[Federal Register Volume 63, Number 10 (Thursday, January 15, 1998)]
[Notices]
[Pages 2558-2585]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-944]



[[Page 2557]]

_______________________________________________________________________

Part III





Department of Commerce





_______________________________________________________________________



International Trade Administration



_______________________________________________________________________



Tapered Roller Bearings and Parts Thereof, Finished and Unfinished From 
Japan, etc.; Notice

  Federal Register / Vol. 63, No. 10 / Thursday, January 15, 1998 /  
Notices  

[[Page 2558]]



DEPARTMENT OF COMMERCE

International Trade Administration
[A-588-054, A-588-604]


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

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

ACTION: Notice of Final Results of Administrative Reviews.

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

SUMMARY: On September 9, 1997, the Department of Commerce (the 
Department) published the preliminary results of the 1995-96 
administrative reviews of the antidumping duty order on tapered roller 
bearings (TRBs) and parts thereof, finished and unfinished, from Japan 
(A-588-604), and the antidumping finding on TRBs, four inches or less 
in outside diameter, and components thereof, from Japan (A-588-054) 
(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, 62 FR 
47452 (September 9, 1997) (TRB Prelim)). The review of the A-588-054 
finding covers two manufacturers/exporters and two resellers/exporters 
of the subject merchandise to the United States during the period 
October 1, 1995, through September 30, 1996. The review of the A-588-
604 order covers three manufacturers/exporters, two resellers/
exporters, and the period October 1, 1995, through September 30, 1996. 
We gave interested parties an opportunity to comment on our 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: January 15, 1998.

FOR FURTHER INFORMATION CONTACT: Charles Ranado, Stephanie Arthur, or 
Valerie Owenby, 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) 482-3518, 6312, or 0172, 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 are to the Department's regulations, 19 CFR 
part 353 (1997).

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 1, 1996 (61 FR 
51529), the Department published the notice of ``Opportunity to Request 
an Administrative Review'' for both TRB cases. The petitioner, the 
Timken Company (Timken), and one respondent requested administrative 
reviews. We initiated the A-588-054 and A-588-604 administrative 
reviews for the period October 1, 1995, through September 30, 1996, on 
November 15, 1996 (61 FR 58513). On September 9, 1997, we published in 
the Federal Register the preliminary results of the 1995-96 
administrative reviews of the antidumping duty order and finding on 
TRBs from Japan (see TRB Prelim at 47542). We held a hearing for the 
1995-96 administrative reviews of both the A-588-054 and A-588-604 TRBs 
cases on October 30, 1997. 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 A-588-054 reviews cover TRB sales by two TRB manufacturers/
exporters (Koyo Seiko Ltd. (Koyo) and NSK Ltd. (NSK)), and two 
resellers/exporters (Fuji Heavy Industries (Fuji) and MC International 
(MC)). The reviews of the A-588-604 case cover TRB sales by three 
manufacturers/exporters (Koyo, NSK and NTN Corporation (NTN)), and two 
resellers/exporters (Fuji and MC). Because Fuji and MC 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 TRB Prelim at 47453). The period of review 
(POR) for both cases is October 1, 1995, through September 30, 1996.

Duty Absorption

    On December 11, 1996, Timken requested that the Department 
determine, with respect to all respondents, whether antidumping duties 
had been absorbed during the POR. Section 751(a)(4) of the Act provides 
for the Department, if requested, to determine during an administrative 
review initiated two or four years after the publication of the order, 
whether antidumping duties have been absorbed by a foreign producer or 
exporter if the subject merchandise is sold in the United States 
through an affiliated importer. The Department's interim regulations do 
not address this provision of the Act.
    For transition orders as defined in section 751(c)(6)(C) of the Act 
(i.e., orders in effect as of January 1, 1995), section 351.213(j)(2) 
of the Department's new antidumping regulations provide that the 
Department will make a duty-absorption determination, if requested, for 
any administrative review initiated in 1996 or 1998. See 62 FR 27394 
(May 19, 1997). Because the finding and order on TRBs have been in 
effect since 1976 and 1987, respectively, they are transition orders in 
accordance with section 751(c)(6)(C) of the Act. The preamble to the 
new antidumping regulations explains that reviews initiated in 1996 
will be considered initiated in the second year and reviews initiated 
in 1998 will be considered initiated in the fourth year (62 FR 27317, 
May 19, 1997). This approach

[[Page 2559]]

ensures that interested parties will have the opportunity to request a 
duty-absorption determination prior to the time for sunset review of 
the order under section 751(c) of the Act on entries for which the 
second and fourth years following an order have already passed. Since 
these reviews were initiated in 1996, and a request was made for a 
determination, we are making duty-absorption determinations as part of 
these administrative reviews.
    As indicated above, the statute provides for a determination on 
duty absorption if the subject merchandise is sold in the United States 
through an affiliated importer. In these cases, NTN, Koyo, NSK, and 
Fuji sold through importers that are affiliated within the meaning of 
section 751(a)(4) of the Act. We have determined that duty absorption 
has occurred with respect to the following firms and with respect to 
the following percentages of sales made through their U.S. affiliates:

------------------------------------------------------------------------
                                                              Percentage
                                                               of U.S.  
                                                             affiliates'
               Manufacturer/exporter/reseller                 sales with
                                                               dumping  
                                                               margins  
------------------------------------------------------------------------
For the A-588-054 Case:                                                 
  Koyo Seiko...............................................        12.99
  Fuji.....................................................         4.54
  NSK......................................................        13.30
For the A-588-604 Case:                                                 
  Koyo Seiko...............................................        98.10
  Fuji \1\                                                              
  NSK......................................................        51.78
  NTN......................................................       66.36 
------------------------------------------------------------------------
\1\ No shipments or sales subject to this review.                       

    In the case of Koyo, the firm did not respond to our request for 
further-manufacturing information and we determined the dumping margins 
for these further-manufactured sales on the basis of adverse facts 
available. Lacking other information, we find duty absorption on all 
such sales of further-processed TRBs (see Antifriction Bearings (Other 
Than Tapered Roller Bearings) and Parts Thereof from France, et. al.; 
Preliminary Results of Antidumping Administrative Review, 62 FR 31568 
(June 10, 1997) (where we found duty absorption with respect to all 
sales for which respondent provided no data in response to the 
Department's questionnaire)).
    With respect to other respondents with affiliated importers (NSK, 
NTN, and Fuji), for which we did not apply adverse facts available, we 
must presume that the duties will be absorbed for those sales which 
were dumped. Where Koyo's margins were not determined on the basis of 
adverse facts available (i.e., for non-further-manufactured sales), we 
must presume that duties will be absorbed for those sales which were 
dumped. Our duty-absorption presumptions can be rebutted with evidence 
that the unaffiliated purchasers in the United States will pay the 
ultimately assessed duty. After publication of our preliminary results, 
we gave interested parties the opportunity to submit evidence that the 
unaffiliated purchasers in the United States will pay the ultimately 
assessed duties. However, we received no such evidence. Under these 
circumstances, we find that antidumping duties have been absorbed by 
Koyo, NTN, NSK, and Fuji on the percentages of U.S. sales indicated. 
Specific arguments relating to duty absorption are discussed in the 
``Miscellaneous'' section below.

Analysis of Comments Received

    We received case briefs from Koyo, NSK, NTN, and Timken on October 
16, 1997. We received rebuttal briefs from the same four parties, as 
well as from Fuji, on October 23, 1997. The comments which were 
contained in all of the case and rebuttal briefs we received are 
addressed below in the following order:

1. Facts Available/Further Manufacturing
2. Adjustments to Normal Value
3. Adjustments to United States Price
4. Cost of Production and Constructed Value
5. Miscellaneous Comments Related to Duty Absorption, Level of Trade, 
the Arm's-Length Test, and Sample Sales
6. Clerical Errors

1. Facts Available/Further Manufacturing

    Comment 1: Koyo argues that the Department's application of adverse 
facts available with respect to its sales of A-588-604 further-
manufactured TRBs was inappropriate and contrary to law for the 
following reasons. First, Koyo states, the Department apparently 
decided to require further-manufacturing data because there was an 
insufficient quantity of sales of imported finished A-588-604 TRBs to 
serve as a surrogate in accordance with section 773(e) (1) and (e)(2) 
of the Act, the special rule provision for further-processed 
merchandise. Koyo asserts that the Department presumably reached its 
conclusion by comparing the entered and sales values of imported 
finished over 4'' TRBs to the entered and sales values of over 4'' TRB 
components which were further manufactured. However, Koyo contends, the 
Department's comparison of over 4'' finished TRBs to over 4'' further-
manufactured TRBs was flawed because the division of products subject 
to the TRB orders does not reflect commercial reality, but rather arose 
from the manner in which Timken defined merchandise covered by the 
petitions in the A-588-054 and A-588-604 TRB cases. Koyo further 
argues, in support of its assertions that the division between the 
orders is asymmetrical, that the over 4'' A-588-604 order covers 
components of TRBs which are typically further processed into under 4'' 
bearings.
    Second, Koyo contends that the statute does not grant the 
Department discretion to decide whether or not to invoke section 
772(e)(1) and (e)(2) of the Act. Rather, Koyo argues, the Department is 
required to apply the special rule provided the respondent has 
demonstrated that the value added in the United States is likely to 
substantially exceed the value of the imported merchandise. Koyo 
contends that, given that the Department determined in its preliminary 
results that Koyo satisfied the ``substantially exceeds'' requirement, 
the Department was compelled by the statute to apply the special rule 
provision and determine the constructed export price (CEP) for A-588-
604 further-manufactured TRB sales using the price of either identical 
or other subject merchandise or, if it determined that there was not a 
sufficient quantity of sales using these two proxies, any other 
``reasonable'' basis. Koyo argues that the Department cannot, as it did 
in its preliminary results, simply reject the special rule in its 
entirety simply because it determines there is an insufficient quantity 
of sales of identical or other subject merchandise. Rather, contends 
Koyo, the Department must calculate CEP using ``any other reasonable 
basis,'' as directed by the statute.
    Koyo proposes that, in light of the similarities of merchandise 
subject to the A-588-054 and A-588-604 orders, instead of evaluating 
whether the margins of finished over 4'' A-588-604 bearings were an 
appropriate proxy for further-manufactured merchandise, the Department 
should have relied on the margins of finished under 4'' A-588-054 TRBs 
as a surrogate for those over 4'' components which were further 
processed into under 4'' TRBs, and the margins of imported finished 
over 4'' A-588-604 TRBs as a surrogate for those over 4'' components 
which were further manufactured into over 4'' TRBs. In fact, Koyo 
argues, not only is such an approach another reasonable basis, but it 
adheres to the statutory preference for relying on the price of 
``other'' or

[[Page 2560]]

``identical'' subject merchandise. Koyo maintains that while the 
Department may be hesitant to use a margin from a different order or 
finding (A-588-054) and apply it to further-manufactured products 
subject to a different order (A-588-604), its concerns are not legally 
relevant for the special rule provision. Koyo contends that the statute 
contains no language suggesting that ``crossing orders'' would 
constitute an unreasonable basis for comparison, and that the 
Department's refusal to look beyond the confines of the over 4'' order 
is not consistent with the statue. Koyo also adds that the Department's 
failure to acknowledge the existence of the under 4'' finding cedes too 
much control to petitioners who might be encouraged to write petitions 
that create anomalous outcomes, as is the case, Koyo asserts, with 
respect to the division between the two TRB orders.
    Furthermore, Koyo argues, using the calculated margins for under 
4'' finished TRBs as a proxy for that merchandise subject to the A-588-
604 order which was further manufactured is appropriate because of the 
physical similarities of the merchandise. It does not matter, argues 
Koyo, that each of these categories of merchandise is not subject to 
the same order because, as indicated above, the asymmetric division of 
the orders arose from historical happenstance. Koyo also asserts that, 
if the Department were to adopt such an approach, there would be a 
sufficient quantity of U.S. sales of imported finished A-588-054 TRBs 
to serve as a proxy for further-manufactured A-588-604 TRBs.
    Koyo also suggests that, as an alternative, the Department can 
compare the value of finished bearings subject to both the A-588-054 
finding and A-588-604 order to the value of further-manufactured 
bearings subject to the A-588-604 order. This method would guarantee, 
Koyo argues, a sufficient quantity of sales to serve as a proxy and 
would be reasonable and appropriate. Having then determined a 
sufficient quantity test, Koyo suggests, the Department should weight-
average the margins calculated for A-588-054 and A-588-604 finished 
bearings and apply the result to the A-588-604 further-processed 
components.
    Like Koyo, NSK argues that the Department must, in accordance with 
section 772(e) of the Act, apply the special rule for further-processed 
merchandise once it has determined that the value added in the United 
States is likely to substantially exceed the value of the imported 
product. NSK maintains that this is the only statutory requirement for 
the application of the special rule provision, and once this 
requirement has been met, the Department is mandated by the statue to 
apply the special rule for further-manufactured merchandise. NSK 
contends that the determination of whether such sales are appropriate 
or whether there is a sufficient quantity to provide a reasonable basis 
for comparison relates only to the two proxies for calculating CEP set 
forth in section 772(e)(1) and (e)(2) of the statute. NSK further 
argues that if the Department determines that neither of these two 
proxies can be used, it may calculate CEP on ``any other reasonable 
basis.'' However, NSK argues, once it finds that certain merchandise 
qualifies for the special rule under the condition set forth above, the 
Department cannot calculate CEP using the section 772(d)(2) standard 
methodology. Specifically, NSK maintains that reverting to this 
methodology is contrary to the language of the statute and that this 
method does not constitute another ``reasonable basis'' by which to 
calculate CEP because section 772(d)(2) of the Act provides that CEP be 
reduced by ``the cost of any further manufacture or assembly * * * 
except in circumstances described in subsection (e) of this section.'' 
Therefore, NSK asserts, the Department cannot reduce CEP by the cost of 
any further manufacturing within the realm of section 772(e). NSK 
argues that the Statement of Administrative Action (SAA) at 826 
supports its assertions that the Department cannot apply the standard 
772(d)(2) methodology once the condition for the special rule has been 
satisfied because it purposefully omits the standard methodology as an 
alternative to the two surrogates identified in section 772(e)(1) and 
(e)(2). In addition, NSK claims, the SAA makes every attempt to keep 
section 772(e) simple and a resort to the standard methodology is 
contrary to the intent of the special rule to reduce the burden of a 
further-manufacturing analysis for the Department. Finally, NSK argues 
that the Department's interpretation of section 772(e) is contrary to 
the objective of establishing a ``bright-line standard'' which allows 
the Department to inform respondents early during a review proceeding 
whether or not they must supply detailed further-manufacturing 
information. Because the Department reversed its decision regarding 
Koyo's further manufacturing months after it initially concluded this 
data would not be required, the Department, NSK argues, has defeated 
its stated objective of informing respondents if it will require 
further-processing data early in the review.
    Timken responds that the Department's application of adverse facts 
available with respect to Koyo's further-manufactured merchandise was 
supported by the record and in accordance with the law. Timken argues 
that the statute grants the Department broad discretion in the 
implementation of the special rule, and asserts that the Department's 
actions were consistent with the statute when it determined that Koyo's 
A-588-604 non-further-manufactured TRBs were an inappropriate proxy for 
Koyo's A-588-604 further-manufactured merchandise. Timken argues that 
the Department's use of the standard section 772(d)(2) methodology to 
calculate CEP for Koyo's further-manufactured sales constituted another 
``reasonable basis,'' and that the information on the record did not 
provide any other ``reasonable basis'' for determining margins for 
further-manufactured sales.
    Department's Position: We disagree with respondents. The statute at 
section 772(e) provides that:

    Where the subject merchandise is imported by a person affiliated 
with the exporter or producer, and the value added in the United 
States by the affiliated person is likely to exceed substantially 
the value of the subject merchandise, the administering authority 
shall determine the constructed export price for such merchandise by 
using one of the following prices if there is a sufficient quantity 
of sales to provide a reasonable basis for comparison and the 
administering authority determines that the use of such sales is 
appropriate:
    (1) The price of identical subject merchandise sold by the 
exporter or producer to an unaffiliated person;
    (2) The price of other subject merchandise sold by the exporter 
or producer to an unaffiliated person.
    If there is not a sufficient quantity of sales to provide a 
reasonable basis for comparison under paragraph (1) or (2), or the 
administering authority determines that neither of the prices 
described in such paragraphs is appropriate, then the constructed 
export price may be determined on any other reasonable basis.

    Koyo asserts that the Department, having determined that the value 
added in the United States is likely to substantially exceed the value 
of the imported merchandise, is required to apply the special rule 
provision of the statute, and argues that the use of the word ``shall'' 
in the provision clearly demonstrates that the Department does not have 
discretion as to when to invoke the special rule.
    Koyo and NSK incorrectly assume that we rejected the provision 
entirely. In addition, Koyo incorrectly argues that we imposed an 
additional qualification

[[Page 2561]]

