[Federal Register Volume 63, Number 80 (Monday, April 27, 1998)]
[Notices]
[Pages 20585-20612]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-10570]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
International Trade Administration
[A-588-604; A-588-054]
Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or
Less in Outside Diameter, and Components Thereof, From Japan; Final
Results of Antidumping Duty Administrative Reviews and Termination in
Part
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty administrative
reviews and termination in part.
-----------------------------------------------------------------------
SUMMARY: On May 20, 1996, the Department of Commerce (the Department)
published the preliminary results of its 1992-93 and 1993-94
administrative reviews of the antidumping duty order on tapered roller
bearings (TRBs) and parts thereof, finished and unfinished, from Japan
(A-588-604), and of the finding on TRBs, four inches or less in outside
diameter, and components thereof, from Japan (A-588-054). The review of
the A-588-054 finding covers four manufacturers/exporters and ten
resellers/exporters of the subject merchandise to the United States
during the period October 1, 1993, through September 30, 1994, and one
manufacturer/exporter for the period October 1, 1992, through September
30, 1993. The review of the A-588-604 order covers five manufacturers/
exporters, ten resellers/exporters, and seventeen firms identified by
the petitioner in this case as forging producers, and the period
October 1, 1993, through September 30, 1994. The A-588-604 review also
covers one manufacturer/exporter for the period October 1, 1992,
through September 30, 1993.
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 the preliminary
results of review.
EFFECTIVE DATE: April 27, 1998.
FOR FURTHER INFORMATION CONTACT: Robert James at (202) 482-5222 or John
Kugelman at (202) 482-0649, Antidumping and Countervailing Duty
Enforcement Group III, Office 8, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW, Washington, D.C. 20230.
APPLICABLE STATUTE AND REGULATIONS: Unless otherwise indicated, all
citations to the statute and to the Department's regulations are in
reference to the provisions as they existed on December 31, 1994.
SUPPLEMENTARY INFORMATION:
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
[[Page 20586]]
on TRBs from Japan (52 FR 37352). On October 7, 1994 (59 FR 51166), the
Department published the notice of ``Opportunity to Request an
Administrative Review'' for the 1993-94 reviews of both TRBs cases. The
petitioner, the Timken Co. (Timken), and two respondents requested
administrative reviews. We initiated the A-588-054 and A-588-604
administrative reviews for the period October 1993 through September
1994 on November 14, 1994 (59 FR 56459). On May 20, 1996, we published
in the Federal Register the preliminary results of the 1993-94
administrative reviews of the antidumping duty order and finding on
TRBs from Japan (see Tapered Roller Bearings and Parts Thereof,
Finished and Unfinished, from Japan, and Tapered Roller Bearings, Four
Inches or Less in Outside Diameter, and Components Thereof, from Japan;
Preliminary Results of Antidumping Duty Administrative Reviews and
Termination in Part, 61 FR 25200 (Prelim Results).
The Prelim Results also included the preliminary results for the
1992-93 administrative reviews of both TRBs cases for Koyo Seiko
Company, Ltd. (Koyo). While we initiated the 1992-93 reviews of both
TRBs cases on November 17, 1993 (58 FR 60600) and published our final
results of administrative reviews for the 1992-93 period in the Federal
Register on November 7, 1996, we did not include Koyo in these 1992-93
reviews (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; Final
Results of Antidumping Duty Administrative Reviews and Revocation in
Part of an Antidumping Finding, 61 FR 57629 (TRBs 92-93)). Rather, as
explained in our Prelim Results, we determined that, because we had yet
to make our final scope determination concerning Koyo's rough forgings,
rather than delay our 1992-93 results of review for all other reviewed
firms, we would conduct Koyo's 1992-93 reviews after making our final
scope determination. On February 2, 1995, we published in the Federal
Register our final scope determination in which we found Koyo's rough
forgings to be within the scope of the A-588-604 TRBs order (60 FR
6519). We provided Koyo additional time to submit sales and cost
information concerning its rough forgings for both the 1992-93 and
1993-94 administrative reviews and determined that, due to the timing
of our receipt of this information and the timing of our 1993-94
administrative review analysis, it would be appropriate to conduct the
1992-93 and 1993-94 reviews for Koyo concurrently (see Prelim Results
at 25200). As a result, both Koyo's 1992-93 and 1993-94 final results
are included in this instant notice.
On August 21, 1996, we held a hearing which covered the 1993-94
reviews of both the A-588-054 and A-588-604 TRBs cases and the 1992-93
reviews of Koyo in both the TRBs cases. In addition, the Department re-
opened the administrative record of these proceedings on March 16, 1998
to afford Kawasaki an additional opportunity to submit a complete
response to the Department's antidumping questionnaire. On March 23,
1998, Kawasaki declined to do so.
The Department has now completed these reviews in accordance with
section 751 of the Tariff Act of 1930, as amended (the Tariff Act).
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 Bearing Corporation, Ltd. (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. In addition, in accordance with
our February 2, 1995, final scope determination concerning Koyo's rough
forgings, Koyo's rough forgings are also included within the scope of
the A-588-604 order.
The HTS numbers listed above for both the A-588-054 finding and the
A-588-604 order are provided for convenience and Customs purposes. The
written description remains dispositive.
The period for each 1993-94 review is October 1, 1993, through
September 30, 1994. These reviews cover TRBs sales by five TRBs
manufacturers/exporters (Koyo, NSK Ltd. (NSK), NTN, Nachi-Fujikoshi
Corporation (Nachi), and Maekawa Bearing Mfg. Co., Ltd. (Maekawa)), and
ten resellers/exporters (Honda Motor Company (Honda), Fuji Heavy
Industries, Ltd. (Fuji), Kawasaki Heavy Industries, Ltd. (Kawasaki),
Yamaha Motor Co., Ltd. (Yamaha), Sumitomo Corporation (Sumitomo),
Itochu Co., Ltd. (Itochu), Suzuki Motor Co., Ltd. (Suzuki), Nigata
Converter Co., Ltd. (Nigata), Toyosha Co., Ltd. (Toyosha), and MC
International (MC Int'l)). These reviews also cover U.S. sales/
importations of forgings by Koyo, NTN, and seventeen firms identified
by the petitioner as Japanese forging producers (Daido Steel Co., Ltd.
(Daido Steel), Asakawa Screw Co., Ltd. (Asakawa), Fuse Rashi Co., Ltd.
(Fuse), Hamanaka Nut Mfg. Co., Ltd. (Hamanaka), Ichiyanagi Tekko
(Ichiyanagi), Isshi Nut Industries (Isshi Nut), Kawada Tekko, Kinki
Maruseo Nut Kogyo Kumiai (Kinki), Kitazawa Valve Co., Ltd. (Kitz
Corp.), Nittetsu Bolten (Nittstsu), Shiga Bolt, Shinko Bolt, Sugiura
Seisakusho (Sugiura), Sumikin Seiatsu (Sumikin), Toyo Valve Co. (Toyo
Valve), Unytite Fastener Mfg. Co., Ltd. (Unytite Kogyo), and Showa
Seiko Co., Ltd. (Showa)).
As explained in the Prelim Results, we have terminated the 1993-94
reviews of the A-588-604 case for Fuse, Hamanaka, Kinki, Kitz Corp.,
Shiga Bolt, Shinko Bolt, Sugiura, Toyo Valve, Nittetsu, Sumikin, and
Unytite Kogyo (see Prelim Results at 25202). As also explained in the
Prelim Results, we used for Nachi, Kawasaki, Daido Steel, Kawanda
Tekko, Asakawa, Ichiyanagi, and Isshi Nut a first-tier non-cooperative
total best information available (BIA) rate of 40.37 percent in the A-
588-604 case. In addition, we used a first-tier total BIA rate of 47.63
percent for Kawasaki and Nachi in the A-588-054 case (see Prelim
Results at 25201).
Because Fuji and MC Int'l did not make any shipments of subject
merchandise during the POR in the A-588-604 case and because Showa did
not make any shipments of subject merchandise during the POR in the A-
588-604 case, as explained in our Prelim Results, we have not assigned
a rate to Fuji and MC Int'l in the A-588-604 nor to Showa in the A-588-
604 case (see Prelim Results at 25202).
Because we determined in the Prelim Results that Itochu and
Sumitomo have no influence over the sale prices and quantities of those
shipments of TRBs they made to the United States, we have determined
that the supplier's rates, and not unique Sumitomo and Itochu rates,
[[Page 20587]]
should be applied for cash deposit and appraisement purposes (see
Prelim Results at 25202).
Finally, we have terminated the 1993-94 A-588-054 review for Honda
since we recently revoked Honda from the A-588-054 finding in our 1992-
93 final results (see TRBs 92-93 at 57650).
The period for the 1992-93 reviews is October 1, 1992, through
September 30, 1993. The 1992-93 reviews of both the A-588-054 and A-
588-604 cases included in this notice cover TRBs sales by Koyo.
Analysis of Comments Received
We received case briefs from Timken, Koyo, NTN, NSK, Fuji, and
Kawasaki. We received rebuttal briefs from Timken, Koyo, NTN, and NSK.
In addition, at the request of the presiding official at the hearing,
we received additional comments from NTN on August 28, 1996, and
additional comments from Timken on September 9, 1996, regarding the
issue of new information in NTN's rebuttal brief. These comments, and
those contained in all of the case and rebuttal briefs, are addressed
below in the following order:
1. Miscellaneous Comments Concerning Model Match, Set-Splitting,
Level of Trade, Sales Not in the Ordinary Course of Trade, Arm's
Length Test, Annual Averaging, and Assessment
2. Adjustments to United States Price (USP)
3. Discounts, Rebates, and Post-Sale Price Adjustments (PSPAs)
4. Cost of Production (COP) and Constructed Value (CV)
5. Clerical and Computer Programming Errors
1. Miscellaneous Comments
Comment 1: NTN argues that the Department incorrectly split home
market TRB sets which are ``unsplittable.'' NTN claims that, because
certain of its TRB models contain cups and cones which are never sold
individually in any market, it is illogical to split such models into
individual cup and cone sales. Furthermore, NTN states that because the
rationale behind the Department's set-splitting methodology is to find
merchandise ``such or similar'' to individual cups and cones sold in
the United States, the Department may only split TRB sets sold in the
home market which contain cups and cones identical or similar to those
cups and cones sold individually in the United States. NTN argues that,
because cups and cones contained in its ``unsplittable'' sets are never
sold individually, they do not represent merchandise which is
potentially similar to individually sold cups and cones. Therefore, NTN
asserts, the Department creates, by splitting such sets, a pool of home
market cups and cones which cannot be fairly considered as candidates
for matching to cups and cones sold separately in the United States.
Timken argues that, in accordance with section 771(16) of the
Tariff Act, the Department's model-match methodology reasonably
assesses objective physical criteria and the variable costs of
production when identifying that home market merchandise which is such
or similar to merchandise sold in the United States. Timken asserts
that if the cup or cone split from an ``unsplittable'' set is
physically identical, or most physically similar, to a cup or cone
individually sold in the United States, there is no statutory basis for
the Department to reject such a comparison. Timken further states that
NTN's argument, which basically asserts that a cup or cone sold within
a set can never be found to be such or similar to a cup or cone that is
sold separately, calls for an additional matching factor which is
unwarranted by the statute. Finally, Timken argues that if the
Department were not to split NTN's claimed ``unsplittable'' sets, the
pool of home market such or similar merchandise would be narrowed and
the Department's ability to match U.S. and home market merchandise
would be curtailed.
Department's Position: We agree with Timken. Section 771(16) of the
Tariff Act does not require that such or similar merchandise be sold in
the same manner as merchandise under review. TRB components that are
sold solely within sets do not lose their status as merchandise such or
similar to individually-sold TRB components simply by virtue of the
fact that they are sold as components of sets instead of as individual
cups and cones. The fact that a home market cup or cone was never sold
individually in any market does not preclude the possibility that that
cup or cone may be the most physically similar merchandise to cups and
cones NTN sold separately in the United States. Because they may be the
most similar products, it is appropriate to include this merchandise in
the pool of home market sales and, if such cups and cones are
determined to be the most similar merchandise to products sold in the
United States, it is appropriate to use them in our dumping
comparisons, as we have done in past reviews of NTN and as has been
approved by the Court of International Trade (CIT) (see, e.g., NTN
Bearing Corp. v. United States, 747 F. Supp. 726, 741 (CIT 1990), NTN
Bearing Corp. v. United States, 924 F.Supp. 200, 206 (CIT 1996) TRBs
1992-93 at 58631, and Final Results of Antidumping Duty Administrative
Reviews; Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, From Japan and Tapered Roller Bearings, Four Inches or Less
in Outside Diameter, and Components Thereof, From Japan, 58 FR 64720
(December 9, 1992) (TRBs 1990-92)).
Comment 2: NTN contends that the Department improperly determined
its reported home market sample and small-quantity sales to be in the
ordinary course of trade and included such sales in its margin
calculations. NTN argues that its home market sample sales cannot be
considered as in the ordinary course of trade because they are items
which enable a customer to make a buying decision, and maintains that
its reported home market small-quantity sales cannot be considered
ordinary, given the extremely small quantities involved. Citing to past
TRBs reviews in which the Department excluded these sample and small-
quantity sales from its margin calculations for NTN, NTN asserts that,
in view of the Department's past exclusion of such sales as outside the
ordinary course of trade, the Department should do so in these final
results as well in accordance with Shikoku Chemicals Corp v. United
States, 795 F. Supp. 417 (CIT 1992) (``At some point Commerce must be
bound by its prior actions so that parties have a chance to purge
themselves of antidumping liabilities'') and in accordance with the
Supreme Court's observation that ``long-continued methodologies
naturally serve to provide the basis from which subjects of agency
investigation adjust their behavior'' (Id. at 12, n.8. (quoting United
States v. Midwest Oil Co., 236 U.S. 459 (1915)).
Timken argues that, while the Department did grant NTN's claim in
some past proceedings, it has denied the claim in the most recent TRBs
reviews and in several of the reviews of the antidumping duty order on
antifriction bearings (AFBs) from Japan. In addition, Timken points out
that two of the TRBs determinations NTN relies on have been remanded by
the CIT, and in both cases the Department reversed its position and
included NTN's sample and small-quantity sales within its margin
calculations (the Department's Final Remand Results Pursuant to The
Timken Company v. United States, Court No. 92-03-0061, transmitted to
the CIT on December 13, 1994, and the Department's Final Remand Results
Pursuant to The Timken Company v. United States, Court No. 92-03-00162,
transmitted to the CIT on December 16, 1994). Given these changes,
Timken contends, it is clear that the
[[Page 20588]]
Department's preliminary determination to include these sales in its
margin calculations is in accordance with established precedent.
Further, Timken argues that it has been the Department's long-
standing policy to require a respondent to provide sufficient evidence
to support any claim for the exclusion of sales as not in the ordinary
course of trade. Therefore, Timken contends, because NTN failed to
demonstrate that its alleged small-quantity and sample sales were
outside the ordinary course of trade, the Department reasonably
determined that NTN failed to meet the burden of demonstrating that the
sales in question were outside the ordinary course of trade.
Department's Position: We agree with Timken. Section 773(a)(1)(A)
of the Tariff Act states that the Department is required to compare the
price of the merchandise imported into the United States to the price
of the merchandise sold or offered for sale ``in the principal markets
of the country from which exported in the usual commercial quantities
and in the ordinary course of trade for home market comparison.'' As
defined in section 771(15) of the Tariff Act, ordinary course of trade
means the ``conditions and practices which, for a reasonable time prior
to exportation of the merchandise which is the subject of an
investigation, have been normal in the trade under consideration with
respect to merchandise of the same class or kind.''
Generally, when determining whether home market sales are within
the ordinary course of trade, the Department applies the standards set
forth in Murata Mfg. Co., Ltd. v. United States, 820 F. Supp. 603, 606
(CIT 1993) (Murata), Nachi-Fujikoshi Corp. v. United States, 798 F.
Supp. 716, 718-719 (CIT 1992) (Nachi), and Mantex, Inc., et. al., v.
United States, 841 F. Supp. 1290, 1305-1309 (CIT 1993) (Mantex). In
Murata the CIT quoted with approval the Department's statement in
Certain Welded Steel Standard Pipes and Tubes from India; Final Results
of Antidumping Duty Administrative Reviews, 56 FR 64753 (1991), that
the Department, in determining whether home market sales are in the
ordinary course of trade, does not rely on one factor considered in
isolation, but rather considers all circumstances of the sales in
question. In addition, the CIT noted that in other cases the Department
determined that sales were outside the ordinary course of trade based
not only on the presence of small quantities or high prices, but also
because the Department found other factors that supported the outside-
the-ordinary-course-of-trade categorization (see Murata at 9). In Nachi
the CIT held that the Department must make determinations regarding
sample sales by examining the relevant facts of each individual case
and that the burden of proof to demonstrate that such sales are outside
the ordinary course of trade lies with the respondent (see Nachi at
718). In Mantex the CIT restated its previous opinion in Nachi (see
Mantex at 1306).
In its response NTN described its sample sales as sales of items to
a customer which are used by the customer to determine whether or not
to buy the product. NTN explained that, through statements and other
representations the customer makes, NTN determines the ``sample''
nature of the sale and codes the sale accordingly. Concerning its
small-quantity sales reported as not in the ordinary course of trade,
NTN explained that for each transaction where the total quantity was
three units or less, and the total number of transactions during the
POR was seven or less, NTN searched back to fiscal year 1990 and, if
certain conditions were met, it considered the sale as outside the
ordinary course of trade. The only other information on the record
regarding these sales are NTN's computer data files in which it
reported such sales separately from the rest of its home market data
base.
In accordance with Murata, we attempted to examine all factors
surrounding NTN's reported sample and small-quantity sales to determine
if they were outside the ordinary course of trade. However, NTN
provided us with little information other than a general description of
these sales upon which to base such a determination. The administrative
record contains no other narrative explanation, supporting
documentation, or other evidence to demonstrate why these sales are not
representative of NTN's normal practices in selling TRBs in Japan, or
otherwise demonstrates the ``aberrational'' nature of these sales. For
example, we have no evidence supporting the notion that NTN's sample
sales were sold only for the purpose of allowing the customer to make a
decision to buy. Likewise, we have no evidence supporting NTN's
categorization of its ``small-quantity'' sales as abnormal, other than
the fact that they were small-quantity sales. In accordance with Nachi,
the burden of proving that its sales are outside the ordinary course of
trade lies clearly with the respondent, and in this instance NTN has
failed to meet that burden.
Furthermore, this is not the first review or the first case in
which we have rejected NTN's categorization of certain of its sales as
not in the ordinary course of trade. In our last three TRBs reviews we
clearly explained that we applied the Murata and Nachi standards to our
determination of whether such sales were indeed outside the ordinary
course of trade (see TRBs 92-93 at 57639 and TRBs 90-92 at 64732). In
those reviews we determined that NTN did not supply sufficient evidence
to allow us to determine that these sales were outside the ordinary
course of trade. As a result, NTN has had clear notice prior to these
current reviews that its response failed to demonstrate the ``not-in-
the-ordinary-course-of-trade'' status of its sample and small-quantity
sales. However, NTN took no steps to improve its response regarding
this issue, but rather provided only the same general information with
little other explanation.
