[Federal Register Volume 62, Number 89 (Thursday, May 8, 1997)]
[Notices]
[Pages 25165-25172]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12045]



[[Page 25165]]

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DEPARTMENT OF COMMERCE

International Trade Administration
[A-588-028]


Notice of Preliminary Results and Partial Recission of 
Antidumping Duty Administrative Review: Roller Chain, Other Than 
Bicycle, From Japan

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

SUMMARY: We preliminarily determine that sales of roller chain, other 
than bicycle, from Japan have been made below normal value (NV). We 
also preliminarily determine that one manufacturer/exporter under 
review had no sales or shipments of the subject merchandise during the 
POR. If these preliminary results are adopted in our final results of 
administrative review, we will instruct the U.S. Customs Service to 
assess antidumping duties on all appropriate entries.

EFFECTIVE DATE: May 8, 1997.

FOR FURTHER INFORMATION CONTACT: Jennifer Katt, Jack K. Dulberger, or 
Ron Trentham, AD/CVD Enforcement Group II, Office Four, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 
20230; telephone: (202) 482-5253, (202) 482-4793, or (202) 482-0498, 
respectively.

The Applicable Statute

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

SUPPLEMENTARY INFORMATION: The Department published the antidumping 
finding on roller chain, other than bicycle, from Japan in the Federal 
Register on April 12, 1973 (38 FR 9926) (Roller Chain). On April 3, 
1996, the Department published a notice of ``Opportunity to Request an 
Administrative Review'' of the antidumping finding on roller chain, 
other than bicycle, from Japan covering the period April 1, 1995, 
through March 31, 1996 (POR) in the Federal Register (60 FR 17052). In 
accordance with 19 CFR 353.22(a)(2), on April 25, 1996, the petitioner, 
American Chain Association (ACA), requested that the Department conduct 
an administrative review of the antidumping duty order for the 
following six manufacturers/exporters of roller chain in Japan: (1) 
Daido Kogyo Co., Ltd. (Daido); (2) Enuma Chain Mfg. Co., Ltd. (Enuma); 
(3) Izumi Chain Manufacturing Co. Ltd. (Izumi); (4) Hitachi Metals 
Techno Ltd. (Hitachi); (5) Pulton Chain Co., Ltd. (Pulton); and (6) 
R.K. Excel Co. Ltd. (RK) (collectively, the respondents). On April 30, 
1996, Izumi, Daido, and Enuma also requested that the Department 
conduct an administrative review of their shipments of roller chain to 
the United States during the POR. In their April 30, 1996 letters, 
Daido and Enuma also requested partial revocation of the finding as to 
themselves, pursuant to section 353.25(b) of the Department's 
regulations. On May 24, 1996, the Department published a notice of 
initiation of administrative review (61 FR 26158) for the period April 
1, 1995, through March 31, 1996. The Department is now conducting this 
administrative review in accordance with section 751 of the Act.
    Under section 751(a)(3)(A) of the Act, the Department may extend 
the deadline for completion of a preliminary determination if it 
determines that it is not practicable to complete the review within the 
statutory time limit. On August 8, 1996, the Department extended the 
time limit for the preliminary and final results of this case. See 
Notice of Extension of Time Limits of Antidumping Duty Administrative 
Review, 61 FR 68237 (December 27, 1996).

Verification

    In accordance with section 782(i) of the Act, we verified the 
further manufacturing costs for merchandise produced by Enuma during 
March 1997. The results of this verification are outlined in the public 
version of the verification report on file in room B-099 of the main 
Commerce building. (See April 2, 1997, Memorandum to the File from Jack 
K. Dulberger and Justin Jee.)

Scope of Review

    The merchandise subject to this review is roller chain, other than 
bicycle, from Japan. The term ``roller chain, other than bicycle,'' as 
used in this review, includes chain, with or without attachments, 
whether or not plated or coated, and whether or not manufactured to 
American or British standards, which is used for power transmissions 
and/or conveyance. This chain consists of a series of alternately-
assembled roller links and pin links in which the pins articulate 
inside from the bushings and the rollers are free to turn on the 
bushings. Pins and bushings are press fit in their respective link 
plates. Chain may be single strand, having one row of roller links, or 
multiple strand, having more than one row of roller links. The center 
plates are located between the strands of roller links. Such chain may 
be either single or double pitch and may be used as power transmission 
or conveyor chain. This review also covers leaf chain, which consists 
of a series of link plates alternately assembled with pins in such a 
way that the joint is free to articulate between adjoining pitches. 
This review further covers chain model numbers 25 and 35. Roller chain 
is currently classified under the Harmonized Tariff Schedule of the 
United States (HTSUS) subheadings 7315.11.00 through 7619.90.00. 
Although the HTSUS subheadings are provided for convenience and Customs 
purposes, the written description remains dispositive.

Period of Review

    The POR is April 1, 1995, through March 31, 1996.

Non-Shipper

    Hitachi claimed in an August 5, 1996 letter to the Department that 
it did not have shipments during the POR, which we confirmed with the 
United States Customs Service. Since Hitachi made no shipments of the 
subject merchandise during the POR, and is not an exporter or producer 
as defined in section 771(28) of Act, we are rescinding this review 
with respect to Hitachi. See Antidumping Duties; Countervailing Duties; 
Notice of Proposed Rulemaking, Sec. 351.213(d)(3), (61 FR 7308, 7365) 
(February 27, 1996). Consequently, Hitachi's cash deposit rate will 
continue to be that established in the most recently completed final 
results. (For further discussion of Hitachi, see the Memorandum to the 
File from Jack Dulberger, dated April 1, 1997, on file in room B-099 of 
the main Commerce building.)