for the application of the special rule; namely, that we required Koyo 
not only to demonstrate that the value added to its further-
manufactured subject merchandise substantially exceeded the value of 
the subject merchandise as entered but also to demonstrate that there 
was a sufficient quantity of its non-further-manufactured sales to 
serve as a proxy for the calculation of CEP for its further-
manufactured merchandise. To the contrary, our decision to request 
further-processing data from Koyo was made within the confines of and 
according to the language of the special rule. The SAA provides that 
the special rule provision will come into play when it is estimated 
that the value added in the United States is substantially more than 
half of the price charged to the first unaffiliated purchaser of the 
finished merchandise (see SAA at 825-826).
    After a determination that the value added is likely to 
substantially exceed the value of the imported components, the statute 
specifies that the use of the options identified in section 772 (e)(1) 
and (e)(2) is contingent upon the existence of a sufficient quantity of 
sales to provide a reasonable basis for comparison and that the use of 
such sales is appropriate. In other words, even if the quantity of the 
proxy sales is sufficient, we will reject their use unless we determine 
that using them is appropriate.
    In determining whether the use of either of the two proxy methods 
is appropriate, the Department looks to the underlying purpose of the 
special rule, which is to avoid imposing an unnecessary burden on the 
Department, while still ensuring reasonably accurate results (see SAA 
at 825-826). As part of this determination, we consider such factors as 
whether their use may lead to inaccurate results. We believe that the 
greater the proportion of further-manufactured to non-further-
manufactured merchandise, the greater the possibility of inaccurate 
results. If there is a concern about accuracy, we must consider whether 
an alternative method, especially the standard methodology, would be 
unduly burdensome. The burden of applying the standard methodology to 
calculate the CEP for further-manufactured merchandise may vary from 
case to case depending on factors such as the nature of the further-
manufacturing process and the finished products. The accuracy gained by 
applying the standard methodology may also vary significantly from case 
to case, depending upon such factors as the amount of value added in 
the United States and the proportion of U.S. sales which undergo 
further processing. Where the burden of performing a further-
manufacturing analysis is high, we may determine that the potential 
gains in accuracy do not outweigh the burden of applying the standard 
section 772(d)(2) methodology and that the use of one of the statutory 
alternatives set forth in 772 (e)(1) and (e)(2) is appropriate. 
However, if the burden is relatively low and the proportion of further-
manufactured sales is sufficiently high to raise concerns about 
accuracy, we may consider use of the statutory alternatives 
inappropriate.
    In the instant case, the record does not lead us to conclude that 
the use of either of the two alternative methods described in section 
772 (e)(1) and (e)(2) with respect to Koyo's further-manufactured 
merchandise is appropriate. The record indicates that Koyo's U.S. sales 
of further-manufactured subject merchandise represented a large portion 
of its total U.S. sales of subject merchandise during the POR. 
Therefore, the use of either of the proxy methods in this case--where 
the proportion of further-manufactured sales is relatively high--would 
have a relatively high potential for inaccuracy. In addition, as noted 
in our preliminary results, the finished merchandise sold by Koyo to 
the first unrelated U.S. customer was still in the same class or kind 
as merchandise within the scope of the TRB order and finding (i.e., 
imported TRB components were processed into TRBs). As a result, the 
calculation of the precise amount of cost of further manufacturing 
would not be nearly as burdensome as it would be for Fuji, another 
respondent who imported TRBs for incorporation in automobiles. 
Furthermore, in prior reviews we have calculated margins for Koyo's 
further-processed sales and have extensive experience with and 
knowledge of Koyo's further-manufactured sales and the calculation of 
the cost of further manufacturing in the United States with respect to 
these sales. Therefore, in this case we have determined that for Koyo 
the relatively small reduction of burden on the Department that would 
result from resorting to either of the two statutory proxy methods 
under the special rule is outweighed by the potential distortion and 
losses in accuracy as a consequence of their use. Accordingly, we have 
rejected the use of either of the two proxies as inappropriate and have 
sought to calculate the CEP for Koyo's further manufactured sales using 
another reasonable basis.
    This determination, however, does not indicate that, because we 
found the alternative methods in section 772 (e)(1) and (e)(2) to be 
inappropriate, we have abandoned the special rule, as Koyo and NSK 
suggest. For all respondents with further-manufactured merchandise, we 
first evaluated whether the value added in the United States was likely 
to substantially exceed the value of the imported components. We 
determined that Fuji, NTN, and Koyo met the ``substantially exceeds'' 
qualification for implementation of the special rule. However, while we 
have determined that the use of either of the two proxy methods is 
appropriate for Fuji and NTN, we have found that for Koyo, resorting to 
either of the alternatives set forth in the special rule provision is 
not appropriate.
    If we determine that the use of one of the two proxies set forth in 
section 772 (e)(1) and (e)(2) is inappropriate, as explicitly directed 
by the statute, we may use any other reasonable basis to calculate CEP 
for further-manufactured sales. Here the statute again grants us 
considerable latitude in determining precisely what constitutes ``any 
other reasonable basis.'' The SAA at 825 indicates that one possible 
method is basing the CEP of the further-processed merchandise on the 
transfer price from the exporter or producer to the affiliated 
importer. In general, however, if the two statutory alternatives cannot 
be used, we should identify and use a method which not only satisfies 
the overall purpose of the provision--the reduction of the burden on 
the Department--but also furthers the goal of accuracy. A reasonable 
alternative, then, may be our standard further-processing analysis if 
its use is not unduly burdensome and if it sufficiently reduces the 
potential for inaccuracy or distortion.
    As explained in detail above, the record in this case indicates 
that the use of the standard methodology for calculating CEP for Koyo's 
further-manufactured sales is a reasonable method. Therefore, we 
disagree with NSK that the standard methodology cannot serve as another 
reasonable basis. Not only would its exclusion as another reasonable 
basis effectively eliminate the Department's ability to use an accurate 
and valid alternative in situations such as this, but the plain 
language of the provision clearly does not preclude the standard 
methodology as a viable alternative. In addition, we disagree with NSK 
that, because the SAA does not specifically reference the standard 
methodology as another reasonable basis, we are unable to use it as 
such. In fact, the SAA does not specifically exclude the standard 
methodology as an option. In addition, both the statute and the SAA 
clearly grant the Department discretion with respect to the 
determination of what

[[Page 2562]]

constitutes another reasonable basis. While NSK and Koyo correctly 
point out that the intent underlying Congress' enactment of the special 
rule was the reduction of the burden on the Department, both 
respondents overlook the fact that the Department, nevertheless, has an 
overriding mandate to calculate accurate dumping margins (see Bowe-
Passat v. United States, 17 CIT 335, 340 (1993) (Bowe-Passat)). While 
the special rule provides us with a method to eliminate the burden of 
calculating the cost of further processing, its intent was not to 
elevate the goal of burden reduction over the goal of accuracy. 
Finally, we note that while NSK argues against the use of the standard 
methodology as another reasonable basis, it provides no alternative for 
calculating CEP for Koyo's further-manufactured merchandise, nor does 
it point to any record evidence establishing that the standard 
methodology would be, in this instant case, inappropriate for 
calculating CEP for Koyo's further-manufactured merchandise.
    As discussed in the summary above, Koyo does propose, however, an 
alternative for calculating the CEP of its further-manufactured A-588-
604 TRB merchandise, which it believes constitutes ``another reasonable 
basis.'' Koyo proposes that the Department, instead of evaluating 
whether the margins for finished over 4'' A-588-604 bearings were an 
appropriate surrogate for A-588-604 further-manufactured merchandise, 
could have used the margins it calculated for under 4'' A-588-054 
bearings as a proxy for that A-588-604 merchandise which was further 
processed into under 4'' bearings, and the margins calculated for over 
4'' bearings as a proxy for that A-588-604 merchandise which was 
further processed into over 4'' bearings.
    While Koyo's proposal would be less burdensome than the use of the 
standard methodology, we believe that the standard methodology is not 
unduly burdensome and presents a higher probability of accurate results 
than using margins calculated for non-further-manufactured sales. Among 
other things, Koyo's proposal relies on information concerning a 
different class or kind of merchandise and therefore in this case does 
not sufficiently allay concerns about potential inaccuracy. The record 
indicates that the use of these proxy methods would have a relatively 
high potential for distortion; we believe that the gains in accuracy we 
would achieve using the standard methodology would outweigh the 
additional burden resulting from the use of the standard calculation. 
The record supports our continued use of the standard methodology as a 
reasonable basis for calculating the CEP for Koyo's further-
manufactured merchandise.
    Based on its incorrect presumption that we found its sales of 
identical or other A-588-604 subject merchandise to be in an 
insufficient quantity to be used as a proxy for its further-
manufactured A-588-604 merchandise, Koyo argues that the Department 
should have compared the value of all imported unfinished components to 
the value of all finished bearings (whether subject to the A-588-604 
order or A-588-054 finding) in order to make our sufficiency 
determination. Since we rejected the use of Koyo's identical or other 
A-588-604 subject merchandise based on our determination that these 
alternatives were inappropriate, Koyo's argument is irrelevant. 
However, we nonetheless note that section 772 (e)(1) and (e)(2) of the 
Act refers to identical or other subject merchandise. As a result, when 
determining if such sales occurred in a sufficient quantity, the 
statute clearly limits our determination to the scope of the order and 
does not permit the inclusion of non-subject sales as Koyo suggests.
    In light of all of the above, we have determined that the facts in 
this case support the selection of the standard methodology as a 
reasonable basis. Furthermore, because Koyo failed to comply with the 
Department's request for further-processing data, for these final 
results we have applied as adverse facts available to Koyo's further-
manufactured merchandise the highest rate ever calculated for Koyo in 
any segment of the A-588-604 proceeding (36.21 percent).
    Comment 2: Timken argues that Department should adhere to its 
normal practice and apply an adverse facts available rate of 36.21 
percent to the total sales value of Koyo's further-manufactured sales 
rather than to the total entered value of these sales. Citing the 
United States Court of Appeals for the Federal Circuit's (CAFC) 
decision in Olympic Adhesives v. United States, 899 F. 2d 1565, 1572 
(Fed. Cir. 1990), Timken contends that the Department is required to 
draw an inference that is ``reasonably adverse'' to the respondent. 
However, Timken asserts, Koyo's selective submission of information has 
seemingly worked to its advantage in that Koyo has apparently received 
a lower margin despite the application of facts available. Timken 
maintains that this is supported by the fact that while the preliminary 
margin for Koyo in the A-588-604 case for this review is 23.26 percent, 
in previous reviews in which the Department calculated margins for both 
Koyo's A-588-604 further-manufactured and non-further manufactured 
sales, preliminary margins for Koyo were 46.03 percent (1992-1993) and 
41.21 percent (1993-1994).
    Koyo responds that while the Department should not have applied 
facts available at all, nonetheless it should reject Timken's argument. 
Koyo argues that it would be difficult to imagine how applying the 
highest rate ever calculated for Koyo is not ``reasonably adverse.'' 
Furthermore, Koyo asserts that just because Timken is able to devise a 
more adverse approach in applying facts available does not mean that 
the Department's application of facts available is not ``reasonably 
adverse.'' Koyo also contends that the Department's choice of the 
highest rate ever for Koyo as the adverse facts available rate was 
reasonable considering the fact that Koyo cooperated with the 
Department in every aspect of the review with the only exception being 
its decision not to file a response to Section E of the Department's 
questionnaire.
    Department's Position: We disagree with Timken. In accordance with 
section 776 (a) and (b) of the statute and our consistent practice, 
because Koyo failed to cooperate to the best of its ability in 
responding to our requests for information by declining to provide data 
on its further-processed sales, we applied adverse facts available in 
the absence of the further-manufacturing sales information. In 
selecting from among the facts available, we chose as the adverse facts 
available rate to apply to Koyo's further-manufactured sales the 
highest rate we ever calculated for Koyo in any previous review of the 
A-588-604 case. We then applied that rate to the total entered value of 
Koyo's further-manufactured sales. In choosing among the facts 
available, we are not required by the statute to select a method that 
is ``the most'' or ``more'' reasonably adverse. In choosing the highest 
margin ever calculated for Koyo in the A-588-604 case, we have adhered 
to the statutory language and selected information that is adverse to 
the interest of Koyo. Timken has failed to offer arguments or provide 
record evidence demonstrating that the rate selected is not reasonably 
adverse. Therefore, for these final results, we have not changed our 
application of facts available with respect to Koyo's sales of further-
manufactured TRB components.
    Comment 3: For the preliminary results of these reviews, we applied 
facts available with respect to certain of MC's sales because it did 
not provide

[[Page 2563]]

complete model-matching data. The absence of this information prevented 
us from finding a suitable home market match for these U.S. sales. 
Because the Department did not issue a supplemental questionnaire to MC 
prior to the preliminary results, we provided the company with an 
opportunity to correct its deficiencies for the final results. Timken 
argues that if MC is unable to provide the information necessary for 
matching certain of its U.S. sales to sales of the foreign like 
product, the Department should apply as adverse facts available to 
these unmatched U.S. sales the highest margin for any respondent in any 
review of the A-588-054 finding.
    Department's Position: As stated in our preliminary results, MC's 
questionnaire response contained only limited model-match information 
which prevented us from finding contemporaneous sales of the foreign 
like product for comparison to a small number of U.S. sales of subject 
merchandise (see TRB Prelim at 47455). As a result, in accordance with 
section 776(a) of the Act, we resorted to facts available. Because MC 
was not previously afforded the opportunity to remedy or explain its 
deficiencies, on September 16, 1997, we issued a supplemental 
questionnaire to MC requesting this information. On September 30, 1997, 
MC responded by submitting the necessary data. The information provided 
by MC has allowed us to find contemporaneous sales of the foreign like 
product to compare to all of MC's U.S. sales. Therefore, we have 
determined that it is not necessary to apply facts available to any of 
MC's U.S. sales for these final results.

2. Adjustments to Normal Value

    Comment 4: Timken asserts that because there is a discrepancy 
between NTN's computer tape and the total billing adjustment figure in 
a verification exhibit, NTN has incorrectly reported its home market 
billing adjustments. Thus, Timken argues that NTN's reporting is 
inconsistent with its narrative response and its verification exhibit 
and, given these inconsistences, the Department should convert NTN's 
negative billing adjustments to positive adjustments.
    NTN claims that there is no merit to Timken's request because the 
Department verified that its reported home market billing adjustments 
were accurate. Therefore, NTN argues that the Department should retain 
its billing adjustments as reported, and reject Timken's proposed 
adjustment.
    Department's Position: We agree with Timken in part. We examined 
NTN's home market database and found a significant discrepancy between 
the total billing adjustment for the POR located in exhibit three of 
our home market verification report and the total billing adjustment we 
derived from NTN's home market database. However, the difference 
between the two totals was significantly different from the difference 
Timken cited in its brief. Therefore, we reviewed the record to 
ascertain the accurate total for NTN's billing adjustments.
    During verification we thoroughly verified NTN's reported home 
market volume and value for the POR. As our verification report 
indicates, it was necessary for us to reconcile the volume and value 
NTN reported in its response to its Ministry of Finance (MOF) reports. 
As part of this reconciliation we examined an adjustment NTN made for 
its total HM billing adjustments for the POR (see Department's Home 
Market Verification Report for NTN, July 9, 1997, exhibit three) (NTN 
HM Report). Not only did we successfully trace this total to the 
computer program NTN used to calculate it, but we also traced NTN's 
reported volume and value for the POR for its home market sales 
directly to the MOF report with no discrepancies (see NTN HM Report at 
6). We also verified NTN's reported, transaction-specific home market 
billing adjustments by examining a variety of sales documentation in 
the sales trace portion of our verification (see NTN HM Report at 17). 
Again we found no discrepancies. As a result of both verification 
exercises, one would assume that NTN's reported home market billing 
adjustments were accurate and that the total of its transaction-
specific billing adjustments for the POR would equal the total reported 
on exhibit three of our verification report. However, this is not the 
case. In fact, when we calculated the overall POR total billing 
adjustment for NTN's home market database, this total was significantly 
different from that reported in the referenced exhibit three. 
Therefore, we needed to determine which billing adjustment figure was 
correct. For example, as we noted above, not only did we verify the 
accuracy of the total from exhibit three, but we also verified the 
accuracy of NTN's reported transaction-specific billing adjustments. 
After additional review, we have concluded that the exhibit three 
figure is the accurate total. We recognize that while our verification 
of NTN's reported transaction-specific adjustment yielded no 
discrepancies, this verification exercise constituted a ``spot check.'' 
In other words, we only examined selected billing adjustments. It is 
therefore possible that, while the samples we selected were correct, 
several of NTN's other reported transaction-specific billing 
adjustments were inaccurate. In fact, we have determined that other 
transaction-specific adjustments are inaccurate because the total of 
all billing adjustments does not match the total from exhibit three. 
Furthermore, because the total from exhibit three resulted in our 
successful trace to NTN's MOF reports, we find this total to be far 
more reliable than any other information on the record.
    Therefore, having determined that the exhibit three total billing 
adjustment amount is the accurate figure, we have adjusted NTN's 
reported transaction-specific billing adjustments to reflect this 
total. However, because our own analysis indicates an adjustment 
different than that calculated by Timken, while we agree with Timken 
that an adjustment is warranted, we have relied on our own calculated 
adjustment amount. Furthermore, because the record provides no 
information as to which transaction-specific billing adjustments are 
accurate, and because NTN has neither explained this discrepancy nor 
provided us with any information with respect to the correction of this 
discrepancy in its reported data, we have relied on facts available to 
correct NTN's reported home market billing adjustments. Because we are 
unable to identify which billing adjustments are inaccurate, as facts 
available, we systematically sorted through NTN's raw home market 
database and totaled the reported per-sale billing adjustments until we 
arrived at a total equal to our calculated adjustment. We then adjusted 
these sales' billing adjustments such that they reflected the total in 
exhibit three and disallowed the rest of NTN's reported billing 
adjustments. For a detailed description of this methodology please 
refer to the proprietary version of the Department's Final Analysis 
Memorandum for NTN, dated January 7, 1998.
    Comment 5: Timken contends that NTN used an incorrect denominator 
when calculating the ratio it used to allocate home market inventory 
carrying costs, resulting in inaccurate expense calculations. Timken 
also argues that even if NTN had calculated an accurate ratio, it 
nevertheless incorrectly applied this percentage to its home market 
sales. Therefore, Timken asserts, for purposes of the final results the 
Department should not only recalculate the inventory carrying cost 
expense ratio for

[[Page 2564]]

NTN's home market sales using the appropriate sales value 
(denominator), but it should also use the revised ratio to recalculate 
NTN's claimed adjustment.
    NTN argues that the Department thoroughly verified its calculation 
methodology for inventory carrying costs and found no discrepancies. 
NTN further asserts that not only is Timken's argument based on a 
misunderstanding of information on the record, but the Department has 
repeatedly accepted NTN's reporting methodology in prior TRB and 
antifriction bearings (AFB) cases. 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 25200, 25202 (May 
20, 1996) and Antifriction Bearings (Other Than Tapered Roller 
Bearings) and Parts Thereof From France, Germany, Italy, Japan, 
Singapore, Sweden, and the United Kingdom; Final Results of Antidumping 
Duty Administrative Reviews and Partial Termination of Administrative 
Reviews, 61 FR 66472, 66486 (December 17, 1996) (AFBs V). As a result, 
NTN argues, there is no basis for Timken's argument.
    Department's Position: We agree with NTN. Timken appears to have 
misunderstood the verification exhibits. However, it is clear from the 
information on the record that NTN accurately calculated and applied 
the appropriate ratio when allocating its home market inventory 
carrying costs. Not only did we verify NTN's inventory carrying cost 
allocation, including the denominator, without discrepancy (see NTN HM 
Report at 11), but NTN's response demonstrates that NTN applied an 
accurate ratio to all of its home market sales. Therefore, we have not 
recalculated NTN's reported home market inventory carrying costs for 
these final results.
    Comment 6: Timken argues that the Department should ensure that all 
of NTN's reported home market adjustments are accurate and claims that 
NTN's post-sale freight, pre-sale freight, packing labor, packing 
material, and indirect selling expenses (to include technical services, 
advertising, warehousing, and other indirect selling expenses) were 
incorrectly allocated using an inaccurate total sales value. Timken 
asserts that the Department should recalculate allocation ratios for 
all of NTN's expenses (except technical services) using the correct 
total sales value and apply these revised ratios to NTN's home market 
sales to calculate revised expense adjustments.
    NTN contends that these adjustments were successfully verified and 
that its methodology has been accepted by the Department in the past. 
NTN claims that for the reasons set forth in comments four and five, 
the Department need not reexamine the data verified in Japan. Further, 
NTN contends that, because Timken fails to put forth any rationale 
regarding their proposed modification of the ratio used to determine 
the amount of the adjustment, there is absolutely no grounds for the 
Department to reverify and modify data already closely examined.
    Department's Position: We agree with the respondent. In the instant 
review we conducted a thorough verification of NTN's reported home 
market adjustments to include post-sale freight, pre-sale freight, 
packing labor, packing material, and indirect selling expenses. We 
concluded that NTN's methodology yielded accurate results (see NTN HM 
Report at 8). After reviewing the record again for these final results, 
it is clear from the home market verification exhibits that all of 
NTN's adjustments were calculated correctly. Therefore, for these final 
results, we have accepted NTN's reported home market adjustments but 
have recalculated them without regard to levels of trade, as discussed 
in our response to comment 32 below.
    Comment 7: Timken claims that NTN failed to provide an adequate 
narrative response to the Department's supplemental questionnaire 
regarding its calculation of technical service expenses. Instead, 
Timken argues, NTN failed to demonstrate that its technical services 
were selling expenses, and, as a result, the Department should not make 
an adjustment to normal value (NV) for these expenses.
    NTN claims that Timken's argument is based on a misunderstanding of 
the NTN corporate brochure and that Timken misunderstands the 
relationship, role, and function of those entities which incurred 
technical service expenses during the POR. NTN argues that it has 
clearly demonstrated that all of its technical service activities are 
selling expenses and that, Timken's claims should be dismissed as 
groundless.
    Department's Position: We agree with NTN. In its brief Timken 
argues that a specific entity which NTN reported as incurring technical 
service expenses did not incur these expenses as selling expenses. 
However, it is clear from information on the record that the unit in 
question performed selling functions, including technical services, and 
thus incurred selling expenses, including technical service expenses. 
Furthermore, at verification we verified that the unit in question 
clearly performed selling functions, and clearly incurred selling 
expenses. Timken's claims are based on its failure to recognize the 
distinction between two separate divisions of the same unit which 
perform separate responsibilities. Therefore, for these final results, 
we agree with NTN and have continued to accept its reported technical 
service expenses.
    Comment 8: Timken argues that Koyo's transaction-specific home 
market billing adjustments (BILADJ1H) are already reflected in the 
reported gross unit prices and that, consequently, the Department 
should not adjust Koyo's unit prices for the BILADJ1H amounts. Timken 
asserts that the Department's June 20, 1997 home market verification 
report for Koyo (Koyo Home Market Report) supports its arguments that 
home market prices have already been revised to account for billing 
adjustments because the report notes that ``Koyo searched back through 
its database, located the matching sales transaction(s), canceled them 
out and re-entered the revised price'' (Koyo Home Market Report at 6). 
Additional evidence from the relevant verification exhibit, Timken 
argues, also supports its conclusions. For example, Timken notes, there 
is a particular TRB model which appears in Koyo's sales ledger at a 
given price (apparently the ``original'' price), but the reported gross 
unit price for a sales transaction involving that model is different 
from the ledger price. Timken further argues that the fact that the 
Department had to deduct post-sale price adjustments from the ledger 
totals to reconcile total value and volume supports its position that 
gross unit sales prices are already net of billing adjustments.
    Koyo responds that Timken has overlooked an error in the BILADJ1H 
computer reporting methodology that was corrected prior to 
verification. Koyo argues that the revised tapes it submitted to the 
Department after verification properly reflect gross unit prices prior 
to any billing adjustments. The reported gross unit price of the TRB 
model identified by Timken, Koyo argues, has been corrected on the 
revised tapes and now matches the ``original'' price (before any 
adjustments) appearing in its sales ledgers.
    Department's Position: We disagree with petitioner. We have 
reviewed the record, and have determined that the gross unit prices 
Koyo reported in its revised home market tape submitted on