Therefore, for the reasons stated above, and in accordance with our
established practice, we have not changed our treatment of NTN's sample
and small-quantity home market sales for these final results. Rather,
we have again determined these sales to be within the ordinary course
of trade and we have included them in our margin calculations.
Comment 3: NSK argues that the Department must apply the ordinary
meaning of ``sale'' to the antidumping law (which involves not only the
transfer of ownership, but the payment, or promise, of consideration),
and should exclude from its analysis those free samples NSK reported as
given away to its customers in the United States. NSK claims that it
has provided evidence demonstrating that this free U.S. merchandise
constitutes promotional samples, and contends that, by including this
promotional merchandise in its analysis, the Department fails to
recognize the normal business practice of giving away free samples and
calculates distortive margins. Finally, NSK argues that, in accordance
with the Torrington Company v. United States, 926 F. Supp. 1151 (CIT
1996), for the purpose of calculating antidumping duties, the
Department reviews sales, not entries. Therefore, NSK concludes, there
is no basis for including this merchandise in the Department's margin
calculations.
Timken argues that not only does the statute require the Department
to calculate a value for each U.S. entry of subject merchandise, but,
if the Department accepts NSK's arguments, it would allow NSK to evade
the law by providing zero-priced merchandise as gifts while raising its
prices on other subject merchandise identified as sales.
[[Page 20589]]
Department's Position: 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.'' 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)). When respondents fail to support their sample
claim, we did not exclude the alleged samples from our margin analysis.
In light of the policy above, we have determined that the record
indicates that NSK's reported sample transactions did not involve
consideration. 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.
In addition, 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 NSK's assessment rate and set the dumping duties
due for such transactions to zero. We have done this because U.S.
Customs will collect the ad valorem 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 4: NTN claims that the Department's sum-of-the-deviations
model-match methodology inconsistently treats the Y2 factor variable.
Specifically, NTN questions why the Department sets the variable
``Y2H'' equal to ``Y2DEV'' when the Department sets the deviation for
the outside diameter (OD) variable equal to zero.
Timken argues that the Department's sum-of-the-deviations model-
match methodology properly reflects the reality of bearing
characteristics. For example, Timken states, because thrust TRBs have a
zero Y2 factor, when comparing thrust to non-thrust TRBs, the
Department correctly set the Y2 factor deviation equal to the non-zero
Y2 factor value because the difference between a zero and non-zero
value will always be the non-zero value. Timken further asserts that,
because the Department only compares TRB cups to cups and TRB cones to
cones, if the inside diameter (ID) or OD for the U.S. TRB is zero, the
value for the ID or OD for the home market TRB being compared will
automatically be zero. Therefore, Timken concludes, if the ID or OD for
the U.S. TRB is zero, and the ID or OD for the home market TRB is also
zero, the ID or OD deviation between the U.S. and home market cups or
cones compared will automatically be zero.
Department's Position: We agree with Timken. In order to determine
the home market merchandise most similar to U.S. merchandise, we apply
our sum-of-the-deviations model-match methodology using five physical
criteria of TRBs: ID, OD, width, load rating, and the Y2 factor.
Because each of these criteria are quantitatively measured, we compare
the value for each criterion for the U.S. model to that for the home
market merchandise and calculate the difference. Once we determine the
deviation for each criterion, we derive the overall sum of the
deviations for all five criteria and use this value to rank the most
similar home market merchandise.
When we first developed this methodology we realized that, in
certain instances, the ID, OD, or Y2 factor of a TRB would be equal to
zero. For example, TRB cups do not have an ID, TRB cones do not have an
OD, and thrust TRBs may not have a Y2 factor. Because we only compare
U.S. cups to home market cups and U.S. cones to home market cones, the
ID for each U.S. and home market cup compared would be equal to zero
and the OD for each U.S. and home market cone compared would be equal
to zero. As a result, the ID deviation for cup comparisons would
automatically equal zero and the OD deviation for cone comparisons
would automatically equal zero. In order to account for this in our
sum-of-the-deviations model-match methodology, if the ID or OD of the
U.S. TRB is equal to zero, we automatically set the ID or OD deviation
equal to zero.
In contrast to the above, we do not compare U.S. thrust TRBs to
only home market thrust TRBs (see TRBs 92-93 at 57631 and TRBs 90-92 at
64721). Therefore, if the Y2 factor for the U.S. model is equal to
zero, the Y2 factor for the comparison home market model will not
automatically be equal to zero. Because we calculate the deviation
between U.S. and home market criteria as the absolute value of one
minus the home market TRBs criterion value divided by the value of the
U.S. TRBs criterion, if the U.S. Y2 factor value is equal to zero, we
would, in effect, be dividing by zero in our computer program.
Therefore, to ensure the proper calculation of the Y2 factor deviation
when the U.S. model's Y2 factor is equal to zero, we automatically set
the Y2 deviation equal to the home market TRBs value.
Comment 5: Both Fuji and Kawasaki argue that, because merchandise
which meets the criteria for the application of the ``Roller Chain''
principle is outside the scope of the Japanese TRBs order and finding,
the Department should adopt an assessment strategy which would ensure
that antidumping duties are not assessed on this ``Roller Chain''
merchandise.
Fuji proposes that one method would be for the Department to assess
duties on an entry-by-entry basis. Fuji claims that not only would this
ensure proper assessment of Fuji's entries, but it would be
administratively easy for the Department to do given the fact that Fuji
has provided the Department with its entry numbers. Alternatively, Fuji
suggests that, because all of those TRBs which qualify for exclusion
under the ``Roller Chain'' principle were imported by a single related
importer, Subaru-Isuzu Automotive, Inc. (SIA), the Department should
assess duties on an importer-specific basis and apply zero duties to
all SIA imports. Fuji adds that if the Department selects this option
it should also adjust the cash deposit rate it calculates for Fuji to
take into account the ``Roller Chain'' merchandise by including the
value of the ``Roller Chain'' merchandise in the cash deposit rate
calculation denominator. Finally, Fuji proposes that, if the Department
rejects these first two proposals, the Department should, at a minimum,
adjust both the cash deposit and assessment rates it calculates for
Fuji by including the value of the TRBs meeting the ``Roller Chain''
criteria in the
[[Page 20590]]
denominators used when calculating these rates.
Kawasaki contends that not only is there sufficient evidence on the
record to demonstrate that all A-588-054 TRBs imported by Kawasaki
Motors Manufacturing Corporation (KMM) meet the ``Roller Chain''
principle, but there is also sufficient evidence allowing the
Department to identify the total value of KMM's A-588-054 TRB imports.
Thus, Kawasaki asserts, the Department has the information necessary to
calculate an A-588-054 assessment rate for Kawasaki which would
effectively exclude KMM's entries of TRBs from antidumping duty
assessment.
With regard to Fuji, Timken argues that if the Department decides
to apply a single assessment rate to all of Fuji's imports, and
recalculates Fuji's assessment rate to take into account Fuji's
``Roller Chain'' merchandise, the Department should first be certain
that liquidation was suspended and antidumping duty deposits were paid
on Fuji's ``Roller Chain'' merchandise. If Fuji's ``Roller Chain''
entries were suspended, Timken argues, the Department should not use
the assessment rate Fuji proposed in its comments. Rather, Timken
asserts, because duties are assessed on entered value, the Department
should calculate Fuji's assessment rate by including in the calculation
denominator the sum of the entered values of both Fuji's non-``Roller
Chain'' and ``Roller Chain'' merchandise.
In response to Fuji's contention that the Department should apply
to Fuji cash deposit and assessment rates which are identical, Timken
argues that, while the statutory scheme requires estimates of
antidumping duties to be as accurate as possible, it is not necessary
that cash deposit rates be absolutely accurate (Badger-Powhatan, a
Division of Figgie International, Inc. v. United States, 633 F. Supp.
1364, appeal dismissed, 808 F.2d 823 (Fed. Cir. 1986)). Timken
therefore urges the Department to apply to all of Fuji's entries a cash
deposit rate equal to the final margin rate the Department calculates
for Fuji's non-``Roller Chain'' merchandise.
With regard to Kawasaki, Timken contends that the Department cannot
make a determination that any of Kawasaki's entries were subject to the
``Roller Chain'' principle not only because the record lacks the
information necessary for the Department to do so, but also because
Kawasaki was an uncooperative respondent to which the Department
applied a first-tier total BIA rate in both the A-588-054 and A-588-604
reviews. Timken contends that the Department applied total adverse BIA
to Kawasaki because it submitted only partial information in response
to the Department's questionnaire, which was insufficient for the
Department to conduct its analysis. Timken claims that, the Department
cannot accept partial data because to do so would place control of the
review in the hands of Kawasaki by permitting Kawasaki to selectively
provide information. Timken argues that this reasoning was upheld in
Persico Pizzamiglio, S.A. v. United States, 18 CIT 299, Slip. Op. 94-61
(April 14, 1994) (Persico), in which the CIT explained that the
acceptance of partial submissions will only encourage respondents to
selectively disclose only that information which would serve to
decrease a dumping margin based on BIA. Therefore, Timken states, the
Department should assess Kawasaki's entries of A-588-054 TRBs at a rate
equivalent to the total adverse BIA rate it assigns to Kawasaki in
these final results and not make any adjustments to this rate to
effectively exclude KMM's entries of TRBs.
Department's Position: We agree with the petitioner and in part
with the respondents. It is important to first clarify that merchandise
which meets the criteria of the ``Roller Chain'' principle is not out-
of-scope merchandise. Our determination in an administrative review
that the ``Roller Chain'' principle is applicable to certain
merchandise is not equivalent to a determination that the merchandise
is non-scope merchandise. To the contrary, in these TRBs reviews, that
merchandise which we have deemed to be ``Roller Chain'' merchandise
clearly falls within the scope of the A-588-054 finding and the A-588-
604 order, as described earlier in this notice. Based on section
772(e)(3) of the Tariff Act and the applicable legislative history, we
have developed a practice whereby we do not calculate and do not assess
antidumping duties on subject merchandise which is imported by a
related party and which is further processed where the subject
merchandise comprises less than one percent of the value of the
finished product sold to the first unrelated customer in the United
States (see, e.g., Roller Chain Other Than Bicycle From Japan, 48 FR
51804 (November 14, 1983), and TRBs 92-93 at 57548)). The statute
provides for the assessment of antidumping duties only to the extent of
the dumping that occurs. If there can be no determination of any
dumping margin where the imported merchandise is an insignificant part
of the product sold, then there is no dumping to offset and antidumping
duties are not appropriate. Therefore, we do not consider ``Roller
Chain'' merchandise as non-scope merchandise, but rather as scope-
merchandise which is not subject to duty assessment.
We disagree with Fuji that our cash deposit rates should somehow
take into account merchandise meeting the ``Roller Chain'' criteria
because we have no way of knowing at the time of entry whether any
particular entry qualifies under the ``Roller Chain'' principle for
exclusion from assessment of antidumping duties. Our decision to
exclude any merchandise is made on a case-by-case basis within the
course of an administrative review, which takes place after the actual
entry of the potentially excludable merchandise. For this reason, at
the time of entry we must require cash deposits of estimated
antidumping duties on all entries, including those entries of
merchandise potentially excludable from assessment under the ``Roller
Chain'' principle. Furthermore, cash deposit rates are estimates of
dumping liability. Because at the time of entry we have no idea of the
value of merchandise which we may ultimately determine meets the
``Roller Chain'' criteria, we cannot alter our cash deposit rate to
effectively compensate for the value of the ``Roller Chain''
merchandise in the current review, which may be a value significantly
different from that in the future.
We also disagree with Fuji that entry-by-entry assessment is a
viable option for its assessment. Entry-by-entry assessment requires
the traditional appraisement instructions which list each entry and the
margin calculated for it. The disadvantages of such assessment are
numerous. For example, because our dumping analysis focuses on sales,
it is necessary for us to associate reviewed sales with entries in some
way. However, companies are generally unable to make such a link. In
addition, such appraisement instructions are burdensome, time-
consuming, and at risk for error. It is therefore the position of the
Department that assessment rates applicable to all covered entries are
preferable. In comparison to entry-by-entry assessment, the use of an
assessment rate which applies to all entries during the POR is far less
burdensome and time-consuming, and the risk of incorrect assessment is
minimized. In general, we have tried to calculate assessment rates on
an importer-specific basis to prevent one importer from paying
antidumping duties attributable to margins found on sales to a
different importer. However, this concern for importer-specific rates
is limited to
[[Page 20591]]
those instances where the importer is not related to the foreign
exporter. Where the importer is related to the foreign exporter, we
consider the related parties to constitute one corporate entity and the
use of manufacturer/exporter-specific assessment rates to be
appropriate. Therefore, we also reject Fuji's proposal that we adopt an
importer-specific rate for SIA, its related U.S. subsidiary, and we
will calculate one rate for Fuji's related importers.
We have determined that Fuji's final proposal, that the assessment
rate take into account the value of the ``Roller Chain'' merchandise,
is the most viable assessment option and would ensure that antidumping
duties are not assessed on that merchandise we determined to meet the
``Roller Chain'' principle criteria. As explained above, we do not
agree that the cash deposit rate should be altered in any way.
Therefore, after ensuring that liquidation was suspended for SIA's
entries of TRBs, we will ensure that assessment does not occur on this
``Roller Chain'' merchandise by including the total entered value of
Fuji's ``Roller Chain'' merchandise in our assessment rate calculation
denominator. This will have the effect of lowering the percentage
assessment rate so that, even though antidumping duties will be
assessed on all entries, the lower percentage assessment rate (which
will still result in the collection of the actual amount of antidumping
duties owed) will effectively exclude the ``Roller Chain'' merchandise
from assessment.
Concerning Kawasaki's alleged ``Roller Chain'' merchandise, as the
record for these reviews demonstrates, Kawasaki only provided a
response to the general information section of our questionnaire
(section A) and included within this partial response a statement
indicating that it declined to provide the information requested in the
remaining sections of the questionnaire. Because the information
Kawasaki declined to provide was its detailed home market and U.S.
sales and adjustment information, we were unable to conduct an analysis
of, or calculate a margin for, Kawasaki. Therefore, Kawasaki's refusal
to provide a response to the additional sections of our questionnaire
significantly impeded our ability to conduct a review for Kawasaki and
we used a total first-tier uncooperative BIA rate of 40.47 for Kawasaki
in the A-588-604 review and of 47.63 percent in the A-588-054 review
(see Prelim Results at 25201).
Kawasaki now argues that, because it submitted information
demonstrating that all of KMM's entries of A-588-054 TRBs during the
POR met the requirements of the ``Roller Chain'' principle, the
Department should not assess duties against this merchandise. Kawasaki,
therefore, makes an argument identical to Fuji's third proposal in that
it calls for the recalculation (i.e., lowering) of its A-588-054
assessment rate such that duties will not be assessed against KMM's
entries of TRBs.
Kawasaki's argument, however, not only overlooks the fact that the
information it wants the Department to rely on to ensure that duties
are not assessed on KMM's entries represented only a partial response
to the questionnaire, but it ignores the fact that it was an
uncooperative respondent that refused to provide the information
necessary for us to conduct an analysis. Furthermore, our March 16,
1998 letter requesting once more that Kawasaki provide a complete
response to our questionnaire stated specifically that failure to do so
would result in our proceeding on the basis of total BIA, including
issuing appraisement instructions to Customs to liquidate all Kawasaki
entries, including those allegedly subject to the ``Roller Chain''
principle, at the appropriate BIA rate. On March 23, 1998, Kawasaki
stated for a third time that it would not provide the requested
information necessary to complete our analysis and calculate dumping
margins for Kawasaki.
The CIT has ruled on several occasions that the use of a
respondent's incomplete questionnaire response would only reward the
respondent for failing to report requested information. For example, in
Persico, the case cited by Timken in its comments, the CIT rejected the
argument that the Department should have used some of the information
submitted by the respondent instead of relying on other information as
BIA. The CIT stated:
``If the court were to accept Persico's argument, such result
might encourage respondents to analyze information Commerce would
employ as BIA should that agency ignore a questionnaire response for
being unresponsive or incomplete. Presumably, the respondent would
then selectively disclose only that information which would decrease
a dumping margin calculated from BIA. . . . In this way, it would
be in a respondent's best interest to only partially respond to
Commerce's inquiry. . . . By allowing Commerce to reject a
submission in toto, the court encourages full disclosure by the
respondent, because only full disclosure will lead to a dumping
margin lower than that established by employing BIA.''
(See Persico at 23). In Nippon Pillow Block Sales Co., Ltd. and FYH
Bearing Units USA, Inc. v. United States, 903 F. Supp 89 (CIT 1995)
(Nippon), the CIT, applying the same reasoning as in Persico, stated
that ``if Commerce were required to use the small portion of the
requested information that Nippon submitted, there would be no
incentive for Nippon to provide Commerce with complete information
since the submission of partial information would result in a decreased
dumping margin.'' See Nippon at 95.
In the instant case, the partial information submitted by Kawasaki
allegedly demonstrates that KMM's imports met the requirements of the
``Roller Chain'' principle. If we were to take this information into
account, as Kawasaki argues, Kawasaki's assessment rate would be
reduced and duties would not be assessed on a significant portion of
its TRBs entries. As a result, this uncooperative respondent, who
refused to provide the information necessary for us to conduct an
analysis, would actually benefit from its refusal to provide the
Department with a complete response. In this way, we would encourage
Kawasaki to selectively disclose only that information which would
benefit its position, and control over the proceedings would
effectively move from the Department to the respondent. Furthermore,
because Kawasaki was an uncooperative respondent to which we assigned a
first-tier total adverse BIA rate in the reviews of both TRBs cases,
there was no basis on which to verify the limited information Kawasaki
submitted. Therefore, given Kawasaki's uncooperativeness, we have no
basis upon which to conclude that the limited information in Kawasaki's
partial submission is accurate and reliable. For these reasons we
disagree with Kawasaki that, because information on the record
allegedly demonstrates that KMM's entries of TRBs were subject to the
``Roller Chain'' principle, we have an obligation to take that
information into account for assessment purposes. Rather, we will
assess duties for Kawasaki in both the TRBs cases at rates equivalent
to the first-tier total BIA rates we assigned to Koyo for these final
results.
Comment 6: Fuji argues that the Department failed to make a
difference-in-merchandise (difmer) adjustment when it compared Fuji's
U.S. TRBs to most similar, rather than identical, home market TRBs.
Fuji asserts that because it is a reseller, the acquisition costs it
provided to the Department are its variable costs and the Department
should calculate a difmer adjustment based on the difference in
acquisition costs between U.S. merchandise and the non-identical
comparison home market merchandise.
[[Page 20592]]
While Timken does not object to the Department making a difmer
adjustment for Fuji based on Fuji's acquisition costs, Timken contends
that the computer programming language Fuji included in its brief
demonstrating how the Department should incorporate the adjustment into
Fuji's computer program is deficient because it applies the adjustment
to comparisons of identical U.S. and home market merchandise and does
not properly convert the adjustment from yen to U.S. dollars.
