculation for assessment rates and cash deposits rates * * *.
Moreover, Title 19 bases the cash deposits rate on estimated
antidumping duties on future entries * * *. Thus, Title 19 requires
only cash deposit estimates, not absolute accuracy. This estimate
need only be reasonably correct pending the submission of complete
information for an actual and accurate assessment * * *. No evidence
compels this court to find that deriving cash deposit rates from
entered values leads to a more accurate estimation of future duties
* * *.'' (Emphasis added)(citations omitted).
Therefore, cash deposits are clearly not payments of actual antidumping
duties.
In its comments Timken suggests that, in instances where a
respondent is subject to more than one antidumping duty order, the
adjustment should be
[[Page 11830]]
limited to those interest expenses incurred when financing cash
deposits only for the merchandise subject to the order being reviewed.
While we generally believe that the adjustment should be limited to
only merchandise subject to the order under review, depending upon a
respondent's calculation methodology, this issue may be irrelevant, as
it was with regard to NTN in Timken Final Remand Results (q.v. at 35).
Therefore, we believe it is necessary to examine the specifics of each
case before it can be determined whether the scope/non-scope
distinction is relevant to the adjustment at issue, as we have done in
the instant case with regard to Koyo, and as is explained in our
response to Comment 2 below.
We also disagree with Timken's contention that we must deny Koyo's
downward adjustment because the record demonstrates that Koyo expensed
its interest on cash deposits expenses. While the record demonstrates
that Koyo expensed its cash deposits, there is no evidence that the
interest expenses incurred when financing these cash deposits were also
expensed. Furthermore, Koyo is claiming an imputed interest amount
because these expenses are not readily identifiable in its records. As
a result, there is no identifiable amount of interest for Koyo to
expense. In addition, as explained above, these interest expenses
reflect a real, ongoing financial burden to Koyo which is neither
dissolved nor impacted by Koyo's use of an accounting convention which
expenses antidumping cash deposits.
Finally, while we agree with Timken that at the time of the 1994-95
TRB Prelim the record in this case did not contain detailed information
supporting Koyo's calculation of its claimed adjustment, we do not
agree that this warrants denial of the adjustment. Prior to these final
results we reopened the record for these reviews to allow additional
comment on Koyo's calculation of its reported adjustment amount. We did
this because our policy concerning this adjustment was in its
developmental stages throughout most of these administrative review
proceedings. For example, at the time we issued our 1994-95 TRBs
questionnaire to Koyo, and throughout the supplemental questionnaire
stage of these review proceedings, it was our practice to deny this
downward adjustment. Then, as a result of litigation in both the AFBs
and TRBs cases, shortly before our 1994-95 TRB Prelim, we articulated
and began to apply a clear policy on this issue of allowing the
adjustment. As a result of this change in policy, we allowed Koyo's
claimed downward adjustment in our 1994-95 TRB Prelim. Since we adopted
this revised policy prior to the publication of the preliminary results
for these reviews, we followed this policy in our preliminary review
results. However, this was the first opportunity for the Department and
the parties to address the rationale underlying our policy. Due to the
changing nature of the policy throughout the course of these review
proceedings, this is also the first opportunity for all parties, the
Department included, to properly comment on and address the detailed
specifics of Koyo's actual adjustment calculation. Thus, while we
believe that there are numerous compelling reasons why the adjustment
should be granted, to ensure a fair and reasonable application of this
policy to these reviews, we determined that it was necessary to reopen
the record for these reviews in regard to Koyo's calculation of its
reported adjustment. In this way the Department would have the
information and argument before us necessary to make a reasonable
determination whether to allow Koyo's adjustment. Therefore, on
December 20, 1996, we reopened the record and received additional
information and comment from Koyo on December 27, 1996, and from Timken
on January 3, 1997. These comments, as well as our position on the
issues raised, are addressed in Comment 2 below.
Comment 2: Koyo argues that not only is its calculation of those
imputed interest expenses it incurred when financing antidumping cash
deposits based on information derived directly from its financial
statements, but its calculation methodology is both conservative and
reasonable. Koyo explains that it calculated the imputed interest
expense it incurred as a result of having to finance cash deposits
rather than use the monies in other interest-yielding financial
arrangements by first calculating the total amount of cash deposits it
paid for TRBs up to the beginning of the 1994-95 POR. Koyo argues that
it derived these cash deposit figures directly from its 1993/94
financial statements, but, because the 1993-94 financial statement
included the entire FY 1994, the figures reported in the financial
statement included cash deposits paid during the months of October,
November, and December of 1994. Because the 1994-95 POR only began on
October 1, 1994, Koyo stated that, in order to calculate cash deposits
paid only prior to the 1994-95 POR, it deducted from the figure in its
financial statement those cash deposits paid from October 1994 through
December 1994. Koyo explained that it then multiplied this total cash
deposit amount by the KCU borrowing rate in effect during the 1994-95
POR, which it reported in exhibit C-9 of its 1994-95 TRBs questionnaire
response. Koyo states that the result, which reflected the imputed
interest expenses it incurred during the POR for cash deposits paid
prior to the POR, is identical to the figure it deducted from its
reported U.S. indirect selling expenses, as indicated in exhibit C-13
of its 1994-95 TRBs questionnaire response.
Timken argues that because there is no evidence that Koyo actually
obtained loans in order to finance its antidumping cash deposits, Koyo
failed to demonstrate that it actually incurred any interest expenses.
Timken asserts that the Department should therefore deny the adjustment
in question.
Timken further contends that it is unclear from the record whose
opportunity was actually lost. Timken contends that, if Koyo, in
accordance with the TRB antidumping duty order raised its U.S. prices
in order to finance its cash deposits, it could not have lost any
opportunity because its deposits would be paid for by the additional
cash flow and, as a result, loans to finance cash deposits would be
unnecessary. In addition, Timken asserts that if Koyo Seiko, the
Japanese parent company, eased KCU's cash deposit requirements by
either lowering transfer prices or reimbursing KCU, KCU would not have
lost any opportunity to use the money it deposited. Therefore, Timken
concludes, because Koyo has not demonstrated that KCU actually incurred
the opportunity costs at issue, the Department should not allow the
adjustment.
Timken also maintains that Koyo is not entitled to claim any lost
opportunity income based on cash deposits that it will actually owe and
which will not be refunded upon liquidation. Timken asserts that it is
clear that Koyo will owe antidumping duties on those POR shipments for
which it has paid cash deposits. Timken argues that, as a result, some
or even all of its cash deposits reflect what will be owed to the U.S.
Treasury as antidumping duties. Because these are lawful debts to the
U.S. Treasury, Timken asserts, they cannot represent lost opportunity
costs. Therefore, Timken states, Koyo's calculation formula is grossly
overstated because it fails to take into account that portion of the
cash deposits which reflect legal debts.
Timken further contends that Koyo's calculation fails to take into
account the
[[Page 11831]]
fact that Koyo will owe antidumping duties for the 1974-1979 TRB
shipments, periods during which Koyo was not required to make cash
deposits. Timken asserts that, to the extent that Koyo enjoyed the
opportunity income from these funds that should have otherwise been
required as cash deposits during the 1974-79 PORs, Koyo reaped a
windfall which it has omitted from its calculation.
Finally, Timken argues that, even though the Department conducted a
1994-95 review for Koyo only in the A-588-054 TRBs case, Koyo
nevertheless included within its calculation those interest expenses it
allegedly incurred for the A-588-604 TRB shipments as well. Timken
therefore asserts that, because TRBs within the scope of the A-588-604
case are non-scope merchandise within the context of the A-588-054
finding, to the extent that the Department allows Koyo's claimed
adjustment, it should recalculate Koyo's adjustment to reflect only
those interest expenses incurred with regard to cash deposits paid for
A-588-054 TRBs.
Department's Position: As indicated in Comment 1, we believe that
there are numerous reasons why the adjustment at issue should be
allowed. However, as also explained in Comment 1, before making a final
determination on whether to accept Koyo's adjustment, we determined
that it was necessary to gather additional information regarding the
details of Koyo's calculation of the adjustment. Based upon our review
of the additional comments and information we received, we have
determined that Koyo's calculation of its reported adjustment was
reasonable and accurate and have allowed the adjustment for the
following reasons.
First, we disagree with Timken that, in order to qualify for the
adjustment at issue, Koyo must demonstrate that it obtained loans for
the sole purpose of financing cash deposits. As explained in detail in
our response to Comment 1 above, while a firm may choose to obtain
loans specifically for the purpose of financing cash deposits, a firm
may also choose to divert funds from other corporate activities to pay
cash deposits. By diverting funds for the purpose of paying cash
deposits, the firm is forgoing the income which could have been earned
had it used these funds for any number of other activities. As a
result, an opportunity cost arises because the funds could have been
invested in alternative financial arrangements yielding interest.
Therefore, because it is not always the case that interest expenses
incurred when financing cash deposits will be easily identified, easily
traced to a company's books and records, or easily isolated from the
company's other interest expenses, we have determined that it is
reasonable for the expense to be imputed. It is therefore unnecessary
for a respondent to demonstrate that a loan was obtained for the sole
purpose of financing cash deposits in order to qualify for the
adjustment at issue.
We also disagree with Timken's contention that, because Koyo has
failed to demonstrate that KCU actually incurred the opportunity costs
at issue, the adjustment should be denied. Timken's argument relies
first on the notion that, if KCU raised its U.S. prices in response in
response to the TRB antidumping duty order or finding, the additional
cash flow would have been sufficient to offset the cash deposits. Thus,
Timken concludes that no opportunity cost would be incurred and loans
to finance the cash deposits would be unnecessary. The purpose of the
antidumping duty statute is to offset the effect of discriminatory
pricing between the U.S. and home markets (see Certain Hot-rolled Lead
and Bismuth Carbon Steel Products From the United Kingdom, 60 FR 4409
(August 24, 1995)). Thus, while there is no statutory requirement that
a firm must act to eliminate price discrimination, if it decides to do
so, how it does so is within its own discretion. For example, upon the
imposition of antidumping duties, a respondent may act to eliminate the
price differential by (1) increasing its U.S. prices, (2) lowering its
home market prices, or (3) undertaking a combination of the two. If a
firm chooses to eliminate the price discrimination solely by lowering
its home market prices, there would be no need to increase U.S. prices.
A firm may also choose to increase its U.S. prices and lower its home
market prices at the same time. Thus, there is no requirement that a
firm must raise its U.S. prices. There is also no guarantee that any
increase in U.S. price would increase the cash flow in an amount that
would offset the respondent's cash deposits. Even if a firm chose to
rely solely on an increase in its U.S. prices, such that the increase
would eliminate any dumping margins, the fact remains that the
company's funds are tied up in cash deposits until liquidation occurs
and final duties are assessed and this results in a financing cost to
the company that is wholly attributable to application of the
antidumping duty order.