[[Page 2565]]

May 30, 1997 are not net of billing adjustments. As Koyo explained in 
its rebuttal brief, it filed a revised home market sales file with the 
Department as a result of the error it discovered in the reporting 
methodology for this adjustment. The model identified by Timken was one 
of those affected by this reporting error (see Koyo Home Market Report 
at 6). Therefore, for these final results, we have not made any changes 
with respect to our treatment of Koyo's transaction-specific billing 
adjustments.
    Comment 9: Timken argues that the Department should reject Koyo's 
and NSK's claims for home market lump-sum post-sale price adjustments 
(PSPAs). With respect to Koyo, Timken asserts that the Department 
should deny an adjustment to NV for Koyo's customer-specific lump-sum 
billing adjustments (BILADJ2H) for the following reasons: (1) NV may 
not be modified by adjustments attributable to non-scope merchandise; 
(2) sales prices modified by adjustments not attributable to those 
particular sales cannot be used to calculate NV; (3) Koyo has not acted 
to ``the best of its ability'' in reporting its lump-sum billing 
adjustments; and (4) Koyo hasn't demonstrated that its allocation 
methodology is not distortive. Timken notes that Koyo has calculated 
its lump-sum billing adjustments by multiplying the total adjustment 
amount paid to a customer by the ratio of its TRB sales to that 
customer to the total sales to that customer. As a result, Timken 
argues, this adjustment is attributable to subject and non-subject 
merchandise and this allocation methodology attributes a portion of the 
adjustment to sales for which no adjustment was made. Timken claims 
that the Court of International Trade (CIT) in Torrington Co. v. United 
States, 17 CIT 199, 218, 818 F. Supp 1563, 1578 (1993) (Torrington) 
held that ``merchandise which is outside the scope of an antidumping 
duty order cannot be used in the calculation of antidumping duties,'' 
and its decision in this case is reason alone to reject Koyo's claim 
for lump-sum billing adjustments.
    Regarding its next claim, Timken asserts that the statute provides 
that ``normal value shall be the price'' at which the foreign like 
product is sold. However, Timken argues, as a result of Koyo's 
allocation methodology, there are some home market sales prices that 
have been modified by a portion of the lump-sum billing adjustment 
which is not properly attributable to those particular sales. 
Therefore, Timken argues, the modified price of such sales is not ``the 
price at which the foreign like product was first sold.''
    Timken also argues that Koyo's claim for lump-sum billing 
adjustments should be denied because Koyo has not acted to the best of 
its ability in reporting them. Timken claims that there is information 
on the record which demonstrates Koyo could have devised a computer 
program to match lump-sum adjustments to the relevant sales. For 
example, Timken argues that while in its questionnaire response Koyo 
states that it does not maintain lump-sum adjustments in a customer-
specific manner, it also states in the response that it ``matched these 
debit and credit notices to the relevant sales in order to report the 
billing adjustments on a transaction-specific basis.'' Timken maintains 
that this is exactly the type of computer programming that would allow 
Koyo to attribute lump-sum billing adjustments to the sales upon which 
they were granted. Timken also argues that additional evidence of 
Koyo's ability to match lump-sum adjustments to relevant sales is 
contained in the home market verification report, which describes how 
Koyo was able to design a program that searched its database to reenter 
revised unit prices.
    Finally, Timken asserts that Koyo has not demonstrated that its 
lump-sum billing adjustments are not distortive, and claims that Koyo's 
May 30, 1997 home market sales printout demonstrates this. Timken 
points to two examples of similar gross unit prices from the sales tape 
that have been modified by lump-sum billing adjustments, and argues 
that because each of the adjustments is a given percentage of the unit 
price, all those sales which have had the adjustment allocated to them, 
even though they were not in the group of sales to which the adjustment 
is correctly attributed, have been modified by that percentage. Timken 
further contends that such a difference is distortive given that the 
statute recognizes any margin over .5 percent as significant, and 
recommends that the Department subtract (rather than add) BILADJ2H from 
the gross unit price to correct this distortion.
    Petitioner also urges the Department to reject NSK's claims for 
lump-sum rebates. Timken argues that NSK failed to accurately report 
the amount of it customer-specific lump-sum PSPAs directly attributable 
to specific sales of scope merchandise, and that, accordingly, the 
Department should deny an adjustment to NV for these PSPAs. Timken 
argues that the Department's acceptance of NSK's lump-sum adjustments 
is contrary to Federal-Mogul Corp. v. United States, 834 F. Supp. 1391 
(CIT 1993), in which the CIT, upon remand, ordered the Department to 
attempt to devise a methodology that removed PSPAs and rebates paid on 
sales of non-subject merchandise from FMV (NV), and to deny such an 
adjustment if they could not be removed. In that decision, Timken 
contends, the CIT held that PSPAs and rebates paid on both subject and 
non-subject merchandise were acceptable provided the amount paid per 
sale was the same throughout the POR. Timken further argues that 
because the CIT determined that NSK did not meet the standard for 
acceptance of its lump-sum PSPAs, and because NSK's allocation 
methodology for the current reviews is apparently unchanged, its lump-
sum adjustments should not be allowed. Timken asserts that the CIT, in 
other decisions, has upheld the rejection of NSK's lump-sum 
adjustments. For example, in Torrington Co. v. United States, 881 F. 
Supp 622 (CIT 1995), Timken argues, the CIT ordered the Department on 
remand to develop a methodology for removing PSPAs paid on non-subject 
merchandise from the calculation of FMV (NV). Timken also cites 
Torrington Co. v. United States, 926 F. Supp. 1151 (CIT 1996), and 
claims that the CIT, in that decision, held that PSPAs which could not 
be tied specifically to the sales for which they were granted could not 
be treated as direct expenses and affirmed the disallowance of NSK's 
lumps-sum adjustments because they could not be tied to specific part 
numbers.
    Timken further contends that in Timken Co. v. United States, 930 F. 
Supp. 621 (1996), the CIT held that Commerce should not have allowed an 
adjustment to FMV (NV) for NSK's lump-sum PSPAs. Timken also cites to 
the CIT's more recent decision in NSK vs. United States, 969 F. Supp. 
34 (CIT 1997), asserting that the CIT affirmed the Department's 
disallowance of NSK's lump-sum PSPAs.
    In sum, Timken argues that NSK's allocation methodology is 
distortive because, although every individual payment of a lump-sum 
adjustment ties to a certain group of sales transactions (and not to 
all sales), NSK nonetheless allocates the total of lump-sum payments to 
all POR sales. In addition, Timken claims that NSK has not acted to the 
best of its ability in reporting its lump-sum PSPAs.
    Koyo responds that its lump-sum billing adjustments are not 
distortive. Citing to the most recent AFB and TRB reviews, Koyo asserts 
that the Department has evaluated Koyo's lump-sum billing adjustment 
methodology and in each case has allowed the adjustment. The reporting 
methodology

[[Page 2566]]

for the current reviews, Koyo asserts, is the same as that which the 
Department has previously accepted.
    Koyo argues that Timken's reliance on Torrington to support its 
assertions that the adjustment should be denied because it was 
allocated over a total sales value which included non-subject 
merchandise is inappropriate because the case was decided before the 
enactment of the URAA. Furthermore, Koyo argues, even prior to the 
URAA, the CAFC rejected the distinction between scope and non-scope 
merchandise used by the CIT. In addition, Koyo argues that the 
Department determined that the Torrington case was of limited relevance 
in evaluating Koyo's billing adjustment allocation methods for 1994/95 
AFB review (see Antifriction Bearings (Other Than Tapered Roller 
Bearings) and Parts Thereof From France, et. al.; Final Results of 
Antidumping Administrative Review, 62 FR 2091 (January 15, 1997) (AFBs 
VI)).
    With respect to Timken's claims that Koyo has not demonstrated that 
its allocation methodology is not distortive, Koyo responds, citing the 
1995/1996 AFB Final Results (Antifriction Bearings (Other Than Tapered 
Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, 
Romania, Singapore, Sweden, and the United Kingdom; Final Results of 
Antidumping Duty Administrative Reviews, 62 FR 54043 (October 17, 
1997)(AFB's VII)), that the Department has established a test for 
determining whether or not allocations are distortive. Koyo argues that 
the Department's test does not depend on whether sales in the 
allocation pool were of non-subject merchandise, nor does it depend 
upon the difference between the allocated and actual adjustment. Koyo 
contends that the purpose of the test is to determine if merchandise in 
the allocation pool is significantly different in terms of value, 
physical characteristics, and the manner in which it was sold. Koyo 
further argues that evidence on the record in the instant reviews 
demonstrates that it has met the Department's test regarding whether an 
allocation is distortive. For example, Koyo claims that the merchandise 
over which it allocated billing adjustments was similar in terms of 
value and physical characteristics and that as a result, the sales 
patterns of these products were similar to the merchandise to which the 
adjustments were specifically attributable. Citing AFBs VI and AFBs 
VII, Koyo notes that the Department concluded in the three most recent 
AFB reviews that ``it is not feasible for Koyo to report this 
adjustment on a more specific basis'' and that ``we are satisfied that 
Koyo's allocation methodology across subject merchandise by sales value 
was not distortive.''
    Koyo adds that the Department followed the intent of the URAA to 
liberalize reporting requirements in accepting billing adjustments and 
asserts that the SAA at 823-824 makes clear this intent. Furthermore, 
Koyo claims, the Department's new antidumping regulations allow the 
Department to consider allocated expenses and adjustments where 
transaction-specific reporting is not possible, and that Koyo's 
allocation methodology is consistent with the expressed goals of the 
new regulations.
    Koyo claims that calculating BILADJ2H on a transaction-specific 
basis is not possible. Because a portion of the adjustments are 
attributable to more than one sale, Koyo asserts that data linking a 
given sale to a particular adjustment does not exist within its 
database. Finally, regarding Timken's assertion that any adjustment 
which exceeds the de minimis threshold points to a distortive 
allocation, Koyo responds that the concept of the de minimis threshold 
is not related to whether or not an allocation is distortive.
    NSK responds that the judicial precedent relied on by Timken to 
support its assertions includes cases decided before the enactment of 
the URAA which do not govern the Department in post-URAA reviews. 
Furthermore, NSK argues that the SAA and the new antidumping 
regulations support the Department's acceptance of NSK's methodology 
for allocating lump-sum PSPAs. NSK adds that the Department, in recent 
AFB reviews, has accepted NSK's lump-sum PSPAs.
    Department's Position: We disagree with Timken. We have granted 
claims for PSPAs as direct adjustments to NV if we determined that the 
respondent, in reporting these adjustments, acted to the best of its 
ability in providing information and meeting the requirements we have 
established with respect to these adjustments, and that its reporting 
methodology was not unreasonably distortive (see section 782(e) of the 
Act). We did not treat such adjustments as direct or indirect selling 
expenses, but as direct adjustments to identify the correct starting 
price. While our preference is for transaction-specific reporting, we 
recognize that this is not always possible. It is inappropriate to 
reject allocations that are not unreasonably distortive where a fully 
cooperating respondent is unable to report the information in a more 
specific manner (see section 782(e) of the Act). Accordingly, we have 
accepted these adjustments when it was not feasible for a respondent to 
report these adjustments on a more specific basis, provided that the 
allocation method used does 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 are not acceptable 
where we have reason to believe that respondents did not grant such 
adjustments in proportionate amounts with respect to sales of out-of-
scope and in-scope merchandise. We have made this determination by 
examining the extent to which the out-of-scope merchandise included in 
the allocation pool is different from the in-scope merchandise in terms 
of value and physical characteristics, and the manner in which it is 
sold. Significant differences in such terms may increase the likelihood 
that respondents did not grant price adjustments in proportionate 
amounts with respect to sales of subject and non-subject merchandise. 
While we scrutinize any such differences carefully between in-scope and 
out-of-scope sales in terms of their potential for distorting reported 
per-unit adjustments on the sales involved in our analysis, it would be 
unreasonable to require that respondents provide sale-specific 
adjustment data on non-scope merchandise in order to prove that there 
is no possibility for distortion. Such a requirement would defeat the 
purpose of permitting the use of reasonable allocations by a respondent 
that has cooperated to the best of its ability.
    Based on our examination of the record in this and in past reviews, 
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 adjustment on as 
narrow a basis as its records allowed. Therefore, for these final 
results we have made a direct adjustment to NV for Koyo's lump-sum 
billing adjustments.
    With respect to NSK, as explained in our preliminary analysis 
memorandum, we have accepted its claims for lump-sum rebates because we 
are satisfied that NSK's methodology, while it includes non-subject 
merchandise, does not shift rebates from non-scope to scope 
merchandise. In its response, NSK submitted information demonstrating 
that the ratio of scope to non-scope merchandise purchased by each 
customer who received this rebate was relatively constant throughout 
the POR. Furthermore, we have determined based

[[Page 2567]]

on our review of the record that NSK acted to the best of its ability 
in reporting these price adjustments and that reporting on a more 
specific basis was not possible given the manner in which NSK maintains 
its records.
    Comment 11: Timken argues that Koyo's home market rebates were not 
allocated over the actual sales for which they were incurred. Timken 
further asserts that Koyo did not act to the best of its ability in 
reporting this adjustment because the record indicates that Koyo had 
the capability to properly link rebates to specific sales. Finally, 
Timken maintains that Koyo has provided no evidence demonstrating that 
its allocation methodology is not distortive and asserts that the 
Department should consequently deny Koyo's claim for home market 
rebates.
    Koyo responds that, as with its billing adjustments, the measure of 
whether or not an allocation is distortive does not depend on the 
difference between an allocated and actual adjustment or whether the 
allocation pool includes merchandise for which the expense was not 
originally incurred. Koyo argues that when attempting to determine 
whether an allocation is distortive, the Department examines the extent 
to which merchandise in the allocation pool is different from 
merchandise for which the expense was incurred in terms of value, 
physical characteristics, and the manner in which it is sold. In fact, 
Koyo asserts, the Department, in the most recently completed TRB 
review, found that the subject and non-subject bearings included in the 
allocation pool for home market rebates did not differ significantly 
with respect to value, physical characteristics, or sales patterns. 
Koyo further argues, citing the home market verification report, that 
the Department's finding that ``[there were] no discrepancies in either 
the program or the calculation methodology'' demonstrates that Koyo's 
rebate allocation methodology is not distortive.
    Finally, Koyo argues that because the Department in the 1994/1995 
TRB reviews determined that Koyo had acted to the best of its ability 
in reporting rebates, and because the allocation methodology for these 
reviews is unchanged, the Department should continue to make a direct 
adjustment to home market price for rebates for these final results.
    Department's Position: We disagree with Timken. During the POR Koyo 
granted rebates to certain of its home market customers. Koyo 
calculated rebate factors by dividing the total rebates paid to a given 
customer by the total POR sales to that customer. In our supplemental 
questionnaire, we asked Koyo to explain why it was unable to report 
home market rebates on a more specific basis. In its supplemental 
response Koyo stated that more specific reporting for a certain 
customer who received rebates was not possible because its records did 
not allow it to isolate sales of those bearings for which rebates were 
granted. Based on information Koyo provided, we are satisfied that Koyo 
acted to the best of its ability in reporting home market rebates. 
However, because Koyo's allocation methodology includes non-scope 
merchandise, we have nevertheless examined Koyo's allocation to 
determine if it is distortive. Our review of the record indicates that 
the non-scope merchandise included in Koyo's allocation are 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 
rebates on sales of bearings other than TRBs than 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 among 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 were sold such that 
Koyo's allocation would result in an unreasonably inaccurate or 
distortive allocation. Therefore, for these final results we have made 
no changes in our treatment of Koyo's home market rebates.
    Comment 12: Timken argues that Koyo's domestic pre-sale freight 
expenses should be allocated equally to sales in the home market and in 
the United States. Timken contends that Koyo's practice of allocating 
Japanese pre-sale freight expenses to U.S. sales on the basis of 
transfer prices is potentially distortive because such prices are not 
at arm's length. Koyo's allocation methodology, Timken argues, has the 
effect of shifting expenses attributable to U.S. sales to sales in the 
home market.
    Timken also argues that Koyo's response demonstrates that there are 
certain home market sales for which the company did not incur pre-sale 
freight expenses. Timken suggests that, because the record indicates 
that Koyo maintained warehouses at its plants during the POR, and 
because pre-sale freight expenses are not incurred for sales shipped 
directly from the plant warehouse to the customer, the Department 
should follow its practice from the 94-95 TRB review in which it 
removed the total sales value of Koyo's OEM home market sales from the 
denominator of the expense ratio.
    Koyo responds that Timken's argument regarding its allocation 
methodology for pre-sale freight has been rejected by the Department in 
past reviews and urges the Department to once again dismiss it. Koyo 
argues that it has reported its pre-sale freight expense in the same 
manner as in past reviews, and asserts that the Department has verified 
and accepted its use of Koyo Seiko's total sales value as the 
denominator for calculating pre-sale freight. Koyo further maintains 
that its total bearing sales amounts were based on its ``Sales and Cost 
of Goods Sold'' summary, and that the total bearing sales for its 
distributors were based on figures the Department tied to the audited 
financial statements. Furthermore, Koyo argues that these sales totals 
included those to affiliated and unaffiliated customers in the home 
market and export markets. Koyo argues that because its home market and 
export sales were to a mix of both affiliated and unaffiliated 
customers, its allocation methodology was fair and that the proper 
basis for allocation is its prices for all relevant sales.
    Department's Position: We agree with petitioner in part. While we 
agree 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. 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 36 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 consolidated distributors, but it also stored certain 
merchandise at its plant warehouse. In the proprietary explanation 
following this description Koyo again indicates that there are certain 
types of home market sales for which the merchandise was stored at its 
plant warehouse. In

[[Page 2568]]

addition, on page 23 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, this indicates 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 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 36 of its response, we have concluded 
that Koyo 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., 92-93 TRB Final 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 internal 
consistency between the numerator and denominator and in 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 home market 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 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. 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. Since Koyo 
Seiko's customer in the United States is Koyo Corporation of U.S.A. 
(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 while others 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 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

[[Page 2569]]