Facts Available

Pulton

    During the current POR, the Department requested that Pulton report 
its sales of all roller chain models sold in the home market. Despite 
our request, Pulton did not report its sales of all home market models, 
but rather chose to report only its home market sales of models which, 
according to Pulton, were the most similar models to the models sold in 
the United States. In addition, Pulton failed to provide the requested 
difference in merchandise

[[Page 25166]]

(DIFMER) information for all home market models. Therefore, the 
Department was unable to determine whether other home market models 
were sufficiently similar for comparison purposes.
    On February 5, 1997, the Department issued a supplemental 
questionnaire to Pulton, requesting additional information on the home 
market models and the DIFMER calculations. In the same questionnaire, 
the Department also requested constructed value (CV) information 
pertaining to the models sold in the U.S. market. In both instances, 
the Department advised Pulton that failing to provide the requested 
information may result in the application of facts available (FA).
    In response to the February 5, 1997, supplemental questionnaire, 
Pulton stated that the DIFMER data for the home market sales ``is not 
currently available;'' and regarding the CV information Pulton stated 
that ``no response is required.'' See Pulton's February 10, 1997 
Supplemental Questionnaire Response. On February 24, 1997, the 
Department provided Pulton with an additional opportunity to submit a 
complete response to the Department's February 5, 1997, supplemental 
questionnaire. In the supplemental letter to Pulton, the Department 
informed Pulton that should it fail to provide the requested 
information, the Department may apply adverse FA in its determination. 
On February 24, 1997, Pulton responded to the Department's additional 
request for information by stating that it would not provide additional 
information because of the ``burden and expenses involved'' including 
``a substantial amount of time and research * * * plus legal 
expenses.'' Pulton did not propose any alternatives to the Department. 
See the February 24, 1997 Letter from Pulton to the Department.
    Section 776(a)(2) of the Act provides that if an interested party 
withholds information that has been requested by the Department, fails 
to provide such information in a timely manner or in the form 
requested, significantly impedes a proceeding under the antidumping 
statute, or provides information that cannot be verified, the 
Department shall use FA in reaching the applicable determination.
    Section 782(d) provides certain conditions that must be satisfied 
before the Department may, subject to subsection (e), disregard all or 
part of the information submitted by a respondent. First, this section 
states that if the Department determines that a response to a request 
for information does not comply with the request, it shall promptly 
inform the person submitting the response of the nature of the 
deficiency and shall, to the extent practicable, provide that person 
with an opportunity to remedy or explain the deficiency in light of the 
time limits established for the completion of the review. Section 
782(d) continues that if the party submits further information in 
response to the deficiency and the Department finds the response is 
still deficient or submitted beyond the applicable time limits, the 
Department may disregard all or part of the original and subsequent 
responses.
    As noted above, on several occasions the Department notified Pulton 
of the nature of its deficiencies and provided Pulton with the 
opportunity to submit the requested DIFMER information for those home 
market models which were not reported on the home market sales listing. 
On each occasion Pulton failed to provide the requested data, declined 
to provide an explanation for the deficient nature of its responses, 
and failed to provide the Department with any suggested alternatives 
for the requested data.
    Because the DIFMER information for these models was not provided by 
Pulton and there were other unreported home market models with physical 
characteristics identical to the two models reported by Pulton, the 
Department does not have complete information on sales of identical 
merchandise and is unable to determine whether any of Pulton's 
unreported home market models passed the Department's 20 percent DIFMER 
test and should be included in the calculation of NV for the 
preliminary results. In addition, no CV information was supplied. 
Therefore, the Department is compelled to use total FA with regard to 
Pulton.
    Section 776(b) of the Act provides that adverse inferences may be 
used against a party that has failed to cooperate by not acting to the 
best of its ability to comply with requests for information. See also 
Statement of Administrative Action (SAA) at 870. Pulton's failure to 
report the DIFMER data requested by the Department, despite several 
warnings by the Department regarding the consequences of such an 
action, demonstrates that Pulton has, to date, failed to cooperate to 
the best of its ability in this review. Thus, in selecting among the FA 
for Pulton, an adverse inference is warranted. Section 776(b) states 
that an adverse inference may include reliance on information derived 
from: (1) The petition; (2) the final determination in the LTFV 
investigation; (3) any previous review under section 751 of the Act or 
investigation under section 753 of the Act; or (4) any other 
information placed on the record. See also SAA at 829-831.
    Therefore, we are applying as total adverse FA the rate of 43.29 
percent. This rate represents the highest calculated rate for Pulton 
from any prior segment of this proceeding (i.e., the margin calculated 
for Pulton in the first administrative review (46 FR 44488, September 
4, 1981)).
    Section 776(c) of the Act provides that when the Department relies 
on secondary information in using FA, it must, to the extent 
practicable, corroborate that information from independent sources 
reasonably at its disposal. The SAA provides that ``corroborate'' means 
simply that the Department will satisfy itself that the secondary 
information to be used has probative value (see SAA at 870). However, 
unlike other types of information such as input costs or selling 
expenses, there are no independent sources for calculated dumping 
margins. The only source for margins is administrative determinations 
and reviews. Thus, in an administrative review, if the Department 
relies on a calculated dumping margin from a prior segment of the 
proceeding, as FA, the Department can normally be satisfied that the 
information has probative value and that it has complied with the 
corroboration requirements of section 776(i) of the Act. See 
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts 
Thereof From France, et. al., 62 FR 2083, 2087 (January 15,1997)(AFBs). 
Furthermore, there is no reliable evidence on the record indicating 
that this selected margin is not appropriate as adverse FA. See Id., at 
2088. The Department has, in an earlier segment of this proceeding, 
applied a rate of 43.29 percent as ``best information available 
(BIA).'' See Final Results of Antidumping Administrative Review: Roller 
Chain, Other Than Bicycle, From Japan, 62 FR 5590, 5591 (December 4, 
1996) (1993-1994 POR). (For further discussion of FA for Pulton, see 
the Memorandum from Holly Kuga to Jeffrey P. Bialos dated April 15, 
1997, on file in room B-099 of the main Commerce building).