Furthermore, by arguing that the Department must ensure that Koyo
Seiko did not compensate KCU for the antidumping duty expenses it
incurred, Timken is, in effect, simply restating a position it raised
in a previous TRB review concerning the issue of duty reimbursement. In
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,
From Japan, and Tapered Roller Bearings, Four Inches or Less in Outside
Diameter, and Components Thereof, From Japan; Final Results of
Antidumping Duty Administrative Reviews and Revocation in Part of an
Antidumping Finding, 61 FR 57629 (November 7, 1996) (TRBs 92-93), a
review conducted in accordance with the law in effect prior to the
URAA, Timken argued, and we rejected, the contention that the
Department was required to adjust USP for reimbursed duties pursuant to
19 CFR 353.26 of the Department's regulations. We explained that we
have consistently held that, absent evidence of reimbursement, we do
not have the authority to make such an adjustment (see TRBs 92-93 at
57637). Furthermore, in Torrington Company and Federal-Mogul Corp. v.
United States, 881 F. Supp. 622, 631 (CIT 1995), the CIT clearly
explained that in order for 19 CFR 353.26 to apply, it must be shown
that the foreign manufacturer either paid the antidumping duty on
behalf of the U.S. importer or reimbursed the U.S. importer and that
the regulation does not impose upon the Department an obligation to
investigate based on mere allegations. The CIT went on to state that,
before the Department is required to commit resources to investigate
the transfer of funds and the reimbursement of antidumping duties, the
party who requests the investigation must produce some link between the
transfer of funds and the reimbursement of antidumping duties (see id.
at 632). In addition, the CIT pointed out that once an importer has
indicated on its certificate at the time of liquidation that it has not
been reimbursed for antidumping duties, it is unnecessary for the
Department to conduct additional inquiry absent a sufficient allegation
of Customs fraud (see id.).
Other than the changes in language required by the URAA, section
351.402 (f) of the Department's proposed regulations, with respect to
antidumping duties, is unchanged from 19 CFR 353.26, our current
regulation. As a result, the rationale upon which we based our
determination to not make an adjustment under section 353.26 still
applies (see AFBs 94-95 at 2129). In addition, while we recognize that
the issue at hand is not whether we should make an adjustment in
accordance with section 351.402(f) of the proposed regulations, our
reasons for rejecting Timken's position with regard to that
[[Page 11832]]
issue apply in this instance as well. As clearly explained in our
response to Comment 1 above, interest expenses incurred when financing
cash deposits are due solely to the existence of the antidumping duty
order. Thus, like antidumping legal fees, these expenses are
antidumping duty-related expenses. Timken provided no link between any
of Koyo's intercorporate transfers and the reimbursement of antidumping
duties in the earlier stages of this review nor has it done so for
these final results. Considering that we have no evidence of the
reimbursement of antidumping duties themselves, we clearly have no
evidence of the reimbursement cash deposits or of any antidumping duty-
related expenses. Therefore, absent this evidence, we are under no
obligation to investigate the issue of reimbursement on the basis of
mere allegations (see, e.g., AFBs 94-95 at 2129). As a result, we
disagree with Timken that we must ensure that reimbursement has not
occurred prior to accepting Koyo's adjustment for those imputed
interest expenses it incurred when financing antidumping duty cash
deposits.
We also disagree with Timken that, because Koyo's cash deposits
reflect legal debts, they cannot result in opportunity costs. Not only
does this position overlook the basic fact that interest on cash
deposits are incurred solely due to the existence of the antidumping
duty order, and, as such, cannot be considered selling expenses and
cannot be deducted from USP, but it ignores the fact that it is
precisely because Koyo is required to pay cash deposits that the
opportunity cost arises in the first place. If Koyo was not legally
required to pay cash deposits, it would have the opportunity to use
these funds in other financial arrangements. It is only because Koyo is
required to pay cash deposits that it forgoes the opportunity to use
the funds with which it pays cash deposits in other interest-yielding
financial arrangements.
Timken's contention that Koyo incurred interest income during the
1974-79 PORs as a result of not having to pay cash deposits is also
without merit. The law in effect pursuant to which the 1974-79 TRBs
reviews were conducted did not require cash deposits upon entry (see
The Tariff Act of 1930, as amended (1978)). Rather, importers were
required to post other securities such as bonds. The legal basis for
the requirement of cash deposits only came into effect with the
introduction in 1978 of section 778 of the law (see The Trade
Agreements Act of 1979 (1979 Act). Because the 1979 Act repeatedly
linked the words ``deposit'' and ``cash'' (see, e.g., sections
733(d)(2) and 734 (f)(2)(A)(iii) of the 1979 Act), we interpreted the
words ``amounts deposited'' in section 778 to refer only to cash
deposits of estimated antidumping duties upon entry and not to other
types of securities such as bonds (see Tapered Roller Bearings Four
Inches or Less in Outside Diameter From Japan; Final Results of
Antidumping Duty Administrative Review, 55 FR 22369 (June 1, 1990)
(TRBs 74-79)). Thus, we concluded that, since a bond is not cash, it
does not constitute an amount deposited within the meaning of section
778 of the Act of 1979 (see TRBs 74-79 at 22370). In addition, there
was no provision in the 1979 Act which provided for the immediate
conversion for existing antidumping findings from bonds to cash (see
id.).
Therefore, because the 1974-79 reviews were conducted pursuant to
the law in effect prior to the 1979 Act, which did not require cash
deposits, the cash deposit requirement is irrelevant to the 1974-79
period. Therefore, Koyo's funds during the 1974-79 reviews cannot be
characterized as funds which would have otherwise been required as cash
deposits. Thus, Koyo correctly excluded from its adjustment calculation
any consideration of that which occurred within the context of the
1974-79 period.
Finally, as we explained in our response to Comment 1 above,
depending upon a respondent's U.S. indirect selling expense calculation
methodology, the issue of whether the adjustment in question reflects
scope and non-scope merchandise may be irrelevant, as it is in the
instant case. During the POR Koyo manufactured TRBs which were subject
to both the A-588-054 and A-588-604 cases, AFBs subject to the A-588-
804 AFBs order, and other merchandise not subject to any antidumping
duty order. KCU sold TRBs, AFBs, and other products in the United
States. In addition, Koyo Seiko and KCU did not maintain separate
financial statements for AFBs, TRBs and other merchandise. Because
these financial statements reflect expenses incurred for all sales of
all merchandise sold during the POR, Koyo calculated a U.S. indirect
selling expense factor reflecting all merchandise, not only TRBs, by
dividing the total U.S. indirect selling expenses incurred for all
merchandise sold during the POR by the total value of all sales of all
merchandise during the POR. However, prior to calculating this ratio,
Koyo removed from its total U.S. indirect selling expense amount those
expenses reported elsewhere in the response and made other adjustments,
which included the adjustment for interest incurred on cash deposits.
Because the total U.S. indirect selling expense amount reflected
expenses for all sales (both scope and non-scope), the deductions Koyo
made from this total expense correctly reflected all sales of all
merchandise. However, in regard to its deduction for interest on cash
deposits, Koyo only deducted from the total U.S. indirect selling
expense amount those interest expenses incurred on TRB cash deposits.
Given that Koyo's total U.S. indirect selling expense amount reflected
all sales, this was a conservative calculation in that Koyo effectively
left in its allocated expense amount those interest expenses incurred
on its cash deposits for non-TRB merchandise. Thus, Koyo's inclusion of
these expenses within its U.S. indirect selling expense amount results
in the overstatement of its U.S. indirect selling expenses and a
greater deduction from USP. Timken argues that Koyo's adjustment should
be even more limited, suggesting that, because this review was only for
the A-588-054 case, interest expenses incurred on cash deposits for A-
588-604 TRBs should not be deducted. Given that the expense amount from
which Koyo is making its interest on cash deposit adjustment reflects
interest expenses related to all antidumping duty orders applicable to
all merchandise, Timken's suggested methodology would result in an even
greater overstatement of Koyo's U.S. indirect selling expenses than
Koyo's current methodology. Therefore, in the instant case, the issue
of whether the adjustment must be scope-specific is irrelevant because
the indirect selling expense amount Koyo is adjusting reflects all
sales of all merchandise and not only scope merchandise. If, however,
Koyo calculated and reported scope-specific U.S. indirect selling
expenses (those only incurred for the A-588-054 case) prior to making
the adjustment for interest on cash deposits, we would have expected
Koyo to adjust its scope-specific U.S. indirect selling expenses for
those interest expenses incurred on cash deposits for A-588-054
merchandise only.
Comment 3: Timken argues that the Department incorrectly based its
calculation of profit for Fuji's constructed export price (CEP) sales
on Fuji's financial statements rather than on information on the record
which would yield a more accurate calculation. Timken contends that,
because the COP for a non-producer like Fuji is its acquisition costs,
the Department is able to calculate the profit for all of Fuji's CEP
sales by using
[[Page 11833]]
Fuji's reported acquisition costs as well as Fuji's reported U.S.
selling and movement expenses. In addition to providing a sample of how
CEP profit for Fuji should be calculated, Timken also states that,
because section 772(d)(3) of the Act provides for CEP profit to be
calculated using a respondent's reported expenses before using a
respondent's financial statements, the Department should alter its
calculation of Fuji's CEP profit for its final results of review.
Fuji argues that, while Timken is correct that the new law provides
a hierarchy for the Department to determine the proper expenses to be
used for calculating CEP profit, Timken overlooks that the SAA clearly
indicates that the Department will ``request the information necessary
to determine total expenses under the first alternative if Commerce is
conducting a cost of production investigation,'' and ``if Commerce is
not conducting a cost of production investigation, the respondent may
submit the necessary information on a voluntary basis'' (SAA at 155).
As a result, Fuji asserts, the Department should only use the first
alternative in the statute if there is a cost investigation or if the
respondent voluntarily submits the necessary information. Fuji contends
that, if these circumstances are not present, the statute explicitly
directs the Department to resort to a respondent's financial reports to
calculate CEP profit (id.). Thus, Fuji maintains, because Fuji was not
subject to a cost investigation during the POR and did not provide the
information voluntarily, the Department acted in accordance with
section 772 (d)(3) of the Act by using its financial reports to
calculate CEP profit.
Furthermore, Fuji contends, Timken's argument implies that Fuji's
reported acquisition costs, which it reported for model match purposes,
are a surrogate for the detailed expense data requested in a COP
investigation. Fuji argues that the Department has repeatedly rejected
the notion that a reseller's acquisition costs are equivalent to COP
data.
Fuji also rejects Timken's assertion that the Department's use of
Fuji's financial reports led to an inaccurate calculation of CEP
profit. Fuji maintains that, even though its financial statements
incorporate data on other Fuji product lines, this is of no consequence
because the SAA recognizes that calculating costs from a larger product
line is not distortive (SAA at 155). Finally, Fuji objects to Timken's
suggested calculation of Fuji's CEP profit, stating that Timken
neglected to include fundamental packing, selling, and movement
expenses and committed other errors which serve to undermine the
reliability and credibility of Timken's argument.