Department's Position: We agree with Fuji that a difmer adjustment
is warranted and have based that adjustment on the difference in Fuji's
reported acquisition costs. However, we also agree with Timken that
Fuji's suggested programming language is deficient. Therefore, we have
incorporated the difmer adjustment into our computer program for Fuji
by using computer programming language which ensures that the
adjustment is (1) only applied to comparisons between U.S. merchandise
and the most similar, rather than identical, home market merchandise,
and (2) is properly converted from yen to U.S. dollars.
Comment 7: Fuji argues that because it is a reseller which does not
have access to the variable costs of manufacturing (VCOM) and total
costs of manufacturing (TCOM) of the TRBs it resells in the U.S. and
home markets, it agrees with the Department's use of its acquisition
costs as the basis for the 20 percent difmer test. Fuji contends that
in those cases where VCOM and TCOM are available, the Department allows
non-identical home market models to be included within the pool of
potential home market matches if the difference in the VCOMs between
the U.S. and home market models is less than 20 percent of the U.S.
model's TCOM. In other words, Fuji states, the Department uses the U.S.
model's costs as the benchmark for its comparison. However, Fuji
asserts, rather than use the U.S. model's acquisition cost as the
benchmark for the 20 percent difmer test the Department conducted for
Fuji, the Department incorrectly used the home market model's
acquisition costs as the basis for the 20 percent difmer comparison.
Department's Position: We agree with Fuji. In our margin
calculation computer program for Fuji we inadvertently used programming
language which incorrectly applied the 20 percent difmer test. We have
corrected this error for these final results.
Comment 8: Fuji argues that the Department's 99.5 percent arm's-
length test, in which it calculates home market customer-specific
weighted-average related/unrelated price ratios and excludes from its
margin calculations all sales to a home market customer if its ratio is
not greater than 99.5 percent, is too restrictive and inappropriately
rejects bona fide sales to related home market customers that are made
at the same prices as sales to unrelated home market customers. Fuji
asserts that, even though it sold from the same price list at the same
prices to all home market customers during the POR for any given
product during any given month, the Department's arm's-length test
nevertheless resulted in the exclusion of a large percentage of its
related customer sales from the Department's preliminary margin
calculations.
For example, Fuji asserts that the Department's reliance on POR
weighted-average prices results in the exclusion of related party sales
simply because different quantities may have been purchased by a
related party after a monthly price change took effect, even though the
prices charged to related and unrelated customers during any given
month were the same. In addition, Fuji contends that, even if the same
number of units are sold to both the related and unrelated customer,
all sales to the related customer will fail the test even if a majority
of the sales to the related customer during the POR were priced higher
than the sales of the identical product to the unrelated customer.
Fuji claims that, to avoid these inaccuracies, the Department
should adopt a new arm's-length test in which individual transactions
to related customers are determined to be at arm's length unless the
prices to the related customer deviate from the weighted-average prices
to unrelated customers by more than two standard deviations. Fuji
asserts that this method not only better reflects commercial reality,
but it eliminates abnormally high and low priced sales while still
ensuring that only those related-customer sales prices which are
statistically comparable to unrelated-party sales prices are included
in the Department's margin calculations.
Fuji further asserts that, if the Department does not adopt this
new test, it should at least modify its existing arm's-length test such
that it would use the same methodology, but apply it on a monthly,
rather than a POR, basis. Fuji explains that if the Department compares
the average monthly weighted-average price of a product sold to an
related customer to the monthly weighted-average sales prices of the
same product to an unrelated customer, it would capture the fact that
Fuji's monthly average sales prices to related and unrelated customers
are the same. In this way, Fuji concludes, the Department will avoid
the arbitrary results produced by its current test and correctly
include within its margin calculations those sales to related home
market customers which were clearly at arm's length.
Timken argues that Fuji's arguments are hypothetical in nature and
fail to demonstrate that the Department's methodology actually produced
distortive results. In addition, Timken asserts, given that the
Department employed a reasonable methodology, there is no basis for the
Department to change it's arm's-length analysis. Finally, Timken states
that it is the Department, and not an interested party, who makes the
determination as to what methodology should be used (NTN Bearing Corp.
v. United States, 747 F. Supp. 726 (CIT 1990)).
Department's Position: We agree with Timken. While Fuji argues that
our 99.5 percent arm's-length test produces arbitrary results, it
failed to provide a single example from its own data supporting its
assertions. Fuji presents only theoretical examples of why the arm's-
length test is distortive and we have no basis upon which to conclude
that our test is unreasonable. Furthermore, not only is our 99.5
percent arm's-length test methodology well established (see, e.g.,
Certain Cut-to-Length Carbon Steel Plate from Sweden; Final Results of
Antidumping Duty Administrative Review, 61 FR 15772 (April 9, 1996)),
but the CIT has repeatedly sustained this methodology (see e.g., Usinor
Sacilor v. United States, 872 F. Supp. 1000 (CIT 1994) (Usinor), Micron
Technology, Inc. v. United States, 893 F. Supp. 21 (CIT 1995) (Micron),
and NTN Bearing Corp. of America, Inc. v. United States, 905 F. Supp.
1083 (CIT 1995)). Consistent with our view that a party must provide
evidence of distortion in order for us to verify its allegations that
our arm's-length test is distortive, in Usinor the CIT specifically
stated that ``[g]iven the lack of evidence showing any distortion of
price comparability, the court finds the application of Commerce's
arm's-length test reasonable.'' See Unisor at 1004. Likewise, in
Micron, because the CIT found that the plaintiff/respondent failed to
``demonstrate that Commerce's customer-based arm's length test inquiry
is unreasonable'' and failed to ``point to record evidence which tends
to undermine Commerce's conclusion,'' the CIT sustained the 99.5
percent arm's-length test based on the lack of evidence showing a
distortion of price comparability (see Micron at 45-46).
[[Page 20593]]
Therefore, for these final results we have not altered our 99.5 percent
arm's-length test for Fuji, and have continued to apply the test as we
have in other cases upheld by the CIT and as we did in our preliminary
results.
Comment 9: Fuji contends that, because it changes its home market
prices only at the beginning of a month, the Department's use of annual
weighted-average home market prices fails to capture the monthly
fluctuations in its prices. Therefore, Fuji asserts, the Department
should calculate monthly weighted-average home market prices. Fuji
contends that not only would this change be a minimal burden on the
Department, but such a change would ensure greater accuracy in the
Department's margin calculations for Fuji. Fuji further asserts that,
if the Department chooses not to rely on monthly weighted-average home
market prices, it should at least calculate semiannual home market
weighted-average prices based on the two periods within the POR which
reflect the timing of Fuji's price changes.
Timken argues that not only did the Department conduct a detailed
analysis which demonstrated that Fuji's home market prices were stable
over the POR such that the calculation of annual weighted-average home
market prices was reasonable, but there is no evidence on the record
indicating that the use of monthly weighted-average home market prices
for Fuji would be more accurate or reasonable than annual weighted-
average prices.
Department's Position: We agree with Timken. Pursuant to the law in
effect prior to January 1, 1995, although it is our normal practice to
calculate monthly weighted-average home market FMVs, it has been our
established practice in TRBs reviews to conduct a three-step price
stability test in order to determine if a respondent's pricing
practices in the home market were sufficiently stable throughout the
POR such that we may reasonably calculate annual weighted-average home
market FMVs. (see, e.g., Tapered Roller Bearings, Four Inches or Less
in Outside Diameter, and Certain Components Thereof, From Japan; Final
Results of Antidumping Duty Administrative Review, 56 FR 65228
(December 16, 1991) (054 TRBs 88-89), and Tapered Roller Bearings, Four
Inches or Less in Outside Diameter, and Certain Components Thereof,
From Japan; Final Results of Antidumping Duty Administrative Review, 56
FR 26054 (June 6, 1991) (054 TRBs 87-88)). We began this practice in an
effort to simplify our TRBs calculations which involve extremely large
data bases and complex, time-consuming analysis.1 Although
Fuji's 1993-94 databases were less voluminous than other respondents'
databases, the amount of data Fuji submitted, as well as the overall
complexity of the analysis we conducted for Fuji, prompted us to
determine if annual weighted-average FMVs were appropriate for our
calculations. Therefore, consistent with section 777A of the Act, we
determined whether the use of annual weighted-average FMVs was
appropriate by performing our established three-step price stability
test. First, we compared the annual/POR weighted-average home market
price for each home market TRB model with each of the model's 12
monthly weighted-average prices during the POR. We then calculated the
proportion of each model's sales for which the annual weighted-average
price did not vary more than plus or minus 10 percent from the monthly
weighted-average prices. Second, we compared the volume of sales of all
models for which annual weighted-average prices did not vary more than
plus or minus 10 percent from the monthly weighted-average prices with
the total volume of sales of TRBs. Because the annual weighted-average
price of at least 90 percent of Fuji's home market TRBs sales did not
vary more than plus or minus 10 percent from the monthly weighted-
average prices, we considered Fuji's annual weighted-average prices to
be representative of the transactions under consideration. Finally, we
tested whether there was any correlation between price and time for
each model by calculating a Pierson coefficient. Because the
correlation coefficient we calculated for Fuji was less than 0.05
(where a coefficient approaching 1.0 indicates a direct correlation
between price and time), we concluded that there was no significant
relationship between price and time.
---------------------------------------------------------------------------
\1\ For example, if our three-step price stability test reveals
that price variations have no relation to time, we eliminate from
our multiple searches for contemporaneous home market such or
similar merchandise. This results in a dramatic simplification of
the highly complex TRBs sum-of-the-deviations model-match
methodology and ensures less errors in computer programs and margin
calculations.
---------------------------------------------------------------------------
Because this three-step analysis demonstrated that over 90 percent
of Fuji's annual weighted-average prices were within 10 percent of its
monthly weighted-average prices and that there was no relationship
between Fuji's pricing practices and time, we concluded that Fuji's
home market pricing practices were sufficiently stable over time such
that annual FMVs were representative of home market prices.
Therefore, while Fuji argues that monthly weighted-average FMVs
would be more accurate, our analysis and all the evidence on the record
indicate that our use of annual weighted-average FMVs for Fuji produced
accurate and reliable results.
We also disagree with Fuji that we should, at a minimum, rely on
FMVs based on certain semiannual weighted-averages. Since we have
confirmed that annual weighted-average FMVs will not differ
significantly from monthly weighted-average FMVs, we have no reason to
suspect that annual weighted-average FMVs would differ significantly
from weighted-average FMVs calculated on a greater-than-one-month or
semiannual basis. Furthermore, Fuji has provided no evidence supporting
its contention that its proposed semiannual weighted-average FMVs would
produce results more accurate than those we achieved by using annual
weighted-average FMVs. Therefore, we have continued to rely on annual
weighted-average FMVs for Fuji for these final results.
Comment 10: In its responses for both the 1992-93 and 1993-94
reviews, Koyo reported four different categories of sales in the home
market: (1) sales to original equipment manufacturers (OEM) for the OEM
market, (2) sales to OEM customers for the after-market (AM), (3) sales
to AM customers for the OEM market, and (4) sales to AM customers for
the AM market. In order to determine whether any of these four
categories of sales represented distinct levels of trade (LOT), we
conducted an analysis in which we calculated and compared the weighted-
average prices for each category in order to determine if patterns of
pricing differences existed between these categories. Based on our
analysis we concluded that sales in category 1 clearly represented an
OEM LOT while sales in category 4 clearly represented an AM LOT.
However, because sales within categories 2 and 3 did not clearly
reflect distinct LOTs, we examined whether sales in these two
categories were more appropriately defined as within the category 1 OEM
LOT or the category 4 AM LOT. Based on further analysis we concluded
that sales in category 2 were most similar to those in category 1 and
sales in category 3 were most like the sales in category 4. Therefore,
we collapsed sales categories 1 and 2 into one OEM LOT and sales within
categories 3 and 4 into one AM LOT.
Koyo contends that, in all its questionnaire responses since the
1990-92 TRBs reviews (where the Department
[[Page 20594]]
first recognized the complexity of the bearing distribution system), it
has explained its distribution system and identified the identical four
home market sales categories as in these 1992-93 and 1993-94 reviews.
Koyo states that in the most recently completed final results for Koyo
( the 1990-92 TRBs reviews), the Department determined that category 1
was the OEM LOT, and collapsed categories 2, 3, and 4 into a single AM
LOT. Koyo asserts that because (1) no party ever objected to the
Department's determination and (2) Koyo has not changed its
distribution system or its explanation of this system for these
reviews, there is no reason for the Department to change its LOT
identification for these 1992-93 and 1993-94 reviews.
Koyo also argues that the Department's LOT analysis was flawed
because the Department relied on an over-inclusive pool of sales when
calculating the weighted-average prices it used to identify Koyo's home
market LOTs. Koyo asserts that the Department calculated weighted-
average prices for categories 1, 2, 3, and 4 by including all models
sold rather than eliminating from the calculation those models sold
only in a given category but not sold to the category being compared.
As a result, Koyo contends, the Department's analysis is distorted.
Based on its own analysis Koyo argues that, by removing from the
calculation of each category's weighted-average price those sales of
models which were sold only in that category, the comparison of the
revised weighted-average prices for each category reveals that
categories 2 and 3 are most similar to category 4, and categories 2, 3,
and 4 are distinctly different from category 1. Therefore, Koyo
concludes, the Department should have collapsed categories 2, 3, and 4
into a single AM LOT and treated category 1 as the distinct OEM LOT.
Timken argues that the elaborate analysis Koyo presented in its
comments is flawed because it lacks any support on the record
explaining why sales have been put into sub-categories within the OEM
and AM LOTs. Timken asserts that, absent an explanation as to why there
should be distinctions within the OEM and AM LOTs, Koyo's analysis is
nothing more than a post-hoc rationalization of its original,
unsupported LOT designations. Timken concludes that, regardless of any
possible flaws in the Department's analysis, given the lack of
information on the record, the Department should continue to categorize
categories 1 and 2 as a single OEM LOT and categories 3 and 4 as a
single AM LOT.
Department's Position: We agree in part with both the petitioner
and the respondent. As explained above, in its 1992-93 and 1993-94
responses Koyo claims two distinct LOTs in the home market, an OEM LOT
and an AM LOT. However, Koyo reported four separate home market
categories of sales based on the customer category (OEM or AM) and
market in which the sale was made (OEM or AM). Because Koyo's response
lacked both a detailed explanation of these four subgroups and an
explanation whether these four subgroups represented distinct LOTs, we
determined that it was necessary to conduct a detailed analysis using
Koyo's reported home market pricing data to identify any pricing
patterns and determine whether these categories reflected distinct
LOTs. As also indicated above, our analysis revealed that four separate
LOTs did not exist, and we concluded that certain categories of sales
should be collapsed into two separate LOTs. Therefore, we agree with
Timken that Koyo's responses lacked the information necessary to
demonstrate four distinct LOTs. However, we disagree with Timken that
Koyo's comments and analysis are an attempt to argue that four separate
LOTs exist. Rather, in its comments Koyo only asserts that inherent
flaws in the Department's LOT analysis resulted in the Department's
improper combining of category 1 sales with category 2 sales and
category 3 sales with category 4 sales.
In light of Koyo's comments we have reexamined our LOT analysis for
Koyo in both the 1992-93 and 1993-94 reviews and have determined that
the computer analysis we used to identify Koyo's home market LOTs
produced accurate and reliable results. For example, we began our
analysis by calculating an overall weighted-average price for each of
Koyo's four categories and compared these prices to one another. We
relied on this comparison as a means to ascertain the general pricing
trends that existed between Koyo's categories such that we would have
some basis upon which to proceed with a more detailed model-specific
comparison. In other words, while this macro-comparison did allow us to
draw some general conclusions, we recognized that it was not detailed
enough to provide conclusive results concerning each category and its
relationship, if any, to the other three categories. Therefore, in
order to identify Koyo's LOTs and resolve the issue of whether
categories 2 and 3 reflected distinct and separate LOTs or were more
like category 1 or 4 such that they should be collapsed with category 1
or 4 in some way, we conducted a model-specific analysis in which we
calculated and compared the model-specific weighted-average prices for
each model sold in each category. For example, we compared the model-
specific weighted-average prices for each model sold in categories 1
and 2, 1 and 3, 3 and 4, and 2 and 4. In doing so, we compared only the
weighted-average prices for those models which were sold in two
categories. For example, when we compared the pricing practices between
categories 1 and 2, we only compared the prices for models sold to both
categories 1 and 2. As a result, contrary to Koyo's assertion, we did
not rely on our macro-comparison as the basis of our overall LOT
determinations and we did not base our analysis on an over-inclusive
pool of models. Rather, we conducted a more detailed model-specific
analysis in which we excluded from our comparisons those models which
were not sold in both of the categories being compared. Therefore, we
disagree with Koyo that our analysis was inherently flawed.
However, while we have concluded that our computer analysis was
accurate and reliable, we have discovered that, when we interpreted the
results of this analysis in our preliminary results, we misidentified
Koyo's four categories. This led to us draw incorrect conclusions
concerning the manner in which Koyo's categories were to be combined
for LOT purposes. Therefore, for these final results we have properly
identified Koyo's categories and have reexamined the results of our LOT
analysis. Based on our reexamination of our model-specific comparisons
we have concluded that our original determination that categories 1 and
4 were distinct from each other and reflected separate OEM and AM LOTs
was correct. Furthermore, we have concluded that there is a clear
pattern of pricing differences between categories 1 and 2 and
categories 1 and 3 such that we cannot consider sales in categories 2
and 3 to be at the same LOT as category 1. In addition, our
reexamination of our comparisons between categories 2 and 4 and
categories 3 and 4 reveal that there is no distinct pattern of pricing
differences between categories 2 and 4 and categories 3 and 4 such that
we could consider sales in categories 2 and 3 as at a separate LOT than
category 4. Therefore, we agree with Koyo that we improperly collapsed
its home market sales categories in our preliminary results of review.
As a result, for these
[[Page 20595]]
final results we have collapsed categories 2, 3, and 4 into one
distinct AM LOT and treated category 1 as the OEM LOT.
2. Comments Concerning Adjustments to United States Price (USP)
Comment 11: Timken argues that it is not clear why NTN did not
report its U.S. credit expenses on a transaction-specific basis and,
based on its own analysis, claims that NTN has under-reported these
credit expenses.
NTN argues that not only has it consistently reported its U.S.
credit expenses on a customer-specific basis, but the Department has
consistently accepted NTN's methodology in all past reviews. NTN states
that Timken has provided no evidence indicating that NTN's customer-
specific methodology is unreasonable, and is only attempting to
persuade the Department to adopt a position which would yield the
results that Timken wants.
Department's Position: We disagree with Timken. While we prefer to
have credit calculated on a transaction-specific basis, when there is a
massive number of transactions in a review, we generally will not
require the respondent to calculate and report individual credit costs
for each transaction. Rather, when there is a voluminous number of
transactions involved, we permit a respondent to report credit
calculations based on the average credit days outstanding on a
customer-specific basis. This has been upheld by the CIT (see, e.g.,
The Torrington Company v United States, 818 F. Supp 1563 (CIT 1993)),
and is in accordance with our established practice (see, e.g.,
Antifriction Bearings (Other than Tapered Roller Bearings) and Parts
Thereof From the Federal Republic of Germany; Final Results of
Antidumping Administrative Review, 56 FR 31692 (1991)).