Enuma

    Enuma reported that it owned part of a Japanese trading company, 
Daido Tsusho. Daido Tsusho, in turn, owns a U.S. sales subsidiary, 
Daido Corporation. In the U.S. market, Enuma makes all U.S. sales 
through Daido Tsusho, which then resells the subject merchandise either 
directly to unaffiliated U.S. customers, or to Daido

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Corporation. Daido Corporation then resells the subject merchandise to 
unaffiliated U.S. customers.
    Despite owning less than five percent of Daido Tsusho during this 
review segment, Enuma characterized its relationship with Daido Tsusho 
and Daido Corporation as ``affiliated'' throughout its questionnaire 
response. Furthermore, Enuma reported its direct sales made through 
Daido Tsusho as export price (EP) sales and its sales made through 
Daido Corporation as constructed export price (CEP) sales. In addition, 
in its claim for a CEP offset, Enuma characterized the companies as 
being affiliated.
    We also note that in prior administrative reviews, Enuma had a 
greater equity share in Daido Tsusho and, as a result, the Department 
considered these parties to be ``related'' or ``affiliated''. During 
the 1992-1993 review period, Enuma's equity share dropped to its 
current level. Given that Enuma now owns less than five percent of 
Daido Tsusho, the two companies are no longer considered affiliated 
under section 771(33)(E) of the Act. Moreover, there is no other 
information on the record of this review at this time indicating 
affiliation, pursuant to section 771(33) of the Act, between these two 
entities. Accordingly, for purposes of these preliminary results, we 
find that Enuma is not affiliated with either Daido Tsusho or Daido 
Corporation. Since we do not consider these entities to be affiliated, 
we believe that the appropriate U.S. transactions to be reviewed are 
those between Enuma and Daido Tsusho.
    Section 776(a) of the Act authorizes the Department, subject to 
section 782(d), to use FA when necessary information is not available 
on the record. Given that Enuma has not reported its sales to Daido 
Tsusho in the U.S. sales listing, we cannot calculate United States 
price with respect to Enuma. Therefore, we are compelled to use FA.
    Section 776(b) of the Act provides that adverse inferences may be 
used against a party that has failed to cooperate by not acting to the 
best of its ability to comply with requests for information. As noted 
above, Enuma, in its questionnaire response, in various places, 
expressly characterized Enuma and Daido Tsusho as affiliated when in 
fact they do not appear to be affiliated. Also, Enuma did not report 
the proper U.S. sales data. However, we note that the Department did 
not specifically request that Enuma provide this data in its 
supplemental questionnaires. Therefore, for purposes of these 
preliminary results, we do not believe an adverse inference is 
warranted and are applying non-adverse FA under Section 776 of the Act. 
We are applying, as non-adverse FA, the simple average of the 
calculated dumping rates for Daido, Izumi, and RK (i.e., those 
respondents in this segment of the proceeding whose margins are not 
based on adverse FA).
    For purposes of the final results, we will request that Enuma 
report all U.S. sales made to Daido Tsusho, and provide any additional 
explanations and/or clarifications regarding the nature of the 
affiliation and any forms of control between the two companies. The 
Department is mindful of the need for accuracy in representations made 
in questionnaire responses which the Department must rely upon in 
making its decisions. Inaccurate responses undermine the integrity of 
the review process. We therefore will take the accuracy of Enuma's 
overall responses into account in our final results.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced by the respondents, covered by the description in the 
``Scope of the Review'' section, above, and sold in the home market 
during the POR, to be foreign like products for purposes of determining 
appropriate product comparisons to U.S. sales. Where there were no 
sales of identical merchandise in the home market to compare to U.S. 
sales, we compared U.S. sales to the next most similar foreign like 
product, based on the following three product characteristics listed in 
order of importance: (1) The type of roller chain (e.g., industrial 
roller chain, motorcycle chain, or leaf chain); (2) the number of 
strands (e.g., single, double, triple, multiple, etc.); and (3) the 
finish (e.g., carbon steel, nickel plated, stainless steel, etc.).
    In past segments of this proceeding, the Department has used the 
model match databases submitted by the respondents to identify 
identical and similar merchandise in the home market. For this review, 
however, we have determined it appropriate to make the analysis in this 
proceeding consistent with the Department's current practice of 
defining identical and similar merchandise based only on the product 
characteristics outlined in the antidumping questionnaire. In this 
administrative review, the questionnaire instructed the respondents to 
provide data regarding the three product characteristics specified 
above for all reported United States and home market sales. In 
addition, the questionnaire informed the respondents that they could 
report additional product characteristics if they believed there were 
other product characteristics that the Department should consider in 
performing product comparisons. If a respondent chose to report 
additional product characteristics, the questionnaire instructed the 
respondent to describe in the narrative response why it believed the 
Department should consider the additional characteristics in defining 
identical and similar merchandise.
    Although no additional product characteristics were specifically 
identified by Daido, Enuma, and Izumi in their questionnaire responses, 
it was apparent from the model match databases submitted by these 
respondents that these companies had considered product characteristics 
beyond those specified in the Department's questionnaire to define 
unique products. However, based on information on the record in this 
proceeding, we are unable to determine what additional characteristics 
these respondents relied upon in identifying unique products. Regarding 
RK, the company identified additional product characteristics in its 
questionnaire response, including pitch length, roller width, roller 
diameter, pin diameter, pin length, link height, link thickness, 
average strength and average weight. However, RK did not explain why it 
believed the Department should consider these characteristics in 
identifying identical and similar merchandise for product comparison 
purposes. Therefore, for purposes of these preliminary results, we have 
redefined the product control numbers reported by the respondents using 
only the three product characteristics outlined in the Department's 
questionnaire to define a unique product.
    Interested parties are requested to comment on these matching 
criteria and to provide comments on whether the Department should 
consider any additional criteria within its matching analysis. All 
comments must be submitted no later than 14 days from the date of 
publication of this notice in the Federal Register. If a party believes 
that there are product characteristics other than the three enumerated 
in the Department's questionnaire which should be considered in 
performing product comparisons, the party should: (1) Specify the 
characteristic(s); (2) explain why they believe the characteristic is 
essential in defining identical and similar merchandise, including the 
effect of the product characteristics on both the cost of manufacturing 
and the selling price of