Department's Position: We agree with Fuji. Section 772(d)(3) of the
Act requires the Department, in determining CEP, to identify and deduct
from the U.S. starting price an amount for profit. The SAA explains
that this profit will be calculated by ``multiplying the total profit
by the percentage determined by dividing total U.S. expenses by total
expenses'' (SAA at 154). Section 772(f), the special rule for
determining profit, defines total expenses as ``all expenses in the
first of the following categories which applies and which are incurred
by or on the behalf of the foreign producer and foreign exporter of the
subject merchandise and by or on the behalf of the United States seller
affiliated with the producer or exporter with respect to the production
or sales of the merchandise; (1) the expenses incurred with respect to
the subject merchandise * * * if the expenses were requested by the
administering authority for the purpose of establishing NV and CEP; (2)
the expenses incurred with respect to the narrowest category of
merchandise * * * which includes the subject merchandise; or (3) the
expenses incurred with respect to the narrowest category of merchandise
sold in all countries which includes the subject merchandise.'' Thus,
section 772(f) establishes a hierarchy of methods for calculating total
expenses. The SAA clarifies these alternatives, explaining that, under
the first alternative, ``Commerce will request the information
necessary * * * if Commerce is conducting a COP investigation'' (see
SAA at 155). If there is no COP information the SAA states that the
``respondent may submit the necessary information on a voluntary
basis'' (see id.) However, if the information is not collected in the
course of a COP investigation or submitted by the respondent
voluntarily, the Department will then resort to the second two
alternatives. The SAA states that, under the second two alternatives,
``the information will be obtained from financial reports'' (see id.).
Finally, because section 772(f)(2)(D) of the Act and the SAA instruct
the Department to calculate total profit on the same basis as total
expenses, the SAA also explains that ``no distortion in the profit
allocable to U.S. sales is created if total profit is determined on the
basis of a broader product-line than the subject merchandise, because
the total expenses are also determined on the basis of the same
expanded product line'' (see id.).
Because we did not conduct a cost investigation of Fuji in either
TRB review of the 1994-95 POR, we determined in our preliminary results
that we did not have the information necessary to calculate CEP profit
in accordance with the first alternative. As a result, we resorted to
Fuji's financial reports for the POR to calculate the CEP profit
percentage to be applied to U.S. expenses to calculate the CEP profit
amount to be deducted from Fuji's CEP sales. In its arguments Timken
suggests that, because Fuji submitted its acquisition costs, the
Department has the information necessary to calculate profit under the
first alternative. However, the only information we have concerning
certain costs, such as general and administrative expenses, is from
Fuji's financial statements. Because we do not have all the actual
expenses necessary to calculate a CEP profit percentage based on the
first of the alternatives, we have based this information on Fuji's
financial statements, in accordance with section 772(f) of the Act and
the SAA at 155.
Comment 4: Koyo argues that the Department incorrectly deducted
from USP those indirect selling expenses Koyo incurred in Japan for its
U.S. sales (export selling expenses). Koyo contends that the SAA
clearly states that, under section 772(d) of the Act, CEP will be
reduced by only those expenses and profit associated with economic
activities occurring in the United States. Citing to Antifriction
Bearings (Other than Tapered Roller Bearings) and Parts Thereof From
France et. al., 61 FR 35713 (July 8, 1996) and Calcium Aluminate Flux
from France, 61 FR 40396 (August 2, 1996), Koyo contends that the
Department has interpreted section 772(d) to exclude the deduction of
export selling expenses from USP in other administrative review
proceedings and should apply the same interpretation in these final
results of review as well.
Timken argues that under the law in effect prior to January 1,
1995, the Department made an adjustment for those indirect selling
expenses incurred in Japan for Koyo's U.S. sales because these expenses
were relevant to the sale of U.S. merchandise. Timken asserts that,
because the definition of indirect selling expenses under the new
antidumping law has not changed, the Department must continue to make
this adjustment to USP. For example, Timken states that the Senate
indicated that the category of indirect selling expenses which U.S.
prices are adjusted for is to remain the same as under the old law
(Committee on Finance, Committee on Agriculture, Nutrition, and
Forestry, Committee on Governmental Affairs, Uruguay Round
[[Page 11834]]
Agreements Act, S. Rep. No. 412, 103d Congress. 2d Sess. 65 (1994)).
Timken also contends that not only does the SAA support this position,
but the Department itself has indicated that in implementing the URAA
it will make ``adjustments to constructed export price under section
772(d) of the Act for expenses associated with economic activities in
the United States, no matter where incurred'' (Antidumping Duties;
Countervailing Duties, Notice of Proposed Rulemaking and Request for
Public Comments, 61 FR 7308 (February 27, 1996) (Draft Regulations)).
Department's Position: We agree with Koyo. It is clear from the SAA
that under the new statute we should deduct from CEP only those
expenses associated with economic activities in the United States. The
SAA also indicates that ``constructed export price is now calculated to
be, as closely as possible, a price corresponding to an export price
between non-affiliated exporters and importers'' (see SAA at 823).
Therefore, we have deducted from CEP only those expenses associated
with commercial activities in the United States. Our proposed
regulations reflect this logic at 351.402(b) (``(t)he Secretary will
make adjustments to constructed export price under 772 (d) for expenses
associated with commercial activities in the United States, no matter
where incurred'').
Timken's reference to the SAA to support the proposition that the
new law is not intended to change our practice in this regard is
misplaced. Timken cites various provisions of the SAA which state that
our practice with respect to ``assumptions'' would not change. The SAA
explains that ``assumptions'' are selling expenses of the purchaser for
which the foreign seller agrees to pay (see SAA at 824). Thus, if the
home market producer agrees to pay for the affiliated importer's cost
of advertising in the U.S. market the Department would deduct such an
expense as an ``assumption.'' It should be noted that assumptions are
different than selling expenses incurred in the home market in selling
to the affiliated importer, which are not incurred ``on behalf of the
buyer'' (i.e., the affiliated importer). Rather, the exporter incurs
such expenses on its own behalf, and for its own benefit, in order to
complete the sale to the affiliated importer (see AFBs 94-95 at 2124).
In this case, Koyo's reported selling expenses at issue are not
specifically associated directly to commercial activity in the United
States, such as the subsidiary's activity of selling the merchandise in
the United States. Rather, the expenses at issue were associated
directly with the sale between Koyo and its subsidiary and were
incurred prior to the commercial activity in the United States.
Therefore, because Koyo's reported export selling expenses did not
represent commercial activities performed in the United States, we did
not deduct these expenses from CEP for these final results.
Comment 5: In its response Koyo reported those inventory carrying
costs (ICC) it incurred in the United States for its U.S. sales as well
as the ICC it incurred in Japan for TRBs sold in the United States.
Because the average number of days a TRB spent in inventory in the
United States was shorter than the number of days in which KCU, Koyo's
U.S. subsidiary, was required to pay Koyo, we set U.S. ICC equal to
zero, added the number of days of KCU's payment terms to the number of
days Koyo reported for inventory in Japan, and calculated a revised ICC
for U.S. sales using this revised number of days in inventory and the
home market borrowing rate. This is in accordance with our practice to
use the interest rate applicable to the foreign parent's borrowings in
calculating U.S. ICC when there is evidence on the record that the
foreign parent assumed the financial burden of this imputed expense
through delayed payment by the U.S. subsidiary (see, e.g., Federal-
Mogul Final Remand Results at Comment 1 and The Timken Company v.
United States, 865 F. Supp. 881 (CIT 1994)).
Koyo states that while it agrees in principle with the Department's
recalculation of its U.S. ICC, it disagrees with the Department's
calculation of the number of days in inventory. Koyo contends that the
Department's method assumes that a TRB will be held in inventory in the
United States for the same number of days as KCU's payment terms, when,
as the record demonstrates, the number of days in inventory in the
United States is less than the number of days of KCU's payment terms.
Koyo contends that, as a result, the Department's recalculation of its
U.S. ICC calculates ICC beyond the period for which TRBs were actually
held in inventory in the United States.
Department's Position: We agree with the respondent. When
recalculating Koyo's ICC for its U.S. sales of TRBs, we incorrectly
included within our calculation of the revised number of days in
inventory for U.S. merchandise the full number of days of KCU's payment
terms to Koyo Seiko, despite the fact that the actual number of days
the merchandise spent in inventory in the United States was less than
the payment terms. As a result, we agree that our recalculation
overstates Koyo's ICC for its U.S. TRBs sales. Therefore, for these
final results we have corrected this error by calculating the number of
days in inventory for Koyo's U.S. merchandise by adding to the number
of days the U.S. merchandise spent in inventory in the home market the
actual number of days in inventory in the United States, rather than
the number of days reflected by the full payment terms between KCU and
Koyo Seiko.
Comment 6: Koyo states that, while it does not challenge the
Department's splitting of home market TRBs sets, the Department
incorrectly calculated CEP and CV profit after it split Koyo's home
market TRBs sets into individual cup and cone sales. Koyo asserts that,
as a result, the calculation of home market total revenue, total cost
of goods sold, total selling expenses, and total movement expenses,
includes not only the amount of the expense for home market sets, but
the amounts for the individual components of the set as well.
Consequently, Koyo claims, all home market elements of the Department's
CEP and CV profit calculations are double-counted and Koyo's margin
calculation is distorted. Koyo concludes that the Department should
correct this error by either performing its set splitting after its
calculation of the home market elements for CEP and CV profit, or by
identifying within its computer program for Koyo those cups and cones
split from home market sets and excluding them from the CEP and CV
profit calculations.
Department's Position: We agree with Koyo. By performing the set-
splitting portion of our analysis prior to our derivation of the home
market elements necessary for the calculation of CEP and CV profit, we
inadvertently double-counted home market total revenue, total cost of
goods sold, total selling expenses, and total movement expenses. We
have corrected this error for these final results by performing our
derivation of the home market elements for our CEP and CV profit
calculation prior to the set-splitting portion of our margin
calculation computer program for Koyo.
Adjustments to Normal Value
Comment 7: Timken disagrees with Koyo's allocation of those home
market expenses it incurred when transporting bearings from its plant
to its warehouses (pre-sale freight). Timken contends that, based on
its review of Koyo's response, only those bearings that Koyo sold for
export and through home market affiliated distributors were shipped to
warehouses. Other bearings (e.g., those
[[Page 11835]]
sold to home market original equipment manufacturers (OEMs)), appear to
have been stored at the warehouse located at Koyo's plant. Timken
asserts that, because Koyo's home market pre-sale freight allocation
includes the sales of all bearings, Koyo actually allocated its pre-
sale freight expenses to home market sales for which the expense was
not incurred. As a result, Timken asserts, the Department must re-
allocate and re-calculate Koyo's reported home market pre-sale freight
expenses to exclude that merchandise which was not shipped from Koyo's
plant to one of its warehouses.