Given the massive number of transactions NTN has reported in this
review, we have allowed NTN to report its U.S. credit expenses on a
customer-specific basis. Furthermore, not only have we allowed NTN to
report its credit expenses on a customer-specific basis in all previous
TRBs reviews, but NTN has explained in past reviews that it derived its
customer-specific credit ratio based on information directly from its
accounts receivables ledgers concerning the average number of days
payment was outstanding for each of its customers. As such, NTN's
reported credit amounts are based on a customer's actual payment
information as maintained in NTN's books and records (see, e.g., TRBs
92-93 at 57637)). We have verified this method in previous reviews,
and, because there is no evidence that NTN has changed its methodology
for this review, we are satisfied that NTN has again reported U.S.
credit expenses which are derived directly from actual customer payment
information. Therefore, we have not altered our treatment of NTN's U.S.
credit expenses for these final results.
Comment 12: Timken argues that, because it appears on the record
that NTN USA is some form of holding company which provides support to
its wholly-owned subsidiaries, some portion of NTN USA's expenses
should be allocated to sales of subject merchandise. Therefore, Timken
contends, the Department should increase the pool of U.S. indirect
selling expenses by a portion of NTN USA's general and administrative
expenses.
NTN argues that, because these G&A expenses are not provided for,
as Timken suggests, NTN USA's expenses should not be allocated to sales
of subject merchandise.
Department's Position: We disagree with Timken. The record
indicates that those expenses incurred by NTN USA on behalf of the
various NTN U.S. subsidiaries are already included in NTN's reported
U.S. indirect selling expenses. Therefore, there is no basis to
recalculate NTN's reported U.S. indirect selling expenses to account
for those expenses incurred by NTN USA.
Comment 13: Timken asserts that, because there is no evidence on
the record justifying the various adjustments NTN made to the pool of
U.S. indirect selling expenses it reported to be deducted from USP, the
Department should not allow these adjustments, and should include the
adjustment amounts in the total amount of U.S. indirect selling
expenses deducted from USP.
NTN states that, because its reporting of its U.S. indirect selling
expenses has remained consistent throughout all TRBs administrative
reviews to date and because the Department has consistently accepted
this reporting methodology, the Department should disregard Timken's
contentions and again allow NTN to make the adjustments at issue to its
reported U.S. indirect selling expenses.
Department's Position: We agree with NTN. We have examined certain
of these adjustment's in previous verifications of NTN without
discrepancy (see TRBs 90-92 at 64726) and, absent evidence from Timken
supporting its contention that these adjustments are unreasonable, we
have no reason to reject them for these final results.
Comment 14: Timken contends that NTN's adjustment to its U.S.
indirect selling expenses for a certain interest expense amount should
not be allowed because there is no explanation on the record of what
this amount represents, what it is attributable to, or why it should be
removed from the pool of U.S. indirect selling expenses to be deducted
from USP.
NTN states that both the Department and Timken are well aware that
the interest expense in question reflects those interests expenses NTN
incurred in regard to antidumping duty cash deposits. NTN contends
that, just as antidumping duties are not a basis for adjustment to USP,
the costs related to them should also not be the basis for an
adjustment to USP.
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)). 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
[[Page 20596]]
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. Money 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
as to 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 15: In its response NTN reported that it paid commissions
to NBCA for certain purchase price sales. In addition, NTN indicated
that NBCA incurred other expenses associated with the services it
provided with regard to these purchase price sales. In our preliminary
results we determined that it was necessary to determine the arm's-
length nature of these related-party commissions by comparing the
related-party commission rate to those commission rates NTN reported it
paid to unrelated U.S. commissionaires. However, because the record did
not explicitly indicate the related-party commission rate, we attempted
to calculate this commission rate based on data NTN provided in exhibit
B-8 of its response. In exhibit B-8 NTN demonstrates its calculation of
NBCA's total U.S. indirect selling expenses for all merchandise (both
scope and non-scope), as well as its allocation of these total expense
amounts to scope and non-scope merchandise. In addition, it is
important to note that the purpose of this exhibit was for NTN to
calculate the indirect selling expense NBCA incurred for its reported
U.S. exporter's sales price (ESP) sales. Because the expenses NBCA
incurred in relation to those services it provided for certain purchase
price sales were not expenses NBCA incurred in association with its ESP
sales, NTN removed these expenses from its reported total NBCA expenses
in exhibit B-8 by making a downward adjustment to specific total
expense accounts. These downward adjustments were clearly identified in
exhibit B-8 as related to those expenses incurred by NBCA for certain
purchase price sales. Based on these reported downward adjustments we
calculated a total commission amount and divided this by the total
sales value of NTN's TRB purchase price sales, which we derived
directly from NTN's U.S. computer sales file. We considered the
resulting ratio the related-party commission rate and, upon comparing
it to the commission rates NTN reported it had paid to unrelated U.S.
parties, we determined the related-party commission not to be at arm's
length. Therefore, we treated it as an indirect selling expense and
adjusted for it accordingly in margin calculations for purchase price
sales.
NTN argues that, while it agrees with the Department's disregarding
the related-party commission, the Department's additional arm's-length
analysis was unnecessary because, in accordance with the Department's
practice, related-party commissions are treated as intra-company
transfers of funds and, as such, are not proper adjustments to price.
NTN further claims that, while the Department should not have conducted
an arm's-length analysis, it is nevertheless important for the
Department to recognize that it made two errors when calculating the
related-party commission rate. First, NTN asserts, the Department
relied on a numerator which reflected all expenses incurred by NBCA for
the services it provided for certain purchase price sales, rather than
on a numerator which reflected only the related-party commission NBCA
was paid. Second, NTN argues, even if the Department had used the
correct numerator, the calculation would still be incorrect because the
Department used a denominator which reflected only scope merchandise.
NTN asserts that exhibit B-8 clearly indicates that the downward
adjustments for purchase price sales reflected all merchandise, not
only TRBs. As a result, because the numerator for the calculation would
reflect both scope and non-scope merchandise, the Department should
have used a denominator which reflected NTN's purchase price sales of
all merchandise, rather than only the purchase price sales of TRBs. In
order to further demonstrate its point, NTN reported its actual
related-party commission rate and referred to the difference between
this rate and the one calculated by the Department.
Timken argues that NTN seeks to alter the Department's judgment
regarding these related-party commissions by supplementing the record
with new factual information. Timken asserts that NTN has reported for
the first time its actual related-party commission rate
[[Page 20597]]
and has indicated for the first time that the downward adjustments it
made in exhibit B-8 for those expenses NBCA incurred for services it
provided for certain purchase price sales reflect both scope and non-
scope merchandise. Therefore, Timken asserts, the Department should
reject this untimely information and disregard NTN's arguments.
Department's Position: Based on Timken's assertion that NTN's brief
contained new information, we reviewed the information and
preliminarily concluded that it most likely constituted new factual
information. Therefore, at the August 21, 1996 hearing, we explained
our position to the parties and requested that NTN and Timken refrain
from discussing the information in question. Based on the objections
raised by NTN at the hearing and the fact that we had yet to make a
final decision regarding the nature of the information in question
(i.e., we had not yet officially rejected or returned the information
to NTN), we reopened the record on the issue and provided both NTN and
Timken additional time to comment on the issue of whether the
information in question constituted new information which should be
rejected and not considered by the Department. The additional comments
submitted by NTN and Timken, our final determination concerning the
issue of new information, and our position on the related-party
commission issue are discussed in Comment 16 below.
Comment 16: NTN argues that the Department's decision to disallow
discussion of the related-party commission issue at the hearing was not
only unwarranted, but, because it prevented NTN from sufficiently
making its case, it served to render the administrative review process
useless. NTN also asserts that, because the Department failed to
communicate coherently which information in NTN's case brief it had
rejected, NTN was only able to surmise which information was in
question. NTN further asserts that, regardless of what the specific
information is, it is its contention that none of the information
contained in its pre-hearing case brief can be considered new factual
information. For example, NTN claims, even a brief review of exhibit B-
8 reveals that the numerator used by the Department in its calculation
reflected all expenses incurred by NBCA for services it provided for
certain purchase price sales, rather than only the commission amount.
NTN contends that this is demonstrated by the fact that the
Department's numerator corresponds to the sum of all the expenses
(i.e., the total amount of downward adjustments for these purchase
price-related NBCA expenses) as identified on worksheet 4 of exhibit B-
8. As a result, NTN concludes, there is no way the numerator used by
the Department could be considered as reflective of only a commission
amount.
NTN further argues that the Department has verified that the
downward adjustments made in exhibit B-8 reflect expenses incurred for
all merchandise, both scope and non-scope. Therefore, NTN claims,
because the adjustments clearly reflect all merchandise, rather than
only TRBs, it is patently absurd for the Department to now claim that
it did not realize this.
As for the related-party commission rate NTN reported in its case
brief, NTN contends that it was never instructed by the Department to
report this rate in this review or any other previous TRBs review. In
fact, NTN claims, it only submitted this rate in its brief in an effort
to point out the inaccuracy of the Department's calculation. NTN
asserts that, to refuse to accept this corrected figure, which the
Department was attempting to calculate itself, is arbitrary and
capricious.
In addition, NTN argues, one of the primary purposes of the pre-
hearing briefing process is to allow respondents to address
methodologies and correct clerical errors. NTN asserts that not only
was the information in question clearly not new information, but it is
apparent that NTN submitted the information in order to correct the
Department's clerical errors. Citing NTN Bearing Corp. v. United
States, Slip Op. 94-1186 (Fed. Cir. 1995) and Koyo Seiko v. United
States, 14 CIT 680 (CIT 1990), NTN asserts that, because the Department
has an obligation to correct errors which are timely identified by a
respondent and because fair and accurate determinations are fundamental
to the proper administration of the antidumping laws, the Department
cannot simply reject the information in question. Rather, NTN urges the
Department to either reconvene the hearing to allow comments on the
related-party commission issue or allow NTN to submit the comments it
was prevented from making at the August 28, 1996 hearing.
Timken argues that the Department could draw only one conclusion
from the information NTN provided in exhibit B-8 concerning the
expenses NBCA incurred when providing services for certain purchase
price sales. Therefore, Timken asserts, because the additional
information NTN provided in its case brief provides a different
interpretation of exhibit B-8, the Department should reject the new
information and not change how it treated NTN's related-party
commissions.
Department's Position: We both agree and disagree in part with NTN.
First, it is important to clarify that, while we indicated to NTN and
Timken at the hearing that we considered certain information in NTN's
case brief to constitute new factual information, we did not consider
this to be our final decision on the issue. For example, we did not, in
accordance with 19 CFR 353.31(3), officially reject and return the
information in question to NTN at any time prior to the hearing.
Rather, we decided that the hearing was the appropriate forum for
explaining our initial determination and to determine whether the issue
required additional examination and/or comment. Due to the controversy
surrounding the issue at the hearing, we decided that, in order to make
a reasonable and equitable decision, we would allow additional comment
and discussion. Therefore, we reopened the record on this issue and
provided both NTN and Timken time to submit additional argument and
rebuttal concerning the nature of the information in question. Given
that we never officially rejected and returned the information in
question and that we reopened the record to allow further examination,
we disagree with NTN that we arbitrarily made a final decision on this
issue without providing NTN proper notice.
We also disagree with NTN that our decision to disallow discussion
of the new information at the hearing undermined the administrative
review process and prevented NTN from adequately presenting its
position. While we acknowledge that we did not allow NTN and Timken to
specifically discuss this new information at the hearing, this only
prevented NTN from discussing the more detailed points of its position.
It did not, in any manner, prevent NTN from voicing its assertion that
the calculation was inaccurate, from objecting to the Department's
treatment of the related-party commission, or from asserting that the
additional analysis we performed concerning the commission was
unwarranted. Furthermore, while NTN may not have been able to address
the detailed points of its position at the hearing, it nevertheless
fully briefed these specific points in its pre-hearing briefs. Given
that parties to a hearing, in accordance with 19 CFR 353.38, may only
discuss at the hearing that which has already been presented in their
[[Page 20598]]
written briefs, both the Department and Timken were fully aware of
NTN's specific arguments upon receipt of its brief and no party would
have been permitted to provide any additional, new arguments at the
hearing. In addition, since most of the information at issue was
identified as proprietary by NTN, no party (NTN, Timken or the
Department) would have been able to discuss the information at the
hearing regardless of our decision to disallow its discussion.
Furthermore, by reopening the record, we clearly provided NTN with the
opportunity to make any additional arguments to support its position.
Thus, we do not agree that NTN had no opportunity to present its case.
We also disagree with NTN that we never clarified which information
in its case brief we considered to be new information. Because Timken's
case brief clearly identified that information which it alleged to be
new information, NTN was on notice of the fact that the issue of
whether the information in question is new might be addressed in the
course of the hearing. In addition, immediately following the hearing
Department officials discussed with NTN the new information issue to
ensure that NTN understood the parameters of the additional comments we
requested at the hearing. Thus, at this time NTN had every opportunity
to request clarification where necessary. Furthermore, our reopening of
the record regarding this issue provided NTN with an additional
opportunity and additional time to request clarification or
explanation.
Therefore, we disagree with NTN's assertions that we mistreated NTN
and failed to extend NTN the opportunity to fully state its position
and/or to participate in the administrative review proceeding. However,
we do agree with NTN that the additional analysis we conducted in our
preliminary results, in which we found it necessary to calculate a
related-party commission rate, was unnecessary. We also agree with NTN
that certain information we initially deemed as new factual information
was not actually new information.
It has been the Department's practice to treat NTN's related-party
``commissions'' for certain purchase price sales as intra-company
transfer of funds which are not an allowable adjustment to price (see,
e.g., AFBs 93-94 at 66489). Thus, it has been our practice not to
include these ``commissions'', the transfer payment between NTN and
NBCA, in our analysis. Rather, we have consistently taken into account
the actual expenses which NBCA incurred with respect to these purchase
price sales and, based on our determination that these expenses are
those that we typically consider to be indirect expenses incurred by
sales organizations, we have treated these expenses as indirect selling
expenses and made the appropriate adjustment for these expenses in our
purchase price margin calculations for commission offset purposes (see
id.).
In light of our past treatment of NTN's related-party commission,
and the fact that the record in this review contains no evidence which
would support a change in this treatment, we have determined for these
final results that it was unnecessary for us to calculate NTN's
related-party commission rate. Rather, we have determined that, in
accordance with our previous policy regarding NTN's related-party
commission, the appropriate adjustment is not to consider NTN's intra-
company transfers as commissions or direct selling expenses, but rather
to consider as indirect selling expenses those expenses which NBCA
incurred for those services it provided for certain purchase price
sales. Because NTN's claimed U.S. related-party ``commissions'' are not
a proper basis for a COS adjustment, the actual calculation of NTN's
related-party commission rate is irrelevant to our treatment of the
related-party commission and those expenses NBCA incurred for those
services it provided for certain purchase price sales. Given the fact
that all the information Timken alleged to be new in NTN's brief
addressed the inaccuracies in our attempt to calculate NTN's related-
party commission rate, the new information issue is moot with regard to
our commission rate calculation.
However, because Timken did allege that NTN's brief contained new
information concerning the nature of the expenses NBCA incurred in
relation to certain purchase price sales, and because it is these
expense amounts that we consider in our margin calculations, we have
determined that the new information issue is relevant with regard to
our adjustment for these expenses. Therefore, for these final results
we have examined the record in order to determine whether the fact that
both scope and non-scope merchandise are reflected in NTN's exhibit B-8
downward adjustments for these purchase price-related expenses is new
information and whether there are any inaccuracies in NTN's exhibit B-8
which would cast doubt on the reliability of these reported purchase
price-related expense amounts.
As indicated earlier, NTN reported and allocated indirect selling
expenses incurred by NBCA for ESP sales. Because NBCA does not maintain
separate records for the merchandise it sells, the initial, unadjusted
expenses NTN reported in this exhibit reflect both scope and non-scope
merchandise sold by NBCA. Prior to allocating these expenses to scope
and non-scope merchandise NTN made a series of downward adjustments to
the total expense amounts, including the downward adjustments for those
expenses NBCA incurred with regard to purchase price sales. Based on
our examination of exhibit B-8 for these final results, it is clear
from the exhibit that the total unadjusted expenses reported by NTN
reflect both scope and non-scope merchandise and that all downward
adjustments NTN made to these total U.S. indirect selling expenses
reflect both scope and non-scope merchandise. Therefore, we agree with
NTN that the purchase price-related adjustments NTN claimed in exhibit
B-8 clearly reflect both scope and non-scope merchandise, and that this
fact is not new information. Furthermore, we have determined that NTN's
removal of these expenses was warranted, given that the purpose of
exhibit B-8 was to calculate ESP-related indirect selling expenses. We
also find NTN's methodology for calculating and allocating these ESP-
related indirect selling expenses to scope and non-scope merchandise
was reasonable and non-distortive. NTN adjusted total expense amounts
which reflected all merchandise by adjustments which also reflected all
merchandise. Because it was only after the adjustments were made that
NTN allocated the total expenses to scope merchandise, the fact that
the adjustments reflected both scope and non-scope merchandise did not
distort the allocation of these expenses to scope merchandise.
Therefore, based on the fact that the information NTN provided
concerning NBCA's purchase price-related expenses was not new
information, and the fact that there is no reason to doubt the nature
of these expenses as reported by NTN, for these final results we have
considered these expenses as indirect selling expenses in our purchase
price margin calculations (for commission offset purposes), rather than
making a COS adjustment for NTN's related-party ``commissions''.
Comment 17: Timken argues that the Department should recalculate
Koyo's reported U.S. selling, general and administrative expenses
(SG&A) to include those expenses incurred by American Koyo
Manufacturing
[[Page 20599]]
Corporation (AKBMC), Koyo's U.S. manufacturing affiliate.
Koyo contends that AKBMC's G&A expenses are already included as an
element of its reported further-processing expenses. Thus, Koyo argues,
to include these G&A expenses in the pool of U.S. indirect selling
expenses would obviously result in an impermissible double counting of
AKBMC's G&A expenses.
Department's Position: We agree with Koyo. In our verification of
Koyo's 1992-93 U.S. sales and further-manufacturing information we not
only verified the accuracy of Koyo's reported U.S. SG&A expenses (see
the Department's U.S. further-manufacturing verification report for
Koyo dated September 8, 1995). Therefore, if we were to include AKBMC's
G&A expenses in Koyo's U.S. indirect selling expenses, we would, in
essence, be deducting these expenses from U.S. price twice. Therefore,
we have not changed our treatment of AKBMC's G&A expenses for these
final results.