[[Page 25168]]

the merchandise; and (3) if the party is a respondent in this 
administrative review, the respondent should explain how the product 
characteristic(s) has been captured in the respondent's reported 
control numbers.
    In this administrative review, Daido did not submit DIFMER 
information for its United States and home market products because the 
company claimed that there were contemporaneous home market sales of 
identical merchandise for comparison to every U.S. sale. However, in 
performing product comparisons using the methodology described above, 
we were unable to identify an identical product for every U.S. sale, as 
claimed by Daido.
    Section 776(a)(2) of the Act provides that if an interested party 
withholds information that has been requested by the Department, fails 
to provide such information in a timely manner or in the form or manner 
requested, significantly impedes a proceeding under the antidumping 
statute, or provides information which cannot be verified, the 
Department shall use FA in reaching the applicable determination. 
Because the Department is unable to compare every U.S. sale to 
identical sales of identical merchandise in the comparison market and 
Daido failed to provide DIFMER information in its questionnaire 
response, the Department is compelled to use FA with regard to the 
DIFMER. Accordingly, for those U.S. sales where contemporaneous home 
market sales of identical merchandise do not exist, we are applying, as 
non-adverse FA, the weighted-average price-to-price margin calculated 
for those U.S. sales where we were able to make identical comparisons. 
For purposes of the final results, we will request that Daido provide 
the requisite DIFMER information.

Level of Trade

    To the extent practicable, we determine NV for sales at the same 
level of trade as the U.S. sales (either EP or CEP). When there are no 
sales at the same level of trade, we compare U.S. sales to home market 
(or, if appropriate, third-country) sales at a different level of 
trade.
    For both EP and CEP, the relevant transaction for the level-of-
trade analysis is the sale (or constructed sale) from the exporter to 
the importer. While the starting price for CEP is that of a subsequent 
resale to an unaffiliated buyer, the construction of the CEP results in 
a price that would have been charged if the importer had not been 
affiliated. We calculate the CEP by removing from the first resale to 
an independent U.S. customer the expenses under section 772(d) of the 
Act and the profit associated with these expenses. These expenses 
represent activities undertaken by the affiliated importer. Because the 
expenses deducted under section 772(d) represent selling activities in 
the United States, the deduction of these expenses normally yields a 
different level of trade for the CEP than for the later resale (which 
we use for the starting price). Movement charges, duties and taxes 
deducted under section 772(c) do not represent activities of the 
affiliated importer, and we do not remove them to obtain the CEP level 
of trade. The NV level of trade is that of the starting-price sales in 
the home market. When NV is based on constructed value, the level of 
trade is that of the sales from which we derive SG&A and profit.
    To determine whether home market sales are at a different level of 
trade than U.S. sales, we examine whether the home market sales are at 
different stages in the marketing process than the U.S. sales. The 
marketing process in both markets begins with goods being sold by the 
producer and extends to the sale to the final user, regardless of 
whether the final user is an individual consumer or an industrial user. 
The chain of distribution between the producer and the final user may 
have many or few links, and each respondent's sales occur somewhere 
along this chain. In the United States, the respondent's sales are 
generally to an importer, whether independent or affiliated. We review 
and compare the distribution systems in the home market and U.S. export 
markets, including selling functions, class of customer, and the extent 
and level of selling expenses for each claimed level of trade. Customer 
categories such as distributor, original equipment manufacturer (OEM), 
or wholesaler are commonly used by respondents to describe levels of 
trade, but, without substantiation, they are insufficient to establish 
that a claimed level of trade is valid. An analysis of the chain of 
distribution and of the selling functions substantiates or invalidates 
the claimed levels of trade. If the claimed levels are different, the 
selling functions performed in selling to each level should also be 
different. Conversely, if levels of trade are nominally the same, the 
selling functions performed should also be the same. Different levels 
of trade necessarily involve differences in selling functions, but 
differences in selling functions, even substantial ones, are not alone 
sufficient to establish a difference in the levels of trade. A 
different level of trade is characterized by purchasers at different 
stages in the chain of distribution and sellers performing 
qualitatively or quantitatively different functions in selling to them.
    When we compare U.S. sales to home market sales at a different 
level of trade, we make a level-of-trade adjustment if the difference 
in levels of trade affects price comparability. We determine any effect 
on price comparability by examining sales at different levels of trade 
in a single market, the home market. Any price effect must be 
manifested in a pattern of consistent price differences between home 
market sales used for comparison and sales at the equivalent level of 
trade of the export transaction. To quantify the price differences, we 
calculate the difference in the average of the net prices of the same 
models sold at different levels of trade. We use the average difference 
in net prices to adjust NV when NV is based on a level of trade 
different from that of the export sale. If there is a pattern of no 
consistent price differences, the difference in levels of trade does 
not have a price effect and, therefore, no adjustment is necessary.
    CEP Offset. The statute also provides for an adjustment to NV when 
NV is based on a level of trade different from that of the CEP if the 
NV level is more remote from the factory than the CEP and if we are 
unable to determine whether the difference in levels of trade between 
CEP and NV affects the comparability of their prices. This latter 
situation can occur where there is no home market level of trade 
equivalent to the U.S. sales level or where there is an equivalent home 
market level but the data are insufficient to support a conclusion on 
price effect. This adjustment, the CEP offset, is identified in section 
773(a)(7)(B) and is the lower of the following:
     The indirect selling expenses on the home market sale, or
     The indirect selling expenses deducted from the starting 
price in calculating CEP.
    The CEP offset is not automatic each time we use CEP. The CEP 
offset is made only when the level of trade of the home market sale is 
more advanced than the level of trade of the U.S. (CEP) sale and there 
is not an appropriate basis for determining whether there is an effect 
on price comparability.
    In this administrative review, Daido claimed that there were 
different LOTs between the home market and U.S. CEP sales and that a 
CEP offset was warranted. As noted above, Daido owns a Japanese trading 
company, Daido Tsusho, which, in turn, owns a U.S. sales subsidiary, 
Daido Corporation.

