[Federal Register Volume 63, Number 221 (Tuesday, November 17, 1998)]
[Notices]
[Pages 63842-63860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30739]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-570-601]
Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, From the People's Republic of China; Final Results of 1996-
1997 Antidumping Duty Administrative Review and New Shipper Review and
Determination Not To Revoke Order in Part
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of 1996-1997 antidumping duty
administrative review and new shipper review and notice of
determination not to revoke order in part of tapered roller bearings
and parts thereof, finished and unfinished, from the People's Republic
of China.
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SUMMARY: On July 10, 1998, the Department of Commerce published the
preliminary results of its administrative review of the antidumping
duty order on tapered roller bearings and parts thereof, finished and
unfinished, from the People's Republic of China. In addition, on August
5, 1998, the Department of Commerce published a notice of intent not to
revoke the order in part. The period of review is June 1, 1996, through
May 31, 1997. Based on our analysis of comments received, we have made
changes to the margin calculations. Therefore, the final results differ
from the preliminary results. The final weighted-average dumping
margins are listed below in the section entitled Final Results of
Review.
We have determined that sales have been made below normal value
during the period of review. Accordingly, we will instruct the Customs
Service to assess antidumping duties based on the difference between
export price or constructed export price and normal value.
EFFECTIVE DATE: November 17, 1998.
FOR FURTHER INFORMATION CONTACT: Zak Smith or James Breeden, Import
Administration, International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, NW, Washington D.C.
20230; telephone (202) 482-0189 and (202) 482-1174, respectively.
Applicable Statute
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (``the Act''), are references to the provisions
effective January 1, 1995, the effective date of the amendments made to
the Act by the Uruguay Round Agreements Act (``URAA''). In addition,
all references to the Department of Commerce's (``the Department's'')
regulations are to 19 CFR 353 (April 1997).
Background
On July 10, 1998, we published in the Federal Register the
preliminary results of administrative review of the antidumping duty
order on tapered roller bearings (``TRBs'') from the People's Republic
of China (``PRC''). See Tapered Roller Bearings and Parts Thereof,
Finished and Unfinished, From the People's Republic of China;
Preliminary Results of Antidumping Duty Administrative Review and New
Shipper Review, 63 FR 37339 (July 10, 1998) (``Preliminary Results'').
In addition, on August 5, 1998, we published a notice of intent not to
revoke the order in part. See Tapered Roller Bearings and Parts
Thereof, Finished and Unfinished, From the People's Republic of China;
Notice of Intent Not to Revoke the Antidumping Duty Order in Part, 63
FR 41801 (August 5, 1998). We gave interested parties an opportunity to
comment on our Preliminary Results and held a public hearing on
September 9, 1998. The following parties submitted comments and/or
rebuttals: The Timken Company (``Timken''); Wafangdian Bearing Factory
(``Wafangdian''), Luoyang Bearing Factory (``Luoyang''); China National
Machinery Import & Export Corp. (``CMC''); Liaoning MEC Group Co. Ltd.
(``Liaoning''); Wanxiang Group Corp. (``Wanxiang''); Xiangfan Machinery
Import & Export (Group) Corp. (``Xiangfan''); Zhejiang Machinery Import
& Export Corp. (``Zhejiang''); Zhejiang Changshan Bearing (Group) Co.,
Ltd. (``ZX''); Premier Bearing and Equipment, Ltd. (``Premier''); Peer
Bearing Company/Chin Jun Industrial Limited (``Chin Jun''); and L&S
Bearing.
We have conducted this administrative review and new shipper review
in accordance with section 751(a) of the Act.
Scope of Review
Merchandise covered by this review includes TRBs and parts thereof,
finished and unfinished, from the PRC; flange, take up cartridge, and
hanger units incorporating tapered roller bearings; and tapered roller
housings (except pillow blocks) incorporating tapered rollers, with or
without spindles, whether or not for automotive use. This merchandise
is classifiable under the Harmonized Tariff Schedule of the United
States (``HTSUS'') item numbers 8482.20.00, 8482.91.00.50, 8482.99.30,
8483.20.40, 8483.20.80, 8483.30.80, 8483.90.20, 8483.90.30, 8483.90.80,
8708.99.80.15, and 8708.99.80.80. Although the HTSUS item numbers are
provided for convenience and customs purposes, the written description
of the scope of the order and this review is dispositive.
Changes Since the Preliminary Results
We have made certain changes to our margin calculations pursuant to
comments we received from interested parties and clerical errors we
discovered since the Preliminary Results.
For All Companies
The changes we have made that affect all companies and the comments
discussing these changes are listed below.
Valuation of Certain Steel Inputs--Comments 3, 4, and 20
Valuation of Scrap--Comment 5
Valuation of Labor--Comment 10
[[Page 63843]]
Valuation of Overhead, SG&A, and Profit--Comments 14, 15, and 18
Valuation of Brokerage and Handling--Comment 24
Valuation of Boxes for Packing--Comment 35
For Premier
We changed our treatment of those sales for which Premier did not
report factors of production (``FOP'') data. As facts available we are
using the weight-averaged margin calculated for those U.S. sales for
which FOP data were reported. See our response to Comment 26.
We have also recalculated Premier's margin to apply its actual
costs for inland freight. See our response to Comment 27.
For CMC
We did not use CMC's most recent database in the Preliminary
Results. We have corrected this error for the final results. See our
response to Comment 34.
For Chin Jun
In the Preliminary Results, we did not match all of Chin Jun's
sales to the appropriate FOP data. We have reviewed our calculations
and made the necessary changes. See our response to Comment 37.
Analysis of Comments Received
1. Valuation of Factors of Production
1(a) Material Valuation
Comment 1: Use of Indian Bearing Manufacturers' Annual Reports for
Steel Input Values
Timken argues that the values for bearing quality steel used in the
production of certain TRB components should be based upon the published
annual reports of Indian bearing manufacturers. Timken contends that
the Department's stated preference is to use reliable domestic market
prices versus equally reliable import prices. Timken cites to Final
Determination of Sales at Less Than Fair Value: Certain Cut-to-Length
Carbon Steel Plate From the People's Republic of China, 62 FR 61964
(November 20, 1997) (``Carbon Plate'') for this position. Therefore,
the Department should use the material costs incurred in India by
bearing manufacturers.
Timken argues further that, in comparison to the other values
available to the Department, data on Indian bearing manufacturers' raw
material costs are more narrowly descriptive of bearing quality steel.
Moreover, the Indian bearing manufacturers' price information is
contemporaneous with the period of review (``POR''). Timken notes that,
while the Department has rejected the use of Indian bearing
manufacturers' data in the past, it did so because the available
information was from only one bearing producer. That one manufacturer,
SKF India, produced more than just bearings and its information did not
correspond precisely to the POR. See Tapered Roller Bearings and Parts
Thereof, Finished and Unfinished, From the People's Republic of China;
Final Results of Antidumping Duty Administrative Review and Revocation
in Part of Antidumping Duty Order, 62 FR 6189, 6193 (February 11, 1997)
(``TRBs VII''). Timken notes that, in this review, the information on
the record includes contemporaneous data from eight Indian
manufacturers that produce only or almost exclusively antifriction
bearings.
Moreover, Timken argues that the materials cost data from the
Indian bearing manufacturers are sufficiently detailed to separate the
various steel inputs used in the production of TRB components. In
support of using the Indian bearing manufacturers' data, Timken
contends that the affidavit it submitted from one of its industry
experts attests that the same grade of bearing quality steel is
typically used for all types of antifriction bearings produced in India
and China. Because of this, and the fact that the Indian financial
statements are sufficiently detailed, Timken argues that the costs
reported by the Indian bearing producers are the best source of
surrogate values for bearing quality steel bars used by the Chinese TRB
manufacturers.
Respondents disagree, arguing that the Indian producers' steel
prices are inherently flawed because several of the producers do not
provide separate prices for bar, rod, and sheet steel. Instead, several
companies' annual reports provide a single figure for all types of
steel used in the factory, including steel used in textile bearings,
ball bearings, and other types of products which are not subject to
this review. Furthermore, these companies' annual reports could include
innumerable types of steel including tube steel, stainless steel, or
machined ``green parts.'' Given this fact, the respondents maintain,
the Department cannot know what types of steel were included in the
material cost calculations.
Additionally, respondents argue that the Indian producers' prices
for steel or any other factor input include Indian duties and internal
taxes. Finally, respondents point out that Timken's suggestion of using
Indian producers' values has been rejected by the Department in two
prior reviews. See Tapered Roller Bearings and Parts Thereof, Finished
and Unfinished, From the People's Republic of China; Final Results and
Partial Termination of Antidumping Duty Administrative Review, 62 FR
6173 (February 11, 1997) (``TRBS VIII'') and Tapered Roller Bearings
and Parts Thereof, Finished and Unfinished, From the People's Republic
of China; Final Results of Antidumping Administrative Review, 62 FR
61276 (November 17, 1997) (``TRBs IX'').
Department's position: We have not adopted Timken's suggestion to
use Indian bearing manufacturers' data on steel cost. Of the eight
Indian manufacturers cited by Timken, only three break out steel costs
according to the type of steel used in the production of bearings
(e.g., steel bar, steel sheet, steel strip). Because the other five
companies' annual reports do not specify the types of steel used in
production, we are unable to accurately value the specific types of
steel used in the production of subject merchandise.
For the three companies that do break out their steel costs by
broad types of steel, only Asian Bearing separately identifies ``steel
bars,'' the steel input used by the Chinese respondents to produce
certain TRB components (cups, cones, & rollers). However, because Asian
Bearing provides an average cost for steel bar and does not provide
specific costs according to the type of bar used (i.e., hot-rolled
versus cold-rolled), the Department is unable to accurately value the
two types of steel bar used in the production of cups and cones versus
that used in the production of rollers. Furthermore, the annual report
does not specify whether the steel bar is only used by Asian Bearings
in the production of tapered roller bearings or whether it is used to
produce other products manufactured by the company. To the extent that
Asian Bearings uses hot-rolled and cold-rolled steel bars in different
proportions than the PRC TRB producers, Asian Bearings' average cost of
steel bars is not an accurate value to apply to the PRC procucers'
factors.
Additionally, section 773(c)(1) of the Act states that, for
purposes of determining normal value (``NV'') in a nonmarket economy
(``NME'') country, ``the valuation of the factors of production shall
be based on the best available information regarding the values of such
factors * * *.'' As set forth in Tapered Roller Bearings and Parts
Thereof, Finished and Unfinished, From the People's Republic of China;
Final Results of Antidumping Duty Administrative Reviews, 61 FR 65527
[[Page 63844]]
(December 13, 1996) (``TRBs IV-VI''), TRBs VII, and TRBs IX, the
Department's preference is to value factors using published
information. We have a longstanding practice of relying, to the extent
possible, on public statistics on surrogate countries to value any
factors for which such information is available over company-specific
data. See Final Determination of Sales at Less Than Fair Value: Certain
Carbon Steel Butt-Weld Pipe Fittings From the People's Republic of
China, 57 FR 21058 (May 18, 1992). In our view, public statistics
provide a more representative value for these material inputs than a
single company's information.
Because we have other surrogate data that allow us to value hot-
rolled and cold-rolled bar individually and because the other data are
taken from public statistics (not a single company's information), we
are not using the data on materials costs from the Indian bearing
manufacturers' financial statements.
Comment 2: Use of Indian Import Statistics for Steel Input Values
Timken argues that, as an alternative to the cost data of the
Indian bearing producers, Indian (not Indonesian) import statistics are
the next best source from which to value bearing quality steel bar used
in the production of cups and cones. First, Timken questions the
reliability of the benchmark used by the Department to evaluate, and
subsequently discard, Indian import data on bearing quality steel bars.
In doing so, Timken contends that the U.S. import statistics used by
the Department as an indication of the world market price and, hence,
as a benchmark for bearing quality steel are far lower than the world
market price for this type of steel. Second, Timken argues that, when
compared to other indicia of world market prices (including the costs
reported by the Indian bearing manufacturers), the Indian import
statistics are a reliable source from which to obtain steel bar values.