Comment 18: Timken contends that Koyo's reported Japanese pre-sale
freight expenses are misallocated because Koyo used an improper
denominator in its allocation methodology. Timken argues that, because
Koyo incurs these expenses for both domestic and export sales, but does
not record the expenses separately for export and domestic sales, the
expenses should be allocated equally to bearings sold domestically and
abroad. However, Timken asserts, Koyo's allocation methodology instead
results in greater pro rata amounts being allocated to domestic sales
in comparison to export sales. Timken contends that this is due to the
fact that Koyo's allocation denominator is the sum of a home market
total sales value which reflects the total sales value to unrelated
parties and a U.S. sales value which reflects the total transfer prices
between related parties. Timken argues that, because these two total
sales values represent different stages in the stream of commerce, the
expenses are over-allocated to home market sales and under-allocated to
U.S. sales. Timken suggests that one method to ensure an even
allocation of the expenses would be to allocate them on the basis of
the ratios of the home market and export sales to the total costs of
sales. Timken concludes that, even if the Department does not choose
this method, it still has an obligation to correct the allocation of
these expenses such that they are evenly allocated to Koyo's domestic
and export sales.
Koyo first argues that not only is its Japanese pre-sale freight
allocation methodology well-established, but it has been repeatedly
verified and accepted by the Department in numerous reviews of both the
TRBs and AFBs cases. Next, Koyo argues that it allocated these expenses
in the manner in which they were incurred. Koyo states that because the
expenses, by definition, cannot be distinguished between the two
markets, it calculated a single allocation ratio by dividing the total
expense amount, which was incurred entirely by Koyo Japan, by Koyo
Japan's total sales value for both the export and domestic markets, as
taken directly from Koyo's financial reports. Third, Koyo asserts that
Timken is incorrect in assuming that the denominator includes U.S. and
home market total sales values at different stages. Koyo points out
that the total home market sales value does not reflect only the total
sales value to unrelated parties but also accounts for the total sales
values to several related home market customers as well. Likewise, Koyo
states, the entire export sales value is based not only on sales to its
related affiliate in the United States, but includes all export sales,
including sales to unrelated parties in third-country markets. As a
result, Koyo concludes, the home market, U.S., and third-country sales
values which constitute the denominator reflect a mix of sales to
related and unrelated parties such that Koyo's allocation results in a
fair ``apples-to-apples'' comparison.
Department's Position: We agree with Koyo. In general, when a
respondent relies on an allocation to calculate its per-unit adjustment
amounts, we require that allocation to reflect the manner in which the
expenses were actually incurred (see, e.g., TRBs 92-93 at 57635 and
Certain Fresh Cut Flowers From Columbia; Final Results of Antidumping
Duty Administrative Reviews, 61 FR 42848 (August 19, 1996)). In
addition, we examine the respondent's allocation methodology to
determine if there is 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 are the
expenses 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 into the total value of the sales for which the expense was
actually incurred. Likewise, the allocation ratio should be applied to
the same sales price reflected in the denominator. For example, we
would not accept the application of an allocation ratio to gross sales
price if the denominator was calculated by totaling the value of all
sales on the basis of a net price.
In the instant case, Koyo Seiko, the Japanese parent, incurred the
pre-sale freight expenses at issue for all merchandise, whether
destined for sale to the U.S., third-country, or home market. 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 expenses
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 these expenses were incurred were Koyo Seiko's sales to all its
various customers, which encompassed a mix of related and unrelated
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.
Because Koyo Seiko's customers encompassed a mix of related and
unrelated parties in both the home and export markets, Koyo's
denominator includes sales values which reflect both transfer and
resale prices. Because Koyo Seiko's customer in the United States is
KCU, its wholly-owned U.S. affiliate, the U.S. sales transactions
relevant to Koyo's allocation are those between Koyo Seiko and KCU.
Thus, Koyo correctly included within its denominator the total value of
its sales to KCU, which were made at transfer prices. Similarly, in the
home and third-country markets Koyo Seiko sold to both related and
unrelated 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 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
[[Page 20600]]
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
unrelated customers) or transfer price (for related 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.
Therefore, because Koyo's allocation properly reflects the manner
in which, and the sales upon which, Koyo actually incurred this
expense, we do not agree with the petitioner that Koyo's allocation is
unreasonable and have made no changes to this methodology for these
final results.
Comment 19: In its response Koyo reported inventory carrying costs
(ICC) it incurred in the United States as well as the ICC it incurred
in Japan for both further-manufactured and non-further-manufactured
TRBs it sold in the United States. In those instances where the average
number of days a TRB spent in inventory in the United States was
shorter than the number of days in which KCU, Koyo's U.S. sales
subsidiary, was required to pay Koyo, we set the U.S. ICCs equal to
zero, added the number of days of KCU's payment terms to the number of
days Koyo reported for inventory in Japan, and calculated a revised ICC
for U.S. sales using this revised number of days in inventory and the
home market borrowing rate. This is in accordance with our practice to
use the interest rate applicable to the foreign parent's borrowings in
calculating U.S. ICCs when there is evidence on the record that the
foreign parent assumed the financial burden of this imputed expense
through delayed payment by the U.S. subsidiary (see, e.g., Federal-
Mogul Final Remand Results at Comment 1 and The Timken Company v.
United States, 865 F. Supp. 881 (CIT 1994)). We then applied our
recalculated factor for Japanese ICC to the transfer price between Koyo
and KCU and our recalculated U.S. ICC factor to the landed cost of the
TRB to derive per-unit ICCs for Koyo's U.S. sales.
Timken argues that, because there are inventory carrying costs
associated with that portion of merchandise which has been further
manufactured, any calculation of the inventory carrying costs for
further-manufactured merchandise should not rely on the transfer price
between Koyo and KCU, because it fails to deduct from USP those
inventory carrying costs attributable to further-manufacturing. In
addition, Timken contends that, with respect to the Department's
recalculation methodology, it incorrectly used the home market
borrowing rate, rather than Koyo's U.S. borrowing rate.
Koyo argues that the Department should not adjust USP for the
imputed carrying costs associated with its further-manufacturing costs
because, during the period that forgings are held at AKBMC's Orangeburg
facility, they are considered raw materials used in the production of
TRBs. Because the Department bases inventory carrying costs on the
value of finished goods only, Timken's argument should be dismissed. In
addition, Koyo adds that the imputed costs of AKBMC's raw material
inventory are already included in its further-manufacturing costs
through the inclusion of financing costs. As a result, Koyo argues that
to make an additional adjustment, as Timken suggests, would constitute
the double-counting of these inventory carrying costs.
However, Koyo states that if Timken is only suggesting that the
Department apply the inventory carrying cost factor for U.S. sales to
the cost of manufacturing TRBs, rather than the transfer price, Koyo
agrees. Koyo asserts that the Department should apply its recalculated
inventory carrying cost factor to the total cost of manufacturing for
both finished and further-manufactured TRBs sold in the United States
because it would allow the Department to apply the same general formula
to both the U.S. sales of finished TRBs and U.S. further-manufactured
TRBs.
Finally, Koyo argues that the Department properly used the home
market borrowing rate in its recalculation because, for those
situations in which the number of days in inventory in the United
States is less that the terms of payment between Koyo and KCU, the
applicable rate is the home market rate. However, Koyo adds, while it
agrees with the Department's recalculation methodology, the Department
erroneously applied the home market rate to the full period covered by
the terms of payment between Koyo and KCU, rather than only to the
actual number of days that the merchandise spent in inventory in the
United States.
Department's Position: We disagree with Timken and agree in part
with Koyo. As indicated above, we applied our recalculation methodology
to both Koyo's further-manufactured and non-further-manufactured U.S.
sales. However, for these final results we have determined that it is
inappropriate to recalculate the ICCs Koyo reported for its further-
manufactured sales because Koyo's methodology accurately reflects the
ICCs it incurred for these sales.
In our preliminary results we determined that it was necessary to
recalculate Koyo's reported ICCs for U.S. sales in order to account for
those instances where the foreign parent assumed the financial burden
of the imputed expenses through the delayed payment by the U.S.
subsidiary. As the record indicates, with respect to Koyo's non-
further-manufactured U.S. sales, where KCU purchases finished TRBs from
Koyo and resells the finished bearings to unrelated U.S. customers,
there were instances where the total time in inventory (in both the
United States and Japan) of the finished TRBs was shorter than the
number of days in which KCU was required to pay Koyo. Accordingly,
because Koyo incurred the financial burden of the imputed expense in
these instances, we recalculated Koyo's reported ICCs for its U.S.
sales in accordance with our practice in such instances to use the
interest rate applicable to the foreign parent's borrowings. We
therefore disagree with Timken that we should not have applied the home
market interest rate in our recalculation.
As was the case with its non-further-manufactured U.S. sales, Koyo
reported ICCs for both the time in inventory in Japan and in the United
States for the further-manufactured sales. However, the Japanese ICC
Koyo reported for its further-manufactured U.S. sales reflected the
time in inventory in Japan for forgings, while the reported U.S. ICC
reflected the time in inventory in the United States for the finished
TRBs. This is consistent with the fact that (1) Koyo treated forgings
as finished merchandise in Japan, (2) once the forgings were purchased
by AKBMC, Koyo's U.S. manufacturing subsidiary, the forgings became
part of AKBMC's raw material inventory, and (3) it wasn't until the
forgings were further processed into finished TRBs that ICCs were
incurred in the United States for finished goods. Because the forgings
became raw material inventory upon purchase by AKBMC, the ICCs for the
forgings at this point were not U.S. selling expenses, but rather
reflected and were captured in AKBMC's production costs. Because it is
our policy to make an ICC adjustment to USP for only finished goods in
inventory because unfinished goods represent production expenses rather
than U.S. selling expenses (see, e.g., Dynamic Random Access Memory
Semiconductors of One Megabit or Above From the Republic of Korea;
[[Page 20601]]
Final Results of Antidumping Duty Administrative Review, 61 FR 20216
(May 6, 1996)), it would be inappropriate to apply our recalculation
methodology to Koyo's further-manufactured sales because this
methodology would not only treat the ICCs incurred during the time the
forgings are unfinished goods as U.S. selling expenses, but it would
result in the double-counting of these expense as well. Therefore, we
have not applied our recalculation methodology to Koyo's further-
manufactured sales for these final results and have relied on Koyo's
originally reported ICC expense calculations.
With respect to Timken's argument that any calculation of Koyo's
ICC for further-manufactured sales should not rely on the transfer
price between Koyo and KCU because it excludes the ICCs incurred during
the time of further-manufacture, we disagree. As noted above, we only
calculate ICCs for finished goods. Because the forgings are clearly not
finished merchandise during the further-manufacturing process, these
expenses were properly captured in AKBMC's production costs. In
addition, we note that as a general rule we prefer ICCs to be
calculated using cost-based information because it represents the
imputed cost to the firm for storing merchandise in inventory. However,
as explained in our Federal-Mogul Final Remand Results, transfer prices
represent the actual cost to a U.S. subsidiary of acquiring the subject
merchandise and, as such, reflect the actual cost of the merchandise as
it entered the subsidiary's inventory (see Federal-Mogul Final Remand
Results at Comment 1). Because the reporting and subsequent
verification of the U.S. ICCs typically requires that the U.S.
subsidiary establish the average cost of merchandise held in inventory
as well as the total cost of merchandise sold during the time period at
issue (generally one year), subsidiaries often base such costs on
transfer prices, which are maintained in the normal course of business,
and provide an accurate basis upon which to calculate the cost to the
subsidiary of holding inventory prior to the sale to an unrelated
customer. Based on these reasons, as well as the fact that there is no
evidence on the record to impugn the reliability of Koyo's reported
transfer prices, we have determined that the use of the transfer price
as the basis for Koyo's calculation of the ICC expenses incurred in
Japan for its U.S. further-manufactured sales and as the basis for our
calculation of the ICC expense incurred by Koyo for non-further-
manufactured U.S. sales is appropriate and accurate.
Finally, we agree with Koyo that, when recalculating Koyo's ICCs
for its U.S. non-further-manufactured sales where the time in inventory
in the United States was less than the terms of payment between Koyo
Seiko and KCU, we incorrectly included within our calculation of the
revised number of days in inventory the full number of days of KCU's
payment terms to Koyo Seiko, despite the fact that the actual number of
days the merchandise spent in inventory in the United States was less
than the payment terms. As a result, we agree that our recalculation
overstates Koyo's ICCs for these U.S. TRBs sales. Therefore, for these
final results we have corrected this error by calculating the number of
days in inventory for Koyo's non-further-manufactured U.S. merchandise
by adding to the number of days the U.S. merchandise spent in inventory
in the home market the actual number of days in inventory in the United
States, rather than the number of days reflected by the full payment
terms between KCU and Koyo Seiko.
Comment 20: Timken argues that, because TRBs manufactured by
American NTN Bearing Corporation (ANBC), NTN's U.S. manufacturing
subsidiary, are maintained in ANBC's inventory until sold to NBCA, the
time in inventory at ANBC should be added to NBCA's time in inventory
in NTN's U.S. inventory carrying cost calculation for further-
manufactured merchandise.
NTN contends that Timken's argument is misplaced because NBCA
incurs all inventory expenses relative to further-manufactured
merchandise from the point ANBC completes the manufacture of the
finished merchandise.
Department's Position: We agree with NTN. Because NBCA incurs all
the inventory expenses relative to further-manufactured merchandise
from the point that ANBC completes the production of the finished
merchandise, the ICCs Timken refers to are already included in NBCA's
reported ICCs for U.S. sales. Therefore, we have made no changes to
NTN's reported ICCs for these final results.
Comment 21: Timken argues that the Department improperly treated
NSK's reported U.S. technical service expenses as indirect selling
expenses. Timken contends that not only did NSK report technical
service expenses which the Department considers to be directly related
to sales, but NSK failed to segregate its technical service expenses
into direct and indirect portions. Timken asserts that, because it is
the Department's practice to treat all of a respondent's U.S. technical
service expenses as direct selling expenses when a respondent fails to
segregate the expenses into direct and indirect portions, the
Department should make an adverse inference and treat all of NSK's
reported U.S. technical service expenses as direct selling expenses.
NSK argues that the record demonstrates that its reported U.S.
technical service expenses reflect indirect expenses such as salaries
and fringe benefits, and that any expenses which could be potentially
identified as direct selling expenses would have a de minimis impact on
the expense calculation. Furthermore, NSK asserts, the Department has
verified and accepted its reported technical service expenses in past
reviews of both the TRBs and AFBs cases (TRBs 90-92 at 64726) and
should do so again in these instant reviews.
Department's Position: We agree with Timken. Our questionnaire
specifically requests respondents to separate the fixed and variable
portions of technical service expenses because we treat fixed technical
servicing costs as indirect expenses and variable technical servicing
costs as direct expenses. Our review of NSK's response indicates that,
although NSK incurred both fixed and variable technical service
expenses, it did not separate these expenses into direct and indirect
portions. While we recognize that, in order to achieve this segregation
it would be necessary for NSK to trace certain expenses, such as travel
and travel-related expenses, to individual customer calls, the
difficulty that may be associated with such an exercise does not
relieve NSK of its responsibility to provide the Department with actual
expense information. Therefore, for these final results we have applied
BIA and treated all of NSK's U.S. technical service expenses as direct
selling expenses (see, e.g., AFBs 93-94 at 66486).
Comment 22: Timken contends that Koyo has identified an imported
component for a certain TRB, that was further manufactured and sold in
the United States during the 1992-93 POR, as an AFB part rather than as
a TRB part. Timken contends that the Department must ensure that Koyo
is properly identifying its imported TRBs components as TRB parts and
is paying the appropriate antidumping duty cash deposit rates on these
components. Furthermore, Timken asserts, given Koyo's failure to
identify this TRB part as a TRB part in its response, the Department
should apply a first-tier BIA rate to all of Koyo's reported U.S. sales
[[Page 20602]]
of the model which contains this misidentified component.
Koyo argues that, when calculating its reported further-processing
expenses for a particular TRB model, it did improperly identify that
component as non-scope merchandise. However, Koyo contends, Timken's
contention that the Department should resort to first-tier BIA to
calculate the margin for all sales of the model which contained this
component is extreme and unwarranted. Koyo claims that the only impact
of its error was to slightly inflate its reported material costs. Koyo
contends that the Department, therefore, should simply neutralize the
impact of the error by making the appropriate offsetting adjustment to
the material costs Koyo reported for the TRB model which contains this
component prior to deducting the model's further-processing costs from
USP.
Department's Position: We agree with Koyo. Not only is this the
first time Koyo has submitted its further-processing costs for TRBs
further manufactured from forgings and sold in the United States, but
there is no evidence on the record to suggest that Koyo intentionally
identified the component in question as an AFBs part or that Koyo is
paying AFBs antidumping duty cash deposit rates on entries of
merchandise subject to the TRBs antidumping duty order or finding.
Rather, the record indicates that Koyo made an error when compiling its
further-processing costs for the purpose of responding to our
questionnaire. Because information on the record allows us to correct
this error, and because the correction of the error does not entail a
substantial revision to Koyo's response, we have made the appropriate
corrections for these final results. See the proprietary version of the
Department's final results analysis memorandum for Koyo for a detailed
description of our corrections.
3. Discounts, Rebates, and Post-Sale Price Adjustments (PSPAs)
Comment 23: Timken argues that, while the Department properly
determined that NTN's discounts, Koyo's billing adjustments (BILLADJI),
and NSK's return rebates should not be treated as direct selling
expenses because they were neither reported on a transaction-specific
basis nor granted at a fixed and constant percentage of the sales upon
which they were allocated, the Department incorrectly treated these
expenses as indirect selling expenses. Timken contends that in
Torrington Company v. United States, 82 F.3d 1039 (Fed. Cir. 1996)
(Torrington), the Court of Appeals for the Federal Circuit (CAFC)
emphasized that indirect selling expenses are those types of expenses
that are not related to particular sales, but are incurred on all
sales, and concluded that expenses that are, by their nature, directly
related to particular sales cannot be treated and deducted from FMV as
indirect selling expenses. Timken asserts that, although NTN's
discount, Koyo's BILLADJI, and NSK's return-rebate reporting
methodologies prevent the Department from treating these expenses as
direct selling expenses, the record demonstrates that they are
nevertheless related to particular sales and are, therefore, direct by
their nature. Timken concludes that the Department, in accordance with
Torrington, cannot treat these expenses as indirect selling expenses;
rather, it must deny each adjustment in its entirety.
NTN argues that, because its home market discounts are not related
to particular sales and do not vary with the quantity of a particular
item sold, Torrington does not apply to these discounts and the
Department properly adjusted for the expenses as indirect selling
expenses.
Koyo argues that Timken has mischaracterized the CAFC's ruling in
Torrington by contending that the CAFC held that direct expenses may
not be allocated to all sales. Koyo argues that the Torrington decision
was in fact much more limited, deciding only that, because PSPAs were
incurred as direct expenses, the Department could not treat them as
indirect expenses under the ESP offset provision. Koyo asserts that in
Torrington the CAFC merely reaffirmed its earlier determination in
Smith Corona Group v. United Sates, 713 F.2d 1568 (Fed. Cir. 1983)
(Smith Corona), which permits the Department to accept allocated
expenses as direct selling expenses, provided that the allocation does
not distort the margins. In fact, Koyo contends, contrary to Timken's
assertion, there is nothing within the Torrington decision which
undermines the authority of the Department to treat expenses allocated
over scope merchandise as direct expenses. Koyo explains that, because
its BILLADJI adjustment was allocated across sales of only scope
merchandise, the Department must reject Timken's arguments and adjust
FMV for these billing adjustments as direct, rather than indirect,
selling expenses.