[[Page 25169]]

Daido, Daido Tsusho, and Daido Corporation are therefore considered 
affiliated parties within the meaning of section 771(33) of the Act.
    In implementing the above referenced principles in this review, we 
first looked for different stages of marketing between CEP and NV. We 
found that there was one stage of marketing in the home market--direct 
sales of roller chain from Daido to unaffiliated customers. We then 
examined the selling functions performed by Daido with respect to both 
markets. In analyzing whether separate LOTs existed, we found that no 
single selling activity was sufficient to warrant finding a separate 
LOT (see Notice of proposed rulemaking and request for public comments, 
61 FR 7307, 7348 (February 27, 1996)). We found that Daido's selling 
functions in the home market included sales administration, billing, 
maintaining inventory, and arranging freight services. In the U.S. 
market, we also found one stage of marketing--direct sales of roller 
chain between Daido/Daido Tsusho and Daido Corporation. We found that 
the selling functions included in the CEP after making deductions under 
section 772(d) of the Act included sales administration, maintaining 
inventory, arranging freight services, and preparing export 
documentation.
    A different level of trade is characterized by purchasers at 
different places in the chain of distribution and sellers performing 
qualitatively or quantitatively different functions in selling to them. 
See AFBs at 2105. Based on the findings noted above concerning Daido's 
U.S. and home market sales, we conclude for these preliminary results 
that the U.S. and home market sales were not made at different points 
in the channel of distribution and that the selling functions performed 
for Daido's CEP sales were not sufficiently different from those 
performed for home market sales. We find, therefore, that Daido's sales 
in the home market and in the United States market are at the same 
level of trade. (For further discussion of this issue, see the LOT 
Memorandum from Holly Kuga to Jeffrey P. Bialos dated April 30, 1997, 
on file in room B-099 of the main Commerce building.)
    With respect to RK, in its questionnaire responses, it did not 
state that there were differences in its selling activities by customer 
categories within each market or between markets. Therefore, in the 
absence of information in R.K.'s questionnaire responses, which might 
lead us to reach a different conclusion, we have determined for 
purposes of these preliminary results that all sales in the home market 
and the U.S. market were made at the same level of trade and no 
adjustment pursuant to section 773 (a) (7) (A) of the Act is warranted.

Sales Comparisons

    To determine whether sales of roller chain by the respondents to 
the United States were made at less than fair value, we compared the EP 
or CEP to the NV, as described in the ``Export Price and Constructed 
Export Price'' and ``Normal Value'' sections of this notice. In 
accordance with section 777A(d)(2) of the Act, we compared the EP and 
CEP of individual transactions to the weighted-average NV of 
contemporaneous sales of the foreign like product.