Timken supports its argument by noting that the U.S. import
statistics for bearing quality steel bar are skewed by large volumes of
imports from Japan of carbon steel bar used in the manufacturing of
wheel hub units and not in the production of TRBs. Timken notes that,
when those imports are removed, the average value of U.S. imports is
$889 per MT. Timken states that another reason for the variation in the
prices between U.S. and Indian import statistics is the physical
difference in the steel itself. Timken argues that the U.S. import
statistics include two types of bearing quality steel: case-hardened
and through-hardened, which vary significantly in price. Therefore, the
U.S. statistics do not exclusively represent the type of steel used by
the PRC producers (through-hardened), and they are unreliable as a
basis for evaluation of Indian values.
Timken argues that several market prices confirm a benchmark of
$900 per MT for 52100 grade steel. Timken notes that the price charged
by SKF for sales from its subsidiary Ovako, Timken's own large-quantity
prices, and U.S. imports from Sweden confirm the accuracy of a $900 per
MT benchmark.
Finally, Timken contends that, measured against a more reliable
world benchmark, Indian import statistics for harmonized tariff
schedule (``HTS'') category 7228.30 (for hot-rolled steel bars and
rods) are on par with world market prices, around $900 per MT. Timken
insists that the reliability of the Indian import values is also
supported by the values found in the Indian bearing producers' annual
reports.
Respondents argue against the use of Indian import data when
calculating material costs for steel used in the production of cups and
cones. Respondents note that in prior reviews, as well as in the
Preliminary Results, the Department correctly determined, after a
comprehensive analysis, that the Indian import statistics for category
7228.30 were unreliable.
Respondents contend that Timken's argument that the U.S. import
statistics for category 7228.30.20 are skewed is speculative.
Respondents refute Timken's attempt to distinguish between different
types of steel used by arguing that there is no evidence on the record
that the Chinese producers used case-hardened versus through-hardened
nor is there documentation on the record as to the price differentials
between case-or through-hardened steel or between different grades of
bearing steel.
Respondents also disagree with Timken's suggestion that Indian
bearing manufacturers' steel costs establish the accuracy of Indian
import statistics. Respondents contend that Timken's use of steel bar
prices for Asian Bearing at $938 per MT does not support the validity
of Indian import data at a price of $1,384 per MT. Furthermore,
respondents point out that the information in Asian Bearing's annual
report does not indicate if the steel bars used are hot-rolled, cold-
rolled, case-hardened or through-hardened, nor is the grade indicated,
which Timken has argued is of vital importance when analyzing the
reliability of a surrogate or benchmark. If Timken wanted to compare
import statistics with actual transaction prices, respondents add, it
should look to the actual prices paid by the Chinese respondents
themselves. According to respondents, such prices prove that the Indian
import prices are not reliable or reasonable surrogate values.
Department's position: In selecting a surrogate value for steel
used in the production of cups and cones, the Department has
consistently found that data for Indian import category 7228.30 (hot-
rolled bars and rods of alloy steel) are unreliable. In examining
Indian import statistics, we were unable to isolate bearing quality
steel because none of the eight-digit tariff categories within the
Indian basket category 7228.30 specifically included bearing quality
steel bar. We examined each of the Indian eight-digit categories and
found that only the ``Others'' category (7228.3019) could contain the
type of bearing quality steel used in the production of cups and cones,
in addition to other types of alloy steel. In comparing these data to
other market values, including U.S. imports from category 7228.30.20
(the only import category on the record which explicitly contains only
bearing quality steel), the Department found the Indian values to be
unreliable because the values for these imports were significantly
higher (See Memorandum to the File: ``Selection of a surrogate country
and steel value sources,'' dated June 1, 1998).
The Department used U.S. import data under HTS category
7228.30.2000 (Other Bars and Rod, Ball Bearing Steel, Not Furthermore
Worked Than Hot-Rolled or Extruded) as a benchmark for hot-rolled
bearing quality steel bar because these data are specific to the type
of steel used by the Chinese respondents and are the most precise
source of market prices for this product on the record. The use of such
a benchmark was upheld on numerous occasions and most recently in Peer
Bearing v. United States, 12 F. Supp. 2d 445 (CIT 1998) (``Peer'').
We do not agree that Japanese values included in the U.S. import
statistics create a distortion which would make the U.S. statistics an
inappropriate benchmark. Timken's argument is speculative because the
affidavit submitted in support of this claim does not definitively
indicate that the Japanese imports are not bearing quality steel of the
type used in the production of TRBs.
Furthermore, we disagree with Timken's argument regarding the
unreliability of U.S. import statistics as a benchmark due to the
inclusion of two
[[Page 63845]]
types of bearing quality (case-hardened and through-hardened) steel
which vary significantly in price. There is no definitive evidence on
the record indicating that the Indian import statistics do not also
include case-hardened and through-hardened steel as well.
Finally, even if we were to accept Timken's argument and disregard
U.S. imports from Japan, the Indian import prices of $1,384 per MT
remain substantially higher than a potentially re-calculated average
U.S. import price of $889. Thus, even if the Department were to accept
Timken's argument that an appropriate benchmark for steel used in the
production of cups and cones should be $900 per MT, based on SKF's
transfer prices, Timken's own steel prices, and U.S. imports from
Sweden, the Indian import values are still over 50 percent higher than
Timken's proposed benchmark. We therefore continue to base our
comparison on the U.S. benchmark.
Comment 3: Reliability of Indonesian Import Statistics
Timken argues that Indonesian import statistics are not reliable as
the basis for valuing bearing quality steel bar used by the Chinese
manufacturers in the production of cups and cones because (1) there is
no evidence of a significant bearing industry in Indonesia that would
import substantial amounts of bearing quality steel bar; and (2) the
Indonesian tariff category selected by the Department is too broad to
be a reliable indicator of bearing quality steel prices.
With respect to the first point, Timken contends that the record in
the instant proceeding indicates that there were only two significant
bearing producers operating in Indonesia during the POR: PT Logam and
PT NSK. Timken argues that, using U.S. import statistics to determine
the ratio of bearing units to weight for the size ranges manufactured
at PT Logam and PT NSK, it can be deduced that the two companies
together produced at most 2,650 MT of bearings. However, Timken
maintains, Indonesian imports under heading 7228.30 for the period of
January-October 1997 (excluding NME imports) were 24,853 MT. Timken
therefore argues that because the Indonesian bearing producers could
have used no more than 20 percent of the steel imports for their own
production, the remainder of imports under heading 7228.30 must have
consisted of non-bearing quality steel.
Timken also argues that Japanese export statistics show that only
2,974 MT of Japan's exports to Indonesia during the POR were exported
under tariff categories which might include bearing quality steel bars
used in the production of cups and cones. The balance (9,405 MT),
Timken argues, consisted of other types of alloy steel bar.
Furthermore, looking at the same export statistics, Timken argues that
a substantial quantity (1,570 MT) of the total Japanese exports under
category 7228.30 consisted of ``other'' alloy steel bar that had a
value far below any benchmark estimate of world market prices for
bearing quality steel. Therefore, Timken continues, Indonesian imports
under heading 7228.30 are not solely or even primarily bearing quality
steel.
With respect to the second point, Timken argues that the Indonesian
tariff category selected by the Department is too broad and includes a
variety of hot-rolled alloy steel bars that are excluded from the
corresponding Indian tariff category. For example, Timken states that
the Indonesian category includes different qualities of alloy steel
bar, including bright bar of alloy tool steel, other bright bar, spring
steel, sulphur bearing steel, and tool and die steel.
Respondents argue that Indonesian import statistics are reliable in
valuing steel bar because there is ample evidence of a significant
bearing industry in Indonesia due to the presence of two large
multinational bearing factories and the fact that Indonesia actually
exports bearings. Respondents also argue that the Indonesian import
values are reliable because they are comparable to the U.S. import
values for the same category of steel, unlike the Indian values which
are considerably higher.
Respondents also argue that the volume of Indonesian imports under
7228.30 is not too large to be a reliable indicator of bearing quality
steel. Respondents argue that Timken has not proven that there is not a
significant bearing industry in Indonesia. Respondents also reject
Timken's argument that Indonesian imports are too large. Respondents
explain that Indonesia, unlike the United States, does not produce much
bearing steel, and, therefore, must import most of it.
Respondents state that it is quite possible that both Indonesian
and Indian tariff classifications for this input include steel which is
not bearing quality. Additionally, respondents contend that Timken has
not provided any evidence that the Indian tariff classification
7228.3019 actually includes bearing quality steel. Given these
difficulties, respondents believe that the Department correctly used
U.S. prices as a benchmark to determine steel values for cups and cones
and, thus, cross-check the validity of the Indonesian import
statistics.
Respondents dispute Timken's contention that the Indonesian steel
category is unreliable because it is overly broad. Respondents state
that the Indonesian data are consistent with U.S. prices for bearing
quality steel and, therefore, are more reliable than the Indian values.
Respondents also maintain that even if the Indian category contained
``bearing quality steel bar used in tapered roller bearings,'' the
Department would be under no obligation to use those data unless it
determined that these data were reasonable and reliable, which has not
been the case.
Department's Position: In determining a value for the steel used in
the production of cups and cones, the Department reviewed several data
sources, including: U.S., Indian, and Indonesian import statistics, and
Japanese export data in order to determine the most accurate value for
steel inputs. As explained in comment 2 above, we are not using import
data from India, the primary surrogate country, because the import
category for hot-rolled bars and rods of alloy steel bars is an
``others'' category which includes several types of steel in addition
to bearing quality steel and bearing quality steel cannot be
segregated. Moreover, when compared with the U.S. import statistics for
the HTS category which only includes bearing quality steel bars and
rods, the Indian values are unreliably high.
A similar comparison was made between the U.S. benchmark and
Indonesian import statistics. As correctly pointed out by Timken and
respondents, the Indonesian import category 7228.30 most probably
includes several types of hot-rolled bars and rods of alloy steel, in
addition to the bearing quality steel bars and rods used in cup and
cone production. However, when compared with the benchmark, the
Indonesian data are consistent.
Nevertheless, we were persuaded by Timken's arguments regarding the
volume of steel imported into Indonesia versus the volume of bearing
quality steel that could actually be consumed in Indonesia. Thus, we
have looked more closely at the Indonesian import values. In
particular, we examined Japanese data on exports to Indonesia. The
Japanese export statistics provide a breakdown of the broad six-digit
7228.30 category into several more narrowly defined eight-digit
categories. As Timken correctly points out, these statistics indicate
approximately 2,974 metric tons of exports were made to
[[Page 63846]]
Indonesia during the POR under Japanese HS code 7228.30.900, ``Bars and
Rods, of Other Alloy Steel,'' a category which would include bearing
quality steel bar.
Based on our review of these data, the Department has decided to
use the Japanese export data to Indonesia for category 7228.30.900 to
value steel bar as best available information. In using these data, we
have isolated the narrowest category most likely containing bearing
quality steel bar.
In our calculation of the average per MT price of the Japanese
exports to Indonesia, we excluded one shipment, the value of which was
far below the average price, and another shipment, the value of which
was far above the average price. On this basis, we calculated an
average price of $755 per MT. This value is consistent with the U.S.
benchmark of approximately $750 per MT.
Because this Japanese tariff category is the narrowest category
which could contain bearing quality steel and because it is consistent
with our benchmark, we believe it is the best alternative for valuing
steel used in the production of cups and cones. Moreover, we view the
data on Japanese exports to Indonesia as an Indonesian value, i.e., it
is a value from a country comparable to the PRC. Although the data are
from Japanese statistics, we have used those statistics to ``refine''
the Indonesian data in an attempt to make the import category conform
better to the input used by the PRC TRB producers.
Comment 4: Steel Input Values Falling Outside the Period of Review
Timken argues that, if the Department relies on Indonesian import
statistics, such data should be limited to the POR. Timken contends
that, in the Preliminary Results, the Department departed from recent
precedent in prior TRBs from the PRC cases in using factor values for a
period of time outside the POR.
Respondents contend that Timken's arguments are without merit
because the Department routinely uses data which fall outside the POR
when necessary to ensure a reasonable surrogate value. In Heavy Forged
Hand Tools, Finished or Unfinished, With or Without Handles, From the
People's Republic of China; Final Results of Antidumping Duty
Administrative Reviews, 63 FR 16758 (April 6, 1998) (``Hand Tools
1998''), respondents state that the Department used Indian import
statistics for the period April 1995 through March 1996 to value steel
for a POR of February 1996 through January 1997. Respondents point out
that there was only an overlap of two months in that case, and the rest
of the data were from outside the POR. Furthermore, respondents argue
that data from a greater period of time will include a greater volume
of imports and, thus, will be less likely to be affected by price
fluctuations.