Furthermore, Timken argues that, when reallocating this expense,
the Department should also ensure that it is allocated equally to all
sales for which it was incurred. Timken contends that, because Koyo
incurred this expense equally for its domestic and export sales, and
because Koyo was unable to report the expense separately for its
domestic and export sales, the expense should be reported equally for
all of Koyo's home market and U.S. sales. However, Timken asserts,
while Koyo calculates the same pre-sale freight allocation ratio for
its home market and U.S. sales, Koyo applies the ratio to U.S. transfer
prices and home market resale prices. Timken claims that Koyo's
calculation of per-unit pre-sale freight expenses for U.S. sales on the
basis of transfer prices, rather than resale prices, results in greater
expense amounts reported for Koyo's home market sales. Timken states
that, because this distorts the commercial reality of the expense and
the manner in which it was incurred, the Department should reallocate
this expense accordingly.
Koyo maintains that its response to section B of the Department's
questionnaire explains that Koyo operates two central warehouses in
order to distribute the foreign like product in the home market. Thus,
Koyo asserts, Timken's assertion that Koyo did not incur home market
pre-sale freight for certain home market sales is based on Timken's
failure to read the relevant section of Koyo's response. Furthermore,
Koyo asserts, because Koyo Seiko incurred all pre-sale home market
freight expenses, Koyo properly allocated the expense on the basis of
the total sales value of Koyo Seiko's sales of TRBs. Koyo argues that
this is a well-established methodology that the Department has verified
and accepted in past TRBs and AFBs reviews, and Timken has provided the
Department with no evidence that would compel the Department to reject
this methodology at this late stage in the instant proceeding. In
addition, Koyo contends that the Department has already resolved this
issue in a closely related context. Koyo states that in its Federal-
Mogul Final Remand Results the Department rejected a very similar
argument in which Timken claimed that the ICC incurred by Koyo Seiko in
Japan for U.S. sales should have been calculated on the basis of KCU's
U.S. resale prices rather than Koyo Seiko's price to KCU (the transfer
price). Koyo contends that the same reasoning the Department applied in
those final remand results, in which it determined that the relevant
sales for the calculation of the ICC expense were Koyo Seiko's sales to
KCU, should apply here as well, and the Department should accept Koyo's
calculation methodology using the sales from Koyo Seiko to KCU as the
basis for its home market pre-sale freight expense allocation.
Department's Position: While we agree with Timken that Koyo's
questionnaire response does indicate that it did not incur pre-sale
freight expenses for certain home market sales, we disagree with Timken
that Koyo's allocation of these expenses is otherwise unreasonable. In
its response Koyo reported home market pre-sale freight expenses which
reflected those expenses it incurred when transporting TRBs destined
for sale in both the U.S. and home markets from the home market plant
to home market warehouses. While Koyo reported these pre-sale freight
expenses for all of its home market and U.S. export sales, its
questionnaire response indicates that there are certain home market
sales for which Koyo did not incur this expense because the merchandise
was not transported from the plant to a warehouse at a location
different from the plant. For example, on page 38 of its section B
response to our questionnaire, Koyo explains that, prior to sale, not
only did it store TRBs at its two home market central warehouses,
warehouses at its branch and sales offices, and at the warehouses of
its four consolidated distributors, but it also stored certain
merchandise at its plant warehouse. In the proprietary explanation
following this description on page 38 Koyo again indicates that there
are certain types of home market sales for which the merchandise was
stored at its plant warehouse. In addition, on page 25 of its section B
response, when explaining its post-sale home market freight expenses,
Koyo states that it incurred post-sale freight expenses either in
shipping merchandise from the plant directly to a customer or when
transporting merchandise from a warehouse to a customer. Again, the
implication is that there are certain home market sales for which the
merchandise is shipped directly from the plant to a customer and,
therefore, is not transported to a warehouse at a location different
from the plant. Therefore, we agree with Timken that the record
demonstrates that there are certain home market sales for which Koyo
did not incur home market pre-sale freight expenses.
We have determined, therefore, that for these final results it is
necessary to (1) reallocate Koyo's reported home market pre-sale
freight expenses such that the total sales value of those home market
sales for which the expense was not incurred is excluded from the
allocation denominator, and (2) apply the expense only to those home
market sales for which the expense was incurred. However, Koyo's
response does not enable us to specifically identify within Koyo's home
market database those sales for which the expense was not incurred. In
light of this, we have determined to rely on facts available to
determine those sales for which the expense was not incurred. Based on
Koyo's proprietary narrative explanation on page 38 of its response, we
have concluded that Koyo most likely did not incur this expense on
certain sales to home market OEM customers. While we recognize that it
is likely that not all of Koyo's home market OEM sales were exempt from
this expense, because we are unable to identify exactly which OEM sales
were exempt, we have applied non-adverse facts available and
recalculated the expense adjustment by (1) removing from Koyo's
reported allocation denominator the total sales value of Koyo's home
market OEM sales and (2) applying the recalculated expense adjustment
to U.S. sales and only non-OEM home market sales.
However, despite the fact that we have determined for these final
results that Koyo's pre-sale freight allocation denominator is
overstated and the expense was reported for home market sales for which
it was not incurred, we disagree with Timken that Koyo's allocation
otherwise fails to reflect the manner in which the expense was actually
incurred. In general, when a respondent relies on an expense allocation
to calculate its per-unit adjustment amounts, we require that
allocation to reflect the manner in which the expense was actually
incurred (see, e.g., TRBs 92-93 at 57635 and Certain Fresh Cut Flowers
From Columbia; Final Results of Antidumping Duty Administrative
Reviews, 61 FR 42848 (August 19, 1996)). In addition, we examine the
respondent's allocation methodology to determine if there is
[[Page 11836]]
internal consistency between the numerator and denominator and within
the methodology as a whole. For example, if an expense is allocated on
the basis of total sales value, as is the expense at issue here, the
expense amount (the numerator) and the total sales value (the
denominator) should reflect the same pool of sales such that the total
expense amount reported by the respondent is divided by the total value
of the sales for which the expense was actually incurred. Likewise, the
allocation ratio should be applied to the same sales price reflected in
the denominator. For example, we would not accept the application of an
allocation ratio to gross sales price if the denominator was calculated
by totaling the value of all sales on the basis of a net price.
In the instant case, Koyo Seiko, the Japanese parent, incurred the
pre-sale freight expenses at issue for all merchandise, whether
destined for sale to the U.S., third-country, or home market (with the
exception of the home market OEM sales described above). Because Koyo
does not maintain its records such that it is able to calculate the
total expense amount incurred for each market, it was unable to
separately calculate the specific pre-sale freight expense attributable
to each market. Therefore, Koyo used as its allocation numerator the
total expense amount incurred by Koyo Seiko for all merchandise, as
derived from Koyo Seiko's sales records.
The sales for which this expense was incurred were Koyo Seiko's
sales to all its various customers, which encompassed a mix of
affiliated and unaffiliated entities in both the export and home
markets. Thus, Koyo calculated its pre-sale freight allocation
denominator by totaling the value for all of Koyo Seiko's sales to all
its customers, as derived from Koyo Seiko's records. While for these
final results we have adjusted this denominator to exclude the total
sales value of home market OEM sales, we have nevertheless preserved
Koyo's basic allocation methodology for the following reasons:
Because Koyo Seiko's customers encompassed a mix of affiliated and
unaffiliated parties in both the home and export markets, Koyo's
denominator includes sales values which reflect both transfer and
resale prices. Because Koyo Seiko's customer in the United States is
KCU, its wholly-owned U.S. affiliate, the U.S. sales transactions
relevant to Koyo's allocation are those between Koyo Seiko and KCU.
Thus, Koyo correctly included within its denominator the total value of
its sales to KCU, which were made at transfer prices. Similarly, in the
home and third-country markets Koyo Seiko sold to both affiliated and
unaffiliated customers. Therefore, Koyo properly included within its
allocation denominator the total value of Koyo Seiko's sales to its
home and third-country market customers, some of which were made at
resale prices and others of which were at transfer prices. Koyo's
methodology therefore not only relies on a numerator and denominator
which reflect the same pool of sales, but its denominator is calculated
on the basis of the value of those sales for which the reported total
expense amount was actually incurred.
When calculating the per-unit expense adjustment amount for each
U.S. and home market transaction, Koyo applied its allocation ratio
(which was the same for all sales) to the appropriate unit price. For
U.S. sales it applied the ratio to the transfer prices Koyo reported
between Koyo Seiko and KCU, which were the U.S. prices upon which the
expense was incurred and the U.S. sales values reflected in Koyo's
allocation denominator. For home market sales, Koyo applied the ratio
to either a resale price (for unaffiliated customers) or transfer price
(for affiliated customers) because these were the home market prices
upon which the expense was incurred and the home market sales values
reflected in the allocation denominator.
Timken argues that, in order to properly reflect commercial reality
and avoid distortion, Koyo should instead apply its expense ratio to
U.S. resale prices, the price of the sale between KCU and the first
unaffiliated U.S. customer. However, Timken overlooks the fact that
this transaction is not the sale for which the expense was actually
incurred. As a result, Timken's proposed methodology would neither
reflect the manner in which, nor the sales upon which, Koyo actually
incurred the expense. Timken's argument also ignores the fact that
Koyo's allocation denominator includes not only U.S. transfer values
but home market and third-country transfer values as well. Thus,
Timken's assertion that Koyo always calculates the home market expense
adjustment on the basis of resale prices is incorrect. Rather, the
record demonstrates that, for sales to affiliated home market parties,
Koyo calculated the adjustment on the basis of the transfer price
between Koyo Seiko and the affiliated home market customer. In
addition, rather than argue that all transfer values included in Koyo's
denominator should be excluded from the allocation methodology, Timken
limits its argument to only U.S. transfer prices and fails to
demonstrate why U.S. transfer values are an improper factor in the
denominators calculation while home market and third-country transfer
values are not.
Finally, the record does not contain, and Timken has not provided,
any evidence demonstrating that the transfer prices Koyo reported
between Koyo Seiko and KCU are unreliable. Rather, the record indicates
that these transfer prices were maintained by KCU, independent of the
antidumping proceedings, within the ordinary course of business.
Furthermore, we note that antidumping proceedings are only one of the
forces applicable to a respondent's transfer pricing practices in that
transfer prices are also subject to Internal Revenue Service audits for
U.S. tax purposes.
Therefore, based on the above reasons, we do not agree with the
petitioner that Koyo's basic allocation methodology is unreasonable.
Therefore, for these final results, while we have recalculated Koyo's
originally reported allocation ratio to exclude home market OEM sales,
we have made no other changes to Koyo's overall allocation methodology.