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 denominator's 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, for purposes other 
than antidumping proceedings, within the ordinary course of business. 
Furthermore, we note that antidumping proceedings are only one of the 
factors a respondent must account for in setting its transfer prices; 
transfer prices are also subject to possible Internal Revenue Service 
audits for U.S. tax purposes and to U.S. Customs' review. 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 13: Timken argues that the Department should recalculate 
Koyo's home market average short-term borrowing rate to exclude 
interest amounts which it maintains are aberrational and unsupported by 
the record. Timken asserts that home market verification documents 
detailing loans taken by Koyo during the POR contain two loan entries 
which do not list certain relevant information regarding the terms and 
details of these loans for which the reported interest was incurred.
    Koyo argues that Timken's assertions are misplaced because they are 
based on a misunderstanding of the credit verification exhibit. Koyo 
argues that the interest amounts Timken identified as aberrational do 
not constitute payments on specific loans, but rather reflected 
interest paid by Koyo Seiko under some other arrangement. Citing the 
Department's home market verification report, Koyo asserts that the 
Department has already verified the accuracy of Koyo's reported credit 
expense ratio and found no discrepancies.
    Department's Position: We disagree with Timken. During verification 
we carefully reviewed the manner in which Koyo calculated its short-
term interest rate and its credit expense ratios. After reviewing 
supporting documentation for each of several loans we selected from 
Koyo's credit calculation worksheets, we were satisfied that Koyo had 
accurately reported its credit expense. While those entries identified 
by Timken were not among those chosen, we emphasize that the purpose of 
verification is not to conduct an exhaustive review of a response. 
Rather, verification is intended to serve as a spot check to verify the 
overall integrity of a response (see, e.g., Bomont Industries v. United 
States, 14 CIT 208, 209, 733 F. Supp. 1507 (1990)). Absent any 
unreconciling information regarding Koyo's calculation of its short-
term borrowing rate, we were satisfied that this expense was accurately 
reported. Furthermore, we are generally satisfied with Koyo's 
explanation of and the reliability of those interest amounts which 
Timken claims should be removed from the interest rate calculation and 
can find no evidence on the record that indicates these interest 
amounts should be excluded from the calculation of credit; accordingly, 
we have not done so for these final results.
    Comment 14: In its case brief Timken argued that Koyo allocated its 
home market inventory carrying costs (ICC) over a sales value which 
improperly excluded sales to its distributors. However, Timken 
subsequently withdrew that argument. In addition, Timken also suggested 
that the Department should recalculate Koyo's ICC ratio using the 
following methodology: (1) calculate separate ICC ratios for Koyo Seiko 
sales and sales by its wholly-owned distributors; (2) apply the Koyo 
Seiko ICC ratio to all of its sales; and (3) apply both Koyo Seiko's 
and the distributors' ICC rates to the affiliated distributors' sales. 
Timken contends that this methodology would produce a more accurate 
result because merchandise stored by Koyo Seiko and by its distributors 
remains in inventory for different average periods of time.
    Koyo did not specifically comment on Timken's proposed method for 
allocating ICC.
    Department's Position: We agree with Timken. Exhibit B-9 of Koyo's 
questionnaire response indicates that, to calculate its reported home 
market ICC, Koyo derived an overall average number of days using 
inventory balance and total sales figures for both Koyo Seiko and its 
consolidated distributors. However, because there were significant 
differences between the inventory balances and total sales values for 
Koyo Seiko as compared to those for its consolidated distributors, 
Koyo's calculation of a single average number of days in inventory has 
the effect of overstating the ICC incurred for those sales made by the 
consolidated distributors and understating the ICC incurred for sales 
made by Koyo Seiko. Therefore, because information exists on the record 
which would allow us to calculate home market ICC which more closely 
reflect the actual experience of Koyo Seiko and its consolidated 
distributors, we have recalculated Koyo's reported home market ICC for 
these final results. Please see our Final Results Analysis Memorandum 
for Koyo, dated January 7, 1998 for a detailed explanation of our 
recalculation.
    Comment 15: Timken argues that Koyo improperly excluded a certain 
category of expenses from its reported total export selling expenses.
    Koyo responds that its methodology properly excludes these expenses 
and contends that Timken's argument is based on a misunderstanding of 
the home market verification report and of Koyo's August 26, 1997 
letter in response to Timken's pre-preliminary comments.
    Department's Position: We disagree with Timken. We have reviewed 
the home market verification report and the relevant exhibit and have 
determined that Koyo correctly excluded this expense category from its 
total export selling expenses. The proprietary nature of this argument 
prevents us from discussing it in further detail here. For more 
information, refer to the proprietary version of our final results 
analysis memorandum for Koyo, dated January 7, 1998.

3. Adjustments to United States Price

    Comment 16: Timken argues that the Department should apply facts 
available with respect to Koyo's pre-sale U.S. inland freight because 
Koyo failed to demonstrate that the expenses attributed to subject 
merchandise are reasonably accurate. Timken is concerned that Koyo's 
allocation methodology is distortive because (1) the total reported 
expenses include those associated with shipping merchandise from Japan, 
Europe, and from Koyo Corporation of U.S.A. Manufacturing Division 
(KCUM) to KCU, and (2) Koyo allocated freight costs based on the weight 
of all sales, including those sales for which KCU apparently did not 
incur a freight expense.
    Koyo maintains that Timken incorrectly assumes that this expense is 
allocated on the basis of sales value when it was actually allocated on 
the basis of the weight of the merchandise shipped. Koyo further 
maintains that

[[Page 2570]]

allocating this expense based on weight is not distortive because the 
cost to ship a given weight of non-scope and scope merchandise is 
identical. Koyo also argues that its allocation methodology is well-
established, has been repeatedly verified, and was again verified 
without discrepancy at the Department's U.S. verification for these 
reviews.
    Department's Position: We disagree with Timken. Koyo calculated its 
U.S. inland pre-sale freight expense ratio by dividing KCU's total POR 
freight-in expenses (associated with shipping merchandise from 
railheads to KCU's warehouses) as reported in its financial statements 
by the total gross weight shipped to U.S. customers of all products. 
Koyo then multiplied the resulting freight-in factor by the unit gross 
weight to arrive at its reported pre-sale freight amounts. During 
verification, not only did we carefully examine Koyo's methodology for 
allocating its U.S. pre-sale inland freight expenses, but we tied KCU's 
reported total pre-sale freight expenses directly to its financial 
statements and found no discrepancy. In addition, we verified that the 
gross weight reported by Koyo was accurate (see Koyo Seiko U.S. 
Verification Report, August 7, 1997, at 13).
    As noted above, the expense total appearing in Koyo's numerator 
encompasses POR freight-in expenses incurred when shipping merchandise 
(whether scope or non-scope) from Europe and Japan to KCU's sales 
warehouses, and from KCUM to KCU. Similarly, the denominator includes 
the POR gross weight of all such sales for which these expenses were 
incurred. We have examined the record and are satisfied that Koyo's 
records do not allow it to report these expenses on a more specific 
basis. Additionally, while Timken asserts that KCU apparently allocates 
U.S. inland pre-sale freight expense totals to certain sales for which 
KCU did not pay for freight transfers from KCUM to KCU, we can find no 
evidence on the record indicating that KCU did not incur all expenses 
associated with shipping merchandise from KCUM to KCU's sales 
warehouse.
    Because we are satisfied that Koyo's allocation is as specific as 
possible, and because the numerator and denominator properly reflect 
all shipments and all expenses, we have not resorted to the use of 
facts available for these final results.
    Comment 17: NTN argues that the Department should have calculated 
CEP profit on a level-of-trade (LOT)-specific basis. NTN claims that 
the Department noted that prices differed significantly based on the 
LOT at which merchandise was sold. NTN claims that selling expenses 
also differed by LOT and had an effect on prices but that this 
difference does not account entirely for the different price levels. 
NTN further emphasizes that section 772 (a) and (f) of the Act 
expresses a preference for the profit calculations to be performed as 
specifically as possible and on the narrowest basis as possible. 
Finally, NTN asserts that because the Department calculated constructed 
value (CV) profit on a LOT-specific basis and matched U.S. and home 
market sales by LOT, the calculation of CEP profit should also take LOT 
into account.
    Timken argues that the Department rejected the identical argument 
by NTN in its final results of the sixth review of the AFBs case, 
stating that ``neither the statute nor the SAA require us to calculate 
CEP profit on a basis more specific than the subject merchandise as a 
whole. * * * [t]he statute and SAA, by referring to ``the'' profit, 
``total actual profit,'' and ``total expenses'', imply that we should 
prefer calculating a single profit figure'' (see AFBs VI at 2081 and 
2125). For these same reasons, Timken contends that the Department 
should again reject NTN's assertion in this TRB review.
    Department's Position: We agree with Timken. Neither the statute 
nor the SAA requires us to calculate CEP profit on a basis more 
specific than the subject merchandise as a whole. See AFBs VI at 2125. 
Respondent's suggestion would not only add a layer of complexity to an 
already complicated exercise with no increase in accuracy, but a 
portion of the CEP-profit calculation would be more susceptible to 
manipulation. Therefore, for these final results we have not changed 
our CEP profit calculation.
    Comment 18: NTN asserts that the Department had no basis for 
including EP sales in the calculation of the CEP profit adjustment and 
argues that section 772 (a) and (f) of the Act clearly state that the 
adjustment for profit to CEP sales is to be based on the expenses 
incurred in the United States as a percentage of total expenses. NTN 
contends that section 772(d) of the Act contains no provision for the 
inclusion of export price expenses and that the canon of statutory 
construction, expressio unius est exclusio alterius, indicates that the 
absence of such a provision precludes its inclusion. NTN further 
asserts that the SAA similarly states that ``the total expenses are all 
expenses incurred by or on behalf of the foreign producer and exporter 
and the affiliated seller in the United States with respect to the 
production and sale of. . . the subject merchandise sold in the United 
States and the foreign like product sold in the exporting country (if 
Commerce requested this information in order to determine the normal 
value and the constructed export price)''. Therefore, NTN claims that 
the Department has calculated CEP profit in a manner contrary to that 
specified in the statute.
    Department's Position: We disagree with NTN. The Department's 
September 4, 1997 policy bulletin regarding the calculation of CEP 
profit indicates that section 772(f)(2)(D) of the Act clearly states 
that the calculation of total actual profit is to include all revenues 
and expenses resulting from the respondent's EP sales as well as from 
its CEP and home market sales. The basis for total actual profit is the 
same as the basis for total expenses under section 772(f)(2)(C) of the 
Act. The first alternative under this section states that, for purposes 
of determining profit, the term ``total expenses'' refers to all 
expenses incurred with respect to the subject merchandise sold in the 
United States (as well as home market expenses). Thus, where the 
respondent makes both EP and CEP sales to the United States, sales of 
the subject merchandise would encompass all such transactions. 
Therefore, because NTN had EP sales, we have included these sales in 
the calculation of CEP profit.
    Comment 19: NTN argues that the Department's decision to ignore 
adjustments to its U.S. indirect selling expenses for expenses incurred 
when financing cash deposits for antidumping duties is contrary to both 
the Department's position in past reviews and judicial precedent, and 
that it inappropriately denies an adjustment for expenses incurred 
solely as a result of the existence of an antidumping order.
    NTN asserts that the CIT has previously held that these imputed 
interest expenses do not constitute selling expenses, and cites PQ 
Corp. v. United States, 11 CIT 53, 67 (1987) (PQ Corp), in which the 
CIT stated, ``if deposits of estimated antidumping duties entered into 
the calculation of present dumping margins, those deposits would work 
to open up a margin where none otherwise exists.'' NTN claims that the 
rationale in PQ Corp applies similarly to interest incurred when 
financing cash deposits, and asserts that if the Department were to 
allow interest expenses from previous reviews to affect the calculation 
of margins for current reviews, it would precipitate an unending cycle 
which would prevent the Department from revoking an order.

[[Page 2571]]

    NTN maintains that the CIT, in Timken v. United States, Slip Op. 
97-87 (July 3, 1997)(Timken), upheld NTN's adjustments to U.S. indirect 
selling expenses for interest incurred when financing cash deposits, 
and notes that the Department itself argued in support of such an 
adjustment. NTN argues that, as set forth in Timken, interest expenses 
attributable to cash deposit financing are not incurred in the course 
of selling merchandise in the United States.
    NTN also references the CIT's decision in Federal Mogul Corp. v. 
United States, Slip Op. 96-163 (December 12, 1996), claiming that the 
CIT explicitly rejected the petitioner's argument that interest 
expenses constituted selling expenses because they were incurred as a 
result of NTN's ``decision'' to engage in dumping. Additionally, argues 
NTN, the Court rejected the petitioner's argument that allowing such an 
adjustment was duplicative of interest paid on the refund of excess 
cash deposits.
    Timken responds that the Department correctly rejected NTN's claim 
for a downward adjustment to U.S. indirect selling expenses for 
interest incurred when financing cash deposits. Timken argues that 
allowing such an adjustment serves as an incentive to respondents to 
prolong litigation to avoid actual payment of duties, which is contrary 
to the purpose of the interest provision set forth in the Trade 
Agreements Act of 1979, which is to reduce incentives to delay payment 
of duties owed.
    Department's Position: We agree with Timken that we should deny an 
adjustment to NTN's U.S. indirect selling expenses for expenses which 
NTN claims are related to financing of cash deposits.
    The statute does not contain a precise definition of what 
constitutes a selling expense. Instead, Congress gave the administering 
authority discretion in this area. It is a matter of policy whether we 
consider there to be any financing expenses associated with cash 
deposits. We recognize that we have, to a limited extent, removed such 
expenses from indirect selling expenses for such financing expenses in 
past reviews of this finding, this order, and other orders. However, we 
have reconsidered our position on this matter and have now concluded 
that this practice is inappropriate. Further, we note that the Court's 
affirmance of our prior policy does not preclude us from following this 
new, reasonable policy.
    We have long maintained, and continue to maintain, that antidumping 
duties, and cash deposits of antidumping duties, are not expenses that 
we should deduct from U.S. price. To do so would involve a circular 
logic that could result in an unending spiral of deductions for an 
amount that is intended to represent the actual offset for the dumping 
(see, e.g., Antifriction Bearings (Other Than Tapered Roller Bearings) 
and Parts Thereof from France, et. al.; Final Results of Antidumping 
Duty Administrative Reviews, 57 FR 28360 (June 24, 1992) (AFBs II); see 
also, e.g., Certain Cut-to-Length Carbon Steel Plate from Germany; 
Final Results of Antidumping Duty Administrative Review, 62 FR 18390, 
18395 (April 17, 1995)). We have also declined to deduct legal fees 
associated with participation in an antidumping case, reasoning that 
such expenses are incurred solely as a result of the existence of the 
antidumping duty order (see AFBs II). Underlying our logic in both 
these instances is an attempt to distinguish between business expenses 
that arise from economic activities in the United States and business 
expenses that are direct, inevitable consequences of an antidumping 
duty order.
    Financial expenses allegedly associated with cash deposits are not 
a direct, inevitable consequence of an antidumping duty order. As we 
stated in the preliminary results at 47455: ``[m]oney is fungible. If 
an importer acquires a loan to cover one operating cost, that may 
simply mean that it will not be necessary to borrow money to cover a 
different operating cost.'' Companies may choose to meet obligations 
for cash deposits in a variety of ways that rely on existing capital 
resources or that require raising new resources through debt or equity. 
For example, companies may choose to pay deposits by using cash on 
hand, obtaining loans, increasing sales revenues, or raising capital 
through the sale of equity shares. In fact, companies face these 
choices every day regarding all their expenses and financial 
obligations. There is nothing inevitable about a company having to 
finance cash deposits and there is no way for the Department to trace 
the motivation or use of such funds even if it were.
    In a different context, we have made similar observations. For 
example, we stated that ``debt is fungible and corporations can shift 
debt and its related expenses toward or away from subsidiaries in order 
to manage profit'' (see Ferrosilicon from Brazil, 61 FR at 59412 
(regarding whether the Department should allocate debt to specific 
divisions of a corporation)).
    So, while under the statute we may allow a limited exemption from 
deductions from U.S. price for cash deposits themselves and legal fees 
associated with participation in dumping cases, we do not see a sound 
basis for extending this exemption to financing expenses allegedly 
associated with financing cash deposits. By the same token, for the 
reasons stated above, we would not allow an offset for financing the 
payment of legal fees associated with participation in a dumping case.
    We see no merit to the argument that, since we do not deduct cash 
deposits from U.S. price, we should also not deduct financing expenses 
that are arbitrarily associated with cash deposits. To draw an analogy 
which shows why this logic is flawed, we also do not deduct corporate 
taxes from U.S. price; however, we would not consider a reduction in 
selling expenses to reflect financing alleged to be associated with 
payment of such taxes.
    Finally, we also determine that we should not use an imputed amount 
that would theoretically be associated with financing of cash deposits. 
There is no real opportunity cost associated with cash deposits when 
the paying of such deposits is a precondition for doing business in the 
United States. Like taxes, rent, and salaries, cash deposits are simply 
a financial obligation of doing business. Companies cannot choose not 
to pay cash deposits if they want to import nor can they dictate the 
terms, conditions, or timing of such payments. By contrast, we impute 
credit and inventory carrying costs when companies do not show an 
actual expense in their records because companies have it within their 
discretion to provide different payment terms to different customers 
and to hold different inventory balances for different markets. We 
impute costs in these circumstances as a means of comparing different 
conditions of sale in different markets. Thus, our policy on imputed 
expenses is consistent; under this policy, the imputation of financing 
costs to actual expenses is inappropriate.
    Comment 20: Timken contends that the Department should recalculate 
NTN's U.S. credit expense because NTN reported a customer-specific 
average credit expense rather than a transaction-specific credit 
expense. Timken argues that NTN has provided the necessary information 
on the record to recalculate a transaction-specific credit expense. 
Further, Timken claims that, based on a comparison of the credit 
amounts reported by NTN to those credit amounts which are derived when 
using NTN's reported transaction-specific sales payment dates, it is 
apparent that NTN's customer-specific methodology produces distortive 
results.