Department's Position: We agree with Timken. Whenever possible, the
Department attempts to use data that are contemporaneous with the POR.
See TRBs IX, 62 FR at 61283. Since we have sufficient data from the POR
to calculate a reasonably accurate value, we do not need to use data
from ouside the POR. Therefore, for the final results, the data used to
value hot-rolled bars and rods used in the production of cups and cones
are contemporaneous with the POR. See Comment 3 above and the
Memorandum to Susan Kuhbach; ``Factors of Production Values Used for
the Final Results,'' dated November 9, 1998.
Comment 5: Proper Import Category for Steel Scrap Valuation
Timken argues that if the Department uses an import category for
alloy steel scrap for purposes of valuing roller scrap, the value used
should be based on Indian imports under HTS category heading
7204.29.09, not 7204.29. Timken contends that the Department departed
from recent precedent in the Preliminary Results by using category
7204.29. Specifically, Timken notes that in TRBs VII, the Department
used the more narrow category of 7204.29.09. Timken further argues that
subcategory 7204.29.09 ``waste and scrap of other alloy steel''
includes bearing steel and is, therefore, a more appropriate
subcategory from which to value roller scrap.
Respondents argue that the Department properly valued roller scrap
steel using the broader six-digit category 7204.29 ``waste and scrap of
other alloy steel.'' Respondents contend that Timken offers no evidence
that bearing quality steel is included only in the ``other'' eight-
digit subcategory (7204.29.09), except for the fact that the Department
has used this subcategory in prior reviews. Furthermore, respondents
assert that it is incumbent upon Timken to establish the reason bearing
quality steel could not be classified under the broader Indian customs
category and by using the broader category, the Department ensures that
bearing quality steel is included in the data.
Department's position: We agree with Timken that it is appropriate
to exclude specific subcategories that do not relate to the type of
scrap that would be generated from TRB roller production. In the
Preliminary Results, the Department used the broad six-digit Indian
import data under category 7204.29 (which included subcategories:
7204.29.01, ``waste and scrap of high speed steel,'' and 7204.29.09,
``others'') to value scrap derived in the production of rollers. We
disagree with respondents that in using the broader 7204.29 category
the Department ensures that bearing quality steel is included in the
data because although both subcategories 7204.29.01 and 7204.29.09
contain scrap derived from alloy steel, subcategory 7204.29.01 (``waste
and scrap of high speed steel'') contains the residue from high speed
steel which is not the same type of steel used in bearing production.
Therefore, subcategory 7204.29.09 (``other'') is the only subcategory
under the broader 7204.29 category that could possibly contain scrap
generated from bearing quality steel.
Therefore, consistent with prior reviews, we determine that
category 7204.29.09 best captures the type of scrap generated from the
production of rollers and we have recalculated the surrogate value for
this scrap excluding data from subcategory 7204.29.01. However, the
Department notes that we continue to use the broad category 7204.29 to
value scrap from the production of cups and cones because the
Indonesian import data do not provide a further breakdown of this
category into subheadings. Therefore, for scrap generated from cups and
cone production, we used data under Indonesian import category 7204.29,
``other waste and scrap of alloy steel.''
Comment 6: Scrap Valuation
Timken argues that the values used by the Department for scrap in
the Preliminary Results are too high when compared with world market
prices for scrap. Timken contends that the PRC bearing producers' scrap
consists of low quality turnings, shavings, and chips. Timken states
that the scrap values selected by the Department reflect prices of
high-quality scrap, not the residue from bearing production. Timken
supports its argument by noting that scrap prices reported in the
American Metal Market for ``shop turnings,'' a low quality scrap,
averaged only $82 per MT delivered, whereas the value the Department
selected cup and cone scrap was $150 per MT. Furthermore, Timken argues
that U.S. import data, which the Department has insisted are a reliable
indicator of world market prices, show that ``turnings'' scrap imported
under heading 7204.41.0060 was valued at $104 per
[[Page 63847]]
MT during the POR. Timken argues, by comparison with these and other
prices, the Indonesian value at $150 per MT is not representative of
Chinese scrap values.
Respondents argue that Timken does not provide evidence that the
scrap it is using as a basis of comparison is derived from bearing
quality steel. Respondents point out that the U.S. import statistics
for HTS 7204.29.00 (the tariff heading used to develop Indonesian
surrogate data for scrap from cup and cone production), shows a scrap
value of $128 per MT. Thus the Indonesian value is consistent with the
U.S. import price for alloy steel waste.
Department's position: We disagree with Timken that the import
categories selected by the Department to value scrap generated from the
production of cups, cones, and rollers do not reasonably reflect the
value of scrap generated in the PRC production process. Timken's
comparison of the surrogate value used for scrap generated from cup and
cone production to other scrap values is the equivalent of comparing
apples to oranges. While the PRC cup and cone production process may
generate lower quality scrap, it remains bearing-quality steel scrap.
Timken, however, is looking at values for scrap from steel which is of
a grade and value inferior to that. The HTS category which Timken uses
for its comparison (7204.41.0060 ``borings, shovelings, and turnings''
does not include scrap generated from bearing quality steel.
Since steel used in the production of cups and cones is bearing
quality steel, the scrap resulting from the production thereof must be
of a corresponding grade. For that reason, it is appropriate to use an
import category for scrap containing alloy steel, as is the case for
import category 7204.29.
Regarding Timken's argument that the scrap values selected by the
Department should be adjusted to reflect the low quality of the scrap
generated in the Chinese production process there are no further
subcategories under 7204.29 which differentiate between different
values of scrap within that particular broad category. Of the
information contained on the record, only the broad U.S. HTS categories
7204.41 and 7204.49 provide for a break-down of scrap into sub-
categories based on the size and quality of scrap. However, these
categories do not include bearing quality steel.
The Department has not adjusted the values for scrap from the
Preliminary Results, with the exception of the change described in
Comment 5 above relating to roller scrap.
1(b) Labor Valuation
Comment 7: Using labor costs reported by Indian bearing manufacturers
Timken argues that the best available information regarding
surrogate labor rates is the data provided by the Indian bearing
producers' financial statements. In response to the Department's
rejection of this information on the basis that it is not possible to
allocate direct labor hours to the subject merchandise because these
companies produce other products, Timken asserts that the Indian
companies produce only or almost exclusively antifriction bearings. See
Memorandum to Susan Kuhbach: ``Selection of surrogate labor wage rates
for preliminary results of review,'' dated June 30, 1998) (``Wage Rates
Memo''). Timken contends that neither in this review nor any other
segment involving TRBs or antifriction bearings has any party indicated
that hourly labor costs within the same company vary according to the
type of antifriction bearing produced. Moreover, Timken argues that the
data from the International Labor Organization's (``ILO'') Yearbook of
Labor Statistics (``YLS''), which the Department used in its
Preliminary Results, are less reliable because the YLS categories cover
broad groups of industries, including companies that do not produce
bearings at all.
Wafangdian and Luoyang disagree with Timken and contend that the
Indian bearing producers' financial statements show that labor rates
vary widely among producers. Furthermore, in contrast to the Chinese
data, the Indian financial statements include labor costs associated
with selling, general, and administrative expenses (``SG&A''). CMC,
Liaoning, Wanxiang, Xiangfan, Zhejiang, and Premier argue that it would
be a vast overstatement to use the Indian bearings producers' labor
rates because they include the costs of senior management and of labor
used in the production of merchandise other than bearings. Moreover, as
upheld recently in Peer, the Department should use objective, industry-
wide values that represent the industry norm rather than company-
specific values because the surrogate producer is not the subject of
valuation. Therefore, the Department should reject Timken's argument
and continue to apply widely published YLS data for the final results.
Department's position: In order to provide for transparency and
predictability, it has been the Department's policy in NME cases to
rely, to the extent possible, on publicly available statistical
information from the first choice surrogate country to value FOP over
company-specific data. See TRBs IX. While we acknowledge that such data
(e.g., YLS data) cover different types of labor and different products,
their public, published nature makes them preferable to financial
report data, which could vary dramatically, depending on which
producers' data go into the calculation. Therefore, contrary to
Timken's assertion, we continue to believe that the use of the Indian
bearing companies' data in valuing labor costs could lead to distortive
results and the use of public statistical information for valuing labor
aids in increasing the transparency and predictability of our
calculations.
Comment 8: The Yearbook of Labor Statistics vs. Investing, Licensing &
Trading Conditions Abroad
If the Department declines to use company-specific data, Timken
argues that the Department should base surrogate labor rates on data
from the Investing, Licensing & Trading Conditions Abroad; India
(``IL&T'') as it has done in the past three administrative reviews of
this case, rather than on the YLS data. According to Timken, the IL&T
is preferable for two reasons: (1) it provides separate wage ranges for
various skill categories, which the YLS does not, and (2) its data are
more contemporaneous with the POR than the YLS data.
In response to the Department's contention that the monthly wages
reported by the IL&T are the wages mandated by Indian law and not the
wages actually paid, Timken argues that the Department has no basis to
assume that the actual wages are different from the wages mandated by
the government. Timken also rejects the Department's argument that the
IL&T rates should not be used because they do not include fringe
benefits paid to workers. Timken argues that the cost of such benefits
is easily calculated as exemplified by the Department's past practice.
CMC, Liaoning, Wanxiang, Xiangfan, Zhejiang, and Premier concur
with the Department that the wages reported in the IL&T are based on
wages stipulated by Indian law rather than a survey of average wages
actually paid, and that these wage rates do not include benefits
normally added to base pay. Respondents refer to the notation in the
IL&T which states that ``these rates are purely indicative; wages vary
greatly by state and industry.'' Accordingly, the Department properly
applied the YLS labor rate which represents the industry norm and more
accurately reflects the cost of labor in India. Furthermore,
respondents argue that Timken has overlooked the Department's extensive
[[Page 63848]]
application of the YLS single average Indian labor rate as a surrogate
in recent antidumping reviews involving China.
Wafangdian and Luoyang argue that the IL&T data are based on
theoretical values. Given the Department's preference to use actual
values, the YLS data are preferable because they are based on actual
values collected by government agencies.
Department's Position: We disagree with Timken's contention that
the IL&T data represent surrogate labor values preferable to the YLS.
Consistent with the Department's practice we have applied a single
average labor rate to all reported skill levels. See, e.g., Manganese
Metal from the People's Republic of China; Final Results and Partial
Rescission of Antidumping Duty Administrative Review, 63 FR 12440,
12446 (March 13, 1998) (``Manganese Metal''); Certain Helical Spring
Lock Washers from the People's Republic of China; Final Results of
Antidumping Duty Administrative Review, 62 FR 61794, 61780 (November
19, 1997); Heavy Forged Hand Tools from the People's Republic of China:
Final Results of Antidumping Administrative Reviews, 62 FR 11814, 11815
(March 13, 1997). Therefore, the specificity afforded by the IL&T data
with regard to different wages for different skill levels is not an
important consideration.
Moreover, the Department learned in a past NME case that the
reported average monthly wages provided in the IL&T are based solely on
wages stipulated by Indian law rather than on any survey of average
wages actually paid. See Manganese Metal. Given that wages in India
vary considerably by industry and region, there is no basis on which to
conclude that wages mandated by Indian law reflect average wage rates
across the Indian economy. Also, it appears from the text in the IL&T
data that the wage rates do not include additional mandatory and
voluntary benefits which normally add an additional 40-50% to the base
pay. The Department, in choosing a surrogate labor value, seeks to
obtain the average fully-loaded cost (i.e., including all costs and
benefits in addition to basic wage) of employing labor on as industry-
specific a basis as possible. Unlike the IL&T, the YLS provides fully-
loaded labor rates for the basic metals industry in India as a whole.
Accordingly, we have continued to use YLS for the final results.
Comment 9: Valuation of SG&A and Indirect Labor
Timken argues that indirect and SG&A labor rates are understated
and are significantly higher than the wage rates applied to direct
labor. Timken claims that all evidence on the record indicates that
indirect and SG&A labor consists of highly skilled workers who would
receive a much higher compensation, compared to direct production
workers who are predominately unskilled. Thus, by using the YLS' single
undifferentiated hourly labor rate for all workers in manufacturing,
the Department disregarded the significant differences in labor costs
among different skill levels for direct workers and different
specialized skills for indirect and administrative workers. Timken
suggests using the IL&T, which provides labor rates by skill levels, to
reflect the higher skill levels of the indirect and SG&A laborers.