NSK contends that the evidence on the record clearly demonstrates
that its reported return rebates warrant deduction from FMV as direct
selling expenses. NSK contends that, in accordance with Torrington,
these return rebates are direct in nature. Furthermore, NSK states that
the evidence on the record also clearly demonstrates that NSK reported
these expenses as specifically as its records permitted and calculated
the adjustments to avoid inaccuracies or distortions to FMV. NSK
concludes that, because the Department allows non-distortive
allocations where transaction-specific reporting is not feasible and
because its reporting methodology reflects its actual experience, the
Department's decision to treat these expenses as indirect selling
expenses in its preliminary results was incorrect.
Department's Position: We agree in part with Timken. As a general
matter, pursuant to the law in effect prior to January 1, 1995, the
Department only accepts claims for discounts, rebates, or other PSPAs
as direct adjustments to price if actual amounts are reported for each
transaction (see, e.g., AFBs 93-94 at 66498). One way in which a
respondent may report actual adjustment amounts is if the PSPA is
reported on a transaction-specific basis. Because allocated price
adjustments can have the effect of distorting individual prices by
diluting the PSPAs received on some sales, inflating them on other
sales, and attributing them to still other sales that did not actually
receive any adjustment at all, such allocations do not result in the
actual amount of the adjustment being reported for each individual
sale. Rather, allocations have the effect of partially averaging
prices. Just as we do not allow respondents to report average prices,
we do not allow respondents to average direct additions to or
subtractions from price. However, if the PSPA is allocated, we consider
the actual amount of the adjustment to be reported and will treat the
PSPA as a direct selling expense if the respondent demonstrates that
the PSPA was granted as a fixed and constant percentage of the sales
price of all transactions for which it was reported and to which it was
allocated. We do so because such an allocation does not distort the
amount of the adjustment the respondent granted because the same
percentage adjustment applies to all sales. This policy is consistent
with the policy we established and followed in numerous reviews of both
the TRBs and AFBs orders (see, e.g., TRBs 92-93 at 57640 and AFBs 93-94
at 66498).
In the past, if a respondent allocated a PSPA such that it was
limited to scope merchandise, but did not result in the actual amount
of the adjustment being reported for each sale (i.e., it was reported
on a customer- or product-specific basis) we treated the PSPA as an
indirect expense and adjusted FMV accordingly. However, in light of
[[Page 20603]]
Torrington, in which the CAFC determined that we cannot treat a PSPA as
an indirect selling expense when it is, by its nature, a direct selling
expense, we no longer treat improperly allocated home market price
adjustments as indirect selling expenses, but instead disallow negative
(downward) adjustments in their entirety. However, we will continue to
treat positive (upward) home market price adjustments (e.g., positive
billing adjustments that increase the final sales price) as direct
selling expenses in our analysis. The treatment of positive billing
adjustments as direct selling expenses is appropriate because
disallowing such adjustments would provide an incentive to a respondent
to report positive billing adjustments on an allocated basis in order
to minimize their effect on the margin calculations. That is, if we
were to disregard positive billing adjustments which would be upward
adjustments to FMV, respondents would have no incentive to report these
adjustments on a transaction-specific basis (see AFBs 93-94 at 66498).
We note that this policy is in direct accordance with Torrington
and Smith Corona which hold that we must disallow home market price
adjustments that are allocated in a manner that does not allow us to
separate expenses incurred on sales of scope merchandise from those
incurred on sales of non-scope merchandise. Our policy incorporates
this decision in that we do not allow allocated price adjustments
except for those granted at a fixed and constant percentage of the
sales price on all transactions for which the adjustment was reported.
If a respondent grants and reports a PSPA as a fixed percentage of the
sales to which it pertains, the fact that this pool of sales may
include non-scope merchandise does not distort the amount of the
expense the respondent granted and reported on sales of subject
merchandise because the same adjustment percentage applied to both
scope and non-scope merchandise (see id.).
Therefore, contrary to Koyo's assertion that we have based our
policy on an overly narrow interpretation of the CIT and CAFC rulings
requiring us to reject allocated PSPAs in all cases, our policy allows
for the acceptance of allocated PSPA amounts as direct selling expenses
when a respondent demonstrates that no distortion has occurred as a
result of its allocation. The only manner in which an allocated PSPA
would not result in distortion is if it was granted and reported as a
fixed and constant percentage of the sales to which it has been
allocated.
For these final results we have applied this policy to NTN's home
market discounts, Koyo's home market BILLADJI adjustment, and NSK's
return rebates and have made the following determinations:
First, concerning NTN's discounts, NTN did not report these
discounts on a transaction-specific basis, but, rather, reported the
adjustments on a product-or customer-specific basis. Furthermore, NTN
did not grant and report these discounts as a fixed and constant
percentage of sales. Therefore, because NTN's discounts are clearly
direct in nature (i.e., they are directly related to particular sales
rather than related to all sales), but were not allocated
appropriately, we have disallowed this adjustment to FMV for these
final results (see AFBs 93-94 at 66501).
Concerning Koyo's BILLADJI adjustment, while Koyo reported this
adjustment based on a scope-specific allocation, Koyo did not report it
on a transaction-specific basis and we found no evidence that Koyo
granted the adjustment as a fixed and constant percentage of the sales
for which it was reported. As a result, because this allocation does
not result in the actual amount of the adjustment being reported for
each transaction, we have, in accordance with our established practice,
denied all negative BILLADJI adjustments in their entirety. However,
because Koyo also reported positive BILLADJI adjustments, in accordance
with our policy stated above, we have treated these as direct selling
expense adjustments to FMV.
With respect to NSK's return rebates, we have determined for these
final results that NSK's return rebates are promotional expenses,
rather than price adjustments, because NSK grants these rebates to
promote sales made by distributors. Because NSK demonstrated in its
response that it incurred and reported these expenses on a model-
specific basis and tied these expenses to subject merchandise, we
consider the expenses to be direct selling expenses and have adjusted
FMV accordingly.
Comment 24: Timken argues that the Department improperly treated
NSK's lump-sum PSPAs as indirect selling expenses. Timken contends that
the CIT has clearly stated that the Department may not allow an
adjustment to FMV for any rebates allocated on the basis of sales of
non-scope merchandise (Torrington Co. v. United States, 818 F. Supp.
1563 (CIT 1993)). Timken contends that the record demonstrates that NSK
did not report its lump-sum PSPAs on the basis of sales of in-scope
merchandise only, and, as a result, the Department must deny this
adjustment to FMV in its entirety.
Citing Torrington, NSK contends that the CAFC has clearly
determined that this type of PSPA constitutes a direct selling expense.
Furthermore, NSK contends, it has submitted evidence demonstrating that
the monthly purchasing patterns of customers receiving these
adjustments are relatively stable for purchases of scope and non-scope
merchandise. NSK asserts that, because these customers consistently buy
about the same percentage of scope and non-scope products from month to
month, without any variance, the PSPA granted is fairly apportioned to
scope sales and does not distort FMV. Thus, NSK contends, its method
for reporting lump-sum PSPAs accurately calculates the per-unit
adjustment for sales of scope merchandise and the Department must treat
these expenses as direct selling expenses.
Department's Position: We agree with Timken. We have denied this
adjustment for these final results because it is a direct price
adjustment and NSK failed to tie the PSPA to the particular sales
affected by the adjustment. NSK explained in its response that it
granted these lump-sum PSPAs as a fixed percentage of a certain group
of sales. However, rather than tying the adjustment to the particular
transactions for which the adjustment was incurred, NSK allocated the
lump-sum PSPAs by dividing the total amount of the lump-sum PSPAs it
paid to a customer during the POR by the total sales value of all
merchandise (scope and non-scope) sold to the customer during the POR.
As a result, NSK allocated the PSPAs across a broader base of sales
than those for which it was granted. Accordingly, we have denied this
adjustment in its entirety for these final results.
Comment 25: Timken contends that the record demonstrates that NSK's
home market early payment discounts are, by their nature, directly
related to sales. However, Timken asserts, NSK did not report these
discounts on a transaction-specific basis and its allocation of these
discounts included non-scope merchandise. Timken argues that, in an
effort to eliminate the flaws in NSK's reporting methodology, the
Department attempted to recalculate NSK's early payment discounts.
However, Timken contends, not only is it unclear how the Department's
recalculation methodology accurately established the payment period for
each customer receiving such a discount, but, because the recalculation
is neither transaction-specific nor limited to scope
[[Page 20604]]
merchandise, it also fails to result in the derivation of the actual
discount earned on individual transactions of scope merchandise.
Therefore, Timken concludes, the Department should abandon its attempts
to recalculate NSK's discounts and should deny the adjustment in its
entirety for these final results.
NSK argues that, while non-scope merchandise was included in both
its original allocation and the Department's recalculation, the record
clearly demonstrates that it granted these discounts as a fixed and
constant percentage of the sales to which they were allocated. As a
result, NSK claims, there is no need for the Department to remove non-
scope merchandise from its recalculation. Furthermore, NSK argues, the
Department's recalculation accurately assigned the applicable payment
period to each customer receiving such a discount. In addition, NSK
asserts, because the record demonstrates that customers' payment
patterns were stable throughout the POR, the Department's recalculation
resulted in accurate per-transaction discount amounts for scope
merchandise. As a result, NSK concludes, the Department should not
abandon its recalculation methodology and should continue to adjust FMV
for these discounts as direct selling expenses.
Department's Position: We agree with NSK. The record demonstrates
that NSK granted a discount to those customers who remitted payment
earlier than the terms of payment for that particular customer called
for. The record also reveals that NSK granted different rates depending
upon how early the payment was received. In other words, NSK had in
place a rebate schedule which offered a different discount rate on the
basis of the payment category, such that when NSK received a payment,
for example, zero to thirty days early NSK granted one discount rate,
while when NSK received a payment thirty to sixty days early, it
granted a different discount rate. The record also indicates that NSK
offered the same discounts equally to sales of both scope and non-scope
merchandise; thus, regardless of the merchandise, whenever payment was
received early, NSK granted the applicable discount rate on the basis
of the payment category. In addition, the record demonstrates that NSK
periodically changed the discount rates for each payment category
throughout the POR such that, even if a customer consistently paid the
same number of days early every month in the POR, it received different
discount rates during the POR. Finally, the record demonstrates that
each customer had a stable payment pattern. In other words, each
customer remitted payment within the same number days early each month
such that it consistently received the discount rate in effect for the
same payment category.
NSK calculated its reported discount amounts by dividing the total
discounts paid to a customer during the POR by the total sales value of
merchandise sold to that customer during the POR. As a result, even
though each customer's payment category remained stable over time, the
discount rate NSK reported for a customer reflected an average POR
percentage rather than the actual rate granted to the customer at the
time the actual transaction was made. In other words, NSK averaged a
customer's discount rate and applied that rate to each transaction
rather than the actual rate granted. In our preliminary results, based
on our review of the information NSK submitted in regard to these
discounts, we determined that information on the record enabled us to
remove this distortion. Therefore, we recalculated NSK discounts as
follows:
First, because a customer's payment category was stable over time,
it was mathematically possible to determine the payment category for a
customer for a given transaction by dividing the discount amount
reported for the transaction by the unit price. By comparing this ratio
to the individual POR averages NSK reported for each customer, we were
able to ascertain the payment category for that customer. For example,
if a customer consistently remitted payment 0-30 days early and the
discount rate for this category was 1.5 percent for the first half of
the POR and 2.0 percent for the second half of the POR, the average POR
rate NSK would have reported for the transaction would be 1.75 percent.
If we divided the discount amount reported for a transaction by the
unit price of that transaction and arrived at 1.75 percent, we would
know that that transaction fell in the zero to thirty day payment
category. However, because the discount rate NSK applied to the unit
price reported for a transaction reflected the average POR rate for the
customer (1.75 percent) and not the actual discount rate granted during
the period in which the transaction took place (either 1.5 percent or
2.0 percent), NSK's allocation failed to result in actual transaction-
specific discounts. Therefore, after determining the payment category
for each transaction, we applied a revised discount rate to that
transaction depending upon the date of the transaction and applicable
payment category discount rate. In this way, we applied to each
transaction the discount rate which actually applied to the sale.
We disagree with Timken that this recalculation suffers from the
same flaws as NSK's original methodology. Because NSK granted the same
discount rate on sales of all merchandise (i.e., granted the discount
as a fixed and constant percentage of all applicable sales prices), the
inclusion of non-scope merchandise in our allocation is non-distortive.
Furthermore, our methodology clearly results in the application of
transaction-specific discounts because we apply the discount rate
granted to a customer within a given time period to sales to that
customer within the corresponding time period. Therefore, we have not
altered our recalculation of NSK early payment discounts for these
final results and have continued to treat these discounts, as
recalculated, as direct selling expenses.
Comment 26: NSK argues that the record demonstrates that it granted
and reported its distributor incentives as a fixed and constant
percentage of all applicable sales. Furthermore, NSK asserts that in a
recent remand determination the Department determined that, because
NSK's distributor incentives were granted and reported as a fixed
percentage of all sales, both scope and non-scope, NSK's allocation was
reasonable and non-distortive, and the Department subsequently treated
the adjustment as a direct selling expense (Final Results of
Redetermination Pursuant to Remand, Torrington Co. v. United States,
Court No. 92-07-00483 (CIT 1995), aff'd Slip Op. 96-85 (CIT 1996)). NSK
concludes, because there is no difference in the methodology it used in
this review and the one at issue in the remand, the Department should
treat these distributor incentives as direct selling expenses in these
reviews as well.
Timken contends that there is no evidence on the record
demonstrating that the sales upon which NSK calculated its incentive
rebates included only sales of subject merchandise. Therefore, Timken
concludes, because the Department cannot allow the inclusion of non-
scope merchandise when calculating adjustments to FMV, the Department
should continue to deny this adjustment for these final results.
Department's Position: We disagree with NSK. Based on our
reexamination of the record, we have determined that, while NSK granted
its distributor incentives as a fixed and constant percentage of its
distributors' gross sales, NSK did not allocate these expenses on the
basis of this same group of sales. Rather, NSK allocated the
[[Page 20605]]
expenses on the basis of its sales to its distributors. Therefore,
while NSK may have incurred the expenses as a fixed and constant
percentage of its distributors' sales, NSK provided no evidence
indicating that the adjustment was granted as a fixed and constant
percentage of its sales to its distributors (the sales upon which NSK
actually allocated the expense for the purpose of its response).
Therefore, we have denied this adjustment in its entirety for these
final results.
Comment 27: Fuji argues that the Department incorrectly disallowed
its claimed adjustment for home market rebates. First, Fuji explains
that it allocated its rebates to scope merchandise using both scope and
non-scope merchandise because the rebates were incurred on the basis of
both scope and non-merchandise. As a result, Fuji asserts, its records
do not provide a separate breakout for TRB rebates alone, and it is
unable to provide TRB-specific rebate amounts. However, Fuji adds,
under its rebate program the same rebate amounts are paid on scope and
non-scope merchandise regardless of whether the merchandise is scope-
or non-scope. Therefore, Fuji asserts, its allocation methodology
accurately allocates the rebates to TRBs and the Department should
adjust FMV for these expenses as direct selling expenses.
Fuji further contends that, even if the Department does not agree
that these rebates warrant a direct adjustment to FMV, the Department
must nevertheless adjust for these rebates as indirect selling
expenses. Fuji asserts that the Department routinely includes the
amount of a disallowed rebate within home market indirect selling
expenses even in situations where the rebate amount includes both scope
and non-scope merchandise.
Timken argues that the Department properly denied Fuji an
adjustment for its home market rebates because the record demonstrates
that Fuji provided rebates for selected periods of time and, as a
result, the POR encompasses several rebate periods. Timken asserts
that, while it may be the case that in a given period Fuji granted the
same rebate for both scope and non-scope merchandise, the existence of
multiple rebate periods indicates that, if the recipient of the rebate
sold only non-scope merchandise within a period and earned a large
rebate, but in the next period sold both scope and non-scope
merchandise, the rebate for the non-scope merchandise would be
allocated to all sales even though it was only earned for non-scope
merchandise. As a result, Timken concludes, the Department must deny
this adjustment as it did in its preliminary results.
Department's Position: We agree in part with Timken. The record
indicates that Fuji offered two different types of rebate programs to
its dealers. Fuji calculated the rebate amounts it reported for each
transaction by dividing the total amount of rebate paid to each dealer
during the POR by the total sales to the dealer during the POR. As a
result, Fuji reported its rebates on a customer-specific rather than a
transaction-specific basis. Therefore, in order for us to accept Fuji's
allocation, Fuji must demonstrate that it granted its rebates to each
customer at a fixed and constant percentage of its sales of all
products, both scope and non-scope. We examined the record to determine
if, as Fuji claims, its rebates were granted and reported as a fixed
and constant percentage of all sales such that the inclusion of non-
scope merchandise in its denominator would not produce distortions.
Fuji noted several times that its rebates were granted at a fixed and
constant percentage. However, we are unable to find any evidence on the
record supporting this contention. Furthermore, it is unclear from
Fuji's response whether there are multiple rebate periods in a POR,
and, if so, whether the rebate percentage granted to a customer was the
same for each period. Given that Fuji calculated an overall POR rebate
percentage for each dealer, if we are unable to determine if multiple
rebate periods existed within the POR, we are unable to determine
whether the POR rebate percentage Fuji reported for each transaction
truly reflects the rebate percentage applicable to each transaction.
Therefore, because the information Fuji submitted is insufficient for
the purpose of determining whether the rebate percentage reported for
each dealer reflected the actual rebate percentage applicable to a
given transaction to that dealer, we have not treated these rebates as
direct selling expenses.
Finally, because the record demonstrates that Fuji's rebates are
direct by their nature, in accordance with Torrington we cannot treat
these rebates as indirect selling expenses. Therefore, for these final
results we have continued to deny Fuji's rebate adjustments in their
entirety.
4. COP and CV
Comment 28: Timken argues that, in accordance with Certain Hot-
Rolled, Cold-Rolled, Corrosion-Resistant and Cut-to-Length Steel Flat
Products from Korea (58 FR 37176) and Certain Stainless Steel Wire Rods
from France (58 FR 68865), the Department should exclude from its
profit calculation for CV those sales to related parties which were not
at arm's length.
NTN argues that nothing in the statute suggests that the Department
must examine whether sales were made at arm's length for the purposes
of calculating CV. NTN argues that the Department did not exclude such
sales in its calculation of CV profit for NTN in the 1992-93 TRBs
review and nothing on the record in this review supports any such
change.
Koyo argues that, because neither the statute nor case law requires
the pool of sales for determining FMV based on price-to-price
comparisons to be the same as the pool of sales used to calculate
profit for CV, the Department has the authority to base CV profit on
all home market sales. Furthermore, Koyo asserts, because section
773(e)(1)(A) of the Act specifies that profit is to be ``equal to that
usually reflected in sales of merchandise of the same general class or
kind as the merchandise under consideration,'' the statute clearly
requires CV profit to be calculated on the basis of all sales of the
general class or kind of merchandise under consideration. Moreover,
citing to Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et. al.; Final Results of Antidumping
Duty Administrative Reviews, 60 FR 10900, 10922 (February 28, 1995)
(AFBs 92-93), Koyo contends that the Department does not support the
exclusion of all related-party sales that fail the arm's-length test
from the CV profit calculation. Thus, Koyo concludes, the fact that
sales may fail the arm's-length test does not warrant the automatic
exclusion of the sales from the CV profit calculation.