[[Page 2572]]

    NTN argues that the Department has upheld its methodology in 
several past proceedings and has verified the accuracy of NTN's data, 
not only in this review, but in previous reviews as well.
    Department's Position: We agree with Timken with regard to NTN's 
CEP sales. We have data on the record which allows us to calculate a 
transaction-specific credit expense for CEP sales. Therefore, we have 
recalculated NTN's credit expense using the dates of payment which NTN 
reported.
    Comment 21: Timken contends that NTN improperly excluded certain 
expenses from its reported U.S. indirect selling expenses and states 
that, for the purpose of final results, the Department should deduct 
these expenses from CEP.
    NTN argues that not only has the Department rejected Timken's claim 
in past reviews, determining that NTN's reporting methodology was 
accurate, but in this current review the Department thoroughly verified 
this methodology and again found no discrepancies.
    Department's Position: We agree with the respondent. As NTN has 
explained and as we have repeatedly accepted, because certain of its 
U.S. expenses were incurred solely for non-scope merchandise, in order 
to ensure an accurate allocation of its U.S. expenses, NTN first 
removed all such expenses from its pool of U.S. expenses. The remaining 
expenses which were incurred for either scope or non-scope merchandise, 
but cannot be specifically linked to either scope or non-scope 
merchandise by NTN, were then allocated to scope and non-scope 
merchandise. We have consistently determined this methodology to be 
reasonable not only in past reviews of these TRB cases but in past 
reviews of AFB cases as well (see 92/93 TRB Final and AFBs VII). In 
addition, for this review, we verified NTN's U.S. expenses and found no 
discrepancies (see Department's U.S. Verification Report for NTN, June 
3, 1997, at 10) (NTN U.S. Report). Because NTN has not altered its 
methodology for this current review and because the record in this 
review indicates no reason for a different methodology to be used, we 
have again accepted this methodology for these final results.
    Comment 22: Timken alleges that certain of NTN's claimed EP 
transactions are actually CEP transactions when examined in light of 
the criteria for defining EP transactions as outlined in the 
Department's Antidumping Manual. Petitioner states that EP sales must 
meet the following criteria; (1) the sales transaction occurs prior to 
importation; (2) the merchandise in question was shipped directly from 
the manufacturer to the unrelated buyer, without being introduced into 
the inventory of the related selling agent; (3) this was a customary 
commercial channel for sales of this merchandise between the parties 
involved; and (4) the related agent in the United States acted only as 
a processor of the sales-related documentation and a communication link 
with the unrelated U.S. buyer. Timken argues that, when the activities 
of the related selling agent exceed the functions normally associated 
with a related agent involved with EP sales, the sale cannot be 
classified as an EP sale. For example, petitioner asserts that the 
Department's Antidumping Manual (1994) states that ``the extent of the 
related selling agent's normal functions, such as the administration of 
warranties, advertising, extensive in-house technical assistance, and 
the supervision of further manufacturing, may indicate that the agent 
is more than the ``paper-pusher'' envisioned for purchase price sales'' 
(see Antidumping Manual, Chapter 7 at 4-5). Timken claims that evidence 
on the record indicates that NTN's U.S. subsidiary, NBCA, performed 
numerous functions which exceeded those normally associated with a 
related agent involved in EP sales transactions. As a result, Timken 
concludes, the Department should reclassify all of NTN's reported EP 
sales as CEP sales.
    NTN argues that, as the Department has verified in this current and 
in previous TRB reviews, (1) there were no sales negotiations between 
its unaffiliated EP customer and NBCA, (2) NBCA did not receive any 
purchase orders from the unaffiliated customer, (3) NBCA did not 
generate any invoices for unaffiliated customers, (4) NBCA never took 
title to the merchandise in question, (5) NBCA never carried the 
merchandise in its inventory, and (6) NBCA never acted as the importer 
of record. In summary NTN states, these sales were clearly made in 
Japan and clearly met the Department's definition of EP sales 
transactions. Furthermore, NTN adds, the record demonstrates that NBCA 
acted solely as a communications link and a processor of documents with 
respect to U.S. EP sales.
    Department's Position: We agree with NTN. Timken lists the criteria 
the Department considers when deciding whether sales should be 
classified as EP or CEP. Of the criteria outlined, however, the only 
area that Timken questions is the activities of NBCA's liaison office. 
As NTN notes, there is no information on the record suggesting that 
NBCA is the seller for the sales in question or that NTN performed 
activities that exceeded those normally associated with the role of a 
related agent in EP transactions. Moreover, we verified NTN's response 
for this review and found that NBCA's functions with respect to EP 
sales were limited to being a communications link and a processor of 
documents. Therefore, we have not reclassified NTN's EP sales for these 
final results.
    Comment 23: Due to the proprietary nature of the comments we 
received regarding NTN USA's expenses, we are unable to state the 
concerns expressed by both NTN and Timken and our position with 
response to this issue. Therefore, for a detailed explanation of this 
issue and our position, please see the proprietary analysis memorandum 
for NTN dated January 7, 1998.

4. Cost of Production (COP) and Constructed Value (CV)

    Comment 24: NTN claims that the Department's preliminary results 
adjustment to COP and CV for affiliated-party inputs is distortive and 
should be eliminated. NTN argues that the Department's adjustment, 
which was calculated based on sampled transactions, does not accurately 
reflect the experience of all sales and, by applying the results of the 
sample to the total population of affiliated-party purchases, the 
Department, in essence, used facts available when sufficient 
information was clearly available on the record. NTN further argues 
that the Department misinterpreted section 773(f)(2) and (3) of the Act 
by determining that an adjustment was necessary. NTN claims that 
section 773(f)(2) of the Act addresses the circumstances under which 
the Department should disregard some transactions, but it does not 
mention the Department's practice of choosing the highest of either the 
cost of production, transfer prices, or market prices when calculating 
COP or CV. NTN additionally claims that Section 773(f)(3) of the Act 
requires the Department to have reasonable grounds to believe that 
inputs are being sold at less than the COP before it may use COP 
information. NTN contends that, because the record demonstrates that 
affiliates sold many inputs to NTN above COP, it is incorrect for the 
Department to adjust the costs for all TRBs which contained affiliated-
party inputs.
    NTN also asserts that, assuming the Department was correct in 
making an adjustment for affiliated-party inputs, it should use a more 
reasonable recalculation methodology such as the weighted-average 
difference between

[[Page 2573]]

COP and transfer price for all inputs sold to NTN. According to NTN, by 
adjusting all sales which had an affiliated-party input, the Department 
added additional profit to those inputs which already included profit. 
Therefore, NTN concludes that the Department should use NTN's 
affiliated-party input data as reported.
    The petitioner contends that the Department acted in accordance 
with section 773(f)(2) and (3) of the Act and that NTN failed to 
demonstrate that the Department's adjustments produced distorted 
results. According to the petitioner, section 773(f)(2) and (3) of the 
Act states that the Department may use information available in 
circumstances such as those which exist with respect to NTN in this 
review and that the Department has the right to use discretion in 
selecting the highest of (1) the transfer price from an affiliated 
party, (2) the COP for the input, or (3) the price from the 
unaffiliated party. Timken disputes NTN's interpretation of section 
773(f)(3) of the Act, stating that the statute does not require the 
Department to act only if it is able to determine that all inputs have 
been priced below COP. Rather, Timken argues, the Department may act 
when it has reasonable grounds to believe or suspect that an amount 
represented as the value of an affiliated-party input is less than the 
COP of the input. Moreover, the petitioner asserts, the Department 
acted reasonably in making its preliminary adjustment because it had 
limited data regarding NTN's affiliated-party inputs. Thus, the 
Department reasonably determined that the problem it had identified was 
likely to affect all models with affiliated-party inputs. Finally, 
Timken claims, for each TRB part number where the COP of the 
affiliated-party input was greater than the transfer price, the 
Department should increase COP and CV by an amount equal to the 
difference between transfer price and the COP.
    Department's Position: We disagree with NTN that our adjustment to 
increase certain transfer prices to equal a market price is flawed. The 
Department tested affiliated-party inputs on a sample basis, and 
applied the results of the sample to the total population of 
affiliated-party transactions. Our adjustment relied on affiliated-
party factors provided by NTN in its COP and CV database and it 
accounted for the fact that only certain inputs obtained from certain 
affiliates did not reflect a market value. The preamble of section 
351.407 of the Final Rule at 27296 and 27413 leaves conducting an 
arm's-length test of the transfer price to the Department's discretion 
depending on the facts and circumstances of the case. In this instance, 
NTN provided the transfer prices and cost information for its major 
inputs. We examined this information on a sample basis and determined 
that the company's reported amounts were not less than its respective 
COP, as required by section 773(f)(3) of the Act. NTN also provided a 
market value for identical or similar inputs obtained from or sold to 
non-affiliated parties to establish that the transfer price was 
comparable to the market price. We then examined this information on a 
sample basis and determined that in certain instances the company's 
reported transfer prices did not reflect a market price, as required by 
section 773(f)(2) of the Act. As noted on page 24 of the June 13, 1997 
cost verification report, NTN could not explain the difference between 
the transfer price and the market price. Thus, for the preliminary 
results we used the results of our samples to increase the 
manufacturing costs of the control numbers NTN identified as including 
related-party inputs.
    We also disagree with NTN's contention that it is not appropriate 
for the Department to rely on section 773(f)(2) and (3) of the Act in 
this instance. We note that section 351.407 (a) and (b) of the Final 
Rule, at 27296 and 27413, sets forth certain rules that are common to 
the calculation of CV and COP. This section states that for the purpose 
of section 773(f)(3) of the Act the Department will determine the value 
of a major input purchased from an affiliated person based on the 
higher of: (1) the price paid by the exporter or producer to the 
affiliated person for the major input; (2) the amount usually reflected 
in sales of the major input in the market under consideration; or (3) 
the cost to the affiliated person of producing the major input. 
Furthermore, we have relied on this methodology in Final Results of 
Antidumping Duty Administrative Review; Certain Corrosion-Resistant 
Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate 
From Canada, 62 FR 18449, 18457 (April 15, 1997), AFBs VI at 2115, and 
the 92/93 TRB Final. In each of these review's final results, the 
Department determined that in the case of a transaction between 
affiliated persons involving a major input, we will use the highest of 
the transfer price between the affiliated party, the market price 
between unaffiliated persons involving the major input, or the 
affiliated supplier's cost of producing this input.
    Accordingly, for the final results we adjusted NTN's reported costs 
to account for the difference between the transfer price and market 
value for inputs purchased from affiliated parties based on the 
adjustment factor used in the preliminary results.
    Comment 25: Petitioner states that the Department should ensure 
that the calculation of COP and CV includes certain non-operating 
expenses (e.g., certain write-offs, depreciation of idle equipment, 
foreign currency gains and losses, etc.) NSK, on the other hand, 
contends that the exclusion of these non-operating expenses is 
permissible and is based on past Department practice.
    Department's Position: For the final results we have relied on 
NSK's reported general expense factor that excludes certain non-
operating income and expenses. We reviewed the information on the 
record and noted that NSK included depreciation of idle equipment in 
its COP. As for the other non-operating expenses identified by the 
petitioner, we note that NSK excluded them from the calculation of COP. 
However, these non-operating expenses are minor expenses. Thus, 
including them in the calculation of the dumping margin has a de 
minimis effect on the calculation of NSK's margin.
    Comment 26: NSK argues that, in accordance with section 773(f) of 
the Act, the Department may only substitute affiliated-party costs for 
a respondent's reported transfer prices for affiliated-party inputs for 
purposes of sections 773(b) and 773(e) of the statute. However, NSK 
asserts, in the preliminary results the Department also substituted 
affiliated-party cost data when it determined whether the foreign like 
product was commercially comparable to each U.S. model, when it 
calculated a difference-in merchandise (difmer) adjustment for non-
identical U.S. and home market matches, and when it recalculated NSK's 
reported U.S. inventory carrying costs prior to deducting this expense 
from CEP. Citing Ad Hoc Comm, of AZ-NM-TX-FL Producers of Grey Portland 
Cement v. United States, 13 F.3d 398, 401 (Fed. Cir. 1994), NSK 
contends that where Congress has included specific language in one 
section of the statute but has omitted it from another, related section 
of the same statute, it is generally presumed that Congress intended 
the omission. Therefore, NSK argues, because the statutory authority to 
determine whether the foreign like product is commercially comparable 
to the U.S. merchandise, to adjust NV for difmer, and to adjust CEP for 
U.S. inventory carrying costs is found in sections 771(16), 773(a)(6), 
and 772(d) of the Act, respectively, and not in

[[Page 2574]]

section 773(f), and because section 773(f) specifically limits the 
substitution of related-party costs to sections 773(b) and 773(e) of 
the statute, the antidumping law clearly does not permit the Department 
to use affiliated-party cost data to determine commercial 
comparability, to calculate the difmer adjustment, or to calculate an 
adjustment to CEP for inventory carrying costs. Therefore, NSK 
concludes, the Department should rely on NSK's reported cost data 
without regard to affiliated-supplier cost data in all instances except 
where specifically authorized by the statute.
    NSK also asserts that the substitution of affiliated-party costs 
when determining commercial comparability constitutes an alteration of 
the Department's model-match methodology and prevents respondents from 
taking advantage of the Department's TRB Option II reporting 
methodology. NSK argues that it is not only difficult for a respondent 
to obtain affiliated-party cost data in time to integrate it into the 
model match, but it is often the case that an affiliated supplier 
refuses to provide the respondent with its cost data. As a result, NSK 
contends, through no fault of its own, a respondent's inability to 
obtain affiliated-party cost data may result in the inability to 
compare appropriate models and in the Department's use of total facts 
available.
    Timken argues that, contrary to NSK's assertions, there is nothing 
in the statutory provisions cited by NSK which restricts the 
Department's discretion to use adjusted cost data for purposes other 
than sections 773(b) and 773(e) of the statute. For example, Timken 
maintains, section 771(16) of the Act, the ``model-match'' provision, 
only instructs the Department to select comparison merchandise that is 
``like'' the U.S. subject merchandise in component material and uses 
and is ``approximately equal in commercial value,'' and does not 
specify the methodology by which the Department is to select the 
similar comparison merchandise or determine commercial comparability. 
Rather, citing the CAFC's decision in Koyo Seiko v. United States, 66 
F.3d 1204 (Fed. Cir. 1995), Timken contends that, because Congress has 
implicitly delegated authority to the Department to determine and apply 
a model-match methodology, it was not inappropriate or unlawful for the 
Department to rely on affiliated-party cost data in making its 
commercial comparability determination for NSK.
    Likewise, Timken argues that the provision which underlies the 
Department's difmer adjustment, section 773(a)(6) of the Act, does not 
detail the precise methodology that the Department must use to make 
such an adjustment. Hence, Timken states, Congress has again implicitly 
delegated authority to the Department to formulate an appropriate 
methodology and the Department reasonably determined that it was 
appropriate to use NSK's affiliated-party cost data when calculating 
this adjustment.
    Timken also asserts that section 772(d) of the Act does not detail 
the methodology the Department is to use to calculate ICC adjustments 
to CEP but only lists the kinds of expenses that may be deducted from 
CEP. Therefore, Timken argues, Congress has once again implicitly 
delegated authority to the Department to select an appropriate 
methodology to calculate ICC and other expenses.
    Finally, Timken argues, the Department's substitution of 
affiliated-party cost data when determining the commercial 
comparability of NSK's home market comparison merchandise is not likely 
to have a significant impact on the Department's model matches. 
Moreover, Timken concludes, not only are respondents required to supply 
data on multiple models for matching under the TRB Option II reporting 
methodology, but any respondent concerned about the potential effect on 
the model-match may revise its submission accordingly.
    Department's Position: We agree with Timken. In our preliminary 
results for NSK, in accordance with section 773(f) of the Act, we 
recalculated NSK's reported TRB-specific COP and CV to include the COP 
of an affiliated-party input if the transfer price NSK reported for 
that input was less than the COP for that input. We note that COP and 
CV are composed of several components. The adjustment we made for NSK's 
affiliated-party inputs is actually an adjustment to its reported 
material costs. Because material costs are a component of the variable 
cost of manufacture (VCOM) and the total cost of manufacture (TCOM), 
and these in turn are components of COP and CV, when we adjusted NSK's 
reported material costs we not only recalculated its COP and CV, but we 
effectively recalculated VCOM and TCOM components of COP and CV as 
well.
    NSK's assertions overlook the fact that the Department does not 
rely on a respondent's reported costs solely for the calculation of COP 
and CV. We also use cost information in a variety of other aspects of 
our margin calculations. For example, when determining the commercial 
comparability of the foreign like product in accordance with section 
771(16) of the Act, it has been our long-standing practice to rely on 
the product-specific VCOMs and TCOMs for U.S. and home market 
merchandise. Likewise, when calculating a difmer adjustment to NV in 
accordance with section 773(b) of the Act, it has been our consistent 
policy to calculate the adjustment as the difference between the 
product-specific VCOMs for the U.S. and home market merchandise 
compared (see, e.g., 92-93 TRB Prelim at 57631). Furthermore, we have 
permitted respondents to calculate their reported ICC on the basis of 
TCOM.
    As a result, if we determine a component of a respondent's COP and 
CV is distortive for one aspect of our analysis, it is reasonable to 
make the same determination with respect to those other aspects of our 
margin calculations where we relied on the identical cost data. To do 
otherwise would not only produce distortive results but would be 
contrary to our mandate to administer the dumping laws as accurately as 
possible.
    NSK incorrectly asserts that section 773(f) of the Act specifically 
limits substitution of affiliated-party cost data to our analysis under 
sections 773(b) and 773(e). In fact, section 773(f) indicates that for 
purposes of subsections (b) and (e) we may substitute certain cost data 
but 773(f) does not prohibit this kind of substitution for other 
purposes. None of the sections of the statute (771(16), 772(d), and 
773(a)(6)), for which NSK argues that we may not substitute affiliated-
party costs, explicitly precludes the incorporation of corrected cost 
data. For example, the only guidance provided by section 771(16) of the 
Act is that the comparison merchandise be ``like'' the U.S. subject 
merchandise in terms of component material and uses and ``approximately 
equal in commercial value.'' Therefore, as Timken points out, section 
771(16) of the Act does not specify a particular methodology for 
determining appropriate matches. Rather, the statute implicitly 
delegates the selection of an appropriate methodology to the 
Department.
    Likewise, section 773(a)(6) of the Act grants us the same 
discretion to determine a suitable method to calculate a difmer 
adjustment and does not restrict our selection of an appropriate 
methodology to any particular approach. In addition, with respect to 
our recalculation of NSK's U.S. ICC, section 772(d) of the Act only 
specifies what adjustments are to be made to determine CEP and does not 
provide details regarding the precise

[[Page 2575]]

calculations for each particular adjustment.
    Accordingly, we have not altered our model-match, difmer, or 
calculation of NSK's ICC for these final results.

5. Miscellaneous Comments Related to Duty Absorption, Sample Sales, 
Level of Trade, and the Arm's-Length Test

    Comment 27: Timken contends that the Department's decision not to 
make an adjustment to CEP to account for indirect selling expenses and 
ICC incurred in Japan because expenses were not related specifically to 
commercial activity in the United States was incorrect. Timken argues 
that under pre-URAA law the Department deducted all selling expenses 
incurred in exporting to the United States and that the new law was not 
intended to change the Department's practice. Timken contends that the 
SAA clearly indicates that Congress did not intend to change the old 
law insofar as the Department's prior treatment of selling expenses was 
concerned. Further, Timken asserts that under the Department's new 
regulations (19 CFR 351.402(b), 62 FR at 27411), CEP should be adjusted 
if the expenses in question are related to the sale to the unaffiliated 
customer in the United States but not if they are only associated with 
the sale to the U.S. affiliate. Therefore, Timken argues that the 
Department should implement the SAA and the understanding Congress 
intended by deducting export selling expenses incurred in Japan from 
the calculation of CEP.
    NTN, NSK, Koyo, and Fuji assert that the SAA fully supports the 
Department's decision not to adjust CEP to account for indirect selling 
expenses and ICC incurred in Japan and cite to section 772(d) of the 
Act which states that ``constructed export price will be calculated by 
reducing the price of the first sale to an unaffiliated customer in the 
United States by the amount of the following expenses (and profit) 
associated with economic activities occurring in the United States.'' 
SAA at 823. Further, respondents argue that the Department has used the 
same methodology 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 Termination in 
Part, 62 FR 11825, 11834 (March 13, 1997) (94-95 TRB Final) and AFBs 
VII at 54043 and 54055, in which the Department concluded that export 
selling expenses are not specifically associated directly with 
commercial activity in the United States.
    Department's Position: As we stated in the 94-95 TRB Final at 
11825, 11834 and AFBs VI at 2124, we will deduct from CEP only those 
expenses associated with economic activities in the United States which 
occurred with respect to sales to the unaffiliated U.S. customer. We 
found no information on the record for this review period to indicate 
that the indirect selling expenses and ICC for the respondents that 
were incurred in their respective home markets were incurred on sales 
to the unaffiliated customer in the United States.
    In addition, 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. 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 VI at 2124). In 
this case respondent's reported selling expenses at issue were not 
associated with commercial activity in the United States. Rather, the 
expenses at issue were incurred prior to the commercial activity in the 
United States. Therefore, because the respondents' reported export 
selling expenses and ICC did not represent commercial activities 
performed in the United States, we did not deduct these expenses from 
CEP for these final results.