Wafangdian and Luoyang reject Timken's contention and suggestion.
They argue against using the IL&T because these data are based on
estimated differences between skill levels and the evidence on the
record does not establish the skill level of indirect laborers involved
in the production of the subject merchandise. Therefore, the Department
has no reliable means to develop a rate for indirect labor.
CMC, Liaoning, Wanxiang, Xiangfan, Zhejiang, and Premier contend
that the Department's valuation of indirect and SG&A labor is
consistent with prior reviews and avoids the aberrations that would
result if a blended rate was applied to direct labor and separate
surrogate skilled rates were applied to indirect and SG&A labor as
suggested by Timken. Respondents also comment that Timken's
recommendation to apply IL&T data is inappropriate as they contain no
basket category for overhead and SG&A labor.
Department's Position: As explained above, we have used YLS data
for wage rates. The YLS data provide a single blended labor rate
relevant to the fabricated metals industry for India as a whole. This
blended labor rate includes direct, indirect, and SG&A labor hours, as
well as among skilled, semi-skilled, and unskilled workers. Also, as
respondents note, it would be inconsistent to apply a blended rate to
direct labor and a separate surrogate skilled rate to indirect and SG&A
labor. For these reasons, we have continued to apply the blended rate
from the YLS to SG&A and indirect labor for our final results.
Comment 10: YLS Category 381 vs. 382
Timken argues that if the Department decides to continue using the
YLS in the final determination, it should apply the wage rate for
category 382 (manufacture of machinery, except electrical) rather than
category 381 (manufacture of fabricated metal products, except
machinery and equipment) as used in the Preliminary Results. Timken
notes that subcategory 3829 02 of the United Nations' International
Standard Industrial Classification of All Economic Activities
(``ISIC'') includes the manufacture of bearings, gears, gearing and
driving elements. Moreover, in previous administrative reviews where
the Department relied upon the YLS, it applied the wage rate for
category 382.
Wafangdian and Luoyang state that it is not clear that the
Department should use category 382. First, they argue that the ISIC
definitions referenced by Timkens may not be used by the ILO. Second,
the ISIC definition for subcategory 3829 02 may be limited to driving
elements that include bearings for driving elements only, rather than
TRBs in general. Absent this information, the Department should
continue to use category 381.
CMC, Liaoning, Wanxiang, Xiangfan, Zhejiang, and Premier note that
in the 1990-93 reviews, Timken argued that the Department should not
use category 382 for purposes of labor costs because the category was
``too broad.'' Respondents argue that Timken cannot have it both ways.
Furthermore, respondents state that category 381 has been used in prior
administrative reviews of bearing and steel cases and that it
accurately reflects the cost of labor engaged in the manufacture of
metal products.
Department's Position: We agree with Timken with respect to the use
of ISIC major group 382. Upon further review, we found that labor
associated with bearing production is included in category 382 and that
the labor categories that comprise ISIC major group 381 are not
relevant to bearing production. Therefore, the Department has used
major group 382 for the final results of these reviews.
Comment 11: Number of Labor Hours Used To Produce TRBs
Timken argues that the verifications conducted by the Department
confirm its allegation that labor usage is uniformly understated by
respondents. Timken asserts that respondents excluded from their
responses any labor hours in which direct labor workers were not
actively producing bearings. Timken substantiates its argument by
referring to the verifications conducted at Xiangfan and Luoyang in
which the Department discovered that labor hours reported were
understated due to, respectively, the reporting of standard
[[Page 63849]]
processing times as opposed to actual hours worked and the omission of
downtime from the reported direct labor hours. Timken argues the
relevant issue is whether direct laborers would have been paid for idle
time or downtime in the surrogate country. As such, respondents should
have reported total hours on site as opposed to the hours for which
work was paid. Overall, Timken maintains that the Department should
increase the number of labor hours for all respondents, using data
provided by Timken as ``facts available.'' At the least, for those
respondents that reported direct labor hours accurately but omitted
idle time, Timken suggests that the Department increase indirect labor
hours to account for the missing labor.
CMC, Liaoning, Wanxiang, Xiangfan, Zhejiang, and Premier object to
Timken's argument. They contend that Timken is attempting to expand the
definition of direct labor beyond its reasonable terms. Noting that
Timken's argument to capture ``total hours on-site'' and not merely for
which work was paid, would serve to double count the labor dedicated to
indirect labor tasks. Therefore, the Department should not engage in
Timken's speculative adjustments and should apply the reported and
verified labor data from respondents.
Department's Position: It is the Department's practice to value
labor by determining the number of hours (including downtime) which are
needed to produce the subject merchandise in the facilities in the
state-controlled-economy country and applying the surrogate wage rate.
At verification, we closely examined respondents' accounting systems to
determine how they calculated the labor hours reported in their
submissions. As Timken notes, we did find inconsistencies in the labor
data reported by Xiangfan and Luoyang. For these companies, we made
adjustments in our Preliminary Results to accurately reflect the total
amount of actual labor hours worked. Additionally, for Luoyang and
Wafangdian we increased the amount of labor hours by the amount of
unreported downtime associated with the production of the subject
merchandise in order to capture total labor hours. Thus, were we to
adjust indirect labor by the amount of idle time as Timken recommends,
we would increase the indirect labor percentage and decrease the total
direct labor figure by the amount of labor that was reclassified. The
net result of this adjustment would yield no difference in the total
labor used by these companies to produce the subject merchandise.
In summary, for certain companies we discovered at verification
unreported labor hours related to downtime. For these companies, and
for those companies for which we were unable to verify certain aspects
of the labor hours reported, we corrected the reported hours
appropriately. For other companies, the number of labor hours verified.
For these companies, no changes were made to the reported figures.
1(c) Overhead, SG&A and Profit
Comment 12: Adjustment to Factory Overhead and SG&A Ratios
Timken argues that the methodology used by the Department in the
Preliminary Results deliberately understates factory overhead and SG&A
costs and, consequently, NV. This distortion, according to Timken, is
due to the fact that the Department used reported materials and labor
costs, calculated as the average of the reported costs of eight Indian
bearings producers, as the denominator in deriving the surrogate
overhead and SG&A ratios. However, the Department then applied these
ratios to the lower cost of materials and labor it calculated using
other, lower-valued surrogate sources. Timken contends that the Indian
producers' materials costs on average are much higher than the
Department's calculated total materials costs because the Indian
producers use higher cost materials (than those reflected in the
surrogate materials values), and because their material costs include
high import duties paid in India.
Timken argues that the Department has the legal authority to adjust
surrogate overhead and SG&A ratios in order to derive the most accurate
dumping margin possible. Therefore, Timken contends, the Department
should adjust the denominator used in calculating the overhead and SG&A
ratios by the ratio of Indonesian steel and labor values to the eight-
producer average materials and labor costs. An alternative methodology,
Timken suggests, would be to make a similar adjustment using only the
reported costs of Asian Bearing Company (``Asian''), rather than the
eight-producer average. This alternative would be reasonable, Timken
claims, because Asia Bearing reportedly produces only antifriction
bearings and has clearly identified its raw material inputs in its
financial statements.
Respondents state that the Department should continue its practice
of not making these kind of adjustments to surrogate values. They cite
Peer to support the Department's practice of not adjusting surrogates
as upheld by the court in previous reviews. Moreover, the Department
should not make Timken's proposed adjustment because the record is
unclear as to what the exact materials used by the Indian factories
are. Therefore, an adjustment would not necessarily improve the
reliability of the overhead or SG&A data. Furthermore, respondents
contend, the fact that the Indian producers' reported costs are higher
merely reflects the fact that these factories are more modern and
located in a more industrialized country than are the PRC factories. In
fact, argue respondents, the surrogate ratios are already too high and
should, instead, be lowered. Finally, respondents state that
differences in overhead costs reflect the unique circumstances of each
respective company. Adjusting the costs of one to reflect the costs of
another would be ``mixing apples and oranges.''
Likewise, respondents urge the Department to reject Timken's
alternative proposal of adjusting the surrogate values using Asian
Bearing's reported costs only. Respondents argue that the Department
has repeatedly rejected the use of this company's data in the past
because the company is a ``sick'' company. Moreover, it would be
inappropriate to rely simply on the reported costs of one factory where
public data, more reflective of the industry generally, are available.
Respondents also object to Timken's proposal to adjust the
surrogate value ratios. According to respondents, the Act, requires the
Department to value NME factor inputs using the best available
information. The Indian producers' costs, as reported in their
financial statements, represent the best available information for
valuing factory overhead and SG&A. The Act does not, respondents
continue, require the Department to substitute specific Indian
producers' costs for Chinese FOP data.
Department's Position: We disagree with Timken's contention that an
adjustment to our surrogate ratios for factory overhead and SG&A is
necessary. Timken has raised this issue in earlier reviews, and our
position (which was upheld in Peer) is unchanged.
First, Timken is incorrect in stating that the Department
calculated overhead and SG&A costs as a percentage of materials and
labor costs. Rather, we calculated these ratios as a percent of direct
materials inputs, direct energy inputs, as well as the ``Consumption of
Traded Goods.'' Neither direct nor indirect labor was included in
either the numerator or denominator of the surrogate ratios.
[[Page 63850]]
Second, consistent with our methodology discussed, among other
places, in TRBs VIII and TRBS IX (62 FR at 6178 and 62 FR 61287,
respectively) although we prefer to base our surrogate values on
industry-wide, public information for producers of merchandise under
review during the POR, such information is not available for factory
overhead and SG&A rates in this review. For these final results, we
therefore have based our surrogate values for overhead and SG&A
(excluding labor) on the average reported costs of Indian producers of
like or similar merchandise. In deriving these ratios, we used the
average of the Indian producers' reported data with respect to the
numerator (reported overhead and SG&A expenses) and the denominator
(direct input costs excluding labor), thus yielding internally
consistent ratios. These ratios, when multiplied by our calculated FOP
values, constitute the best available information concerning overhead
and SG&A expenses that would be incurred by a PRC bearings producers
given such FOP data. Timken's recommended adjustment (including the
proposed alternative adjustment based solely on Asia Bearing's reported
costs) would itself distort the ratios rather than correct the alleged
distortions in our calculations.
Third, with regard to Timken's assertion that the reported Indian
producers' materials costs include high import duties which have the
effect of lowering the calculated surrogate ratios for overhead and
SG&A, we note that Timken has not provided any information regarding
the amount of import duties that are included, nor has Timken provided
a means of identifying and eliminating such duties from our
calculations. Although we would not normally include import duties in
the surrogate values for materials costs, we have no evidence as to the
amount of duties, if any, included in the Indian producers' reported
costs. Therefore, we did not deduct an amount for import duties from
the reported materials costs for the Indian producers when calculating
the overhead and SG&A ratios.
We likewise disagree with the contention of respondents that the
Department's calculated costs for overhead and SG&A are, in fact, too
high because they are based on the reported costs of Indian producers
which are much more sophisticated than the PRC producers. For the
reasons enumerated above, the average of the reported costs of the
Indian bearings producers represent the best surrogate information
available for valuing overhead and SG&A in this review. (As detailed in
Comment 14 below, for our final results we have only used the reported
cost data of six of the Indian producers.)
Comment 13: Excluding ``Consumption of Traded Goods'' From Overhead
Rate Calculation
Timken argues that the Department should exclude the category
``Consumption of Traded Goods'' from the denominator in calculating the
factory overhead ratio because this traded goods category includes
items which are only purchased and sold--but not produced--by the
Indian bearings producers and, therefore, have nothing to do with the
producers' manufacturing operations. Timken notes that the traded goods
category is listed separately in the producers' financial statements
from those products noted as ``manufactured and sold.'' Thus, because
traded goods are neither produced directly nor used as inputs in
manufacturing other products, the producers do not incur any factory
overhead expense for these products.
Respondents argue that ``Consumption of Traded Goods'' should be
included in the denominator of the factory overhead ratio. Respondents
counter Timken's argument by noting that the Department has
specifically rejected Timken's argument for excluding this category in
previous reviews. See, e.g., TRBs IX. Respondents further contend that
Timken is making an implicit argument that other expenses, such as
depreciation, warehousing and maintenance expenses, incurred as a
result of these traded goods should be included in the numerator of the
overhead ratio, whereas the traded goods amount itself should not be
included in the denominator. This, respondents state, would distort the
costs of these Indian producers and, therefore, is illogical.