Export Price and Constructed Export Price

    For Izumi and certain sales made by Daido, we calculated EP, in 
accordance with subsections 772(a) of the Act because the subject 
merchandise was sold directly to the first unaffiliated purchaser in 
the United States prior to importation and CEP methodology was not 
otherwise warranted based on the facts of record. Regarding RK, the 
company made sales to Nissho Iwai Corporation (NIC), an affiliated 
trading company. NIC, in turn, sold the merchandise to Alloy Tool 
Steel, Inc. (ATSI), its affiliated selling agent in the United States. 
Where these sales to the unaffiliated customer took place prior to 
importation into the United States, we preliminarily determine U.S. 
price to be based on EP for the following reasons: (1) The merchandise 
in question was shipped directly from the manufacturer to the 
unaffiliated buyer, without being introduced into the physical 
inventory of the affiliated selling agent; (2) this was the customary 
commercial channel for sale of this merchandise between the parties 
involved, and; (3) the affiliated selling agent in the United States 
acted only as a processor of documentation and a communication link 
with the unaffiliated buyer. See Notice of Final Determination of Sales 
at Less Than Fair Value: Beryllium Metal and Beryllium Alloys from the 
Republic of Kazakstan, 62 FR 2648, 2649 (January 17, 1997); see also 
April 30, 1997, Memorandum from the Team to Jeffrey P. Bialos, 
Regarding the Treatment of U.S. Sales of Roller Chain Manufactured by 
RK.) It is the Department's practice in instances where all three 
criteria are met to regard the routine selling functions of the 
exporter as ``merely having been relocated geographically from the 
country of exportation to the United States,'' and to, therefore, find 
the sales to be EP sales. See Notice of Final Determination of Sales at 
Less Than Fair Value: Large Newspaper Printing Presses and Components 
Thereof, Whether Assembled or Unassembled, From Germany, 61 FR 38166 
(July 23, 1996).
    NIC is affiliated with both ATSI and RK pursuant to section 771(33) 
of the Act. However, based on the information on the record, we 
preliminarily conclude that RK and ATSI are not affiliated parties 
under section 771(33) of the Act. Therefore, for purposes of these 
preliminary results, we are treating RK's sales to ATSI as EP sales.
    We calculated CEP for certain sales made by Daido and RK, in 
accordance with section 772(b) of the Act, where sales to the first 
unaffiliated purchaser took place after importation into the United 
States.
    For Daido, RK, and Izumi we calculated EP and CEP based on packed 
prices to the first unaffiliated customer in the United States. In 
accordance with section 772(c)(2)(A) of the Act, we made deductions, 
where appropriate, for inland freight from the plant to port, inland 
insurance, brokerage and handling, international freight, marine 
insurance, and U.S. Customs duties.
    For CEP sales made by Daido and RK, we made deductions, where 
appropriate, for direct selling expenses including advertising, credit 
and commissions paid to unaffiliated distributors and agents in 
accordance with section 772(d)(1) of the Act. In addition, we deducted 
those indirect selling expenses which were associated with economic 
activity occurring in the United States. These included inventory 
carrying costs incurred in the United States and the indirect selling 
expenses of the affiliated U.S. distributors. For RK, we also deducted 
certain indirect selling expenses incurred in the home market which 
were associated with economic activity occurring in the United States. 
We made adjustments for CEP profit in accordance with sections 
772(d)(3) and (f) of the Act. Because neither Daido or RK were required 
to report cost information, the Department was unable to use such data 
submitted to determine the total expenses (i.e., cost of manufacturing 
and selling, general and administrative expenses) and total actual 
profit for purposes of computing CEP profit. Section 772(f) of the Act 
provides three alternative methods for determining total expenses and 
total actual profit. These alternatives form a hierarchy where the use 
of any one of the methods depends on the data available to the 
Department from the case record. We were unable to apply the first 
alternative (section 772(f)(2)(C)(i), the actual expenses incurred in 
the United States and the

[[Page 25170]]

home market with respect to the merchandise under investigation) 
because the Department is not conducting a sales below cost 
investigation and, therefore, the Department did not request COP 
information for the home market products and CV information for all 
U.S. products. In addition, we were unable to apply the second 
alternative (section 772(f)(2)(C)(ii), the expenses incurred with 
respect to the narrowest category of merchandise sold in the United 
States and the exporting country which includes the subject 
merchandise) because the financial statements of RK and Daido are not 
specific to the production costs and sales information of merchandise 
sold only in the United States and home market. Therefore, we 
calculated CEP profit using alternative three (section 
772(f)(2)(C)(iii), the expenses incurred with respect to the narrowest 
category of merchandise sold in all countries which includes the 
subject merchandise). Under this alternative, we calculated the profit 
percentage for RK and Daido based on the respondent's own financial 
statements for fiscal year 1995/1996 for merchandise produced and sold 
by the respondent in all countries.
    We made additional company-specific adjustments as follows:

A. RK

    For CEP sales, we deducted the cost of further manufacturing in the 
United States in accordance with Section 772(d) (2) of the Act.

B. Daido

    For EP sales, we added the amount of interest revenue collected by 
Daido in instances where the U.S. customer made a late payment. We also 
made deductions for quantity discounts.