Duty Absorption

    As indicated in the introduction to this notice, section 751(a)(4) 
of the Act provides for the Department, if requested, to determine 
whether antidumping duties have been absorbed by a foreign producer or 
exporter subject to the order if the subject merchandise is sold in the 
United States through an importer who is affiliated with such foreign 
producer or exporter, and authorizes this type of investigation during 
an administrative review initiated two years or four years after 
publication of an order.
    For transition orders as defined in section 751(c)(6)(C) of the Act 
(i.e., orders in effect as of January 1, 1995), section 351.213(j)(2) 
of the Department's regulations provides that the Department will make 
a duty-absorption determination, if requested, for any administrative 
review initiated in 1996 or 1998. See 62 FR 27296, 27394 (May 19, 
1997). Although these antidumping regulations are not binding upon the 
Department for these TRB reviews, they do constitute a public statement 
of how the Department expects to proceed in construing section 
751(a)(4) of the Act. This approach ensures that interested parties 
will have the opportunity to request a duty-absorption determination 
prior to the time of the sunset review of the order under section 
751(c) of the Act on entries for which the second and fourth years 
following an order have already passed. Because this finding and order 
on TRBs have been in effect since 1976 and 1987, these are transition 
orders in accordance with section 751(c)(6)(C) of the Act; therefore, 
based on the policy stated above, the Department will consider a 
request for a duty-absorption determination during a review initiated 
in 1996 or 1998. On December 11, 1996, Timken requested that the 
Department determine, with respect to various respondents, whether 
antidumping duties had been absorbed during the POR. Since these 
reviews were initiated in 1996 and such a request was made, we have 
made a duty-absorption determination as part of these administrative 
reviews.
    In our preliminary results of review we calculated the percentage 
of sales by a U.S. affiliate with dumping margins for each exporter. We 
stated that, with respect to those companies (with affiliated 
importer(s)) that had dumping margins, we would rebuttably presume that 
the duties will be absorbed for those sales which were dumped. 
Subsequent to the preliminary results, we received comments regarding 
our duty-absorption determination but have

[[Page 2576]]

not changed our presumption for these final results.
    Comment 28: NSK, NTN, and Koyo claim that the Department has 
interpreted section 351.213(j) of its regulations incorrectly as 
providing for duty-absorption inquiries in the second and fourth years 
following a sunset review after which an order is continued and in 
periods such as the seventh and ninth reviews for transition orders. 
Citing the principle of statutory construction ``expressio unius est 
exclusio alterius,'' wherein there is an inference that all omissions 
should be understood as exclusions, respondents conclude that the lack 
of explicit Congressional approval for duty-absorption inquiries for 
the latter transition orders shows that Congress did not intend for 
duty-absorption inquiries to be initiated more than four years after 
publication of an antidumping order. Finally, respondents contend that 
the Department is incorrect in justifying the duty-absorption inquiry 
by considering the TRB order and finding as transitional in accordance 
with section 751(c)(6)(C) of the Act. According to respondents, section 
751(c)(6)(C) of the Act only applies to ``sunset'' reviews.
    Timken claims that not only does narrowing the applicability of the 
duty-absorption inquiries to only the second and fourth years of sunset 
reviews unduly limit the effectiveness of the statute, but there is no 
indication that sections 751(a)(4) or 751(c)(6)(D) of the Act intended 
such a narrow application. Timken's response to the legal principle of 
``all omissions should be understood as exclusions'' is that it has 
little force in the administrative setting because deference is granted 
to an agency's interpretation of a statute, unless Congress has 
directly spoken to the question at issue (citing Mobile Communications 
Corp. Of America v. F.C.C., 77 F.3d 1399, 1404-1045). Timken further 
argues that ``whether the specification of one matter means the 
exclusion of another is a matter of legislative intent for which one 
must look at the statute as a whole'' (citing Massachusetts Trustees of 
Eastern Gas & Fuel Associates v. United States, 312 F.2d 214, 220 (1st 
Cir. 1963) (citing authority), aff'd, 377 U.S. 235 (1964)).
    Department's Position: As for the time frame in which we are 
conducting these reviews, section 351.213(j)(1) of our regulations, in 
accordance with section 751(a)(4) of the Act, provides for the conduct, 
upon request, of duty-absorption inquiries in reviews initiated two and 
four years after the publication of an antidumping duty order (see 
e.g., AFBs VII at 54043 and 54044). The preamble to the proposed 
antidumping regulations explains that reviews initiated in 1996 will be 
considered initiated in the second year and reviews initiated in 1998 
will be considered initiated in the fourth year (see Final Rule at 
7317). Because the TRB order and finding have been in effect since 1987 
and 1976, respectively, these are transitional in accordance with 
section 751(c)(6)(C) of the Act (see e.g., AFBs VII at 54044 and 
54075). This being a review initiated in 1996 and a request having been 
made, we have made duty-absorption determinations as part of these 
administrative reviews.
    Comment 29: Respondents argue that measuring duty absorption based 
on information not known until the completion of an administrative 
review is unfair. More specifically, they claim that the nature of the 
review process prevents them from determining the U.S. price increase 
necessary to pass dumping duties on to customers because the ultimate 
liability is not determined until the end of a review. Respondents 
argue further that, other than dumping duties paid at the time of 
entry, they have no means of estimating the price increases necessary 
to pass dumping duties on to the customers.
    Finally, respondents argue that the Department cannot presume 
``rebuttably'' that duty absorption on sales to a U.S. affiliate exists 
if the record does not contain evidence of the U.S. purchaser's 
assumption of liability for ultimate assessment. Respondents claim that 
the Department's rebuttable presumption ignores commercial reality in 
that no U.S. buyer would agree to assume liability for an 
unascertainable amount of duties. Respondents claim that the Department 
has not provided any reason for adopting the presumption of duty 
absorption and that the presumption is not allowable by law.
    Timken agrees with the Department's approach in using the 
rebuttable presumption that the duties for sales that were dumped will 
be absorbed. Timken argues that the Department's examination of whether 
duty absorption occurred by reviewing data on the volume of dumped 
imports and dumping margins follows the guidelines of the SAA. Timken 
argues that the Department's decision was reasonable, given the lack of 
record evidence that the first unrelated customer will be responsible 
for paying the duty that is ultimately assessed, the consistency of the 
Department's dumping determinations, and the fact that the Department 
gives the respondents the opportunity to provide evidence that the 
unaffiliated purchasers will pay the assessed duty.
    Department's Position: We agree with Timken. An investigation as to 
whether there is duty absorption does not simply involve publishing the 
margin in the final results of review. As the Department noted in the 
preliminary results of these reviews, the determination that duty 
absorption exists is also based on the lack of any information on the 
record that the first unaffiliated customer will be responsible for 
paying the duty that is ultimately assessed. Absent such an irrevocable 
agreement between the affiliated U.S. importer(s) and the first 
unaffiliated customer, there is no basis for the Department to conclude 
that the duty attributable to the margin is not being absorbed (see, 
e.g., AFBs VII at 54043 and 54044).
    As was the case with the most recently completed review of AFBs, 
this is an instance where the existence of a margin raises an initial 
presumption that the respondent and its affiliated importer(s) are 
absorbing the duty. As such, the burden of producing evidence to the 
contrary shifts to the respondent (see Creswell Trading Co., Inc. v. 
United States, 15 F.3d 1054 (CAFC 1994)). Here, the respondents have 
failed to place evidence on the record, despite being given ample time 
to do so, in support of their position that they and their affiliated 
importer(s) are not absorbing the duties (see, e.g., AFBs VII at 54043 
and 54044).
    Comment 30: Koyo and NSK argue that, even if a duty-absorption 
inquiry is lawful, the Department's duty-absorption methodology fails 
to measure duty absorption on respondents' U.S. sales database as a 
whole. Respondents claim that by not considering sales made at non-
dumped prices the Department fails to get an accurate measure of 
whether duty absorption has occurred.
    Timken responds that taking into consideration negative margins in 
a duty-absorption inquiry may indirectly lead to increased levels of 
dumping. Timken asserts that while sales priced above ``dumping 
levels'' may in fact allow an importer to engage in duty absorption, 
this does not change the likelihood that dumping will increase upon 
revocation of an order.
    Department's Position: We disagree with respondents that we should 
aggregate negative and positive margins in our duty-absorption 
determination. The Department treats so-called ``negative'' margins as 
being equal to zero in calculating a weighted-average margin because 
otherwise exporters would be able to mask their dumped

[[Page 2577]]

sales with non-dumped sales (see Final Determination of Sales at Less 
Than Fair Value; Professional Electric Cutting Tools and Professional 
Electric Sanding/Grinding Tools from Japan, 58 FR 30149 (May 26, 
1993)). It would be inconsistent on one hand to calculate margins using 
only positive-margin sales, which is the Department's practice, and 
then argue, in effect, that there are no margins for duty-absorption 
purposes because a deduction from the total duties determined should be 
made for sales without margins (see AFB VII at 54043 and 54076, citing 
Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From the 
United Kingdom; Final Results of Antidumping Duty Administrative 
Review, 62 FR 18744, 18745 (April 17, 1997)). However, non-dumped sales 
affect the percentage of sales through affiliated importers which are 
dumped and therefore affect the results of the absorption inquiry.

Level of Trade (LOT)

    As set forth in section 773(a)(7) of the Act and in the SAA at 829-
831, to the extent practicable we have determined NV based on sales at 
the same LOT as the LOT of the EP and CEP sales. When we were unable to 
find comparison sales at the same LOT as the EP or CEP sales, we 
compared the U.S. sales to sales at a different LOT in the comparison 
market. We determined the LOT of EP sales on the basis of the starting 
prices of sales to the United States. We based the LOT of CEP sales on 
the price in the United States after making the CEP deductions under 
section 772(d) of the Act but before making the deductions under 
section 772(c) of the Act. Where home market prices served as the basis 
of NV, we determined the NV LOT based on starting prices in the NV 
market. Where NV was based on CV, we determined the NV LOT based on the 
LOT of the sales from which we derived SG&A and profit for CV. In order 
to determine the LOT of U.S. sales and comparison sales, we reviewed 
and compared distribution systems, including selling functions, classes 
of customer, and the extent and level of selling expenses for each 
claimed LOT. Customer categories such as distributor, original 
equipment manufacturer (OEM), or wholesaler are commonly used by 
respondents to describe LOTs but are insufficient to establish a LOT. 
Different LOTs necessarily involve differences in selling functions, 
but differences in selling functions, even substantial ones, are not 
alone sufficient to establish a difference in the LOTs. Different LOTs 
are characterized by purchasers at different stages in the chain of 
distribution and sellers performing qualitatively or quantitatively 
different functions in selling to them. See AFBs VI at 2105.
    As in the preliminary results, where we established that the 
comparison sales were made at a different LOT than the sales to the 
United States, we made a LOT adjustment if we were able to determine 
that the differences in LOTs affected price comparability. We 
determined the effect on price comparability by examining sales at 
different LOTs in the comparison market. Any price effect must be 
manifested in a pattern of consistent price differences between foreign 
market sales used for comparison and foreign market sales at the LOT of 
the export transaction. To quantify the price differences, we 
calculated the difference in the average of the net prices of the same 
models sold at different LOTs. We used the average difference in net 
prices to adjust NV when NV was based on a LOT different from that of 
the export sale. If there was a pattern of no price differences, the 
differences in LOTs did not have a price effect and, therefore, no 
adjustment was necessary.
    Section 773 of the Act provides for an adjustment to NV when NV is 
based on a LOT 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 LOTs between the CEP and NV affects the 
comparability of their prices (see, e.g., AFBs VII at 31566 and 31572). 
This latter situation can occur when there is no home market LOT 
equivalent to the U.S. LOT 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) of the Act 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 used to calculate CEP.
    The CEP offset is not automatically granted each time we use CEP 
(see, e.g., Notice of Final Determination of Sales at Less Than Fair 
Value; Certain Cut-to-Length Carbon Steel Plate from South Africa, 62 
FR 61731, 61732 (November 19, 1997)). The CEP offset is made only when 
the LOT of the home market sale is more advanced than the LOT of the 
CEP sale and there is not an appropriate basis for determining whether 
there is an effect on price comparability.
    We determined that for respondents Koyo and NSK there were two home 
market LOTs and one U.S. LOT (i.e., the CEP LOT). For Fuji we 
determined that one LOT existed in the home market and three distinct 
LOTs existed in the U.S. market (the CEP LOT and two EP LOTs). Because 
there was no home market LOT equivalent to any of the U.S. LOTs for 
Fuji, NSK, and Koyo, and because NV for these firms represented a price 
more remote from the factory than the CEP, for these firms we made a 
CEP offset adjustment to NV in our CEP comparisons (see Certain 
Internal-Combustion Industrial Fork Lift Trucks from Japan; Final 
Results of Antidumping Duty Administrative Reviews, 62 FR 5592, 5608 
(February 6, 1997)).
    We determined that for MC a single LOT existed in the third-country 
market and that a single EP LOT existed in the U.S. market. Based on 
our comparison of the U.S. EP LOT to the third-country LOT, we 
determined that the third-country LOT was the same as the EP LOT. As a 
result, we made no LOT adjustment.
    For NTN we found that there were three home market LOTs and two (EP 
and CEP) LOTs in the United States. Because there were no home market 
LOTs equivalent to NTN's CEP LOT, and because NV for NTN represented a 
price more remote from the factory than the CEP, we made a CEP offset 
adjustment to NV in our CEP comparisons. We also determined that NTN's 
EP LOT was equivalent to one of its LOTs in the home market. Because we 
determined that there was a pattern of consistent price differences, we 
made a LOT adjustment to NV for NTN in our EP comparisons where the 
U.S. EP sale matched to a home market sale at a different level of 
trade.
    Comment 31: Koyo, NTN, and NSK contend that the Department's 
practice with regard to LOTs effectively precludes a LOT adjustment to 
NV for CEP comparisons and is thus contrary to law and Congressional 
intent.
    NSK contends that there is no statutory requirement that a LOT 
adjustment be based on the full difference in prices between the home 
market comparison LOT and the HM LOT equivalent to the CEP LOT and 
suggests that a partial LOT adjustment is contemplated by the statute. 
NSK contends that the plain reading of the statute requires that the 
Department must adjust NV for CEP sales for the difference between 
price levels at the LOTs which do exist in the home market. Therefore, 
NSK argues the Department should at least make a partial LOT adjustment 
when comparing NSK's CEP sales to home market aftermarket (AM) sales 
which, it contends, are more advanced than HM OEM sales because prices 
are higher at

[[Page 2578]]

the HM AM LOT. Finally, NSK contends that the Department should grant 
NSK a partial LOT adjustment equal to the price difference between home 
market AM sales and OEM sales.
    Koyo asserts that it and other respondents have proposed to the 
Department alternative methods by which the Department could construct 
an appropriate home market LOT by deducting from NV those home market 
expenses that correspond to the expenses that are deducted from CEP, 
but that the Department has failed to provide a reasonable explanation 
for rejecting the proposals.
    NTN states that the Department should make a price-based LOT 
adjustment when the LOT of the CEP sale is different from the LOT of 
the comparison foreign like product, and that the LOT of the CEP sale 
should be based on the sale to the first unaffiliated U.S. customer 
prior to the deduction of expenses pursuant to section 772(d) of the 
Act. NTN asserts that such an approach is not only consistent with the 
Department's model-match methodology, but evidence on the record 
demonstrates that NTN's performance of different selling activities at 
each LOT affected price comparability. NTN argues that it is 
unreasonable for the Department to refuse to make a price-based 
adjustment when there are significant differences in prices between 
home market LOTs and U.S. sales are matched to home market sales at 
LOTs different than the U.S. sale.
    Timken contends that under section 773(a)(7)(A)(ii) of the Act, 
Congress intended for a LOT adjustment to be made only if it was 
``demonstrated to affect price comparability, based on a pattern of 
consistent price differences between sales at different LOT's in the 
country in which normal value is determined.'' Timken contends that the 
adjustment cannot be made unless a LOT equivalent to the U.S. LOT 
exists in the home market. Therefore, Timken claims, if the data 
available to the Department does not allow the demonstration required 
by section 773(a)(7)(A)(ii) of the Act, the statute does not permit a 
LOT adjustment and allows only a CEP offset.
    Further, Timken argues that NSK's assertion that the Department 
could have calculated a ``partial LOT adjustment'' for the difference 
between the CEP LOT and the home market AM LOT on the basis of a 
consistent pattern of price differences between the home market OEM and 
AM LOTs is unfounded. Timken contends that where there is no home 
market LOT comparable to the U.S. LOT, the statute does not authorize 
the use of price differences between different home market LOTs to 
substitute for calculated LOT adjustments. As a result, Timken 
concludes, the Department should reject NSK's claim for the same 
reasons it rejected the identical argument in AFBs VII at 54043 and 
54056-57.
    Department's Position: We disagree with respondents. Our 
methodology does not preclude LOT adjustments to NV for CEP sales. 
Rather, we do not make a LOT adjustment where the facts of the case do 
not support such an adjustment. Based upon our examination of the 
information on the record, for this review we found that no respondent 
had a home market LOT equivalent to its CEP LOT. As a result, because 
we lacked the information necessary to determine whether there is a 
pattern of consistent price differences between the relevant LOTs, we 
did not make a LOT adjustment for any of the respondents when we 
matched a CEP sale to a sale of the foreign like product at a different 
LOT. We disagree with NSK that we should make a ``partial LOT 
adjustment'' because there is no provision in the statute for making 
such a partial adjustment. We make a LOT adjustment when there is ``any 
difference between the export price or constructed export price and the 
[NV] that is shown to be wholly or partly due to a difference in LOT 
between the export price or constructed export price and the normal 
value.'' See section 773(a)(7)(A) of the Act. While NSK has interpreted 
the phrase ``wholly or partly'' to justify a partial LOT adjustment, we 
interpret this phrase to mean that we may make a LOT adjustment only if 
part of the differences in prices between LOTs is attributable to the 
difference in LOT. In other words, we need not demonstrate that no 
factor other than LOT influenced a pattern of price differences. Thus, 
we do not read into this language of the statute the authority to make 
a LOT adjustment between two home market LOTs where neither level is 
equivalent to the LOT of the U.S. sale.
    We also disagree with Koyo that we should adopt one of the proposed 
alternative methods by which we would ``construct'' home market LOTs. 
We base home market LOTs on a respondent's actual experience in selling 
in the home market. Therefore, because there is no statutory basis for 
us to ``construct'' levels in the home market or elsewhere, we have not 
used Koyo's claimed constructed NV LOT in order to calculate a LOT 
adjustment for Koyo's CEP sales (see AFBs VII at 54040, 54047).
    Furthermore, we disagree with NSK that its CEP sales should be 
matched to its home market OEM sales before they are matched to home 
market AM sales. Based upon our examination of the information on the 
record, we found that no home market LOT for NSK had more selling 
functions than another home market level. Rather, the home market LOTs 
each involved different degrees of various selling functions. We 
conclude that, for NSK and for respondents generally, while the 
reported home market LOTs are different from one another, no home 
market LOT is more advanced than any other based upon the evidence on 
the record. We also disagree with NSK's assertion that, because its OEM 
prices are generally lower than its AM prices, its OEM LOT is less 
advanced than the distributor/aftermarket LOT. We determine whether one 
LOT is more advanced than another on the basis of the selling functions 
performed by a respondent with respect to the two LOTs. NSK's home 
market OEM and AM sales are more advanced than the LOT of the CEP sales 
because comparatively fewer selling functions are associated with the 
CEP sales than are associated with sales to either of the other LOTs. 
Therefore, we have not altered our LOT methodology.
    Finally, we disagree with NTN. The definition of ``constructed 
export price'' contained at section 772(d) of the Act indicates clearly 
that we are to base CEP on the U.S. resale price, as adjusted for U.S. 
selling expenses and profit. As such, the CEP reflects a price 
exclusive of all selling expenses and profit associated with economic 
activities occurring in the United States. See SAA at 823. These 
adjustments are necessary in order to arrive at, as the term CEP makes 
clear, a ``constructed'' EP. The adjustments we make to the starting 
price, specifically those made pursuant to section 772(d) of the Act 
(``Additional Adjustments for Constructed Export Price''), normally 
change the LOT. Accordingly, we must determine the LOT of CEP sales 
exclusive of the expenses (and associated selling functions) that we 
deduct pursuant to this section (see, Certain Cold-Rolled Carbon Steel 
Flat Products from the Netherlands; Final Results of Antidumping 
Administrative Review, 62 FR 18475, 18480 (April 15, 1997)). As stated 
earlier, because none of NTN's home market LOTs were equivalent to the 
LOT of its CEP sales, we were unable to make a LOT adjustment for such 
sales.
    Comment 32: NTN contends that the Department should have relied on 
its U.S. and home market selling expenses,