Department's Position: The Department has addressed this issue
previously in TRBs VIII and TRBs IX (62 FR at 6182 and 62 FR at 61288,
respectively). In both cases, we rejected Timken's argument that the
``Consumption of Traded Goods'' category should be excluded from the
denominator of the overhead ratio. As we explained in TRBs IX, these
traded goods are not overhead expenses but, instead, reflect the common
practice of manufacturers of purchasing finished and semi-finished
goods to meet their clients' demand. The Indian bearings producers
incur the expense of, inter alia, purchasing and warehousing these
products. Because these purchased goods are an integral portion of the
costs of goods sold, they are ordinary business expenses that we cannot
ignore. Therefore, for the final results we have included ``Consumption
of Traded Goods'' as a component of the denominator of the factory
overhead ratio.
Comment 14: Excluding Asian Bearing Company and National Engineering
Company
Respondents argue that the Department should not include the
companies Asian and National Engineering Company (``NEI'') among the
list of Indian bearings producers utilized for calculating factory
overhead, SG&A and profit ratios. Respondents contend that, in past
reviews, the Department has deliberately excluded data from Asian on
the grounds that it is a ``sick'' company (as defined under Indian law)
and that its accounting practices are suspect. Respondents further
contend that the calculated overhead and SG&A ratios for Asian and NEI
are clearly aberrational and, as such, not reflective of the Indian
bearings industry. Respondents also argue that NEI's data are clearly
extraordinary and, as such, should not be used. Therefore, respondents
argue, the Department should exercise its discretion to exclude
aberrational data by basing its overhead, SG&A and profit calculations
on the reported data for the remaining six Indian bearing producers
only.
Timken counters that Asian's data should not be excluded merely on
the grounds that it is a ``sick'' company. In fact, Timken argues,
having sick company status has enabled Asian to reduce certain overhead
and SG&A costs such as interest and depreciation charges. There is,
moreover, no evidence or reason to believe that any of Asian's other
direct, overhead or SG&A costs would be affected by the company's sick
status. Furthermore, Timken continues, there is no justification for
excluding a sick company from a sample of companies meant to reflect
the industry at large. Any industry or country has a certain number of
non-profitable companies, and this should be reflected in the industry-
wide data. Finally, the fact that Asian's interest expense accounts for
a slightly higher portion of its total costs is not a basis for
excluding this company.
With regard to NEI's data, Timken argues that simply because the
overhead rate of this company is different from that of the other
companies does not establish that NEI's rates are unreliable or
aberrational. Timken argues that if by this logic NEI's data were
aberrational,
[[Page 63851]]
then another Indian producer FAG should also be excluded on the grounds
that its ratios are extraordinarily low. Timken, citing TRBs VIII,
notes that the Department acknowledges that differences in various
companies' overhead and SG&A ratios can be due to differences in the
input materials used, the payment of import duties on the input
materials, the capital structure of the company, and the company's
accounting practices. Thus, in this case, argues Timken, the
differences in the ratios of the various Indian bearings producers
could result from the fact that some of them are more fully integrated
and, therefore, have higher capital costs. Given these differences in
company structure and practice, Timken argues, taking an average of all
eight of the Indian producers' reported costs yields the most
reasonable mix of different practices, and most fairly serves as a
surrogate.
Department's Position: We agree with respondents that data for
Asian and NEI should be excluded from the average of reported costs for
Indian bearings producers. In the Final Results of Antidumping Duty
Administrative Review: Tapered Roller Bearings and Parts Thereof From
the People's Republic of China, 56 FR 67590, 67594 (December 31, 1991),
the Department stated that, ``we believe that Asian is not an
appropriate surrogate primarily because the Auditor's Report notes that
the financial statements are not presented in accordance with the
generally accepted accounting principles (``GAAP'') of India.'' In this
review, the Auditor's Report included with Asian's 1996-97 financial
statements expresses a clear reservation about how certain interest
expenses (with their corresponding effects on depreciation and other
expenses) have been reported, noting that the methodology is not in
accordance with accounting principles recommended by the Institute of
Chartered Accountants of India. The Auditor's Report also notes that
Asian continues to be a ``sick'' company as defined by India's Sick
Industrial Companies Act. Likewise, the auditors' endorsement of NEI's
1996-97 Financial Statements, as contained in the Auditor's Report,
includes qualifications regarding, inter alia, the company's treatment
of various overhead and SG&A expenses.
With regard to Timken's arguments concerning Asian and NEI,
although we recognize, as respondents argue, that the overhead and SG&A
ratios for Asian and NEI generally are higher than those of the other
six producers, this apparent difference is not our primary reason for
excluding the Asian and NEI data. Rather, we have excluded the data for
Asian and NEI in calculating surrogate overhead, SG&A and profit ratios
primarily because, according to the Auditor's Reports, the methodology
used in recording and reporting the financial condition of these two
companies appears, in certain instances, to be inconsistent with the
methodology (i.e., Indian GAAP) used by the remaining six companies.
Given these significant differences, it would be incongruous to combine
the reported data of all eight companies.
Comment 15: Excluding Excise Duties From the Overhead Calculation
Respondents argue that the Department improperly included excise
duties in the overhead costs of the Indian producers on which the
Department based its calculation of the surrogate overhead ratio.
Respondents argue this is incorrect because excise duties are not paid
on exported merchandise but, rather, only on goods consumed in the
domestic market. The Act, respondents note, states that the cost of
materials should be ``exclusive of any internal tax applicable in the
country of exportation directly to such materials or their disposition,
but remitted or refunded upon the exportation of the article in the
production of which such materials are used.'' Respondents further
argue that it has been the established practice of the Department to
exclude Indian excise taxes in other proceedings. See, e.g., Notice of
Final Determination of Sales at Less Than Fair Value: Bicycles from the
PRC, 61 FR 19026, 19039 (April 30, 1996) (``Bicycles from the PRC'').
Respondents also notes that the Department, in the preamble to the
current regulations, states that `` * * * Congress has now established
conclusively that dumping comparisons are to be tax-neutral in all
cases.''
Timken counters that the Indian producers report that this excise
tax is paid on finished products and, therefore, does not apply to raw
materials. Thus, Timken contends, this tax is not within the plain
language of the Act. Moreover, according to Timken, the fact that some
of the Indian producers reported excise tax while others did not
indicates that this amount represents a net excise tax paid, with any
refunded amount already deducted.
Timken continues by arguing that the record only indicates that
such taxes are merely ``refundable,'' and does not explicitly state
that the excise duties were, in fact, actually recovered. They state
that there is no basis to assume that all excise taxes would be
refunded, that all Indian producers obtained or could obtain refunds,
or that PRC producers, operating in a market economy, would not pay any
taxes on finished goods. Timken concludes by arguing that the
Department's past practice of excluding ``refundable'' taxes in PRC
cases is at odds with Department practice in market economy cases where
the respondent is required to show that the refundable taxes were paid
on material inputs that were used in the manufacture of subject
merchandise, and that these taxes were actually recovered from the
government.
Department's Position: We agree with respondents that the excise
tax reportedly paid by the Indian bearings producers should not be
included in the overhead cost calculation. In the final determination
of Bicycles from the PRC (61 FR at 19039), we stated that `` * * * it
is the Department's practice to use, if possible, tax exclusive values
as surrogates in NME cases. * * * Moreover, we have found in previous
cases involving products from India that excise duties and/or taxes
paid by Indian producers were refundable to the producer by the Indian
government. * * * Therefore, we have not only removed the amount of
excise duty and/or tax from TI's financial data, but also from the
financial data of the other Indian producers, where possible, which we
have used to calculate surrogate percentages.''
With regard to Timken's arguments, we note that the fact that some
of the Indian producers do not appear to be reporting excise tax paid
may only reflect that they have not separately itemized that expense in
their statements; it does not necessarily indicate, as Timken contends,
that this represents net excise tax paid, exclusive of any refunded
amount. Moreover, there is no evidence on the record to suggest that
these Indian companies did not recover the refundable taxes. In order,
therefore, to be consistent with the intent of the Act and general
Department practice, in these final results we have excluded the excise
tax, where it has been specifically identified, from the reported costs
of the Indian bearings producers.
Comment 16: Excluding ``Net Loss (Gain) on Fixed Assets Sold''
Respondents contend that the Department improperly included the
category ``Net Loss (Gain) on Fixed Assets Sold'' as an element of
overhead. This category should be excluded from overhead expenses,
respondents argue, because these losses (gains) are incurred
independent of manufacturing or selling activities.
[[Page 63852]]
Timken counters that, contrary to the assertion of respondents, it
is reasonable to expect that the sales of fixed assets by companies,
whose primary business included bearings, would be related to the
production or sale of bearings. Losses arising from the sale of these
assets reflect the fact that depreciation charges for these assets in
prior years were inadequate to fully account for the decline in value
over the assets' life. Likewise, losses on assets employed in sales or
generally in support of corporate operations reflect the same
adjustment to depreciation. Thus, these losses represent overhead costs
tied to bearings manufacture. Timken further notes that in previous
reviews, the Department has included these losses in our overhead
calculation.
Department's Position: We agree with Timken that the ``Net Loss
(Gain) on Fixed Assets Sold'' should be included in the calculation of
the overhead ratio. The Department has addressed this issue previously
in TRBs VIII. In that review, we stated that losses ``* * * incurred in
selling fixed assets used to manufacture merchandise clearly [are]
related to manufacturing activities.'' See TRBs VIII, 62 FR at 6184.
For that reason, in our final results of this review we have continued
to included this category as an overhead expense.
Comment 17: Excluding ``Other Expenses'' From Factory Overhead and SG&A
Calculations
Respondents argue that the category ``Other Expenses'' or
``Miscellaneous Expenses'' noted in several of the Indian producers'
financial statements should not be included in the overhead and SG&A
calculations because there is insufficient information to determine
whether all of these expenses are related to the production of TRBs.
Moreover, assuming all expenses are related to TRBs production, there
is insufficient information to determine the extent to which these
should be properly categorized as overhead, SG&A or some other expense.
Respondents continue by noting that some of these ``other'' expenses,
such as ``auditors' fees,'' ``director's fees,'' and expenses related
to ``Agricultural & Dairy Farm,'' which are specified in some
producers' financial statements are clearly irrelevant to TRBs
production in the PRC and, as such, should be excluded.
Respondents also argue that it is improper to allocate ``other''
and ``miscellaneous'' expenses to only overhead and SG&A because these
may also include expenses related to labor or raw materials. Thus,
argue respondents, these unspecified expenses ought to be allocated
equally to raw materials, labor, overhead and SG&A.
Timken counters that it is unreasonable for respondents to suggest
that the Department exclude an entire category of expenses on the
grounds that its description is not sufficiently precise to either
relate the expenses directly to the production of TRBs, or to classify
them as overhead or SG&A. In allocating these other expenses to
overhead and SG&A, absent specific information as to the cost category
of each expense the Department has relied, as in the past, on its
general expertise of accounting practices and principles. Moreover,
Timken continues, the financial statements of many of the producers do,
in fact, provide considerable detail for a large portion of these other
costs. The line-item detail that is available for some of the expenses
confirms that these expenses are properly classified as either overhead
or SG&A. Thus, absent specific evidence to the contrary, the Department
is correct in categorizing these costs as overhead and SG&A.
Department's Position: We agree with the Timken that the ``other''
and ``miscellaneous'' expenses have been properly classified as part of
factory overhead or SG&A (with the exception of those expenses detailed
in the following comment below). We recognize the fact that there is
limited information regarding any of the expenses included in these
catch-all categories. However, most of the financial statements do
include separate itemized categories for raw materials consumed, and
payments to and provisions for employees. Contrary to the assertion of
respondents, there is no reason to believe that materials and labor
costs are also included in the ``other'' or ``miscellaneous'' expense
categories. Consequently, all expenses not identified as direct
material inputs, direct or indirect labor, energy, or other costs which
the Department values separately (such as packing, freight, etc.) have
been included in either the overhead or SG&A category. Where it was
unclear whether an expense would be more properly categorized as
overhead rather than SG&A (or vice-versa), we generally allocated the
expense amount evenly between the two categories.