Normal Value

    In order to determine whether there was a sufficient volume of 
sales in the home market to serve as a viable basis for calculating NV, 
we compared each respondent's volume of home market sales of foreign 
like product to the volume of U.S. sales of the subject merchandise in 
accordance with section 773(a)(1)(C) of the Act. Since the aggregate 
volume of home market sales of the foreign like product was greater 
than five percent of the aggregate volume of U.S. sales of the subject 
merchandise, and there was no evidence indicating that a particular 
market situation in the exporting country did not permit a proper 
comparison, we determined that the home market was viable for the 
respondents. Therefore, in accordance with section 773(a)(1)(B)(i) of 
the Act, we based NV on the prices at which the foreign like products 
were first sold for consumption in the exporting country. We calculated 
NV as described in the ``Price-to-Price Comparisons'' and ``Price-to-
Constructed Value'' sections of this notice, below.
    Regarding Izumi, the company identified a reseller in the home 
market to which it was affiliated pursuant to section 771(33)(E) of the 
Act. However, Izumi failed to report the downstream sales of this 
affiliated customer to the first unaffiliated customer. Instead, the 
company reported its own sales to the affiliated customer. Izumi 
claimed that it was unable to obtain the downstream sales information 
of its affiliated customer because it does not hold any stock ownership 
in the customer and the customer is a much larger entity than Izumi. 
Because Izumi's sales to this affiliated customer accounted for a 
significant percentage of its total sales of the foreign like product 
during the POR, in our supplemental questionnaire we requested that 
Izumi either: 1) Report the downstream sales of this affiliated 
customer; or 2) demonstrate that its sales to this affiliated customer 
were at arm's length prices.
    In its supplemental questionnaire response, Izumi failed to report 
the downstream sales and failed to show that its sales to the 
affiliated customer were at arm's length. In addition, because the 
total quantity of sales to unaffiliated parties during the POR was so 
small and certain products were only sold to affiliated customers, we 
found that there are an insufficient number of unaffiliated sales to 
provide a meaningful comparison to affiliated party sales. Therefore, 
we concluded that our standard arm's length test would not produce 
reliable results. See Final Results of Antidumping Administrative 
Review: Roller Chain, other than Bicycle, from Japan, 61 FR 64329 
(December 4, 1996).
    Insofar as we were unable to test whether Izumi's sales to this 
affiliated customer were made at arm's-length prices, we have, 
therefore, assumed for these preliminary results that all sales between 
Izumi and the affiliated customer were not made at arm's length prices 
and have excluded these sales from the calculation of NV. See, e.g., 
Preliminary Determination of Sales at Less Than Fair Value: Certain 
Pasta from Italy, 61 FR 1350 (January 19, 1996) (excluding sales that 
were not at arm's length from the calculation of NV); see also 
Preliminary Results of Antidumping Duty Administrative Review: Certain 
Hot-Rolled Lead and Bismuth Carbon Steel Products, 55 FR 42230 (October 
18, 1990) (stating that affiliated party sales can only be used if the 
Department is satisfied that the price is comparable to the price at 
which the exporter/producer sold the foreign like product to an 
unaffiliated person).
    Section 776(a)(2) of the Act provides that if an interested party 
withholds information that has been requested by the Department, fails 
to provide such information in a timely manner or requested format, 
significantly impedes a proceeding under the antidumping statute, or 
provides information that cannot be verified, the Department shall use 
FA in reaching the applicable determination. Despite numerous requests 
by the Department, Izumi failed to report the downstream sales of its 
affiliated customer in its home market sales listing. In addition, as 
noted above, the Department is unable to conduct an arm's length price 
analysis to determine whether Izumi's sales to this affiliated customer 
were indeed at arm's length prices. Therefore, the Department has no 
reliable basis for determining whether these sales can be used to 
calculate NV. Since Izumi's home market sales do not provide a reliable 
basis on which to calculate NV, the Department is compelled to use FA.
    Given that Izumi attempted to obtain the downstream sales 
information of its affiliated customer and Izumi has otherwise complied 
with all of the Department's requests for information, we find that 
Izumi has acted to the best of its ability to comply with the 
Department's information requests in this review and that an adverse 
inference is not warranted pursuant to Section 776(b) of the Act. See 
also the SAA at 870. However, we will continue to examine the 
relationship between Izumi and its affiliated customer in future 
reviews.
    As noted above, the quantity of sales to unaffiliated parties in 
the home market during the POR is insignificant. Because we did not 
find this quantity to be sufficient to validate the arm's length nature 
of the affiliated party sales and we believe that a significant 
potential for price manipulation exists with regard to these sales, we 
find that these sales do not provide a reliable basis on which to 
calculate NV for these preliminary results. Therefore, we have 
disregarded all home market sales and have calculated NV based on CV in 
accordance with section 773(a)(4) of the Act. For discussion of the CV 
calculation, see the ``Price-to-CV'' section of this notice, below.

Price to Price Comparisons

    With respect to RK, where there were contemporaneous sales of the

[[Page 25171]]

comparison product, we based NV on home market prices. As noted in the 
``Product Comparisons'' section above for Daido, we based NV on home 
market prices only in instances where contemporaneous sales of an 
identical home market product existed. In instances where 
contemporaneous home market sales of identical home market merchandise 
did not exist, we disregarded the similar home market sales and applied 
the weighted-average price-to-price margin calculated for those U.S. 
sales where we were able to make identical comparisons to the quantity 
of U.S. sales. (For a further discussion of this issue, see the 
``Product Comparisons'' section of this notice, above).
    We made deductions, where appropriate, from the starting price for 
inland freight, insurance, and other transportation expenses. In 
addition, we made circumstance of sale adjustments for direct expenses, 
including credit, where appropriate, in accordance with section 
773(a)(6)(C)(iii) of the Act. We deducted home market packing costs and 
added U.S. packing costs in accordance with sections 773(a)(6) (A) and 
(B) of the Act.
    Where commissions were paid on EP sales for RK and Daido, we 
deducted home market indirect selling expenses up to the amount of the 
U.S. commission from NV and added the amount of the U.S. commission. 
Where commissions were paid on CEP sales made by RK, we deducted from 
NV the lesser of either: (1) the weighted-average amount of commission 
and indirect selling expenses paid on a U.S. sale for a particular 
product; or (2) the weighted-average amount of indirect selling 
expenses paid on the home market sales for a particular product.