[[Page 2579]]

which were based on LOT, as reported, instead of reallocating these 
selling expenses without regard to LOT. NTN argues that the Department 
incorrectly relied on the CIT's decision in The Timken Company v. 
United States, Slip Op. 96-86 (May 31, 1996)(Timken 1) as the basis for 
its reallocation because the standards set forth in the Timken 1 
decision are not only met by NTN's allocated expenses, but its original 
reporting methodology is less distortive than the Department's 
reallocation without regard to LOT. NTN further asserts that the 
Department's reliance on Timken 1 is misplaced due to the fact that the 
Department has previously indicated that NTN's reporting methodology is 
within the parameters of the Timken 1 determination. For example, NTN 
asserts, in 92/93 TRB Final at 57629 and 57636, the Department 
determined that NTN's LOT-based reporting was not acceptable based 
``solely on our discovery of a discrepancy in NTN's reported total U.S. 
sales value for scope merchandise during the POR.'' NTN maintains that 
it is clear from the language of the determination that the only reason 
the Department rejected NTN's reported expenses was an alleged 
discrepancy in reported numbers. NTN claims that not only is the 
reporting methodology in this review identical to that in the above-
cited final results, but the Department found no discrepancies in this 
methodology during its U.S. sales verification.
    In addition, NTN contends that the Department determined that 
different LOTs existed in the U.S. and Japanese markets for its sales 
(see TRB Prelim at 47458-9), and that the decision to allocate certain 
U.S. and home market expenses without regard to LOT voids the LOT 
determination made in the preliminary results, insofar as the effect of 
the different LOTs on price is lessened by this reallocation. 
Furthermore, NTN argues that the Department's mandate is to administer 
the antidumping laws as accurately as possible (see Bowe-Passat at 335 
and 340). Because the Department's reallocation of these expenses 
without regard to LOT eliminates the affect of LOT on price, NTN 
asserts, the Department's decision to reallocate these expenses is a 
direct violation of this mandate. Therefore, NTN concludes, the 
Department should rely on the LOT-specific expense allocation ratios 
and its LOT-specific expenses as originally reported in its 
questionnaire response.
    Timken contends that in Timken 1 the CIT stated that the issue 
raised by NTN's LOT-specific expense allocation methodology was 
``whether the reported expenses demonstrably vary according to levels 
of trade.'' Timken argues that while NTN asserts that its LOT-specific 
allocation methodology meets this standard, NTN provides no explanation 
on the record of how its methodology met this standard nor is there any 
other evidence on the record supporting NTN's methodology.
    Timken further argues that in Timken 1, after identifying the issue 
in question, the CIT remanded the case to the Department to determine 
whether NTN had demonstrated that its expenses varied according to LOT. 
However, Timken states, while the Department was working on its 
response to that remand, it issued its 1992-93 final results, the final 
results cited by NTN, in which it rejected NTN's allocation of U.S. 
expenses due to a discrepancy in sales value. Timken states that it was 
only after publication of the 1992-93 final results for NTN that the 
Department completed its remand results pursuant to Timken 1 and 
determined that the record lacked the evidence necessary to demonstrate 
that NTN's expenses varied by LOT. See The Department's Final Results 
of Redetermination Pursuant to Court Remand (December 17, 1996), at 9. 
Timken contends that, given that these remand results have been 
affirmed by the CIT (see Timken v. United States, Slip Op. 97-87 (July 
3, 1997), and that the Department has requested a remand in the 
litigation arising from the 1992-93 final results to consider this 
issue in light of its remand redetermination pursuant to Timken 1 and 
the CIT's affirmation thereof, the Department correctly rejected NTN's 
LOT-specific expense allocations in this instant review.
    Department's Position: We agree with Timken in part. We have 
determined that, for a majority of the expenses in question, NTN's LOT-
specific selling expense allocation methodology bears no relationship 
to the manner in which NTN actually incurred these selling expenses. In 
Timken 1 the CIT ordered the Department to accept NTN's LOT-specific 
allocations and per-unit LOT expense adjustment amounts only if NTN's 
expenses demonstrably varied according to LOT. By ordering us to 
ascertain whether these expenses actually varied according to LOT, the 
CIT, in essence, indicated that NTN's use of its calculation of LOT-
specific per-unit expense adjustments did not necessarily mean that NTN 
incurred the expenses differently due to differences in LOTs. Rather, 
additional evidence must also exist which demonstrates that NTN 
actually sold differently to each LOT by performing different 
activities/functions or by performing the same activities/functions to 
a different degree when selling to each LOT. In accordance with this 
order, in our remand results pursuant to Timken 1 we did not allow 
NTN's allocation of its expenses by LOT due to the lack of quantitative 
and narrative evidence on the record demonstrating that the expenses in 
question demonstrably varied according to LOT. In the instant review, 
we applied the same standards articulated by the CIT in Timken 1. In 
other words, we have examined the record to determine if evidence 
exists demonstrating that those home market and U.S. expenses NTN 
allocated by LOT did demonstrably vary according to LOT.
    For this review NTN provided two exhibits which outlined its 
derivation of LOT-specific per-unit expense adjustments for certain of 
its U.S. and home market expenses. Exhibit C-7 detailed NTN's 
calculations of LOT-specific per-unit expense adjustment ratios for its 
U.S. inland freight (warehouse to customer) expenses, other U.S. 
transportation expenses, U.S. Customs duty, U.S. packing material, 
overhead, and labor expenses, U.S. advertising expenses, U.S. inventory 
carrying costs, and other U.S. indirect selling expenses. Exhibit B-4 
detailed NTN's LOT-specific per-unit adjustment ratios for its home 
market pre-sale and post-sale freight expenses, home market advertising 
expenses, home market packing labor and material expenses, home market 
technical service expenses, and other home market indirect selling 
expenses. Both exhibits indicate that, except for certain U.S. and home 
market packing material and packing labor expenses, none of the 
expenses were unique to a single LOT in that NTN incurred each of the 
above expenses when selling to each LOT. However, rather than calculate 
a single allocation ratio to be applied to all sales, NTN instead 
allocated a portion of each total expense amount to each LOT such that 
it was able to derive LOT-specific allocation ratios. When applied to 
the reported unit prices, NTN's LOT-specific allocation ratios resulted 
in the calculation of significantly different per-unit expense 
adjustment amounts such that NTN actually reported an expense 
adjustment amount for a TRB sale to one LOT which was significantly 
different than the amount of the same expense it reported for a sale of 
the identical TRB to another LOT.
    NTN determined the portion of each of the above expenses (except 
for certain U.S. and home market packing material and labor expenses) 
to be allocated to

[[Page 2580]]

each LOT by means of allocation methodologies which were based on (1) 
the differences in total sales value for each LOT, (2) the differences 
in the total number of invoices generated for each LOT, (3) the 
differences in the total number of employees involved in sales at each 
LOT, or (4) a combination of the above. As a result, these differences 
caused the differences in the expense amounts NTN reported for each LOT 
and in its LOT-specific ratios.
    While the record for these reviews contains detailed worksheets 
demonstrating NTN's allocation methodologies, it does not contain any 
narrative or quantitative evidence demonstrating why or to what degree 
a TRB sale to one LOT would generate a greater or lesser amount of the 
above expenses than a sale of the same TRB to another LOT. Rather, 
NTN's sole support for its allocations are the allocations themselves. 
While we recognize that total sales values, the total number of 
invoices, and even the total number of employees may vary according to 
LOT, these aggregate differences do not demonstrate whether NTN sold 
differently to its LOTs and fail to indicate what activities or 
functions NTN may have performed differently when selling to each LOT 
such that it actually incurred per-unit expense amounts differently due 
to differences in LOTs. The record, therefore, lacks the evidence 
necessary to demonstrate that all of NTN's expenses varied according to 
LOT. Therefore, for these final results, we have not accepted NTN's 
LOT-specific allocations and its use of LOT-specific adjustment ratios 
for its U.S. inland freight (warehouse to customer) expenses, other 
U.S. transportation expenses, U.S. Customs duty, U.S. advertising 
expenses, U.S. inventory carrying costs, and other U.S. indirect 
selling expenses, or for its home market pre-sale and post-sale freight 
expenses, home market advertising expenses, home market technical 
service expenses, and other home market indirect selling expenses. 
Rather, we have recalculated NTN's allocation ratios such that we 
derived a single ratio applicable to all sales regardless of LOT. We 
then applied these recalculated allocation ratios to NTN's reported 
U.S. and home market unit prices to calculate per-unit expense 
adjustment amounts which did not vary by the LOT to which the U.S. or 
home market sale was made.
    We disagree with Timken that all of NTN's U.S. and home market 
expenses should be recalculated without regard to LOT. In our 
preliminary analysis memorandum (see Preliminary Analysis Memorandum 
for NTN, September 2, 1997, attachments I and II), we did, in fact, 
recalculate NTN's U.S. selling expenses without regard to LOT. However, 
in contrast to the above, for certain of NTN's U.S. packing material 
and packing labor expenses, exhibit C-7 of NTN's response indicated 
that NTN incurred these expenses only when selling to one specific U.S. 
LOT. In addition, NTN's narrative explanation clearly indicated that 
certain of NTN's packing expenses individually differed by LOT. Because 
these expenses were unique to a single LOT, NTN (1) allocated each 
total expense amount solely to this LOT, (2) calculated a single 
allocation ratio for this LOT, and (3) applied this ratio only to those 
U.S. sales at this LOT. NTN's response clearly indicates that these 
expenses demonstrably varied according to LOT (see NTN questionnaire 
response, January 27, 1997, at exhibit C-7) (NTN Response). 
Furthermore, in the instant review, we verified these expenses in 
detail and concluded that NTN's allocation methodology regarding U.S. 
packing material and U.S. packing labor was accurate (see NTN U.S. 
Report, at 13). Therefore, for our preliminary results we applied our 
recalculated ratios for certain of NTN's U.S. packing and U.S. labor 
expenses only for sales to the one LOT for which these expenses were 
incurred.
    In addition, after further review of the record, we have also 
determined that NTN's home market packing labor and packing material 
expenses demonstrably varied according to LOT. Section A and exhibit B-
4 of NTN's response clearly demonstrate that different methods of 
packing are required depending upon LOT. As indicated above, NTN has 
allocated all of its home market expenses by LOT, but has not provided 
record evidence (except for home market packing) demonstrating that 
they were incurred differently by LOT. Therefore, for these final 
results we have only accepted NTN's allocation for home market packing 
expenses according to LOT.
    Therefore, with the exception of NTN's home market and U.S. packing 
expenses, due to the lack of quantitative and narrative evidence on the 
record demonstrating that certain of NTN's expenses demonstrably varied 
according to LOT, for these final results we have reallocated these 
expenses without regard to LOT.

Arm's Length Test

    Comment 33: NTN asserts that the Department's 99.5 percent arm's-
length test is not a reasonable basis for determining whether 
affiliated-party sales were at prices comparable to those to 
unaffiliated parties. NTN argues that in applying the arm's-length test 
the Department only considers the average percentage difference in 
pricing between affiliated and unaffiliated-party sales and ignores 
other factors which greatly influence price such as the terms and 
quantities of each affiliated-party sale. NTN further contends that the 
Department's 99.5 percent threshold is not really a ``test'', since it 
fails to provide an objective standard to determine whether affiliated 
sales are at arm's-length. Instead, NTN claims, the test weighs sales 
against an average which does not reflect the full range of prices paid 
in the transactions examined. Therefore, NTN asserts, the use of the 
99.5 percent figure as a baseline to decide if sales are at arm's 
length does not address the fact that some arm's-length sales fall 
outside this narrow range. As a result, NTN claims, the percentage used 
would better reflect the range of arm's-length prices if it were 
lowered to a 95 percent threshold.
    Timken claims that in accordance with section 773(a)(1)(B) of the 
Act, the Department properly excluded those home market sales to 
affiliated parties which were not at arm's length. Timken argues that 
not only is it wholly within the Department's discretion to derive a 
methodology to determine whether home market sales to affiliates are at 
arm's length, but NTN has provided no evidence supporting its claim 
that the Department's 99.5 test was contrary to law.
    In addition, Timken points out, the record indicates that one of 
the factors suggested by NTN for inclusion in the 99.5 percent test, 
terms of sale, was reported the same for all of NTN's home market 
sales. Thus, Timken concludes, even if the Department agreed with NTN, 
the adoption of NTN's suggestion would have no effect.
    Department's Position: We disagree with NTN. Our 99.5 percent 
arm's-length test is a reasonable method for establishing a fair basis 
of comparison between affiliated and unaffiliated-party sales. NTN 
asserts that additional factors, such as quantity and payment terms, 
should be taken into consideration when comparing affiliated and 
unaffiliated-party sales, but fails to establish that the Department 
must abandon its existing test. NTN also argues that our use of the 
99.5 percent threshold is distortive but provides no quantitative 
evidence demonstrating that a lowering of the threshold would yield 
more accurate results. Furthermore, the CIT has upheld the validity of 
our arm's-length test on numerous occasions. For example, in Usinor 
Sacilor v. United States, 872 F.

[[Page 2581]]

Supp 1000 (1994), the CIT clearly stated that ``[g]iven the lack of 
evidence showing any distortion of price comparability, the court finds 
application of Commerce's arm's-length test reasonable.'' Likewise, in 
Micron Technology, Inc. v. United States, 893 F. Supp 21, 38 (CIT 
1995), because the CIT found that the plaintiff/respondent failed to 
``demonstrate that Commerce's customer-based arm's-length 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 a lack of evidence showing a distortion of 
price comparability. Further, in NTN Bearing Corp. of America, American 
NTN Bearing Manufacturing Corp., and NTN Corp. v. United States, 905 F. 
Supp. 1083 (CIT 1995), NTN argued, as here, that there were numerous 
factors influencing the price of a related-party transaction and the 
Department cannot make a meaningful price comparison without examining 
them. The CIT disagreed with NTN and stated that, in accordance with 
section 19 CFR 353.45(a) of our regulations, the Department has broad 
discretion in devising an appropriate methodology to determine whether 
particular related-party prices are, in fact, comparable to unrelated-
party prices.
    Therefore, because NTN has failed to demonstrate that the 99.5 
percent threshold produces distortive results and that the Department's 
methodology is unreasonable, in accordance with the CIT decisions cited 
above, we have not altered our 99.5 percent arm's-length test for these 
final results.

Sample Sales

    On June 10, 1997, the CAFC held that the term ``sold'' requires 
both a transfer of ownership to an unrelated party and consideration. 
NSK Ltd. v. United States, 115 F.3d 965, 975 (Fed. Cir. 1997) (NSK). 
The CAFC determined that samples which NSK had given to potential 
customers at no charge and with no other obligation lacked 
consideration. Moreover, the CAFC found that, since free samples did 
not constitute ``sales,'' they should not have been included in 
calculating U.S. price.
    In light of the CAFC's opinion, we have revised our policy with 
respect to samples. The Department will now exclude from its dumping 
calculations sample transactions for which a respondent has established 
that there is either no transfer of ownership or no consideration.
    This new policy does not mean that the Department automatically 
will exclude from analysis any transaction to which a respondent 
applies the label ``sample.'' In fact, for these reviews we determined 
that there were instances where it is appropriate not to exclude such 
alleged samples from our dumping analysis. It is well-established that 
the burden of proof rests with the party making a claim and in 
possession of the needed information (see, e.g., NTN Bearing 
Corporation of America v. United States, 997 F.2d 1453, 1458-59 (CAFC 
1993), (citing Zenith Elecs. Corp. v. United States, 988 F.2d 1573, 
1583 (CAFC 1993), and Tianjin Mach. Import & Export Corp. v. United 
States, 806 F. Supp. 1008, 1015 (CIT 1992)). As discussed below, one 
respondent failed to demonstrate that its claimed sample sales lacked 
consideration. When respondents failed to support their sample claim, 
we did not exclude the alleged samples from our margin analysis.
    With respect to HM sales, in addition to excluding sample 
transactions which do not meet the definition of ``sales,'' we may 
exclude sales designated as samples from our analysis, pursuant to 
section 773(a)(1) of the Act, when a respondent has provided evidence 
demonstrating that the sales were not made in the ordinary course of 
trade, as defined in section 771(15) of the Act.
    With regard to assessment rates, in order to ensure that we collect 
duties only on sales of subject merchandise, we included the entered 
values and quantities of the sample transactions in our calculation of 
the assessment rates and set the dumping duties due for such 
transactions to zero. We have done this because U.S. Customs will 
collect the ad valorem (or per-unit, where applicable) duties on all 
entries of subject merchandise whether or not the merchandise was a 
sample transaction. However, to ensure that sample transactions do not 
dilute the cash deposit rates, we excluded both the calculated U.S. 
prices and quantities for sample transactions from our calculation of 
the cash deposit rates.
    Comment 34: Timken argues that for these final results the 
Department should include in NSK's U.S. database its zero-priced sample 
sales. Timken contends that although the CAFC's decision in NSK held 
that zero-priced sample sales which lacked consideration did not 
constitute ``sales'' for purposes of the antidumping law, the decision 
did not establish a per se exclusion for all zero-priced sample sales. 
Timken argues that such sales do not qualify for automatic exclusion 
from the U.S. database because the burden is on the respondent to 
demonstrate that sample sales did not involve the transfer of ownership 
or that they lacked consideration. Timken maintains that NSK did not 
provide information for the record affirmatively demonstrating that its 
U.S. sample sales were transferred without consideration or ownership. 
Timken further argues that the CIT in J.C. Hallman Mfg. Co. v. United 
States, 13 CIT 1073, 1076, 728 F. Supp. 751, 753 (1989) (J.C. Hallman) 
stated that samples must be reported under a ``temporary importation 
bond.'' Timken asserts that the CIT in that case also held that in the 
absence of such a bond, the Department has no way of knowing that the 
merchandise is not imported for sale. Timken contends that because NSK 
has provided no information demonstrating whether its zero-priced 
sample sales were imported under a temporary importation bond, the 
Department should reverse its preliminary determination and include 
NSK's zero-priced sample sales in its margin calculations for these 
final results.
    NSK responds that the Department correctly excluded zero-priced 
U.S. sample sales from its analysis. NSK contends that Timken's 
reliance on J.C. Hallman is misplaced because this case predated the 
court's NSK decision and because the CIT, in its omission of any 
reference to J.C. Hallman in its decision, effectively determined that 
the case was irrelevant for its decision. Furthermore, NSK argues, the 
only standard set forth by the CAFC in NSK is whether a sale occurred 
(i.e., involved consideration). NSK contends that as long as sample 
sales lacked consideration, then all other issues, such as whether the 
recipient took title to the merchandise, are irrelevant. NSK further 
argues that it reported its free samples as outside the ordinary course 
of trade and indicated that zero-priced samples were not sales because 
they lacked consideration. Because the Department did not ask any 
questions regarding the company's sample sales in its supplemental 
questionnaire, NSK argues, the Department concluded that it had all 
necessary information to determine whether or not zero-priced sample 
sales should be considered ``sales'' for purposes of its analysis.
    Department's Position: We disagree with petitioner. The record 
indicates that NSK's reported sample transactions did not involve 
consideration (see, e.g., NSK Section C Questionnaire Response, January 
27, 1997, at 4). Accordingly, pursuant to the CAFC's decision in NSK, 
we have excluded NSK's reported U.S. sample sales from the U.S. sales 
database.
    Comment 35: NTN argues that the Department should exclude from its 
margin calculations those sample sales