Comment 8: Koyo and Fuji disagree with the Department's preliminary
results treatment of their respective home market post-sale-price
adjustments (PSPAs) . Koyo argues that the Department's denial of its
PSPAs is based on an overly narrow interpretation of The Timken Company
v. United States, 930 F. Supp. 621 (CIT 1996) (Timken) and The
Torrington Company v. United States, 818 F. Supp. 1563 (CIT 1993)
(TorringtonI), aff'd 82 F.3d (Fed. Cir. 1996) (TorringtonII), which the
Department interprets as requiring it to reject home market PSPA
adjustments allocated on a customer-and scope-specific basis. Koyo
contends that, in Torrington II, rather than prohibit the allocation of
direct home market expenses, the CAFC actually confirmed its earlier
decision in Smith Corona Group v. United States, 713 F.2d 1568, 1580
(Fed Cir. 1983) that the Department may treat allocated expenses as
direct selling expenses, provided that the allocation does not distort
the margin. Koyo further asserts that the URAA and the Department's
draft regulations confirm this position. Koyo states that the SAA
explains that the Department does not intend to change its current
practice of allowing companies to allocate direct expenses when
transaction-specific reporting is not feasible, provided that the
allocation method does not cause inaccuracies or distortions (SAA at
823-824). Koyo also asserts that, while the Department's draft
regulations state a preference for
[[Page 11837]]
transaction-specific reporting of direct expenses, it notes that
allocated expenses may be treated as direct expenses when transaction-
specific reporting is not feasible. Koyo further argues that its
allocation of its home market PSPAs is consistent with the CIT's
decision in Federal-Mogul Corp. v. United States, 862 F. Supp. 384 (CIT
1994) that direct selling expenses be allocated only over scope
merchandise. Therefore, Koyo concludes, because its home market PSPA
allocation methodologies meet the requirements established by the CAFC
and the CIT for the treatment of direct expenses, the Department should
accept these adjustments in its final results of review.
Fuji disagrees with the Department's denial of its reported home
market rebate adjustment. Fuji contends that, while its allocation
methodology includes non-scope merchandise, this was necessary because
it is the basis upon which the rebates were incurred. In addition, Fuji
asserts that, since the same rebate amounts are paid on scope and non-
scope merchandise, its use of non-scope merchandise was not only
appropriate, but it accurately allocated the rebates to TRBs.
Furthermore, Fuji asserts, not only did it report its rebates on a
dealer-specific basis, but, while it could have allocated its rebates
to TRBs by taking a portion of the rebates paid based on the ratio of
TRBs purchased to total parts and accessories purchased by each dealer,
as suggested by the CIT in The Torrington Company v. United States,0
832 F. Supp. 379 (CIT), this methodology results in the same allocation
for each dealer as its current methodology.
Fuji also contends that, even if the Department disallows its
rebates as a direct adjustment to NV, the Department must nevertheless
treat its reported rebates as indirect selling expenses. Fuji claims
that the Department routinely treats those home market PSPAs which it
denies as direct adjustments to NV as indirect selling expenses, even
if the expense allocation includes both scope and non-scope
merchandise.
Timken argues that, while Koyo granted its home market PSPA's on a
customer and model-specific basis, Koyo nevertheless allocated these
adjustments to all sales to a given customer during the POR. Timken
asserts that Koyo therefore allocated the expenses to sales for which
the adjustments were not actually granted. Timken states that, because
neither the statute nor the Department's regulations allow such
adjustments, the Department acted properly in denying all of Koyo's
home market PSPAs in its preliminary results and should not alter its
determination for these final results of review.
Timken also argues that the Department's treatment of Fuji's home
market rebates was correct because these rebates were (1) incurred and
allocated on the basis of sales of both scope and non-scope
merchandise, (2) were not allocated on a transaction-specific basis,
and (3) were not granted as a fixed and constant percentage of all
sales upon which they were incurred. Timken argues that, not only has
the CIT repeatedly held that merchandise which is outside the scope of
an antidumping duty order cannot be used in the calculation of
antidumping duties (Torrington Company v. United States, 818 F. Supp.
1563 (CIT 1993) and Federal-Mogul Corp. v. United States, 918 F. Supp.
386 (CIT 1996)), but the Department has repeatedly rejected adjustments
which include non-scope merchandise within their allocations (TRBs 92-
93 and AFBs 93-94).
Further, Timken contends that, while Fuji claims that it accurately
allocated its rebates to TRBs, Fuji failed to demonstrate that its
reported amounts are the actual rebates earned on its home market
sales. As a result, Timken asserts, it is not evident that every home
market sale to a particular customer for which Fuji reported a rebate
adjustment was eligible for, and earned, a rebate. In addition, Timken
contends, given that Fuji's rebates were not transaction-specific and
included sales of non-scope merchandise, Fuji failed to demonstrate
that its rebates were granted at a fixed and constant percentage of all
sales such that its allocation to scope merchandise yielded the exact
amount of per-unit rebate granted on TRB sales.
Finally, Timken argues that the Department should not, as Fuji
suggests, treat Fuji's rebates as indirect selling expenses. Timken
maintains that the CAFC definitively held that direct expenses, such as
rebates and other price adjustments, which, by their nature, are
directly related to particular sales, cannot be treated as indirect
selling expenses (Torrington II at 1050 and 1051). Timken claims that,
because Fuji's rebates are clearly direct expenses, the Department
correctly denied this adjustment in its preliminary review results and
should not alter its determination for these final review results.
Department's Position: For these final results we have accepted
claims for discounts, rebates, and other billing adjustments as direct
adjustments to price if we determined that the respondent, in reporting
these adjustments, acted to the best of its ability and that its
reporting methodology was not unreasonably distortive. We did not treat
such PSPAs as direct or indirect selling expenses, but rather as direct
adjustments necessary to identify the correct starting price. While we
prefer respondents to report these adjustments on a transaction-
specific basis (or, where a single adjustment was granted for a group
of sales, as a fixed and constant percentage of the value of those
sales), we recognize that this is not always feasible, particularly
given the extremely large volume of transactions involved in these TRBs
reviews. It is inappropriate to reject allocations that are not
unreasonably distortive in favor of the facts otherwise available if a
respondent is unable to report the information in a more specific
manner (see section 776 of the Act and AFBs 94-95 at 2090).
Accordingly, we have accepted these adjustments when it was not
feasible for a respondent to report the adjustment on a more specific
basis, provided that the allocation method used by the respondent did
not cause unreasonable inaccuracies or distortions.
In applying this standard, we have not rejected an allocation
method solely because the allocation includes adjustments granted on
non-scope merchandise. However, such allocations may be unacceptable
where we have reason to believe that a respondent did not grant such
adjustments in proportionate amounts with respect to sales of scope and
non-scope merchandise and, thus, may have resulted in unreasonable
distortions. We have examined the extent to which non-scope merchandise
included within the allocation pool is different from the scope
merchandise in terms of value, physical characteristics, and the manner
in which it is sold. Significant differences in such areas may increase
the likelihood that respondents did not grant price adjustments in
proportionate amounts with respect to sales of scope and non-scope
merchandise. While we carefully scrutinize any such differences between
scope and non-scope sales in terms of their potential for distorting
reported per-unit adjustments on the sales involved in our analysis, it
would not be reasonable to require respondents to submit specific
adjustment data on non-scope merchandise in order to prove that there
is no possibility of distortion. Such a requirement would defeat the
purpose of permitting the use of reasonable allocations by respondents
that have cooperated to the best of their ability (see AFBs 94-95 at
2091).
Where we find that a company has not acted to the best of its
ability in
[[Page 11838]]
reporting the adjustment in the most specific and non-distortive manner
feasible, we have made an adverse inference in using facts available
with respect to the adjustment, pursuant to section 776(b) of the Act.
Therefore, we agree with Timken that, when we find a respondent has
allocated a home market PSPA in a distortive manner, or if we determine
that a respondent has not acted to the best of its ability, we should
deny the adjustment rather than treat it as an indirect expense. This
is in accordance with the CAFC's decision in Torrington II at 1047-51.
However, we note that Torrington II is of limited additional relevance
to the issue at hand because the CAFC did not address the
reasonableness of the allocation methods respondents used in reporting
the PSPAs in question. Although the CAFC appeared to question whether
price adjustments constituted expenses at all (see Torrington II at n.
15), it merely held that, assuming the adjustments were expenses, they
had to be treated as direct selling expenses rather than indirect
selling expenses.
In addition, we have included positive (upward) HM price
adjustments (e.g., positive billing adjustments which increase the
final sales price) in our analysis. The treatment of positive home
market billing adjustments as direct adjustments is appropriate because
disallowing such adjustments would provide an incentive to report
positive billing adjustments on an unacceptably broad basis in order to
reduce NV and margins. That is, if we were to disregard positive
billing adjustments, which would be upward adjustments to NV,
respondents would have no incentive to report these adjustments in the
most specific and non-distortive manner feasible (see AFBs 94-95 at
2091).
In its response Koyo claimed direct adjustments to home market
price for two types of billing adjustments and rebates. Because certain
of Koyo's billing adjustments were positive, in accordance with our
policy, we automatically made a direct adjustment to Koyo's reported
home market gross unit prices for these upward adjustments. Concerning
those billing adjustments which were negative (e.g., resulted in a
downward adjustment), based on our examination of the record in this
review and our verification of Koyo's records in past reviews of the A-
588-054 case, we are satisfied that Koyo's records do not allow it to
report these billing adjustments on a transaction-specific basis and
that Koyo acted to the best of its ability in calculating the reported
adjustments on as narrow a basis as its records allowed. Furthermore,
because Koyo's allocation was both scope-and customer-specific, we are
satisfied that Koyo's reported billing adjustments are reasonably
accurate and non-distortive. Therefore, for these final results we have
made direct adjustments to home market price for both Koyo's negative
and positive billing adjustments.
In contrast to its billing adjustments, Koyo reported its rebates
only on a customer-specific basis. While we are satisfied that Koyo
acted to the best of its ability in reporting this adjustment insofar
as its records did not allow for it to report the adjustment on a more
specific basis, its allocation nevertheless included non-scope
merchandise. We therefore examined Koyo's allocation to determine if it
is was reasonably non-distortive. Our review of the record indicated
that the non-scope merchandise included in Koyo's allocation reflected
sales of bearings other than TRBs. Not only has our review and analysis
of the record given us no reason to believe that Koyo is more likely to
grant its rebates on sales of bearings other than TRBs than it is on
sales of TRBs, but we note that Koyo is primarily in the business of
selling bearings, some of which are within the scope of the TRB orders
and others which are not. While we recognize that there are differences
in bearings, we have not found that the scope and non-scope bearings
included in Koyo's allocation vary significantly in terms of value,
physical characteristics, nor the manner in which they are sold such
that Koyo's allocation would result in an unreasonably inaccurate or
distortive allocation. Thus, we have made a direct adjustment to home
market price for Koyo's rebates.
Concerning Fuji's rebates, our review of the record indicates that
Fuji granted two different types of rebates, both of which were
applicable to sales of all automobile parts (not only TRBs), and both
of which were granted to only those dealers meeting the specific
requirements of the individual rebate program. In order to derive the
rebate amount it reported for each appropriate home market transaction,
Fuji calculated dealer-specific allocation ratios by dividing the total
rebate paid to a dealer during the POR (for all parts sales) by the
total value of all parts sales to the dealer during the POR. Based on
our review of the record, we are satisfied that Fuji reported these
rebates to the best of its ability insofar as its records allow neither
the reporting of invoice-specific rebates nor the identification of
those rebates paid to each dealer specifically for TRBs purchases.