Department's Position: We agree with Timken in part. As explained
in numerous reviews of the AFBs orders (see, e.g., AFBs 93-94 at
66493), section 773(e)(2) of the Act provides that a transaction
between related parties may be ``disregarded if, in the case of an
element of value required to be considered, the amount representing
that element does not fairly reflect the amount usually reflected in
sales in the market under consideration.'' Our arm's-length test
determines whether prices to related parties are equal to, or higher
than, sales prices to unrelated parties in the same market. Therefore,
this test is not dispositive of whether an element of profit on
related-party sales is somehow not reflective of the amount usually
earned on sales of the merchandise under consideration.
Related-party sales that fail the arm's-length test do give rise to
the possibility, however, that certain elements of value,
[[Page 20606]]
such as profit, may not fairly reflect an amount usually earned on
sales of the merchandise. For these final results we considered whether
the amount for profit on sales to related parties which failed the
arm's-length test was reflective of an amount of profit usually
experienced on sales of TRBs. To do so, we compared profit on sales to
related parties that failed the arm's-length test to profit on sales to
unrelated parties. If the profit on sales to related parties varied
significantly from the profit on sales to unrelated parties, we
disregarded the related-party sales when calculating profit for CV.
Specifically, we first calculated the profit on sales to unrelated
parties. If the profit on these sales was less than the statutory
minimum of eight percent, we used the eight-percent minimum in the
calculation of CV. If the profit on these sales was equal to, or
greater than, the eight-percent minimum, we calculated profit on the
sales to related parties that failed the arm's-length test and compared
it to the profit on sales to unrelated parties as described above. If
the profits on such sales to related parties varied significantly from
the profits on sales to unrelated parties, we excluded those related-
party sales when calculating profit for CV .
We note that this is identical to the steps we took in AFBs 92-93
at 10922 and AFBs 93-94 at 66493. However, these TRBs reviews mark the
first time since our adoption of this policy that we needed to conduct
this analysis in the TRB cases. We did not apply this policy in TRBs
92-93 because we found that none of the respondents' related-party
sales failed the arm's-length test. As a result, the issue was moot for
those reviews. Therefore, we do not agree with NTN that, because we
have not applied this policy in past TRBs reviews, we have no basis to
do so in these instant reviews. Rather, because we found non-arm's-
length related-party sales for those firms for which we based FMV on CV
(NTN, NSK, and Koyo), we have applied our policy as explained above and
made changes, where appropriate, in our respective company-specific
analyses.
Comment 29: NSK claims that the Department violated the antidumping
law by never establishing the grounds for collecting cost data from
related-party suppliers. NSK contends that, pursuant to section
773(e)(3) of the Act, the Department has the right to disregard sales
prices NSK paid to related-party suppliers in favor of the supplier's
COP only if (1) the Department has reasonable grounds to believe or
suspect that an amount represented as the value of such input is less
than the COP of the input, and (2) the information being requested is
for a ``major'' input. NSK argues that, because the language in section
773(e)(3) of the Act is identical to that in section 773(b) of the Act
(the provision which grants the Department the authority to conduct
cost investigations), the same threshold standard is applicable. In
other words, NSK argues that, because the petitioner never alleged that
NSK purchased an input from a related supplier at less than COP, and
because the Department never alleged or substantiated that transfer
prices from related suppliers were less than COP, let alone whether the
input was a ``major'' input, reasonable grounds for the collection of
this data did not exist.
NSK further contends that the Department has no other statutory
authority for requesting related-supplier COP data and that there is no
evidence on the record to support the Department's disregard of NSK's
related-supplier transfer prices. Therefore, NSK concludes, the
Department should not use this illegally-obtained related-supplier
information and should strike it from the record of these reviews.
Timken argues that the Department's preliminary results decision
regarding NSK's related-supplier transfer prices was justified and in
accordance with the law. Timken contends that the standard for
analyzing below-cost sales pursuant to section 773(b) of the Act does
not require any allegation by domestic parties. Likewise, accepting
NSK's position that the identical language of sections 773(e)(3) and
773(b) constitutes the application of the same standard, Timken
maintains that there is therefore no requirement that the domestic
party has the burden of submitting evidence of below-cost related-party
supplier transfer prices. In fact, Timken maintains, the respondent
should bear the responsibility of providing such evidence because
related-party input transfers are already ``suspect'' and domestic
producers simply do not have access to the respondent's books and
records, or access to what inputs were purchased from related
suppliers. Timken adds that, given the nature of TRB production, it is
also nearly impossible to submit data regarding the production costs at
every stage of production that might be a transfer point. Furthermore,
the petitioner states that to require allegations from the domestic
party as a prerequisite for the Department to investigate would
effectively curtail the inherent authority of the Department to conduct
below-cost sales and related-party transfer price investigations.
Timken also maintains that the Department's collection of NSK's
related-supplier transfer prices was justified because NSK has engaged
in below-cost selling. Timken argues that, given that NSK does sell at
below-cost prices, it is reasonable to infer that its losses are passed
back to related suppliers which are forced to transfer inputs at a
loss. In addition, Timken asserts that there is ample evidence on the
record for these reviews supporting the Department's decision to
disregard NSK's related-party transfer prices.
Finally, Timken argues, because NSK's arguments were rejected by
the CIT in NSK Ltd. v. United States, 910 F. Supp. 663 (CIT 1995)
(NSK), the Department should adhere to its preliminary determination
and adjust NSK's reported COP and CV to reflect the actual COP of
related-party inputs. However, Timken notes, while the Department
indicated in its preliminary results that it did adjust NSK's COP and
CV to reflect the actual COP of related-party inputs, it is not
apparent from the Department's preliminary results computer program
that it did so. Timken, therefore, requests that the Department ensure
that NSK's COP and CV are properly adjusted for these final results.
Department's Position: We disagree with NSK. As we explained in
detail in TRBs 92-93 at 57643, two separate sections of the Act direct
the Department to disregard transfer prices for certain transactions:
section 773(e)(2) which directs us to disregard transfer prices if the
transfer prices for ``any element of value'' do not reflect their
normal market value, and section 773(e)(3) which directs the Department
to disregard transactions if the transfer prices for ``major inputs''
are below the COP.
For CV purposes, pursuant to section 773(e)(2) of the Act, in
general we determine whether the transfer prices for any element of
value were below the normal market value of that element. Pursuant to
the statute, we do not use transfer prices between related companies to
value any element of value if such prices do not fairly reflect the
amount usually reflected in sales of the merchandise under
consideration in the market under consideration. This is sometimes
referred to as the requirement for an ``arm's-length'' price. To
determine whether the transfer prices reflect arm's-length prices, we
normally compare the transfer price to (1) the prices related suppliers
charge to unrelated parties, or (2) the prices charged by unrelated
suppliers to the respondent. If we disregard a transaction because the
respondent
[[Page 20607]]
cannot demonstrate that the transaction was made at arm's length, and
there are no other transactions available for consideration, then we
must rely on the ``best evidence available'' to determine the value of
the element. In other words, if there are no arm's-length prices for
components to compare to transfer prices, ``Commerce generally use[s]
the cost of the components as representative of the value reflected in
the market under consideration'' (see Final Determinations of Sales at
Less Than Fair Value: Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From the Federal Republic of Germany et
al., 54 FR 18992 (1989) (AFBs LTFV)). In that situation we must
determine whether to use the reported cost data as the ``best evidence
available.'' Otherwise, we cannot fulfill our statutory obligation of
valuing elements of value for CV purposes.
NSK erroneously argues that, before we can request cost data for
inputs, we must have a specific and objective basis for suspecting that
the transfer price paid to a particular related supplier for a major
input is below the related supplier's COP. NSK's argument is based on
the erroneous assumption that we must rely upon section 773(e)(3) of
the Act to request information regarding the cost of components parts.
As demonstrated above, section 773(e)(3) of the Act simply provides an
alternative basis for requesting cost information. However, there also
exists a basis for examining whether the transfer prices of major
inputs were below cost under section 773(e)(3). We agree with the
petitioner's argument that, when a domestic party files a COP
allegation, it does not necessarily have the information necessary to
allege that a particular input or element of value from a related party
is priced below COP. Therefore, the petitioner cannot necessarily make
COP allegations regarding specific related-party inputs. As a result,
we consider our initiation of a cost investigation concerning home
market sales a specific and objective reason to believe or suspect that
the transfer price from a related party for any element of value may be
below the related suppliers' COP.
In accordance with our standard practice (see, e.g., Final
Determination of Sales at Less Than Fair Value: Certain Carbon Steel
Butt-Weld Pipe Fittings From France, 60 FR 10538 (February 27, 1995)),
we asked NSK to provide cost data for inputs produced by related
parties. NSK complied with our request for information and supplied the
transfer prices and cost of production of inputs from its related
parties. The record for these reviews demonstrates that in its response
NSK also submitted a comparison of the weighted-average transfer prices
for those inputs NSK purchased from both related and unrelated
suppliers. By this comparison NSK intended to show the arm's-length
nature of its transfer prices where inputs were purchased from both
related and unrelated suppliers. This comparison, however, was not
useful in determining whether related-supplier transfer prices were at
arm's length because it listed only a limited number of instances where
NSK purchased an identical or similar input from both a related and
unrelated supplier. Because we could not rely on NSK's related-party
transfer price comparison, we examined in detail the submitted COP and
transfer prices for all of NSK's related suppliers. We found that,
contrary to NSK's claim, transfer prices from related suppliers were
often below the suppliers' COP for that input. Because NSK was unable
to demonstrate that elements of value included in its submitted CV
calculations were reflective of their normal market value, the
submitted related-party cost information was required by law. Hence, we
did not strike NSK's reported related-party cost information from the
record. On the contrary, for these final results we relied on NSK's
submitted related-party cost information if the COP for the input
exceeded the transfer price NSK reported for the input.
Furthermore, as indicated by Timken, in NSK the CIT upheld our
authority to request cost data from a company's related suppliers. The
CIT determined that ``1677b(e)(2) does not limit Commerce's authority
to request COP data pursuant to 1677b(e)(2) * * * . [T]he purpose of
1677b(e)(3) is to permit Commerce to use the best evidence available
when it has reasonable grounds to suspect below cost sales occurred.
There is no support in the legislative history of 1677b(e)(3) for the
claim that Commerce may not request COP data for other purposes' (see
NSK at 669).
Finally, concerning Timken's assertion that it is unclear whether
our preliminary results computer program for NSK adjusts NSK's reported
COP and CV to take into account related-party transfer prices for
inputs which were below the COP of the input, we note that our
preliminary results computer program for NSK clearly makes this
adjustment. We adjusted NSK's reported COP values in lines 79 and 80
and NSK's reported CV values in lines 570 through 591.
Comment 30: NTN argues that, when the Department recalculated NTN's
COP and CV values to reflect those related-party inputs for which NTN's
transfer prices were less than the COP of the input, the Department
applied an inappropriate allocation ratio. NTN asserts that, in an
attempt to calculate the ratio for the total excess of COP over
transfer price for related-party inputs, the Department used a
denominator based on the sum of transfer prices for those related-party
inputs where transfer price was below COP rather than the sum of all
related-party input transfer prices.
Timken asserts that, while the ratio NTN describes in its comments
could be used in the Department's recalculation, the record contains
neither the quantity data for those inputs transferred below COP nor
the identification of which TRBs included related-party inputs. As a
result, Timken claims, the Department is unable to determine the actual
sum of the difference between COP and transfer price for all parts
purchased by NTN and has, instead, used a reasonable proxy for this
absent information.
Department's Position: We agree with NTN. As explained in our
preliminary results analysis memorandum for NTN dated April 12, 1996,
NTN submitted COP and CV values which reflected the value of related-
party inputs based on transfer price. Based on a schedule submitted by
NTN's related supplier, we determined that a significant number of
inputs were sold to NTN at transfer prices below COP. Therefore, we
calculated a percentage adjustment that, when applied to NTN's reported
COP and CV values, would increase COP by an amount reflective of the
difference between COP and transfer price where transfer price was less
than COP. The first step of our calculation of this percentage
adjustment involved the derivation of the total difference between COP
and transfer price for all related-party inputs where transfer price
was below COP, and the expression of this difference as a percentage of
transfer price. It is the denominator we used to calculate the amount
of COP that exceeded transfer price that NTN objects to based on the
assertion that it reflects only a portion of, rather than the total sum
of, transfer prices. Based on our reexamination of our calculation for
these final results we have determined that the denominator in question
is inconsistent with the methodology of our overall COP/CV adjustment
calculation and have made the appropriate changes to our calculation
for these final results. Please see the proprietary version of our
final results analysis memorandum for NTN for a detailed explanation of
these changes.
Comment 31: Timken states that in the Department's preliminary
results for
[[Page 20608]]
Koyo the Department calculated modified home market indirect and direct
selling expenses for use in those comparisons where the Department
based FMV on CV. Timken argues that, because Koyo's originally-reported
CV values included expense amounts different from the revised expense
amounts the Department deducted from CV to calculate FMV, the
Department should have deducted the originally-reported expense amounts
from CV and added its revised expenses amounts to the CV calculation
prior to deducting the revised expenses from CV when calculating FMV.
Department's Position: We agree with Timken. As explained in our
preliminary results analysis memoranda for Koyo, for those comparisons
in which we based FMV on CV we deducted home market direct and indirect
selling expense from CV. Because Koyo reported in its response the
overall direct selling expense ratio and the overall indirect selling
expense ratio it used to calculate its reported COP and CV, we
recalculated these ratios to include Koyo's reported home market pre-
sale and post-sale inland freight expense and used these recalculated
ratios to calculate the amount of direct and indirect expenses to be
deducted from CV. We recalculated Koyo's overall ratios because, in
accordance with the law in effect prior to January 1, 1995, where we
adjust for home market movement expenses under the circumstance-of-sale
provision of 19 CFR 352.56 and the ESP offset provision of 19 CFR
353.56 (b)(2), we treated Koyo's reported home market pre-sale freight
expenses as indirect selling expenses and Koyo's reported home market
post-sale freight expenses as direct selling expenses. Because Koyo's
overall direct selling expense ratio did not reflect home market post-
sale freight and Koyo's overall indirect selling expense ratio did not
include home market pre-sale freight, in order to ensure the proper
application of our home market freight expense policy when FMV was
based on CV, we determined that it was necessary to recalculate Koyo's
reported indirect and direct selling expense ratios to reflect these
expenses. However, Koyo's originally reported CV values relied on the
ratios Koyo originally reported in its response. As a result, we when
we deducted our calculated indirect and direct selling expenses from
CV, we adjusted for expenses which were not originally included in CV.
This had the effect of artificially lowering CV for our margin
calculations. Therefore, for these final results, prior to deducting
our calculated home market indirect and direct selling expenses from
CV, we first recalculated Koyo's reported CV to reflect its home market
pre-sale and post-sale freight expenses.
Comment 32: NTN argues that, when calculating the overall weighted-
average ratios for NTN's home market direct and indirect selling
expenses, which the Department used to derive the amount of direct and
indirect selling expenses to be deducted from CV in those comparisons
in which FMV was based on CV, the Department made two errors. First,
NTN claims that the ratios the Department calculated in the beginning
of its margin calculation computer program, as contained on the first
page of the preliminary results computer program printout, are not the
same as the ratios the Department used in a subsequent portion of the
computer program. Second, NTN claims that the Department calculated a
single overall weighted-average indirect selling expense ratio which
reflected all home market sales, rather than taking into account
exhibit D-11 of NTN's response where NTN calculated three separate
ratios reflecting the differences in indirect selling expenses NTN
incurred for sales to each of its three home market levels of trade
(LOT).
Department's Position: We agree with NTN that, when transferring
the results of our calculation of the overall weighted-average ratios
for certain of NTN's home market direct and indirect selling expenses
(as they appeared on page 1 of our preliminary results margin
calculation computer program printouts for NTN) to a subsequent portion
of our preliminary results computer program, we incorrectly transcribed
these ratios. Therefore, for these final results we have corrected this
inadvertent error. However, we do not agree with NTN that the single
overall weighted-average ratio we calculated for its home market
indirect selling expenses should not have been a single ratio, but,
rather, three separate ratios reflecting the difference in indirect
selling expenses NTN incurred as a result of the differences in its
three home market LOTs. The LOT-specific indirect selling expenses
ratios NTN refers to in exhibit D-11 of its response were derived
directly from exhibit C-5 of its response, where NTN allocated the
indirect selling expenses it incurred in the home market during the POR
according to its LOTs. While we agree that NTN had three distinct LOTs
in the home market, we do not agree that it incurred its home market
indirect selling expenses differently according to LOT due to the
difference in its LOTs such that LOT-specific allocations are
warranted.
The CIT addressed the issue of LOT-specific expense allocations in
the Timken Company v. United States, 930 F. Supp 621 (CIT 1996)
(Timken). This decision not only has general relevance, but it is
especially significant for the instant reviews because the CIT ruled on
the issue of LOT-specific expense allocations specifically with regard
to NTN and the 1990-91 and 1991-92 TRBs reviews. Recognizing that there
may be a difference between a respondent's methodology for response
purposes which allocates expenses to a LOT and how a respondent
actually incurs the expenses due to differences when selling to each
LOT, the CIT clearly stated that, in order for the Department to accept
NTN's LOT-specific expense allocations, NTN's expenses must
``demonstrably vary according to level of trade'' (see Timken at 628).
In other words, the fact that a respondent allocates according to LOT
in an antidumping questionnaire response does not indicate whether a
respondent actually incurred the expenses differently due to
differences in LOTs. Rather, in order to determine if a respondent's
expenses demonstrably varied according to LOT, additional narrative and
quantitative evidence must exist which demonstrates that the respondent
either performed different activities/functions or performed
activities/functions to a different degree when selling to each LOT
such that the amount of expenses incurred for the sale of the identical
merchandise to different LOTs would vary. Based on our review of the
record for this review, we have determined that NTN did not provide any
evidence demonstrating that it actually incurred its reported home
market indirect selling expenses differently due to differences in LOT.
Rather, NTN's sole support for its LOT-specific allocations is the
allocations themselves. As a result, the record does not support our
using three separate LOT-specific indirect selling expense ratios to
derive the home market indirect selling expense amounts in those
comparisons where FMV is based on CV.
Furthermore, while we recognize that, for these final results, the
issue of LOT-specific allocations appears to be limited to NTN's
comments concerning our calculation of indirect selling expense ratios
for comparisons in which FMV is based on CV, the CIT's determination in
Timken that a respondent must demonstrate that the expenses
demonstrably vary according to LOT in order to allocate those expenses
according to LOT has
[[Page 20609]]
implications for other aspects of our analysis of NTN as well.