With regard to respondents' contention that several of the expenses
included as overhead or SG&A are not relevant to TRB production in the
PRC, and with regard to the issue of surrogate values for overhead and
SG&A in general, we cite to the Department's position on these matters
in Tapered Roller Bearings and Parts Thereof, Finished or Unfinished,
From the Republic of Romania; Final Results and Recission in Part of
Antidumping Duty Administrative Review, 61 FR 51427 (October 2, 1996)
(``TRBs from Romania''). In that review, we stated, ``[t]he Department
generally does not dissect the overhead rate on a surrogate country and
apply only components relevant to the producer. It is generally not
possible to break the surrogate overhead value into its individual
components at a level of detail that would be necessary to value each
individual component of the NME producer's overhead. * * * Rarely, if
ever, will it be known that there is an exact correlation between
overhead expense components of the NME producer and the components of
the surrogate overhead expenses. Therefore, * * * the Department
normally bases normal value completely on factor values from a
surrogate country on the premise that the actual experience in the NME
cannot meaningfully be considered. Accordingly, Department practice is
to accept a valid surrogate overhead rate as wholly applicable to the
NME producer in question.'' See TRBs from Romania, 61 FR at 51429. For
these reasons, we have continued to include these other expenses in our
overhead and SG&A calculations for the final results.
Comment 18: The Double-Counting of Certain Expenses
Respondents argue that, in the Preliminary Results, the Department
included in its surrogate overhead or SG&A calculations expenses
related to packing, freight, discounts and rebates, commissions, and
brokerage. Because these types of expenses are also valued directly
(individually) elsewhere in the Department's FOP calculation, they have
been double-counted. For the final results, respondents argue that
these types of expenses should be excluded from the overhead and SG&A
calculations.
Department's Position: We agree, in part, with respondents that,
where certain costs have been separately calculated elsewhere in the
FOP calculations, they should not be included in overhead or SG&A.
Consequently, where it was possible to distinguish expenses directly
related to packing, freight, discounts and rebates, and brokerage from
other expense categories in the Indian producers' financial statements,
we have excluded those expense items from the overhead and SG&A
calculations for the final results.
We disagree with respondents' contention, however, that commissions
should likewise be excluded. These are
[[Page 63853]]
standard selling costs and, as such, are properly categorized under
SG&A. Whether PRC producers have commissioned sales staff is
irrelevant. As discussed in the Department's Position under the
previous comment, the Department does not tailor surrogate overhead or
SG&A rates to match the circumstances in the NME country. We note that
in our Preliminary Results, where commissions were identified
separately in the Indian producers' financial statements, we
incorrectly included these as labor costs. For these final results,
however, we have included all commission expenses, where possible, as
part of SG&A only.
Comment 19: Offsetting Interest and Other Expense With Interest and
Other Income
Respondents argue that the Department should offset the interest
expense and other expenses which it has included in the surrogate
overhead and SG&A calculations with interest revenue and other
revenues, respectively.
Timken counters that there is no evidence in the financial
statements that the interest or other income earned by these Indian
producers relate to their TRB operations. Timken argues the
Department's practice with regard to market economy cases is to offset
expenses only in cases where the corresponding income is short term in
nature and earned on investment activity related to the subject
merchandise.
Department's Position: We agree with the Timken that interest
expense and other expenses should not be offset with interest and other
income. There is no evidence on the record to indicate that these
expense and income categories are related to each other and to the
production of TRBs. For the final results, therefore, no offsets to
interest and other expenses have been made.
2. Market Economy Inputs
For those TRB producers which purchased steel from market economy
suppliers and paid in hard currency, the Department, in its Preliminary
Results, valued steel inputs at actual prices paid in market economy
currencies. However, consistent with our past practice, we used
surrogate data for TRB producers who purchased imported steel inputs
from trading companies and paid in renminbi. Because this methodology
was subject to court challenge (see Olympia Industrial, Inc. v. United
States), Slip Op. 98-49 (CIT 1998) (``Olympia II''), we have reexamined
our approach for the final results, and considered the comments
received from interested parties as discussed below.
Comment 20: Use of Market Economy Inputs
Timken argues that the Department should not regard the prices paid
by respondents for imported steel inputs as ``market prices.'' In the
final results, Timken urges the Department to reject the import values
used in the Preliminary Results because they are not reliable
indicators of market economy prices for steel inputs.
In support of its position, Timken maintains that the statute
directs the Department to use the prices in one or more market
economies which (1) are at a level of economic development comparable
to that of the NME, and (2) are significant producers of comparable
merchandise (see section 773(c)(4) of the Act). Thus, Timken argues
that, unless the Department determines that the country of origin is
comparable to China and is a significant producer of the subject
merchandise, it would be unlawful to use import values that do not meet
these two criteria.
Furthermore, Timken believes that it is likely that steel exported
to the PRC is dumped or otherwise atypical of the price normally
charged in the country of origin. Therefore, Timken argues, the price
of steel imported to the PRC does not reflect the price charged in the
exporting country, as required by the statute. Moreover, Timken
contends that the use of a steel price from a country that is not at a
level of economic development comparable to that of the PRC will
distort the Department's NME methodology. Timken also argues that if
the Department were to use import prices, it must reject values that do
not represent arm's length sales, that do not reflect commercial
quantities, or that otherwise do not reasonably reflect the actual cost
of production in a comparable market economy country.
Timken also states that in Olympia II, the CIT reviewed its earlier
remand order which instructed the Department to examine whether the
import data submitted by Chinese trading companies were reliable.
Timken argues that the Court did not require the Department to
automatically accept import prices from market economy suppliers as
factor values without examining whether such values are reliable and
adequate in accordance with section 773(c)(4) of the Act.
Wafangdian and Luoyang argue that the Department should apply the
three-pronged test set forth in the Olympia II remand to test the
reliability of the reported import prices (i.e., value and volume of
steel imports, type and quality of the imported steel, and consumption
of imported steel by the NME producers; see Olympia II, Slip Op. 98-49
at 7). Specifically, Wafangdian and Luoyang suggest that the Department
apply the test on a shipper-by-shipper basis by determining if (1) the
trading company imports the steel, (2) the steel is used to produce the
subject merchandise, (3) the value of the steel is reliable and non-
aberrational, and (4) the quantity is meaningful. These respondents
urge the Department to use actual prices wherever possible in the
interest of fairness, accuracy, and predictability.
In response to Timken's arguments, Wafangdian and Luoyang contend
that the statute is silent on the issue of prices on inputs imported
into an NME. However, they argue that section 351.408(c)(1) of the new
regulations directs the Department to use the price paid to the market
economy supplier in cases where an FOP is imported from a market
economy supplier and paid for in hard currency. Citing section
773(c)(1) of the Act, which requires the Department to value the FOP
data using ``the best available information regarding the values of
such factors in a market economy country,'' these respondents claim
that the best available information is the price actually paid for the
input. They agree with Timken that aberrational prices should be
rejected, but argue that as long as the transaction is bona fide, the
price should be presumed to be valid.
With respect to Timken's argument that the Department should
investigate whether the prices of imported inputs are reliable,
Wafangdian and Luoyang assert that it is clear from Lasko Metal
Products, Inc. v. United States, 43 F.3d 1442, 1443 (Fed. Cir. 1994)
(``Lasko''), that the import price is the best available information if
the input is used to produce the subject merchandise and the import
price is not aberrational. The same standard should be applied to
situations where the NME importer is a trading company, which is the
case in Olympia II, according to Wafangdian and Luoyang.
Another group of respondents believes that Timken's argument with
respect to the use of actual import prices involves a strained
interpretation of the statute. They say that Timken is wrong in
asserting that the statute requires that the country of origin must be
at the same level of economic development as the importing country and
that the exporting country must be a significant producer of the
merchandise. These respondents argue that the statute grants the
Department broad discretion to determine which is the best available
[[Page 63854]]
information as demonstrated by long-established Department practice and
court rulings. These respondents urge the Department to use the actual
import prices paid by trading companies in market economy currencies.
Department's Position: The Department interprets section 773(c)(1)
of the Act as authorizing a narrow exception to the statutory
preference for selected surrogate country data. This exception applies
only when the NME producer sources an input from a market-economy
source and pays in a market-economy country currency. The court upheld
this interpretation in Lasko. However, nothing in the Lasko decision
alters the statutory mechanism for selection of surrogate values. Thus,
as the court acknowledged in Olympia Indus., Inc. v. United States,
Slip. Op. 97-44 (April 10, 1997) (``Olympia I''), import prices that
pass through a trading company are not actual costs to the producer but
rather, an alternative surrogate value. Specifically, the court states
in Olympia II, ``As with the surrogate country data, it may be true
that the trading company data does not represent actual prices paid for
the steel input by the PRC * * * manufacturers. And, in this sense, the
use of trading company data would also create a fiction'' (see Olympia
II, Slip Op. 98-49 at 12). Therefore, the question is whether trading
company import prices, as alternate surrogate data, are preferable to
surrogate data from a market-economy country that is a significant
producer and at a level of comparable economic development.
To assess the reliability of the Chinese trading company's steel
prices, we have examined the factors outlined in the Olympia II remand:
(1) the value and volume of steel imports, (2) the type and quality of
the imported steel, and (3) consumption of imported steel by the NME
producer. The record evidence demonstrates that the Chinese trading
company purchased steel from a market-economy country, in a convertible
currency. This company used a portion of the steel in its own
production of TRBs but also sold a portion of the steel to an unrelated
manufacturer. Based on the invoices for the imported steel, and the
specifications of the steel sourced by the factories domestically, we
conclude that the imported steel is of the same grade and has the same
range of sizes as steel that the NME manufacturers used to produce the
subject merchandise.
Regarding the value of the steel imported by the trading company,
we found that the price paid by the trading company is within the range
of prices created by the actual steel prices paid by PRC producers and
our surrogate value. Consequently, the price paid by the PRC trading
company is not aberrational. With respect to volume and consumption of
steel by the NME producer we note that the amount of steel imported by
the trading company was significant and that the NME producer in
question consumed a significant amount of imported steel to produce the
subject merchandise.
Based on the above, we are using the trading company import steel
price as surrogate data for those companies that actually used the
imported steel.
3. Exchange Rates
Comment 21: Exchange Rates
Wafangdian and Luoyang contend that the conversion of foreign-
currency denominated surrogate factor values using the POR average
exchange rate is contrary to the Act which, they argue, requires
conversion based on the date of sale. Section 773A(a) of the Act
states, ``[i]n an antidumping proceeding * * * [the Department] shall
convert foreign currencies into United States dollars using the
exchange rate in effect on the date of sale of the subject merchandise.
* * *'' These parties state that conversion of factor values based on
date of sale would be consistent with Department practice, citing Hand
Tools 1998 and Notice of Final Determination of Sales at Less Than Fair
Value: Brake Drums and Brake Rotors from the People's Republic of
China, 62 FR 9160 (February 28, 1997) (``Brake Drums and Rotors'').
Timken counters that the use of daily exchange rates to convert
foreign-currency denominated surrogate values is ``falsely accurate''
when the surrogate values themselves are annual averages of factor
utilization rates and surrogate values. For example, Timken states that
steel values are based on average import statistics for the POR, labor
rates are based on annual YLS data, and overhead, SG&A and profit are
based on annual reports. Timken states that section 773(c)(1) of the
Act requires that the Department use ``the best information regarding
the values of such factors * * * considered to be appropriate by the
[Department],'' and that the Statement of Administrative Action
(``SAA'') (at 841) states that the Department's practice is to ``ensure
that the process of currency conversion does not distort dumping
margins.'' Consequently, Timken contends that if the best surrogate
values are annual averages then conversion of those values to dollars
requires an average exchange rate. Timken asserts that, by applying an
average exchange rate to the average surrogate values, Commerce is in
fact applying a daily exchange rate.
Alternatively, Timken states that if respondents had desired a
daily exchange rate they should have provided daily production factors.
Timken states that if the Department decides that a daily rate should
be used then, to avoid distortion, it should attempt to compute daily
or, at least, weekly or monthly surrogate values.
Department's Position: In NME cases, the underlying data for
valuing factors are often expressed in multiple currencies, including
U.S. dollars. In fact, many of the factor values, such as the surrogate
values obtained from certain import data and wage rates, will already
be expressed in dollars. Because of this, the Department typically does
not calculate NV in terms of the domestic currency of the surrogate
country. Instead, individual factor values that are expressed in
currencies other than dollars, are converted to dollars using an
average POR exchange rate. Consequently, NV is expressed in dollars and
no currency conversion, pursuant to section 773(A) of the Act, is
necessary.