Furthermore, as explained in the proprietary version of the
Department's final results analysis memorandum for Fuji, we are also
satisfied that Fuji reported the first of these rebates, ``Rebate 1,''
to the best of its ability in that its records allow neither the
reporting of invoice-specific rebates nor the identification of those
rebates paid to each dealer specifically for purchases of TRBs.
Furthermore, as explained in the proprietary version of the
Department's final results analysis memorandum for Fuji, we are also
satisfied that Fuji's allocation methodology is not unreasonably
distortive or inaccurate.
The same cannot be said for Fuji's other rebate program, ``Rebate
2.'' Fuji reported that it granted these rebates not on the basis of
the dealers'' purchases from Fuji but, rather, on the basis of the
dealers'' subsequent sales of automotive parts. In reporting ``Rebate
2,'' however, Fuji did not calculate its reported dealer-specific
allocation ratios using the dealers' total sales values. Instead, Fuji
used the value of Fuji's sales to the dealer. The use of this amount in
calculating the dealer-specific allocation ratios for ``Rebate 2'' has
the effect of overstating the appropriate amount of the rebates
granted. In addition, as Fuji based the ``Rebate 2'' program on the
total value of the dealers' subsequent sales of TRBs and other
automotive parts, Fuji had the data at hand to correctly allocate
``Rebate 2'' on the same basis as originally granted. Therefore, unlike
``Rebate 1,'' we find that Fuji did not act to the best of its ability
in reporting ``Rebate 2'' and, further, used an allocation methodology
which is unreasonably inaccurate or distortive. Therefore, we have
disallowed this adjustment for these final results.
Comment 9: Fuji argues that the Department incorrectly treated its
reported home market warranty expenses as indirect selling expenses.
Fuji contends that not only did it clearly provide the ``direct
expense'' nature of its warranties in response to the Department's
questionnaire, but the Department's questionnaire itself identifies
warranties as a common example of a direct expense.
Timken argues that, rather than treat Fuji's home market warranty
expenses as indirect selling expenses, the Department should have
denied the adjustment in its entirety. Timken asserts that Fuji's
response indicates that Fuji allocated its home market warranty
expenses by dividing its total warranty expenses for all replacement
parts by the total value of parts and vehicle sales during the POR. In
other words, Timken contends, Fuji allocated its home market warranty
expenses on
[[Page 11839]]
the basis of sales of both scope and non-scope merchandise. Timken
maintains that, because the CIT has held that it cannot allow the
Department to accept a methodology which allows for the inclusion of
warranty expenses on non-scope merchandise in calculating adjustments
to NV (Federal-Mogul Corp. v. United States, 862 F. Supp. 384 (CIT
1994) (Federal-Mogul II), the Department must deny Fuji's home market
warranty expense adjustment in its final results of review.
Department's Position: Similar to our policy concerning PSPAs, we
accept claims for home market direct selling expenses as direct
adjustments to price if we determine that a respondent reported the
expense: (1) on a transaction-specific basis; (2) as a fixed and
constant percentage of the value of sales on which it was incurred; or
(3) on an allocated basis, provided that it was not feasible for the
respondent to report the expense on a more specific basis and the
allocation does not cause unreasonable distortions (i.e., was likely to
have been granted proportionately on sales of scope and non-scope
merchandise). In addition, in accordance with Torrington II, we
disallow any allocated home market direct selling expenses which do not
meet any one of these standards (see AFBs 94-95 at 2098).
Furthermore, in regard to warranty expenses, the Department has
long recognized that it is not possible to tie POR warranty expenses to
POR sales, since the warranty expenses can be incurred on pre-POR
sales. Likewise, a respondent may not incur warranty expenses on POR
sales until a future time period. Therefore, warranty expenses
generally cannot be reported on a transaction-specific basis and an
allocation is necessary (see id.).
In its response Fuji reported its warranty expenses using an
allocation because it was unable to tie its POR warranty expenses to
POR sales. While we do not object to Fuji's use of an allocation in
this instance, we are not satisfied that Fuji's allocation is
reasonably non-distortive. Fuji's reported total warranty expenses for
the POR include those incurred for all automotive parts, not only TRBs.
In addition, Fuji's warranties cover the full replacement of a
defective automobile part, including all parts and labor. As a result,
the warranty expense amount reported by Fuji includes not only the cost
of all replaced automobile parts, but the labor for replacing a large
variety of automobile parts as well. Considering the fact that there
are numerous automobile parts which are far more expensive and far more
labor-intensive to replace than a TRB and, likewise, numerous parts far
less expensive and more easily replaced than TRBs, it is highly
unlikely that Fuji incurred warranties for TRBs in an amount
proportionate to other automobile parts. Therefore, we are not
satisfied that Fuji's warranty expense allocation is reasonably non-
distortive and we have denied this adjustment for these final results.
Comment 10: Timken states that Koyo incorrectly applied its
allocation ratios for its home market pre-sale inland freight, post-
sale inland freight, credit, and indirect selling expenses to its gross
unit prices, rather than to unit prices net of rebates and discounts.
Timken contends that Koyo's response demonstrates that the denominator
Koyo used to allocate these home market expenses reflected its total
home market sales value net of rebates and discounts. However, Timken
asserts, rather than apply the allocation ratio it calculated for each
expense to a unit price net of discounts and rebates, Koyo instead
applied its allocation ratios to its gross home market unit prices.
Timken claims that, as a result, Koyo over-allocated the expenses to
its home market sales. Timken concludes that the Department should,
therefore, recalculate these per-unit expense amounts by applying
Koyo's reported allocation ratios to home market unit prices net of
discounts and rebates. Timken also states that, even though the
Department disallowed Koyo's home market rebate and discount
adjustments to NV, the Department may use Koyo's reported discount and
rebate amounts as facts available in order to avoid the over-allocation
of the expenses at issue while still denying Koyo's rebate and discount
adjustments to NV.
Koyo argues that the methodology it used to calculate its home
market pre-sale inland freight, post-sale inland freight, credit, and
indirect selling expenses is well-established and has been repeatedly
verified and accepted by the Department in all past TRBs and AFBs
reviews. Koyo asserts that, because the Department has never found any
fault with Koyo's methodology in the past, it should again accept the
methodology as reasonable for these final review results.
Department's Position: We disagree with Timken. While Timken
asserts that Koyo has excluded rebates and discounts from the
denominators it used in its pre-sale inland freight, post-sale inland
freight, credit, and indirect selling expenses allocations, Timken
points to no evidence on the record demonstrating this. Furthermore,
based on our own re-examination of the record, we have found no
evidence that this is the case. Rather, in regard to Koyo's pre-sale
inland freight and post-sale inland freight allocations, exhibit B-4 of
Koyo's response indicates that the allocation denominators used by Koyo
were net only of internal sales between Koyo and its four affiliated
home market distributors. There is no evidence that the denominators
also excluded rebates and discounts. Likewise, we found no evidence on
the record that Koyo excluded rebates and discounts from the customer-
specific total sales values it used in its customer-specific credit
allocations or the total home market sales value used in its indirect
selling expense allocation. Furthermore, while we did not verify these
allocations for these reviews, we note that Koyo's allocation
methodologies are identical to those which Koyo used in past TRBs
reviews which the Department did verify. Based on our review of the
record and the fact that we have verified these allocations in past
TRBs reviews without discrepancy and have found no evidence in past
verifications that Koyo excluded rebates and discounts from the
denominators in question (see, e.g., the Department's 1992-93 home
market verification report for Koyo dated November 28, 1995), we have
no reason to suspect that Koyo misallocated and/or overstated these
adjustments in these reviews. Therefore, we have made no changes to
Koyo's reported home market pre-sale inland freight, post-sale inland
freight, credit, or indirect selling expenses for these final results.
COP and CV
Comment 11: Timken states that in the computer program the
Department used to determine the preliminary results margin for Koyo,
the Department incorrectly excluded sales below cost from the home
market database before U.S. and home market models were matched to
determine like merchandise. Timken contends that, because this is
contrary to the Department's policy to use CV when the NV of the like
merchandise fails the cost test, the Department should correct this
error for its final review results.
Koyo agrees with Timken that the Department should use CV when a
U.S. TRB matches to a foreign like product which has failed the below-
cost test.
Department's Position: We agree with both the petitioner and Koyo.
In our preliminary results computer program for Koyo we inadvertently
omitted computer programming language which would result in CV being
used for NV in those instances where the U.S. model matched a home
market model which
[[Page 11840]]
failed the below-cost test. We have corrected this error for these
final results of review.
Comment 12: Koyo argues that, for the purpose of determining
whether any of Koyo's home market sales were below cost, the Department
incorrectly compared home market prices net of indirect selling and
packing expenses to COPs which included indirect selling expenses and
packing. Koyo asserts that, to ensure a fair and balanced comparison,
the Department should deduct from COP all indirect selling and packing
expenses prior to comparing it to the home market price net of these
expenses.
Department's Position: We agree with Koyo and have deducted from
COP all indirect selling and packing expenses prior to comparing COP to
home market prices net of these same expenses.
Comment 12: Koyo argues that, when calculating CV, the Department
added indirect selling expenses and commissions in a fixed amount
rather than applying a factor. Koyo asserts that, in doing so, the
Department deducted the exact same amount of indirect selling expenses
and commissions in every CV calculation, ignoring the differences in
sizes and types of TRBs. Koyo contends that in the most recent AFBs
review (AFBs 94-95), the Department calculated CV expense amounts on a
transaction-specific basis such that the calculated expense accurately
reflected the actual expenses which would have been incurred had the
AFBs model been sold in the home market above cost. Koyo contends that
the Department should adopt the AFBs approach in these final results
not only because it is more accurate, but because it is consistent with
the Department's rejection of calculations of average expense amounts
when transaction-specific calculations are possible.
Department's Position: We agree with Koyo and have made the
appropriate changes to our margin calculation computer program for Koyo
for these final results.
Miscellaneous Issues Related to Assessment, Level of Trade (LOT), the
Arm's-Length Test, and the 20% Difference-in-Merchandise (Difmer) Test
Comment 13: Timken states that, because the Department determined
that the value added to those TRBs imported by Subaru-Isuzu Automotive
(SIA), Fuji's manufacturing U.S. subsidiary, for use in the manufacture
of automobiles in the United States substantially exceeded the value of
the imported TRBs, in the preliminary results of review for Fuji the
Department explained that it would use the weighted-average dumping
margins it calculated for sales of identical or similar TRB models sold
as replacement parts by Subaru of America (SOA), Fuji's U.S. selling
subsidiary, to determine the margin for those TRBs imported by SIA.