[[Page 2582]]

it made in both the U.S. and home markets. With respect to its home 
market database, NTN asserts that its home market sample sales which it 
claims are outside the ordinary course of trade should be excluded from 
margin calculations in accordance with section 773(b) of the Act and in 
accordance with the CIT's decision in NSK v. United States, Slip Op. 
97-74 (June 17, 1997), in which the CIT held that the Department 
improperly included NTN's sample sales.
    NTN also asserts that its U.S. sample sales should be excluded from 
the Department's analysis in accordance with the CAFC's ruling in NSK, 
in which the CAFC ordered that zero-priced sample sales be excluded for 
purposes of calculating margins.
    Timken responds that the CAFC in NSK did not establish a per se 
exclusion for so-called sample sales. Rather, Timken claims, the CAFC 
held that sales which lacked consideration did not constitute sales for 
purposes of the antidumping law. Timken notes that the Department's 
preliminary margin program at lines 92 and 704 already excludes zero-
priced sales, and claims that the NSK decision does not support the 
exclusion of sales NTN alleges are samples. Finally, Timken argues that 
NTN has not adequately demonstrated that its home market sample sales 
are outside the ordinary course of trade, and that such sales therefore 
do not warrant exclusion from the home market database.
    Department's Position: We disagree with NTN. We examined the record 
to determine whether NTN's U.S. sample sales lacked consideration, and 
were unable to find any information whatsoever in either NTN's 
narrative or sales database regarding sample transactions. As noted 
above, the party in possession of the information has the burden of 
producing that information, particularly when seeking a favorable 
adjustment or exclusion. Because NTN did not provide any information in 
its response or elsewhere that would have aided us in determining 
whether NTN received a bargained-for exchange from its U.S. customers, 
we cannot conclude that NTN received no consideration for these alleged 
samples. While NTN's database does include sales which are zero-priced, 
we are unable to determine from the record if these transactions 
represent those sales which NTN apparently argues should be excluded 
from the U.S. database in accordance with NSK. Furthermore, the mere 
fact that a sale has a reported unit price of zero does not indicate 
that a transaction lacked exchange of consideration. Our preliminary 
margin program incorporated language to exclude all zero-priced sales 
in the home and U.S. markets. However, for the reasons stated above, we 
have altered our treatment of NTN's zero-priced U.S. sales and have 
included them in NTN's U.S. database for these final results.
    NTN also argues that we should exclude its alleged home market 
sample sales from its home market sales database. As noted previously, 
one of the circumstances under which we may exclude sample sales from 
the home market database is when a respondent has demonstrated that 
such sales were made outside the ordinary course of trade. Accordingly, 
we have examined the record with respect to NTN's alleged home market 
sample sales to determine if these sales qualify for such an exclusion. 
In its original questionnaire response NTN only states that ``samples 
are provided to customers for the purpose of allowing the customer to 
determine whether a particular product is suited to the customer's 
needs'' and that ``the purpose * * * would not be the same as those 
purchased in the normal course of trade'' (see, NTN Response at B-15). 
NTN has provided no other information demonstrating that its alleged 
home market sample sales were outside the ordinary course of trade. The 
fact that a respondent identified sales as samples does not necessarily 
render such sales outside the ordinary course of trade (see AFBs VI at 
2124). For these reasons, we disagree with NTN that its home market 
``sample'' sales should be excluded from our margin calculations.
    We have also evaluated whether NTN's alleged home market sample 
sales qualify for exclusion from the home market database in light of 
the NSK decision. As noted above, we exclude sample transactions from 
the dumping calculation only if a respondent has demonstrated that 
there is either no transfer of ownership or no consideration. Evidence 
on the record clearly indicates that NTN received consideration for all 
home market sales it claims are samples. As such, none of its home 
market sample sales meet the criterion for exclusion established by 
NSK.
    Therefore, because NTN's alleged U.S. and home market sample sales 
do not qualify for exclusion under NSK, and because NTN has failed to 
demonstrate that its home market sample sales are outside the ordinary 
course of trade, we have included these sales in our U.S. and home 
market databases for these final results.
    Comment 36: NSK argues that Timken's general issues should be 
stricken from the record because the petitioner failed to include these 
arguments in the case briefs it served to respondents. NSK contends 
that because the general issues section is free of proprietary 
material, it should have been served with the proprietary portion of 
Timken's brief rather than one day later. NSK claims that the 
Department should not allow Timken to abuse the ``one-day lag'', for 
the purpose of the rule is to permit counsel the opportunity to review 
proprietary portions of submissions and to confirm that (a) all 
proprietary information has been properly bracketed, and (b) that the 
public version correctly removes, ranges or indexes the proprietary 
information. 19 CFR 353.32(a)(2). Therefore, NSK asserts, because 
neither of these purposes is served by Timken's decision to withhold an 
entire portion of its case brief, the Department should reject the 
general issues portion of Timken's case brief.
    Department's Position: During our October 30, 1997 TRB hearing NSK 
raised these concerns. After adjourning to review the details of 
Timken's brief and the issues raised by NSK, we determined that Timken 
improperly served the general issues portion of its case brief to the 
other parties to this proceeding but nevertheless properly filed its 
brief with the Department. After further discussion with the parties in 
attendance we found that NSK, NTN, and Fuji all responded to Timken's 
general comments section in their rebuttal briefs, but that Koyo had 
not. Therefore, with the agreement of the parties in attendance, 
because Koyo did not have the opportunity to rebut this section of 
Timken's brief due to the service of the brief, we granted Koyo an 
additional week to respond to the general issues section of Timken's 
case brief and allowed Timken's general comments to remain part of the 
administrative record.

Clerical Errors

    Comment 37: NSK argues that, when calculating home market net 
prices, rather than deducting NSK's reported REBATE1H, the Department 
incorrectly added these rebates to home market gross unit price. Timken 
states that, to the extent that the Department intended to deduct NSK's 
rebates when calculating NV, it agrees that the rebates were improperly 
added to gross price.
    Department's Position: We agree with NSK and have amended our 
computer program for these final results such that NSK's reported home 
market rebates are subtracted from, rather than added to, home market 
gross unit prices.
    Comment 38: NSK and Koyo assert that, when calculating CEP profit, 
the

[[Page 2583]]

Department incorrectly based its derivation of total home market 
revenue on gross home market prices rather than on home market prices 
net of discounts and rebates. Timken agrees that the calculation of 
home market revenues should be based on net price.
    Department's Position: We agree. The Department's September 4, 1997 
policy bulletin regarding the calculation of CEP profit clearly 
indicates that total home market sales revenue should be calculated net 
of home market discounts and rebates. Therefore, for these final 
results we have adjusted our calculation of NSK's and Koyo's home 
market revenue such that our computer programs calculate home market 
revenues net of rebates and discounts. In addition, while NTN did not 
comment on this issue, we note that we made the identical error in our 
preliminary results computer program for NTN. Therefore, to ensure the 
calculation of the most accurate final results margin for NTN, we have 
corrected this error in our computer program for NTN as well.
    We also note that, while reviewing our preliminary results 
calculation of CEP profit for each of the respondents, we discovered 
that we inadvertently made an additional error. After calculating total 
actual profit and deriving a profit ratio, we multiply this ratio by 
the respondent's total U.S. selling expenses. Our September 4, 1997 
policy bulletin clearly states that ``when allocating a portion of the 
actual profit to each U.S. CEP sale, we will include imputed (U.S.) 
credit and inventory carrying costs as part of the total U.S. expenses 
allocation.'' However, in our preliminary results computer programs we 
inadvertently excluded U.S. credit and inventory carrying costs from 
our calculation of the U.S. selling expenses upon which profit was 
allocated. Therefore, although no party to this proceeding commented on 
this issue, to ensure the calculation of accurate margins we have 
nevertheless corrected this error, where appropriate, for these final 
results.
    Comment 39: NSK argues that, although it is the Department's long-
standing policy when calculating CV to deduct credit from CV as a home 
market circumstance-of-sale (COS) adjustment and to deduct ICC as part 
of the CEP offset, the Department's preliminary results computer 
program for NSK did not make these adjustments. NSK contends that not 
only should the Department make these adjustments for these final 
results, but when deriving the expense ratios for credit and ICC, the 
Department should ensure that these ratios are calculated on the same 
basis as the value to which the ratios are applied.
    Timken asserts that these imputed credit and inventory expenses are 
already included in the Department's calculation of CV as part of SG&A 
and that to add them again would result in double counting.
    Department's Position: We agree with NSK. When calculating CV in 
our preliminary results computer program for NSK we inadvertently 
failed to make a COS adjustment to CV for NSK's reported home market 
credit expenses and failed to deduct ICC from CV as part of the CEP 
offset. Therefore, for these final results we have modified certain 
language within our computer program to ensure that these deductions 
are made when we calculated NV using CV. In addition, in order to 
derive the actual credit and ICC amounts used in our CV calculation, we 
calculated our home market credit and ICC ratios on the same basis as 
the value to which we applied these ratios. Furthermore, while only NSK 
commented on this issue, we have determined that we made the identical 
error in our preliminary results computer programs for NTN and Koyo. 
Therefore, to ensure the calculation of accurate final results margins 
for these two respondents, we have corrected this error in our computer 
programs for NTN and Koyo as well.
    Comment 40: NSK contends that the Department improperly downloaded 
NSK's U.S. computer data by failing to define the Y2FACTU variable as 
having two decimal places. As a result, NSK asserts, the U.S. Y2 
factors used by the Department in its preliminary results model-match 
for NSK erroneously relies on a U.S. Y2 factor which is overstated by 
100. Timken agrees that NSK's U.S. Y2 factor variable appears to lack 
decimal places.
    Department's Position: We agree with NSK. However, rather than re-
downloading NSK's U.S. data to correct this error, for these final 
results we have corrected this error by dividing all of NSK's U.S. Y2 
factors within our database by 100 prior to conducting our model 
matches.
    Comment 41: Timken and NSK assert that an error exists in the 
Department's preliminary results computer programs which causes certain 
U.S. sales to be matched with the second or third most similar foreign 
like product in those instances where the identical or most similar 
foreign like product was determined to be below COP. Timken and NSK 
argue that, because it is the Department's long-standing practice to 
base its calculation of NV on CV whenever the identical or most similar 
foreign like product is below cost, for the final results the 
Department should correct this error such that whenever contemporaneous 
sales of an identical or most similar foreign like product is 
determined to be below COP, the computer program calculates NV on the 
basis of CV rather than continuing the search for a contemporaneous 
match of the next most similar foreign like product.
    Department's Position: We agree with Timken and NSK. Therefore, for 
these final results we have modified our multi-level array model-match 
computer programming language to correct this error and to ensure that 
all sales of a U.S. model for which the identical or most similar 
foreign like product is below COP are compared to CV.
    Comment 42: NTN argues that the Department's preliminary results 
computer program contains two errors which should be corrected for the 
final results. First, NTN claims, when creating the data sets NEGDATA1, 
HMREL, and HMUNREL from the data set HMOVER, the Department's computer 
program for NTN drops several observations which should have not been 
excluded from the margin calculations. Likewise, NTN argues, when the 
Department created the data sets HMSETS, HMCUPS, and HMCONES from the 
data set HMMM, the computer program again dropped several observations 
which should not have been excluded from the margin calculations.
    While Timken does not specifically agree or disagree with NTN's 
clerical error allegations, with respect to NTN's first alleged error 
it notes that the Department's computer programming language causes 
sales observations with a customer relationship code other than 1 or 2 
to be excluded from the Department's calculations. Similarly, Timken 
notes that, with respect to NTN's second alleged error, the 
Department's computer programming language results in observations for 
which the home market part type was reported as other than 1, 2, or 3 
also to be excluded from the margin calculations.
    Department's Position: With respect to NTN's first alleged error, 
we agree. In preparation for our arm's-length test we divided NTN's 
home market sales (data set HMOVER) into two groups on the basis of 
whether the sale was made to an affiliated or unaffiliated customer 
(data sets HMREL and HMUNREL). In our questionnaire we asked 
respondents to identify for each home market sale whether it was to an 
affiliated or unaffiliated customer, using a code of ``1'' for 
unaffiliated customers and a code of ``2'' for affiliated customers.

[[Page 2584]]

While our questionnaire does not instruct respondents to use any 
additional codes, NTN nevertheless separately identified its sales to 
home market affiliated customers which were consumed rather than resold 
using a code of ``3.'' In our preliminary results computer program we 
inadvertently excluded the code of ``3'' from the programming language 
we used to separate home market sales into the affiliated and 
unaffiliated sales groups. Therefore, for these final results we have 
corrected this error by identifying all home market sales to affiliated 
customers by means of both codes ``2'' and ``3.''
    With respect to NTN's second alleged error, we disagree that the 
discrepancy NTN notes is an error. In our TRB questionnaire we ask 
respondents to identify TRB sets, cups, cones, and parts using 
numerical codes (``1'' for sets, ``2'' for cups'', ``3'' for cones, and 
``4'' for parts), and we used these numerical codes when we created the 
data sets HMSETS, HMCUPS, and HMCONES in our computer program. The 
sales NTN identifies as being incorrectly excluded from the margin 
calculations were sales of home market parts (code ``4''). We did not 
create a separate HMPARTS data set and did not retain these sales in 
our margin calculation because we had already determined that NTN did 
not make any sales of TRB parts in the United States. Because our TRB 
model-match methodology does not permit the comparison of U.S. TRB 
sets, cups and cones to home market parts (we only match U.S. TRB sets 
to home market sets, U.S. cups to home market cups, U.S. cones to home 
market cones, and U.S. parts to home market parts), and because there 
were no U.S. sales of TRB parts, it was unnecessary for us to retain 
NTN's reported sales of home market TRB parts (code ``4'') in our data 
base. Therefore, because NTN's sales of home market TRB parts were not 
needed for comparison purposes, our exclusion of these sales from the 
margin calculations was appropriate and does not constitute an error as 
NTN alleges.
    Comment 43: Timken argues that, while the Department's computer 
program for Koyo properly sets the inside diameter (ID) for home market 
TRB cups and the outside diameter (OD) for home market TRB cones to 
zero, the program fails to do the same for Koyo's reported U.S. sales 
of TRB cups and cones. Timken asserts that, because the inside and 
outside diameters are two of the five physical criteria relied upon in 
the Department's model-match methodology, this error will cause 
distortions when the Department matches U.S. sales to sales of the 
foreign like product.
    Koyo contends that it is unnecessary for the Department to 
purposely set the ID for its reported U.S. TRB cups and the OD for its 
reported U.S. TRB cones to zero. Koyo argues that, regardless of 
whether there is an erroneous ID or OD reported for a U.S. TRB cup or 
cone, the Department's computer program nevertheless ranks the home 
market foreign like products for each U.S. model accurately.
    Department's Position: We disagree with Timken that distortions 
will result because the computer program does not set the OD for U.S. 
cones and the ID for U.S. cups to zero. Two of the physical criteria 
for TRB sets are the ID and OD. The ID reflects the measure of the TRB 
cone while the OD reflects the measure of the TRB cup. While a TRB set, 
which contains both a cup and cone, has both an ID and OD measurement, 
individually sold TRB cups do not have an ID and individually sold TRB 
cones do not have an OD. As a result of our home market set-splitting 
methodology, in which we derive separate cup and cones sales from the 
respondents' reported home market TRB set sales, it is necessary for us 
to purposely set the ID for split cups to zero and the OD for split 
cones to zero. In the past, we have found it unnecessary to include 
similar programming language with respect to a respondent's U.S. sales 
because we do not split U.S. sets into individual cup and cone sales. 
Timken's comments reflect its concern that, if a respondent incorrectly 
reports an ID value greater than zero for any U.S. cups and an OD value 
greater than zero for any U.S. cones, the Department's programming 
language would result in inaccurate model matching. Therefore, for 
these final results we have examined whether Koyo reported any ID 
values for its U.S. cups or OD values for its U.S. cones which were 
greater than zero. We found that Koyo had indeed reported values 
greater than zero for both the OD of its U.S. cones and the IDs of its 
U.S. cups. As a result, we have set the value of any positive inside 
cup diameters or positive outside cone diameters to zero in Koyo's U.S. 
summary sales databases.

Final Results of Reviews

    Based on our review of the arguments presented above, for these 
final results we have made changes in our preliminary margin 
calculation programs. We determine that the following percentage 
weighted-average margins exist for the period October 1, 1995 through 
September 30, 1996:

------------------------------------------------------------------------
                                                                Margin  
               Manufacturer/exporter/reseller                  (percent)
------------------------------------------------------------------------
For the A-588-054 Case:.....................................            
  Koyo Seiko................................................        9.60
  Fuji......................................................         .34
  NSK.......................................................        1.45
  MC International..........................................        1.92
For the A-588-604 Case:.....................................            
  Fuji......................................................       (\1\)
  MC International..........................................       (\1\)
  Koyo Seiko................................................       29.02
  NTN.......................................................       27.80
  NSK.......................................................       9.60 
------------------------------------------------------------------------
\1\ No shipments or sales subject to this review. These firms have no   
  rate from any prior segment of this proceeding.                       

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. We will 
calculate importer-specific ad valorem duty assessment rates for the 
merchandise based on the ratio of the total amount of antidumping 
duties calculated for the examined sales made during the POR to the 
total customs value of the sales used to calculate those duties. This 
rate will be assessed uniformly on all entries that a particular 
importer made during the POR. (This is equivalent to dividing the total 
amount of antidumping duties, which are calculated by taking the 
difference between NV and U.S. price, by the total U.S. price of the 
sales compared and adjusting the result by the average difference 
between U.S. price and customs value for all merchandise examined 
during the POR.) While the Department is aware that the entered value 
of sales during the POR is not necessarily equal to the entered value 
of entries during the POR, use of entered value of sales as a basis of 
the assessment rate permits the Department to collect a reasonable 
approximation of antidumping duties which would have been determined if 
the Department had reviewed those sales of merchandise during the POR. 
The Department will issue appropriate appraisement instructions 
directly to the Customs Service.
    Furthermore, the following deposit requirements will be effective 
after the publication date of these final results for all shipments of 
TRBs from Japan entered, or withdrawn from warehouse, for consumption 
on or after the publication date of the final results of these 
administrative reviews, as provided by section 751(a)(1) of the Act:
    (1) The cash deposit rates for the reviewed companies will be those 
rates established in the final results of these reviews;
    (2) For previously reviewed or investigated companies not listed 
above, the cash deposit rate will continue to be

[[Page 2585]]

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 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; and
    (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 case will be 18.07 percent, and 36.52 
percent for the A-588-604 case (see Preliminary Results of Antidumping 
Duty Administrative Reviews; Tapered Roller Bearings, Finished and 
Unfinished, and Parts Thereof, from Japan and Tapered Roller Bearings, 
Four Inches or less in Outside Diameter, and Components Thereof, From 
Japan, 58 FR 51061 (September 30, 1993)).
    The cash deposit rate has been determined on the basis of the 
selling price to the first unaffiliated U.S. customer. For appraisement 
purposes, where information is available, the Department will use the 
entered value of the merchandise to determine the assessment rate.
    This notice serves as a final reminder to importers of their 
responsibility 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. These administrative reviews and this notice are in accordance 
with section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 
353.22.
    This notice also serves as a reminder to parties subject to 
administrative protective orders (APO) of their responsibility 
concerning the return or destruction of proprietary information 
disclosed under APO in accordance with 19 CFR 353.34(d) or conversion 
to judicial protective order is hereby requested. Failure to comply 
with the regulations and terms of an APO is a violation which is 
subject to sanction.
    These administrative reviews and this notice are in accordance with 
section 751 (a)(1) of the Act (19 U.S.C. 1675(a)(1) and 19 CFR 353.22.

    Dated: January 7, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-944 Filed 1-14-98; 8:45 am]
BILLING CODE 3510-DS-P