We acknowledge that the Department converted certain surrogate
factor values denominated in foreign currencies to U.S. dollars on the
date of sale in Hand Tools 1998. However, we disagree with respondents
that it is the Department's practice to put foreign currency
denominated surrogate values in U.S. dollars by using a date of sale
exchange rate. In fact, the Department has had a long-standing practice
of converting such values using a POR/POI average exchange rate. Both
prior to and since the implementation of the URAA, it has been the
Department's practice to convert POR/POI-contemporaneous foreign
currency surrogate values to U.S. dollars using the average POR/POI
exchange rate (see, e.g., Notice of Final Determination of Sales at
Less Than Fair Value: Ferrovanadium and Nitrided Vanadium From the
Russian Federation, 60 FR 27957 (May 26, 1995); and the public versions
of the surrogate valuation memoranda for the following PRC final
determinations: Certain Cased Pencils, Polyvinyl Alcohol, Natural
Bristle Paint Brushes and Brush Heads, Brake Drums and Brake Rotors
1, Collated Roofing Nails, Pure Magnesium, and Manganese
Metal, dated October 31, 1994, March 22, 1996, September 20, 1996,
February 21, 1997, May 15, 1997 and January 14, 1998, and March 9,
1998, respectively. See Memorandum to File, ``Placement of
[[Page 63855]]
Prior Surrogate Valuation Memoranda on Record,'' dated November 9, 1998
(``Prior Surrogate Valuation Memoranda''). Additionally, since the
decision in Hand Tools 1998, the Department has continued to use POR-
average exchange rates in other cases (see, e.g., Porcelain-on-Steel
Cooking Ware From the People's Republic of China: Final Results of
Changed Circumstances Antidumping Duty Administrative Review and Intent
Not To Revoke Antidumping Duty Order, In Part, 63 FR 27261 (May 18,
1998)), continuing the practice of using average exchange rates as
detailed in that cases preliminary determination at 63 FR 1434, 1436;
and the public version of the calculation memorandum dated August 7,
1998 for Sebacic Acid From the People's Republic of China; Final
Results of Antidumping Duty Administrative Review, 63 FR 43373 (August
13, 1998). See Prior Surrogate Valuation Memoranda.
---------------------------------------------------------------------------
\1\ Despite respondents' assertion to the contrary, surrogate
values were converted to U.S. dollars based on a POI average
exchange rate, as is clear in the calculation memorandum.
---------------------------------------------------------------------------
Finally, when read as a whole, along with the SAA and various court
decisions, we do not believe that the Act requires the conversion of
surrogate values to U.S. dollars using a daily exchange rate. The SAA
states that the URAA ``tracks existing practice, the goal of which is
to ensure that the process of currency conversion does not distort
dumping margins.'' See SAA at 841. As detailed above, the use of POR/
POI average exchange rates to convert surrogate values has been the
Department's general practice, with origins prior to the implementation
of the URAA. Given the language of the SAA, we disagree that the intent
of section 773A(a) of the Act was to change the Department's practice
in this regard. Additionally, the courts have given great deference to
the Department in applying section 773(c)(1) of the Act in resolving
any variance between Department practice and other provisions of the
Act in NME cases. See, e.g., Lasko. Section 773(c)(1) states that in
NME cases ``the valuation of the factors of production shall be based
on the best available information,'' and the Department has stated that
it has an obligation to choose surrogate values that emphasize
``accuracy, fairness, and predictability''. See Final Determinations of
Sales at Less Than Fair Value: Oscillating Fans and Ceiling Fans From
the People's Republic of China, 56 FR 55271, 55275 (October 25, 1991).
Since, as Timken notes, we are converting POI/POR average values, use
of a POI/POR average exchange rate may enhance the accuracy of our
calculations.
In addition, there are other instances where the Department uses an
exchange rate other than one tied to a sale date. For example, when
computing NV based on CV in a market economy case, the Department does
not require respondents in antidumping proceedings to convert foreign
currency purchases of input products based on the date of a sale, but
rather on the date the currency transaction took place. In the portion
of section 773A(a) dealing with transactions in the forward market
there is an indication that the intent of this section was to make
currency conversions based on the date of sale only if the conversion
is ``directly linked to an export sale under consideration.'' This
indicates that this section does not address currency conversion for
inputs used in the production process. Instead, this provision seems to
clearly address conversion of NV, circumstance of sale adjustments, and
actual movement charges associated with sales. We therefore are
continuing to use an average currency conversion rate in this case.
4. Freight
Comment 22: Ocean Freight
Respondents argue that the Department should use ocean freight
rates provided by the Federal Maritime Commission (``FMC'') rather than
rate quotes received from private shipping companies when calculating
ocean freight costs. Respondents propose that the Department use these
values because they represent actual costs and fulfill the Department's
statutory obligation of calculating dumping margins as accurately as
possible. Respondents suggest that the shipping company rate quotes are
uncorroborated and potentially inflated. Because the FMC data are
numerically closer to freight costs derived from IM-145 data,
respondents suggest that they are the accurate and appropriate values
to use. Citing Carbon Plate, respondents state that the Department has
consistently relied on actual costs and not theoretical quotations in
dumping cases.
Timken suggests that respondents' data, a 1995 Federal Maritime
Commission & Company Quotes report for 20- and 40-foot containers
shipped from China to the United States, do not reflect actual costs
for the POR. Timken points out that there is neither evidence
supporting the FMC data as actual costs, nor evidence showing that the
Maersk rate quotes the Department used in its Preliminary Results were
inflated. Timken finds that the name of the FMC report, specifically
the phrase ``Company Quotes,'' suggests that the FMC information does
not reflect actual costs. Timken finds that the Maersk rate quotes are
contemporaneous with the POR, where the FMC data are not, and that the
FMC data do not provide any advantage over the source used for the
Preliminary Results. Furthermore, Timken concludes that the Maersk
quotes also contain surcharges and adjustments which may not be
included in the FMC data, making the FMC data more appealing to
respondents. Timken notes that in Carbon Plate, IM-145 data were used
because the values published in Shipping Intelligence Weekly were
``average earnings'' and rates for only the most efficient vessels.
Maersk data are neither averages nor limited to certain vessels. Timken
also points out that the Maersk data are more detailed and not affected
by transfer prices which are possibly included in the values reported
in respondents' exhibit.
Department's Position: We agree with Timken and have continued to
use the Maersk rate quotes for valuing ocean freight. The Maersk rates
quotes reflect actual ocean freight costs that Chinese TRB producers
would face, are contemporaneous with the POR, and include all the
applicable surcharges incurred for the shipment of TRBs.
Comment 23: Application of Sigma
Wafangdian and Luoyang argue that the Department disregarded the
Court's decision in Sigma Corporation v. United States, 117 F.3d 1401
(Fed. Cir. 1997) (``Sigma'') by applying the SG&A, overhead and profit
ratios to the inland freight component of input costs. Additionally,
Wafangdian and Luoyang argue that the Department's practice of limiting
the amount of inland transportation included in the surrogate valuation
of an imported input to the shorter of the distance between the port
and the factory or the distance between the domestic supplier and the
factory is inaccurate in certain circumstances. Specifically,
Wafangdian and Luoyang state that, if the distance is shorter than 25
kilometers, then this distance already is included in the surrogate
value and, therefore, should not be separately valued. Furthermore,
Wafangdian and Luoyang argue that the Department aggravates this
double-counting by applying overhead, SG&A and profit to the surrogate
value calculation.
With respect to respondents' first point, Timken replies that Sigma
does not address the issue of application of overhead, SG&A and profit
rates to the inland freight component of input costs, nor does it
require the Department to distort these rates as suggested. In fact,
Timken states, when the Department adds the freight component prior to
the application of these rates, it takes into
[[Page 63856]]
account the fact that the denominator of the rates includes such
freight costs, as admitted by respondents.
Department's Position: We agree with Timken that Sigma does not
address the issue of the application of the overhead, SG&A and profit
ratios and the appropriateness of applying these ratios to the freight
component of input costs. Given that the Indian financial statements
include these costs, which are included in the denominator of the ratio
calculations, it is appropriate to apply these ratios to the freight
component of input costs. We also disagree with respondents' second
point that the inland freight from the Chinese port to respondents'
factory is included in the import price which we are using as the
surrogate value. Rather, it is clear from the purchase invoice that the
input was sold to respondents under ``Cost and Freight--Chinese Port''
terms. As a result, we have followed our normal practice of including
in the surrogate a valuation of the imported input which is the shorter
of the distance between the port and the factory or the distance
between the domestic supplier and factory (see, e.g., Natural Bristle
Paintbrushes and Brush Heads From The People's Republic of China;
Preliminary Results of Antidumping Duty Administrative Review, 62 FR
60228, 60230 (November 7, 1997)).
Comment 24: Surrogate Value for Brokerage and Handling
Wafangdian and Luoyang argue that the Department made an error when
it calculated the surrogate value for brokerage and handling in the
Preliminary Results. The FOP memorandum used in the Preliminary Results
indicates that the Department used brokerage and handling data for the
period August-October 1993. In order to calculate the corresponding
value for the POR, the Department used an inflator which was obtained
by dividing the average wholesale price index (``WPI'') for the POR by
the WPI for 1993. Wafangdian and Luoyang claim that the surrogate value
used was for the period October 1993-January 1994 (not August-October
1993). Furthermore, they argue, as a denominator, the Department should
use the average WPI for the few months corresponding to the source data
and not the average WPI for the entire 1993.
Timken responds that the Preliminary Results clearly indicates that
the Department used surrogate brokerage and handling data for the
period August-October 1993. Therefore, Timken argues, the Department
should either continue to use the average WPI for the entire 1993 or
use the WPI for the period August-October 1993.
Department's Position: We agree with respondents that the average
WPI for 1993 is unnecessarily broad. Moreover, we note that the FOP
memorandum used in the Preliminary Results incorrectly stated that the
source data were for the period August-October 1993. The dates of the
data should correspond with the shipping dates, which are actually
October 1993 to February 1994. Therefore, to calculate the most
accurate value for brokerage and handling, we have inflated the monthly
source data by the corresponding monthly WPI. In addition, when making
these adjustments, we noted that all observations for each shipment
date were identical, but some shipments had more observations than
others. Consequently, using all observations (as was done in the
Preliminary Results) gives disproportionate weight to certain sales.
Therefore, we determine that it is more appropriate to use only one
observation from each shipment date. We then calculated a simple
average of those values.
5. Miscellaneous Issues
Comment 25: Valuation of Electricity Inputs
Timken contends that the Department should change its methodology
for valuing electricity and use average electricity rates for large
industries in the areas where Indian bearing producers are located
rather than a simple average of Indian regional electricity prices for
large industries. Timken states that it is an abuse of discretion for
the Department to adopt a less accurate national average rate for India
and ignore the available evidence specific to the production of
bearings where there is (data of) greater precision on the record.
Timken dismisses the Department's precedents in Notice of Final
Determination of Sales at Less Than Fair Value; Polyvinyl Alcohol From
the People's Republic of China, 61 FR 14057, 14062 (March 29, 1996)
(``PVA'') and Manganese Metal (63 FR at 12446) as to valuation of
electricity as irrelevant because those cases dealt with the
relationship between energy prices and the location of the industry,
and specifically, with the reasons for regional differences in
electricity prices. Timken argues that the Department should select an
industry-specific surrogate value for electricity as it does for
material inputs such as bearing quality steel, labor and other capital
costs including overhead, SG&A, and profits ratios so that its
surrogate valuation is predictable and rational.
Respondents argue to the contrary that the Department should
continue to apply average Indian electricity rates for the purpose of
the final results. Respondents state that the Department has a well-
settled practice of using electricity rates from the country as a whole
as a surrogate value and cites recent cases. See, e,g., PVA, 61 FR at
14062; Manganese Metal, 63 FR at 12446; Notice of Preliminary Results
of the Antidumping Duty Administrative Review of Chrome-plated Lug Nuts
from the People's Republic of China, 63 FR 31719, 31722 (June 10, 1998)
(``Lug Nuts''); and Notice of Preliminary Results of Antidumping
Administrative Review of Sulfanic Acid from the People's Republic of
China, 62 FR 25917, 25919 (May 12, 1997) (``Sulfanic Acid'').