Timken contends that, while the Department's preliminary results makes
it clear that the Department will apply SOA's cash deposit rate to
SIA's TRB imports, the Department did not specifically indicate at what
rate it would assess antidumping duties on SIA's imports. Timken
asserts that, (1) because the value available to Customs' for
liquidation purposes is the transfer value between Fuji and SIA, (2)
because there is a difference between transfer and resale prices, and
(3) because the Department has already calculated an assessment rate
for Fuji using the total entered value of SOA's imports in the
denominator, the Department should apply this assessment rate to SIA's
imports as well.
Fuji argues that, not only is there nothing within section 772(e)
of the Act, the statutory provision for merchandise with value added
after importation, directing the Department to use the same assessment
rate for each importer, but section 351.212(b)(1) of the Department's
proposed regulations indicates that assessment rates will be specific
to each importer. Therefore, Fuji asserts, the Department is not
required to apply the assessment rate it calculated for SOA to SIA's
imports. Furthermore, Fuji argues, because SIA is not a reseller of
TRBs, as is SOA, there is no reason for one to assume, as Timken does,
that SIA's transfer values would be different from its TRB resale
prices to unrelated U.S. customers. Indeed, Fuji claims, there is no
evidence on the record to support any such conclusion. In addition,
Fuji contends, because SIA is not a reseller of TRBs, it would be
grossly unfair for the Department to apply SOA's assessment rate, a
reseller's assessment rate, to SIA's imports.
Therefore, Fuji asserts, the Department should either use SOA's
calculated deposit rate as SIA's assessment rate, or calculate a new
assessment rate for SIA. Fuji maintains that, because SIA is not a
reseller of TRBs, the use of SOA's cash deposit rate as SIA's
assessment rate would ensure an accurate assessment of SIA's TRB
imports. Furthermore, Fuji argues, the use of SOA's cash deposit rate
as both SIA's cash deposit and assessment rate would be in accordance
with the Department's policy to calculate cash deposits rates which
correspond as closely as possible to the eventual assessment rate.
If the Department decides not to use SOA's cash deposit rate as
SIA's assessment rate, Fuji asserts, the Department should, in the
alternative, calculate a separate assessment rate for SIA using only
the dumping margins the Department calculated on sales of the identical
TRBs imported by SOA. Fuji states that in the preliminary results the
Department calculated SOA's cash deposit rate based on all its TRB
imports. However, Fuji asserts, SIA only imports two TRB models.
Therefore, Fuji concludes, the Department should apply to SIA an
assessment rate based only on SOA's sale of the identical two TRB
models and not the SOA rate it calculated based on SOA's sales of all
TRB models. Fuji maintains that this approach is more consistent with
section 772(e) of the Act and results in a more accurate assessment of
SIA's imports because it is based only on the margins the Department
calculated for the identical TRBs imported by SOA.
Department's Position: We disagree with Fuji. Section 772(e) of the
new law allows us to determine the CEP of further-processed subject
merchandise in a manner that does not require the calculation and
subtraction of U.S. value added if the U.S. value added is likely to
exceed substantially the value of the imported merchandise (this
procedure is identified in the Act as the ``special rule''). The
statute further provides that, where there is a sufficient quantity of
sales of identical or other subject merchandise sold to unaffiliated
persons and the use of such sales is appropriate, the Department shall
use the prices of such sales to determine the CEP of the further-
processed subject merchandise. If there is not a sufficient quantity of
sales of identical or other subject merchandise, or if the use of such
sales is inappropriate, the Department may determine CEP of the
further-processed subject merchandise on any other reasonable basis.
In accordance with section 772(e), in our questionnaire we request
that respondents provide information to demonstrate whether the value
added to the subject merchandise in the United States is likely to
exceed substantially the value of the subject merchandise. If we
determine that it is likely, we will normally not require the
respondent to report the detailed further-manufacturing and sales
information for its further-manufactured sales. In this way, section
772(e) not only relieves the Department of the burden of the detailed
further-manufacturing analysis which would be required to determine the
CEP of further-manufactured subject
[[Page 11841]]
merchandise where the U.S. value added substantially exceeds the value
of the subject merchandise, but it has the additional benefit of
eliminating the burden on a respondent to collect and submit the
detailed data necessary for the Department to conduct such an analysis.
However, if a respondent's U.S. value added is likely to exceed
substantially the value of the subject merchandise and the Department
chooses not to perform a detailed further-manufacturing analysis, in
accordance with section 772(e) of the Act, we will rely on surrogate
prices to determine the dumping margins, if any, for the further-
manufactured subject merchandise.
In the instant case, SIA imports TRBs from Fuji for the sole
purpose of using the TRBs in the further manufacture of automobiles in
the United States, whereas SOA imports TRBs for the sole purpose of
reselling the merchandise in the U.S. replacement market. In its
response Fuji demonstrated that the value added in the United States to
all TRBs imported by SIA is likely to exceed substantially the value of
the TRBs. Accordingly, we did not require Fuji to report detailed
further manufacturing and sales information for SIA's sales. Therefore,
in accordance with section 772(e), we relied on surrogate prices (i.e.,
those of SOA's sales of identical and other subject merchandise) to
determine the dumping margins for SIA's sales.
While Fuji's arguments focus primarily on the manner in which the
Department should calculate a separate assessment rate for SIA, this
issue and Fuji's assertions are moot in light of the fact that our
preference to calculate importer-specific assessment rates is limited
to only those instances where the importer is not related to the
foreign exporter. This is to prevent one importer from being liable for
antidumping duties attributable to margins found on sales to a
different importer. In those instances where the importer, or
importers, are related to the foreign exporter, we consider the related
parties to constitute one corporate entity and consider the use of a
manufacturer/exporter-specific assessment rate to be appropriate (see,
e.g., TRBs 92-93 at 57648). In the instant case, because both SOA and
SIA are Fuji's affiliated U.S. subsidiaries, we consider all three
entities to constitute one corporate entity and, therefore, find no
basis for the calculation of SIA or SOA-specific dumping margins, cash
deposit rates, or assessment rates. Even if section 772(e) did not
apply, we still would not calculate a separate assessment rate for SIA.
Rather, because these entities constitute a single corporate entity,
the margins we calculate for SIA's sales would have been combined with
SOA's in order to calculate an overall Fuji-specific weighted-average
margin, cash deposit rate, and assessment rate.
In addition, there is no evidence on the record supporting Fuji's
contention that because SIA does not resell TRBs for the replacement
market, its selling practices are significantly different from SOA such
that SOA's assessment rate is inappropriate. Fuji has provided no
information which suggests that the weighted-average dumping margin for
SIA's sales would differ significantly from the weighted-average margin
we calculated for SOA's sales, nor has Fuji provided any information
demonstrating that SIA would sell at resale prices equivalent to the
transfer prices it paid Fuji. Rather, the evidence on the record
demonstrates that SIA would most likely engage in selling and pricing
practices similar to SOA. We therefore have no basis to suspect that
the application of SOA's assessment rate to all subject merchandise
imported by SOA and SIA would be unreasonable.
Comment 14: Fuji argues that because it is a reseller which does
not have access to the variable costs of manufacturing (VCOM) and total
costs of manufacturing (TCOM) of the TRBs it resells in the U.S. and
home markets, it agrees with the Department's use of its acquisition
costs as the basis for the 20% difmer test. Fuji contends that in those
cases where VCOM and TCOM are available, the Department allows non-
identical home market models to be included within the pool of
potential home market matches if the difference in the VCOMs between
the U.S. and home market models is less than 20 percent of the U.S.
model's TCOM. In other words, Fuji states, the Department uses the U.S.
model's costs as the benchmark for its comparison. However, Fuji
asserts, rather than use the U.S. model's acquisition cost as the
benchmark for the 20% difmer test the Department conducted for Fuji,
the Department incorrectly used the home market model's acquisition
costs as the basis for the 20% difmer comparison.
Department's Position: We agree with Fuji. In our margin
calculation computer program for Fuji we inadvertently used programming
language which incorrectly applied the 20% difmer test. We have
corrected this error for these final results.
Comment 15: Koyo argues that, in order to ensure a fair comparison
between NV and USP, the URAA implemented section 773(a)(7)(A) of the
Act, which provides for a LOT adjustment to be made if the respondent
demonstrates that different LOTs exist due to a difference in selling
activities between LOTs, and that the differences in LOT affect price
comparability. Koyo argues that, while the Department correctly
recognized that one LOT, a CEP LOT, existed in the United States, and
two different LOTs existed in Koyo's home market (an OEM LOT and an
after-market (AM) LOT), the Department nevertheless incorrectly
concluded that Koyo did not meet the statutory requirements for a LOT
adjustment. Koyo states that the Department did not grant Koyo a LOT
adjustment because it could not find a LOT in the home market the same
as the U.S. CEP LOT, and concluded that it lacked the data necessary to
determine whether there was a consistent pattern of price differences
between LOTs, based on Koyo's home market sales of TRBs. Koyo contends
that this methodology, in which the Department requires a LOT to exist
in the home market which is the same as the U.S. CEP LOT in order to
determine if a pattern of price differences exists between established
home market LOTs, overlooks the fact that there will almost never be a
home market LOT equal to the U.S. CEP LOT. As a result, Koyo asserts,
in almost every CEP situation, there will be no basis upon which to
grant a LOT adjustment. Koyo further argues that in this case, and in
virtually every case involving CEP sales thus far, the Department has
applied this methodology and has never granted a LOT adjustment in CEP
calculations. Koyo contends that this prevents a fair comparison
between NV and USP and eviscerates the URAA's entire LOT adjustment
provision in CEP cases.
Furthermore, Koyo asserts, the fact that a LOT like the U.S. CEP
LOT does not exist in the home market does not mean that the data to
determine a consistent pattern of price differences does not exist.
Rather, Koyo claims, in the instant case, it provided the Department
with exactly the type of data it needs to determine price
comparability. Koyo contends that it provided the Department with a
home market price, which reflects the price of home market TRBs if they
were sold at a home market LOT identical to the U.S. CEP LOT. Koyo
states that when this ``constructed normal value'' is compared to the
NV of its home market sales, it becomes apparent that a pattern of
price differences exists between the home market constructed CEP LOT
and the other two home market LOTs. Therefore, Koyo concludes, because
it has met the statutory requirement to demonstrate that a pattern of
price
[[Page 11842]]
differences exists and has met all other statutory requirements for a
LOT adjustment, the Department is required to grant Koyo a LOT
adjustment.
Timken argues that, in CEP calculations, the only way the
Department can determine, in accordance with section 773(a)(7)(A) of
the Act, if there is a consistent pattern of price differences between
sales at different LOTs in the country in which NV is determined is if
one of the home market LOTs is the same as the U.S. CEP LOT. Timken
asserts that Koyo's constructed normal values, which Koyo claims
reflect the prices that would exist if there was a home market LOT like
the U.S. CEP LOT, do not serve as a reliable substitute for the absence
of an actual home market CEP LOT. Furthermore, Timken claims that not
only is it unclear which of Koyo's constructed normal values is the
analog to the U.S. CEP LOT, but Koyo's deduction of indirect selling
expenses to derive these constructed normal values is contrary to the
underlying premise of a LOT adjustment. Timken states that the whole
purpose of a LOT adjustment is to adjust for those price differences
which are not reflected in selling expenses. Therefore, Timken
maintains, if one does make prices at different LOTs equivalent by
adjusting for differences in selling expenses, as Koyo does in this
case, there is no need or statutory basis for the additional LOT
adjustment.