A. Calculation of CV

    In accordance with section 773(e)(1) of the Act, we calculated CV 
for Izumi based on the sum of the COM of the product sold in the United 
States, plus amounts for home market selling, general and 
administrative expenses (SGA), profit, and U.S. packing costs. Since 
Izumi had no sales of the foreign like product in the ordinary course 
of trade during the POR, we calculated home market selling expenses and 
profit using alternative methodologies in accordance with section 
773(e)(2)(B). We calculated Izumi's selling expenses as described in 
section 773(e)(2)(B)(ii). That is, we used the weighted-average selling 
expenses experienced by Daido and RK, which are exporters or producers 
subject to review, in connection with the production and sale of the 
foreign like product in the ordinary course of trade for consumption in 
the home market. We calculated profit as described in section 
773(e)(2)(B)(iii) of the Act, which specifies that profit can be 
calculated using any other reasonable alternative. For these 
preliminary results, we used the actual amount of profit realized by 
another publicly-held non-investigated producer of roller chain in 
Japan. (For a further discussion, see the Izumi Memorandum from Holly 
Kuga to Jeffrey Bialos dated April 30, 1997, on file in room B-099 of 
the main Commerce building.)

Price-to-CV Comparisons

    For Izumi, where we compared EP to CV, we deducted from CV the 
weighted-average home market direct selling expenses and added the 
product-specific U.S. direct selling expenses, in accordance with 
sections 773(a)(8) and 773(a)(6)(iii) of the Act.

Currency Conversion

    For purposes of the preliminary results, we made currency 
conversions based on the official exchange rates in effect on the dates 
of the U.S. sales as certified by the Federal Reserve Bank of New York. 
Section 773A (a) of the Act directs the Department to use a daily 
exchange rate in order to convert foreign currencies into U.S. dollars, 
unless the daily rate involves a ``fluctuation.'' In accordance with 
the Department's practice, we have determined that a fluctuation exists 
when the daily exchange rate differs from a benchmark by 2.25 percent. 
The benchmark is defined as the rolling average of rates for the past 
40 business days. When we determine that a fluctuation exists, we 
substitute the benchmark for the daily rate in accordance with 
established practice.

Intent Not To Revoke

    Daido and Enuma submitted a request in accordance with 19 CFR 
353.25 (b) to revoke the order with respect to its sales of roller 
chain in the United States. In the final results of our most recently 
completed administrative review of this order, Daido and Enuma had 
margins that were greater than de minimis. See Roller Chain at 64327. 
Therefore, Daido and Enuma do not qualify for revocation.

Preliminary Results of the Review

    As a result of this review, we preliminarily determine that the 
following weighted-average dumping margins exist for the period April 
1, 1995, through March 31, 1996:

------------------------------------------------------------------------
                                               Weighted-average margin  
           Manufacturer/exporter                     percentage         
------------------------------------------------------------------------
Daido.....................................  4.98.                       
Enuma.....................................  10.13 (facts available).    
Izumi.....................................  14.13.                      
Pulton....................................  43.29 (adverse facts        
                                             available).                
R.K. Excel................................  11.29.                      
------------------------------------------------------------------------

    Parties to the proceeding may request disclosure within five (5) 
days of the date of publication of this notice. Any interested party 
may request a hearing within 10 days of the date of publication. Any 
hearing, if requested, will be held 44 days after the publication of 
this notice, or the first workday thereafter.
    Interested parties are invited to comment on these preliminary 
results. Parties who submit arguments in this proceeding are requested 
to submit with each argument: (1) A statement of the issue; and (2) a 
brief summary of the argument. All case briefs must be submitted within 
30 days of the date of publication of this notice. Rebuttal briefs, 
which are limited to issues raised in the case briefs, may be filed not 
later than 37 days after the date of publication. (As noted above, all 
comments on the model matching criteria must be submitted on or before 
May 22, 1997. Rebuttal comments may be filed no later than May 29, 
1997.) The Department will issue the final results of this 
administrative review, which will include the results of its analysis 
of issues raised in any such written comments, within 120 days from the 
publication of these preliminary results.
    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. Upon completion of this review, the Department will issue 
appraisement instructions directly to the Customs Service. The final 
results of this review shall be the basis for the assessment of 
antidumping duties on entries of merchandise covered by the 
determination and for future deposits of estimated duties.
    Furthermore, the following deposit requirements will be effective 
upon completion of the final results of this review for all shipments 
of roller chain from Japan entered, or withdrawn from warehouse, for 
consumption on or after the publication date of the final, as provided 
by section 751(a)(1) of the Act: (1) The cash deposit rate for the 
reviewed companies will be those rates specified in the final results, 
(2) for merchandise exported by manufacturers

[[Page 25172]]

or exporters not covered in these reviews but covered in the original 
LTFV investigation or a previous review, the cash deposit will continue 
to be the most recent rate published in the final determination or 
final results for which the manufacturer or exporter received a 
company-specific rate; (3) if the exporter is not a firm covered in 
these reviews, or the original investigation, but the manufacturer is 
covered, the cash deposit rate will be that established for the 
manufacturer of the merchandise in the final results of these reviews, 
or the LTFV investigation; and (4) if neither the exporter nor the 
manufacturer is a firm covered in these or any previous reviews, the 
cash deposit rate will be 15.92 percent, the ``all-others'' rate based 
on the first review conducted by the Department in which a ``new 
shipper'' rate was established in the final results of antidumping 
administrative review (48 FR 51801, November 14, 1983). These 
requirements, when imposed, shall remain in effect until publication of 
the final results of the next administrative review.
    This notice serves as a preliminary 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 administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 
353.22.

    Dated: April 30, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-12045 Filed 5-7-97; 8:45 am]
BILLING CODE 3510-DS-P