For example, using the LOT-specific allocations it calculated for
its home market indirect selling expenses in exhibit C-5, NTN
calculated LOT-specific per-unit indirect selling expense amounts by
multiplying its exhibit C-5 LOT-specific allocation ratios by its
reported unit prices. As a result, NTN reported for each of its home
market transactions indirect selling expense adjustments which varied
according to the LOT at which the transaction occurred. Based on our
determination for these final results that the record does not contain
evidence demonstrating that NTN actually incurred these indirect
selling expenses differently due to the differences in LOTs, we cannot
accept NTN's reported LOT-specific per-unit indirect selling expense
adjustments. Therefore, we have recalculated NTN's home market indirect
selling expense allocations such that we derived a single allocation
ratio applicable to all sales regardless of LOT. We then applied this
ratio to NTN's reported home market unit prices and calculated per-unit
adjustment amounts which also did not vary according to LOT.
NTN's exhibit C-5 allocations, however were not limited to only
indirect selling expenses. NTN also calculated LOT-specific allocations
and per-unit adjustments for its home market pre-sale and post-sale
freight expenses. We have examined the record and have found no
evidence demonstrating that NTN actually incurred these freight
expenses differently due to differences in LOTs. Therefore, as was the
case with NTN's indirect selling expenses, for these final results we
recalculated a single allocation ratio for each of these freight
expenses and applied this single ratio to NTN's reported unit prices so
that NTN's allocation ratios and expense adjustments did not vary
according to LOT.
The CIT's requirement that LOT allocations must be supported by
evidence that a respondent's expenses demonstrably varied according to
LOTs applies to U.S. expenses as well. As a result, because NTN
allocated several of its reported U.S. expenses according to LOT in
exhibit B-8 of its response, and calculated LOT-specific U.S. expense
allocation ratios and LOT-specific U.S. per-unit expense amounts, we
examined the record to determine if there was any evidence which
demonstrated that NTN actually incurred these expenses differently due
to differences in LOTs. Based on our review we have determined that
there is no evidence that NTN incurred its U.S. direct technical
service expenses, freight expenses, indirect advertising expenses, or
other indirect selling expenses differently due to the differences in
its U.S. LOTs. Therefore, because there is no evidence that these U.S.
expenses demonstrably varied according to NTN's U.S. LOTs, we have not
allowed NTN's LOT-specific allocations, allocation ratios, and per-unit
amounts for these U.S. expenses. Rather, for these final results we
have calculated a single allocation ratio for each expense which
reflects all U.S. sales and have recalculated NTN's reported U.S. per-
unit amounts for these expenses without regard to LOTs.
In addition to the above, we have made one more change to our
preliminary results for NTN based on our determination that NTN's home
market expenses did not demonstrably vary according to LOT. In this
review NTN requested and we preliminarily granted a LOT adjustment
based on the differences in certain home market indirect selling
expenses between NTN's LOTs whenever we compared U.S. merchandise to
such or similar home market merchandise at a home market LOT different
than the LOT of the U.S. sale. In accordance with our regulations and
policy concerning LOT adjustments pursuant to the law in effect prior
to January 1, 1995, NTN bears the burden of demonstrating that it was
entitled to an adjustment for differences in LOTs (see 19 CFR 353.54)
and is required to provide evidence that its claimed adjustment was in
fact attributable to differences in LOTs (see, e.g., NAR S.p.A. v.
United States, 707 F. Supp. 553 (CIT 1989), and Silver Reed et. al. v.
United States, 669 F.Supp 291 (CIT 1988)). In our preliminary results,
which were published prior to the CIT's determination in Timken, we
considered NTN's LOT-specific allocations of its home market expenses
in exhibit C-5 to indicate that NTN actually incurred these expenses
differently due to a difference in LOT. As a result, we considered the
LOT differences NTN reported in exhibit C-5 for certain home market
indirect selling expenses to constitute quantitative evidence that NTN
incurred these indirect selling expenses differently due to the
difference in LOTs and subsequently based our calculation of NTN's LOT
adjustment on the indirect selling expense differentials in exhibit C-
5. However, in light of (1) Timken, (2) our determination that NTN
failed to provide evidence that its home market expenses demonstrably
varied according to LOTs, and (3) our denial of nearly all of NTN's
LOT-specific home market and U.S. allocations in these final results,
we can not rely on NTN's LOT-specific allocations of certain of its
home market indirect selling expenses alone as evidence that NTN
actually incurred these expenses differently due to LOT differences. In
addition, we can not consider NTN's exhibit C-5 home market indirect
selling expense differentials as a reliable basis for a LOT adjustment.
Therefore, for these final results we have eliminated from our margin
calculation for NTN the LOT adjustment we allowed in our preliminary
results.
Comment 33: Timken states that NSK's response indicates that it did
not include inventory write-offs and write-downs for damaged or
obsolete merchandise in its reported COP. Timken asserts that, because
the Department considers inventory write-offs/write-downs as part of
COP, the Department should revise NSK's reported COP to include these
costs.
NSK contends that its inventory write-off/write-down methodology
has been the same for decades and is in accordance with the Japanese
Generally Accepted Accounting Principles (GAAP). Furthermore, NSK
argues, its inventory write-offs and write-downs have no relation to
the cost of producing the subject merchandise. Finally, NSK asserts,
even if the Department should agree with Timken, it still should not
include these costs in COP because the effect of any such inclusion
would be de minimis.
Department's Position: We agree with Timken. We regard NSK's
inventory write-offs and write-downs as part of the fully-absorbed cost
of goods sold which should be included in the calculation of COP (see,
e.g., AFBs 94-95 at 2117). Therefore, for these final results we have
included both NSK's inventory write-offs and write-downs in its
reported COP.
Comment 34: Timken argues that NSK's response indicates that NSK
did not include idled asset depreciation as an element of its
production costs. Timken asserts that, because the Department has an
established practice of adjusting a respondent's cost data to reflect
depreciation on idled assets, if, as under the Japanese GAAP, the
respondent does not report this depreciation as an element of its
production costs, the Department should revise NSK's reported COP and
CV by including an amount for NSK's idled asset depreciation. In
addition, Timken contends, because NSK did not report the amount of its
idled asset depreciation, the Department should use as BIA the highest
idled asset
[[Page 20610]]
depreciation reported by any other respondent in the review.
NSK argues that, because it has already accounted for its idled
asset depreciation in its reported cost of manufacturing (COM), it is
unnecessary for the Department to make any adjustment to its reported
COP and CV.
Department's Position: We agree with NSK. It is evident from NSK's
response that it included an amount for idle-asset depreciation in its
COM. Therefore, for these final results it is unnecessary for us to
modify NSK's reported COP and CV to reflect this depreciation.
Comment 35: Timken asserts that, because (1) it is the Department's
practice to allow offsetting interest income only if it is related to
COP and (2) NSK has failed to demonstrate that its reported interest
income is related to normal production, the Department should revise
NSK's reported financing expenses by disallowing NSK's claimed interest
income offset.
NSK contends that its interest income offset is appropriate because
its short-term interest is generated by short-term investment of its
working capital. Therefore, NSK argues, in accordance with the
Department's policy to accept interest income offsets when the offset
is attributed to short-term investments of working capital, the
Department should adhere to its preliminary results determination and
continue to accept NSK's claimed offset.
Department's Position: We agree with NSK. We have determined in
past AFB reviews that NSK's business records do not separately report
the short-and long-term nature of the interest income earned by the
company and its subsidiaries and that its alternative calculation of
its income offset reasonably reflects short-term interest income
related to production activities and the investment of working capital
(see AFBs 93-94 at 66495 and AFBs 94-95 at 2118). Because there is
nothing on the record in these TRBs reviews to suggest that NSK has
altered its reporting methodology or that its claimed interest income
offset is no longer attributed to short-term investments of working
capital, we have not altered NSK's reported financing expenses for
these final results.
Comment 36: Timken argues that, because NSK failed to include in
its reported COP and CV an amount reflecting NSK's losses and gains on
the disposal of fixed assets, the Department should revise NSK's
reported COP and CV to include these amounts.
NSK argues that, because gains and losses as a result of the
disposal of fixed assets are not related to its production, the
Department correctly concluded in its preliminary results that these
extraordinary losses and gains should not be included in COP.
Department's Position: We regard gains and losses as a result of
the disposal of fixed assets as a normal cost of production (see, e.g.,
AFBs 94-95 at 2118). Based on our review of NSK's response, we have
found no evidence to suggest that NSK's gains and losses were unrelated
to the general production activity of NSK overall. Therefore, we have
included this amount as a general expense and recalculated NSK's
reported COP and CV accordingly.
5. Clerical and Computer Programming Errors
Comment 37: Timken asserts that, as NTN's preliminary margin
calculation computer printouts demonstrate, the Department apparently
erred when uploading NTN's U.S. database such that the values for
several U.S. variables were misaligned. As a result, Timken contends,
the U.S. database the Department relied upon to calculate NTN's 1993-94
margin contains variables for which the wrong values have been
reported.
Department's Position: We agree with Timken and have corrected
these errors for these final results.
Comment 38: Timken argues that, while the Department properly
determined that certain of Koyo's sales to related home market
customers were not at arm's length, when transcribing the results of
its arm's-length test to its margin calculation computer program for
Koyo in order to exclude non-arm's-length sales from its analysis, the
Department failed to include the codes for all customers who had sales
which were not at arm's length.
While Koyo agrees with Timken that the Department incorrectly
transcribed the results of its arm's-length test to its margin
calculation program, it argues that Timken's proposed method for
correcting this error only addresses half of the problem. Koyo asserts
that Timken only identifies the error as the Department's failure to
exclude those sales to certain customers which did not pass the arm's-
length test. However, Koyo argues, the Department also excluded certain
customer codes in its margin calculation program which should have been
included on the basis that the sales to these customers were found by
the Department to be at arm's length. Koyo contends that the
Department's errors are apparently due to the Department's transcribing
the results of the arm's-length test for the A-588-054 review to the A-
588-604 portion of the margin calculation program. In addition, Koyo
asserts, the Department also made certain keypunch errors when
transferring customer codes from the arm's-length test to the margin
calculation computer program and it should correct these errors as
well.
Department's Position: We agree with Koyo. For both the 1992-93 and
1993-94 reviews of both TRBs cases we conducted an arm's-length test
for Koyo to determine those home market related customers to which
Koyo's sales were not at arm's length. In our analysis we determined
these customers for each TRBs case in each review period. Because we
used computer programs separate from our margin calculation computer
programs for Koyo, it was necessary to transcribe the results of the
arm's-length tests for each case in each review period to the
corresponding portions of our margin calculation programs. However,
when doing so, we inadvertently transcribed the arm's-length test
results for the 1992-93 A-588-054 review to the 1992-93 A-588-604
portion of our margin calculation computer program. We made the same
error for the 1993-94 reviews as well. This resulted in the
inaccuracies both Koyo and Timken describe in their comments above. For
these final results we have corrected this error by transcribing the
results of our arm's-length test for each case in each review period to
the appropriate sections of our margin calculation computer programs.
In addition, we agree with Koyo that we also made other keypunch errors
when entering certain customer codes in our margin calculation
programs, and we have corrected these errors for these final results as
well.
Comment 39: Koyo argues that, in accordance with the Department's
practice of correcting inadvertent errors in a respondent's response,
provided that these errors are obvious from the administrative record
and the Department is able to verify the correct information, the
Department should correct two errors which occurred within Koyo's
reported computer databases.
First, Koyo explains, in its 1992-93 and 1993-94 computer tape
files for U.S. further-manufactured sales, it erroneously reported a
fixed adjustment amount for its ocean freight and marine insurance.
Koyo contends that, as a result, it reported the identical ocean
freight and marine insurance amount for every transaction contained in
this file. Koyo contends that, in its narrative responses, it clearly
explained that its intention was to calculate these adjustment amounts
by applying its calculated ocean freight allocation ratio to the net
weight it reported for each individual transaction and its marine
[[Page 20611]]
insurance allocation ratio to the CIF value it reported for each
individual transaction. Koyo argues that this methodology would clearly
result in a different amount being reported for each transaction.
Therefore, Koyo asserts, it is obvious that it made an error in these
two adjustments when compiling its U.S. further-manufacturing
databases. Furthermore, citing the Department's 1992-93 home market
sales verification report dated November 22, 1995, Koyo contends that
the Department clearly verified that Koyo's intention was always to
calculate these two adjustments using its reported allocation ratios.
Koyo argues that it also inadvertently misreported the nomenclature
for one A-588-054 TRB cone which was sold as part of a set in the home
market during the 1993-94 POR. Koyo asserts that, after examining the
nomenclature of the nine TRBs sets most similar to the TRB set
containing this cone, it is apparent that a keypunch error resulted in
the incorrect product code being entered into the computer databases
for this cone.
Department's Position: Pursuant to the CAFC's decision in NTN
Bearing Corp. v. United States, 74 F.3d 1204 (Fed. Cir. 1995), we will
correct alleged clerical errors made by a respondent if the following
conditions are met: (1) The error in question must be demonstrated to
be a clerical error, not a methodological error, an error in judgment,
or a substantive error; (2) the Department must be satisfied that the
corrective documentation provided in support of the clerical error
allegation is reliable; (3) the respondent must have availed itself of
the earliest reasonable opportunity to correct the error; (4) the
clerical error allegation, and any corrective documentation, must be
submitted to the Department no later than the due date of the
respondent's administrative case brief; (5) the clerical error must not
entail a substantial revision of the response; and (6) the respondent's
corrective documentation must not contradict information previously
determined to be accurate at verification (see Certain Fresh Cut
Flowers From Columbia; Final Results of Antidumping Duty Administrative
Reviews, 61 FR 42833 (August 19, 1996)).
Concerning Koyo's claim that it erred when reporting its ocean
freight and marine insurance adjustments in its U.S. further-
manufacturing computer tape sales file, we have determined that, not
only is the error obvious from the record in existence prior to Koyo's
submission of its pre-hearing case brief, but Koyo's allegation clearly
meets each of the six conditions outlined above. Therefore, we have
corrected this error for these final results.
In regard to Koyo's nomenclature error, we have examined the
argument and documentation submitted by Koyo in its case brief, and
have again found that each of the six conditions described above were
met. Therefore, we have also corrected this error for these final
results.
Comment 40: Timken argues that, when calculating the amount of home
market value-added tax (VAT) to be used when calculating NSK's VAT
adjustment, the Department used computer programming language which
resulted in the calculation of inaccurate home market VAT values.
Department's Position: We agree with Timken and have corrected this
error for these final results.
Final Results of Review
Based on our review of the arguments presented above, for these
final results we have made changes in our margin calculations for NTN,
Koyo, and NSK. All of our Prelim Results determinations concerning the
application of BIA, no shipments, and the termination of reviews remain
unchanged for these final results (see Prelim Results at 25201-25202).
As a result of our comparison of USP to FMV, we have determined
that the following margins exist for Koyo for the period October 1,
1992, through September 30, 1993:
For the A-588-054 Review
Manufacturer/Exporter and Margin:
Koyo Seiko--38.07%
For the A-588-604 Review
Koyo Seiko--40.12%
In addition, we have determined that the following margins exist
for the period October 1, 1993, through September 30, 1994 for the
following firms:
For the A-588-054 Review
Manufacturer/Reseller/Exporter and Margin:
Koyo Seiko--35.27%
Nachi--47.63%
NSK--11.25%
Fuji--6.04%
Kawasaki--47.63%
Yamaha--47.63%
MC International--2.36%
Maekawa--47.63%
Toyosha--47.63%
Nigata Converter--47.63%
Suzuki--47.63%
For the A-588-604 Review
NTN--20.80%
Koyo Seiko--41.04%
Nachi-Fujikoshi Corp.--40.37%
NSK--12.78%
Fuji--____\2\
Kawasaki--40.37%
Yamaha--40.37%
MC International--____\2\
Maekawa--40.37%
Toyosha--40.37%
Nigata Converter--40.37%
Suzuki--40.37%
Showa Seiko--____\2\
---------------------------------------------------------------------------
\2\ No shipments or sales subject to this review. The firm has
no rate from any prior segment of this proceeding.
---------------------------------------------------------------------------
Daido--40.37%
Ichiyanagi Tekko--40.37%
Kawada Tekkosho--40.37%
Asakawa Screw Co.--40.37%
Isshi Nut--40.37%
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. Individual
differences between USP and FMV may vary from the percentages stated
above. The Department will issue appraisement instructions on each
exporter directly to the Customs Service.
Furthermore, the following deposit requirements will be effective
for all shipments of the subject merchandise entered, or withdrawn from
warehouse, for consumption on or after the publication date of these
final results, as provided for by section 751(a)(1) of the Tariff Act:
(1) The cash deposit rates for Kawasaki, Nigata, Suzuki, and Yamaha
for the A-588-054 case and Kawasaki, Yamaha, Nigata, and Suzuki for the
A-588-604 case are those rates we determined for these firms for our
administrative reviews of the October 1, 1994, through September 30,
1995 period for both the TRBs finding and order (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; Final Results of Antidumping Duty
Administrative Reviews and Termination in Part, 62 FR 11825, 11843
(March 13, 1997) (TRBs 1994-95). The cash deposit rates for Koyo, NSK,
Fuji, and MC International in the A-588-054 case and for NTN, NSK, and
Koyo in the A-588-604 case are the rates we determined for these firms
for our recently published administrative reviews of the October 1,
1995, through September 30, 1996 period for both the TRBs finding and
order (TRBs 1995-96). The cash deposit rates for all other firms listed
above will be the rates outlined above;
(2) For previously reviewed or investigated companies not listed
above
[[Page 20612]]
and not listed in TRBs 1994-95 or TRBs 1995-96, the cash deposit rate
will continue to be the company-specific rate published for the most
recent period;
(3) If the exporter is not a firm covered in these reviews, a prior
review, or the original less-than-fair-value (LTFV) investigations, but
the manufacturer is, the cash deposit rate will be the rate established
for the most recent period for the manufacturer of the merchandise;
(4) If neither the exporter nor the manufacturer is a firm covered
in these or any previous reviews conducted by the Department, the cash
deposit rate for the A-588-054 finding will be 18.07 percent and 36.52
percent for the A-588-604 order (see Preliminary Results of Antidumping
Duty Administrative Reviews; Tapered Roller Bearings and Parts Thereof,
Finished and Unfinished, From Japan and Tapered Roller Bearings, Four
Inches or Less in Outside Diameter, and Components Thereof, From Japan,
58 FR 51058 (September 30, 1993)).
The cash deposit rate has been determined on the basis of the
selling price to the first unrelated customer in the United States. For
appraisement purposes, where information is available, the Department
will use the entered value of the merchandise to determine the
assessment rate. In the case of Fuji, the Department will calculate an
assessment rate in the A-588-054 case which reflects the total value of
that merchandise which we deemed to meet the criteria of the ``Roller
Chain'' principle.
This notice also serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as a reminder to parties subject to
administrative protective orders (APOs) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 353.34(d). Timely written notification of
return/destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulations and the terms of an APO is a sanctionable violation.
These administrative reviews and this notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.
Dated: April 15, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-10570 Filed 4-24-98; 8:45 am]
BILLING CODE 3510-DS-P