Department's Position: We agree with Timken. We may not base LOT
determinations or adjustments upon ``constructed'' or artificial home
market levels. Koyo's constructed normal value LOTs are not LOTs at
which Koyo actually sold TRBs in the home market during the POR.
Furthermore, not only do we rely on actual starting prices in
determining whether different LOTs exist, but there is no statutory
basis for us to construct LOTs in the home market or elsewhere.
Therefore, because Koyo was unable to demonstrate a pattern of
consistent price differences between a home market LOT equivalent to
its CEP and other home market LOTs, we did not have the information
necessary to make a LOT adjustment. However, because Koyo's CEP LOT was
less advanced than its HM LOTs, we made a CEP offset adjustment to NV
for all our comparisons of Koyo's CEP sales.
Comment 16: Fuji argues that the Department's 99.5 percent arm's-
length test, in which it calculates home market customer-specific
weighted-average affiliated/unaffiliated price ratios and excludes from
its margin calculations all sales to a home market customer if its
ratio is not greater than 99.5 percent, is too restrictive and
inappropriately rejects bona fide sales to affiliated home market
customers that are made at the same prices as sales to unaffiliated
home market customers. Fuji asserts that, even though it sold from the
same price list at the same prices to all home market customers during
the POR for any given product during any given month, the Department's
arm's-length test nevertheless resulted in the exclusion of a large
percentage of its affiliated customer sales from the Department's
preliminary margin calculations.
For example, Fuji asserts that the Department's reliance on POR-
weighted average prices results in the exclusion of affiliated party
sales simply because different quantities may have been purchased by an
affiliated party after a monthly price change took effect even though
the prices charged to affiliated and unaffiliated customers during any
given month were the same. In addition, Fuji contends that even if the
same number of units are sold to both the affiliated and unaffiliated
customer, all sales to the affiliated customer will fail the test even
if a majority of the sales to the affiliated customer during the POR
were priced higher than the sales of the identical product to the
unaffiliated customer.
Fuji claims that, to avoid these inaccuracies, the Department
should adopt a new arm's-length test in which individual transactions
to affiliated customers are determined to be at arm's length unless the
prices to the affiliated customer deviate from the weighted-average
prices to unaffiliated customers by more than two standard deviations.
Fuji asserts that this method not only better reflects commercial
reality, but it eliminates abnormally high and low priced sales while
still ensuring that only those affiliated-customer sales prices which
are statistically comparable to unaffiliated-party sales prices are
included in the Department's margin calculations.
Fuji further asserts that, if the Department does not adopt this
new test, it should at least modify its existing arm's-length test such
that it would use the same methodology, but apply it on a monthly,
rather than a POR, basis. Fuji explains that if the Department compares
the average monthly weighted-average price of a product sold to an
affiliated customer to the monthly weighted-average sales prices of the
same product to an unaffiliated customer, it would capture the fact
that Fuji's monthly average sales prices to affiliated and unaffiliated
customers are the same. In this way, Fuji concludes, the Department
will avoid the arbitrary results produced by its current test and
correctly include within its margin calculations those sales to
affiliated home market customers which were clearly at arm's length.
Timken argues that, not only has the CIT ruled on several occasions
that the Department's 99.5 percent arm's-length test is reasonable, but
Fuji has failed to demonstrate that this test is unreasonable or that
it results in distortions of price comparability. Timken concludes that
the Department, therefore, should continue to adhere to its established
arm's-length test in these final results of review.
Department's Position: We agree with Timken. Fuji failed to provide
a single example from its own data supporting its assertions. Fuji
presents only theoretical examples of why the arm's-length test is
distortive and we have no basis upon which to conclude that our test is
unreasonable. In addition, our comparison of Fuji's weighted-average
net prices to unrelated customers and related customers in the home
market clearly demonstrated that Fuji did not always sell to its
related and unrelated customers at the identical net prices.
Furthermore, not only is our 99.5 percent arm's-length test methodology
well established, but the CIT has repeatedly sustained this methodology
(see, e.g., Certain Cut-to-Length Carbon Steel Plate from Sweden; Final
Results of Antidumping Duty Administrative Review, 61 FR 15772 (April
9, 1996), Usinor Sacilor v. United States, 872 F. Supp. 1000 (CIT 1994)
(Usinor), Micron Technology, Inc. v. United States, 893 F. Supp. 21
(CIT 1995) (Micron), and NTN Bearing Corp. of America, Inc. v. United
States, 905 F. Supp. 1083 (CIT 1995)). In addition, in Usinor, the CIT
specifically stated that ``[g]iven the lack of evidence showing any
distortion of price comparability, the court finds the application of
Commerce's arm's-length test reasonable.'' Likewise, in Micron, because
the CIT found that the plaintiff /respondent failed to ``demonstrate
that Commerce's customer-based arm's length test inquiry is
unreasonable'' and failed to ``point to record evidence which tends to
undermine Commerce's conclusion,'' the CIT sustained the 99.5 percent
arm's-length test, given the lack of evidence showing a distortion of
price comparability. Therefore, for these final results we have not
altered our 99.5 percent arm's-length test for Fuji, and have continued
to apply the test used in our preliminary results.
Clerical Errors
Comment 17: Koyo argues that in the Department's preliminary
results computer program for Koyo, the
[[Page 11843]]
Department incorrectly adjusted a quantity value which was already net
of adjustments. Koyo argues that, to correct this error, the Department
should either use the quantity value Koyo reported net of adjustments,
or calculate its own net quantity value by deducting the quantity
adjustments Koyo reported in its response from the gross quantity value
Koyo also reported in its response.
Department's Position: We agree with the respondent. In order to
correct these errors for these final results we have used the variable
which reflects that quantity value which is already net of adjustments.
Comment 18: Fuji argues that in its response it explained that the
date of sale for its EP sales was the purchase order date and the date
of sale for its CEP sales was the invoice date. Fuji also states that,
while it reported the invoice and purchase order dates under separate
variables, it also reported another sale date variable ``SALEDTU''
which reflected the correct date of sale, whether the reported sale was
an EP or CEP sale. Fuji contends that in the Department's preliminary
results computer program for Fuji, the Department incorrectly used the
invoice date variable for all of Fuji's EP sales. To correct this
error, Fuji suggests that the Department simply use the ``SALEDTU''
variable, where appropriate.
Timken argues that the Department's use of the invoice date as the
date of sale for Fuji's EP sales is in accordance with its new policy
and should not be altered for the final results of review.
Department's Position: We agree with Fuji. While Timken is correct
that, in recent antidumping reviews of other cases the Department has
sent to respondents revised questionnaires which request them to report
the invoice date as the date of sale for all sales, it was not our
practice to do so at the time we issued our 1994-95 TRBs
questionnaires. As a result, we had no intention of requiring the
respondents in the 1994-95 TRBs administrative reviews to report their
date of sale information in this manner for all sales, and our use of
the invoice date as the date of sale for Fuji's EP sales was clearly a
clerical error and does not reflect the application of this new
practice. Therefore, because we believe it would be both unreasonable
and unfair to apply this new practice now, a practice we began to use
several months after our receipt of questionnaire responses in the
1994-95 TRBs reviews, and because we have determined that the proper
date of sale for Fuji's EP sales was clearly the purchase order date,
we have simply corrected our clerical error by using Fuji's reported
purchase order date as the date of sale for its EP sales.
Final Results of Review
Based on our review of the arguments presented above, for these
final results we have made changes in our margin calculations for Fuji
and Koyo. Our preliminary determinations concerning no shipments, the
use of total adverse facts available, and the terminations of reviews
have remained unchanged for these final results (see TRBs 94-95 Prelim
at 7392).
As a result of our comparison of CEP and EP to NV, we have
determined that margins exist for the period October 1, 1994, through
September 30, 1995, as follows:
------------------------------------------------------------------------
Margin
Manufacturer/reseller/exporter (percent)
------------------------------------------------------------------------
For the A-588-054 Review
------------------------------------------------------------------------
Koyo Seiko................................................. 21.70
Fuji....................................................... 11.48
Kawasaki................................................... 47.63
Yamaha..................................................... 47.63
Nigata..................................................... 47.63
Suzuki..................................................... 47.63
------------------------------------------------------------------------
For the A-588-604 Review
------------------------------------------------------------------------
Fuji....................................................... (\1\)
Honda...................................................... (\1\)
Kawasaki................................................... 40.37
Yamaha..................................................... 40.37
Nigata..................................................... 40.37
Suzuki..................................................... 40.37
Nittetsu................................................... (\1\)
Showa Seiko................................................ (\1\)
------------------------------------------------------------------------
\1\ No shipments or sales subject to this review. The firm has no rate
from any segment of this proceeding.
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. Individual
differences between USP and NV may vary from the percentages stated
above. The Department will issue appraisement instructions on each
exporter directly to the Customs Service.
Furthermore, the following deposit requirements will be effective
for all shipments of the subject merchandise entered, or withdrawn from
warehouse, for consumption on or after the publication date of these
final results, as provided for by section 751(a)(1) of the Tariff Act:
(1) The cash deposit rates for the reviewed companies will be those
rates outlined above;
(2) For previously reviewed or investigated companies not listed
above, the cash deposit rate will continue to be the company-specific
rate published for the most recent period; (3) If the exporter is not a
firm covered in these reviews, a prior review, or the original less-
than-fair-value (LTFV) investigations, but the manufacturer is, the
cash deposit rate will be the rate established for the most recent
period for the manufacturer of the merchandise; (4) If neither the
exporter nor the manufacturer is a firm covered in these or any
previous reviews conducted by the Department, the cash deposit rate for
the A-588-054 finding will be 18.07 percent and 36.52 percent for the
A-588-604 order (see Preliminary Results of Antidumping Duty
Administrative Reviews; Tapered Roller Bearings and Parts Thereof,
Finished and Unfinished, From Japan and Tapered Roller Bearings, Four
Inches or Less in Outside Diameter, and Components Thereof, From Japan,
58 FR 51058 (September 30, 1993)). All U.S. sales by each respondent
will be subject to one deposit rate according to the proceeding.
The cash deposit rate has been determined on the basis of the
selling price to the first unrelated customer in the United States. For
appraisement purposes, where information is available, the Department
will use the entered value of the merchandise to determine the
assessment rate.
This notice also serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as a reminder to parties subject to
administrative protective orders (APOs) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 353.34(d). Timely written notification of
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.
These administrative reviews and this notice are in accordance with
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR
353.22.
Dated: March 6, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-6375 Filed 3-12-97; 8:45 am]
BILLING CODE 3510-DS-P