Department's Position: We agree with respondents. The Department
established a practice of using a simple average of country-wide Indian
state electricity rates as a surrogate value for Chinese electricity
rates unless a party has shown that a company can be located only in a
specific state (See Manganese Metal, 63 FR at 12446, PVA, 61 FR at
14062, Sulfanic Acid, 62 FR at 25919 and Lug Nuts, 63 FR at 31722.)
Timken's argument of using industry and state-specific electricity
rates as a surrogate value was considered and rejected in PVA, 61 FR at
14062, wherein we stated, ``* * * [t]here is insufficient basis to
assume that the electricity rates from the Indian states selected by
Timken are more appropriate for surrogate value than electricity rates
in other states. Other factors beside production level, such as methods
of generation and transmission as well as overall demand, are
determinants of price. Since there is not sufficient information on the
record to weigh the appropriateness of using one Indian state's
electricity rates over those in another, we have based the surrogate
value on the simple average of all Indian state rates. * * *'' In
Manganese Metal, 63 FR at 12446, we again rejected a similar industry
and state-specific electricity rates argument and explained that, ``* *
* [t]here is insufficient evidence on the record from which to conclude
that the developments affecting the electricity prices of Indian
ferromanganese necessarily reflect conditions in which the PRC
manganese metal producers likewise must operate. * * * In lieu of
concrete evidence that the higher state-specific rates are directly a
result of the presence of manufacturers of identical or comparable
merchandise, Departmental
[[Page 63857]]
practice in past cases has been to take a simple average of electricity
rates for the surrogate country as a whole.'' In the instant case,
there is no evidence on the record to show that there is a direct or
causal relationship between the presence of TRB producers in a locale
and the electricity rates for that locale.
We disagree with Timken's assertion that the Department is abusing
its discretion by using a simple average of country-wide electricity
rates as a surrogate value. Electricity prices are subject to a number
of influences specific to the location of the plant. These include:
local market conditions, state intervention, methods of transmission,
distribution of power generation and privatization. Simply put, there
are more variables to consider and weigh than the location of the
industry because of the nature of the electricity industry in India.
Thus, it is fair and reasonable to use a simple average for large
industries in all Indian states as a surrogate value for electricity
rates.
Comment 26: Premier has acted to the best of its ability
Premier argues that the Department's use of adverse facts available
in the Preliminary Results, because it was unable to supply information
from its unaffiliated suppliers, was not appropriate; nor was it
consistent with the Department's past treatment. Premier argues that,
despite its incomplete questionnaire response, it has cooperated to the
best of its ability. Premier notes that it has provided evidence of its
attempts to contact its suppliers in order to acquire FOP data and has
provided, in several cases, its suppliers' letters refusing to provide
these data. Premier suggests that because this concrete evidence is now
on the record, Premier has proven that it acted to the best of its
ability in cooperating with the Department in this review and
therefore, should not be adversely treated in the application of facts
available. According to Premier, its actions in this review are
identical to those in TRBS VIII where Premier cooperated with the
Department, yet was unable to provide FOP data for all of its sales.
The Department should, therefore, not resort to an adverse rate for
those sales not covered by the FOP data supplied by Premier. Premier
suggests that the Department use a methodology like that used for Chin
Jun in the Preliminary Results of this review, where the Department
applied a weighted average margin calculated from those sales for which
acceptable data were available to sales not represented by FOP data.
Timken insists that the Department rely upon adverse facts
available when substantial data are missing for a particular
respondent, as in the case of Premier. Timken cites TRBs IV-VI showing
that the Department applied ``best information available'' to determine
margins for Peer and Chin Jun when FOP data were not available. The
Department used the company specific dumping margin from the previous
POR for these sales. Timken also cites National Steel v. United States,
870 F. Supp. 1130, 1136 (CIT 1994) where the Court of International
Trade found that the ``quality and completeness of the data, and not
Peer's cooperation are the determining factors in establishing the
appropriateness of the partial BIA rate.''
Timken suggests that the Department is not required by the statute
to analyze the reasons why a respondent was not able to provide the
information requested by the Department. According to the Timken,
citing Koyo Seiko Co., Ltd. v. United States, 905 F. Supp. 1112, 1116-
17 (CIT 1995), the Department has the authority to ``resort to the
highest rate assigned * * * in a previous review as partial BIA for
those sales.'' Timken suggests that the Department should create an
incentive for Premier's suppliers to come forward in the future by
applying an adverse rate to those sales that are not represented by FOP
data. According to Timkin, if the Department applies Premier's
calculated margin to sales that are not represented by FOP data, this
only encourages producers to sell through exporters that have separate
rates. If an adverse rate was applied to these producers, it would
encourage them to come forward in the future and supply the factor
values.
Timken further contends that Premier has not shown that it has
acted to the best of its ability to provide factor information in this
review. Timken reminds the Department that Premier has participated in
all of the Department's reviews of this case. According to Timken,
Premier's efforts to prove that it attempted to provide the factors
data bring into question the accuracy and completeness of Premier's
responses. Timken notes that there were inconsistencies between the
lists of suppliers in various responses and suggests that this could
reflect additional insufficiencies in Premier's sales listings. Timken
suggests that the Department reject all of Premier's partial responses
and apply adverse facts available to all of Premier's sales.
Department's Position: We are continuing to apply a partial adverse
facts available rate to Premier's U.S. sales that are lacking
corresponding FOP data. Section 776(b) of the Act provides that an
adverse inference may be used against a party that has failed to
cooperate by not acting to the best of its ability to comply with a
request for information. Furthermore, section 353.37 of the
Department's regulations states that ``[I]f an interested party refuses
to provide factual information requested by the Secretary or otherwise
impedes the proceeding, the Secretary may take that into account in
determining what is the best information available'' (54 FR 12784).
In this case, we determine that Premier has not acted to the best
of its ability. Premier was unable to provide letters from all of its
suppliers responding to Premier's request for information. Instead, it
relies heavily on an affidavit from its marketing executive stating
that he had contacted the companies listed in Premier's response.
Moreover, Premier submitted contradictory information as to whom its
suppliers were, correcting misinformation only after repeated questions
by the Department. Taking into account that this is the tenth review of
the antidumping order on TRBs from the PRC, and that Premier has
participated in several reviews, we find that Premier has not acted to
the best of its ability.
For these reasons, the Department finds that applying adverse facts
available is appropriate. Therefore, as in the Preliminary Results, we
are applying a rate of 25.56 percent ad valorem to Premier's U.S. sales
for which factors data was not provided.
Comment 27: Premier's Inland Freight Expenses
Premier claims that its inland transportation was provided by
market-economy companies. Upon the Department's request, Premier
clarified information in its response concerning the use of market
economy freight forwarders to transport goods from China to the United
States. Premier contends that these freight forwarders are Hong Kong
companies and were paid in hard currency. Premier insists that the
Department should apply the actual market economy inputs to value these
factors for the final results.
Department's Position: Premier has reported that its freight
forwarding expenses, including inland freight charges, were paid in
hard currency. Absent evidence on the record to the contrary, for
purposes of these final results, the Department has recalculated
Premier's margin to apply its actual costs for inland freight.
[[Page 63858]]
Comment 28: Revocation of Order for Luoyang
Luoyang argues that the Department should revoke the order with
respect to TRBs produced and/or exported by Luoyang. Luoyang states
that it provided the Department with the necessary certifications
stating that it had not sold subject merchandise as less than fair
value during the current review period and would not do so in the
future, and agreed to reinstatement of the order if goods were
subsequently sold at less than NV. Luoyang states that after
corrections are made, it will receive a zero dumping margin in the
final results.
Timken argues that Luoyang does not qualify for revocation because
it received a margin of 2.35 percent in TRBs IX and received a margin
of 1.82 percent in the Preliminary Results. Therefore, according to
Timken, Luoyang does not currently have three consecutive years of no
dumping, as required by the Department's regulations (see 19 CFR
353.25(a)(2)(i)), to qualify for revocation, even though it did have
three consecutive years of no dumping prior to the 1995-96 review.
Department's Position: As Timken points out, Luoyang received a
margin of 2.35 percent in the preceding review. Given that Luoyang does
not meet the Department's first criterion for revocation, namely that
at the time of revocation that a respondent have three years of no
sales of subject merchandise at less than fair value, we are not
revoking the order with respect to this respondent.
Comment 29: Luoyang's Imported Steel Surrogate Value
Timken notes several apparent discrepancies between Luoyang's FOP
database, the verification report, and the Department's calculation
memorandum, with regard to Luoyang's use of imported steel.
Luoyang states that any inconsistencies in its database were
clarified prior to verification, confirmed by the Department at
verification, and reflected in the Department's Preliminary Results.
Department's Position: We agree with Luoyang that our Preliminary
Results reflected the clarifications to its FOP database submitted
prior to verification, and that these clarifications were verified by
the Department. Therefore, no adjustments were necessary.
Comment 30: Luoyang's Well and Circulation Pump Electricity
Luoyang contends that the Department improperly included the
electricity Luoyang used to power its well and water circulation pumps
as part of its electricity factor usage. Luoyang argues that, because
this electricity is used to provide water as a coolant for the turning
and grinding stages of production and cannot be directly linked to
production output, it should be included in overhead rather than
considered as a direct cost. Consistent with the Department's decision
in TRBs VIII that power which cannot be directly linked to production
output be incorporated as overhead, Luoyang states that the electricity
used by the well and circulation pumps should be included in overhead.
Timken counters that section 773(c)(3) of the Act requires that the
Department separately identify, quantify and value all ``energy and
utilities consumed'' in producing subject merchandise. Timken contends
that, given the statutory language, there is no basis for allocating
electricity usage between direct costs and other activities.
Furthermore, Timken states that there is no apparent method for
splitting the energy costs of the eight Indian producers between direct
input costs and overhead, nor does Luoyang offer any such methodology.
Department's Position: As explained in the Preliminary Results, we
separately quantified and valued the energy consumed in producing the
subject merchandise separate from overhead. This means that we did not
include the Indian producers' energy in calculating overhead, and our
overhead ratio is net of energy. Therefore, it is appropriate to value
Luoyang's electricity as a direct cost.
Our treatment of electricity in this case can be distinguished from
TRBs VIII, where we incorporated the consumption of energy as part of
overhead. The present case is distinct because we have been able to
directly quantify and value energy as a factor input. Furthermore, as
Timken has noted, it would be impossible to split the energy costs of
the Indian producers between direct input costs and overhead. Thus, any
attempt to make the adjustment Luoyang has recommended, would lead to
inaccurate overhead and SG&A ratios. Therefore, we have not altered our
calculation methodology for these final results.
Comment 31: Factor Value for Cages for Luoyang
Luoyang alleges that, in the Preliminary Results, the Department
erroneously applied an imported steel input value for one of the TRB
components instead of applying the scrap value. Luoyang argues that it
reported that a particular TRB component was manufactured with scrap
sourced within the factory. Luoyang explains that, rather than selling
the scrap derived from the production of non-subject merchandise,
Luoyang instead reuses the recovered scrap in the manufacture of a TRB
component. Accordingly, Luoyang maintains, the factor value of the
reused scrap steel should equate to the scrap value and not the full
imported steel value.
Timken argues that Luoyang does not use ``scrap'' to manufacture
certain components, but Luoyang, as described in the verification
report, uses the same piece of steel sheet to cut patterns for
components of different sizes. Timken contends that these smaller
pieces cannot be defined as ``scrap'' because they are new steel
material. Furthermore, Timken maintains that scrap is not sold in
uniform cut-to-size batches and that the raw material used for both the
larger and smaller components was steel sheet, not scrap.
Department's Position: We agree with Timken. As set forth in TRBs
IV-VII we have valued scrap-steel inputs as new steel because the scrap
input reported by Luoyang was not purchased as scrap, but rather,
Luoyang paid the full price for this steel. According to Luoyang's
verification report, the pattern for the TRB component in question is
cut from the same material that a larger non-subject merchandise
component is made from. See Memorandum to Susan H. Kuhbach:
``Verification of Factors of Production for Luoyang Bering Corporation
(Group) Company Limited'' dated June 18, 1998. Therefore, this
component was made from first quality steel sheet and not from scrap as
Luoyang maintains. Furthermore, as indicated in the verification
report, the steel sheet that remains when the larger component is cut,
is never recorded as scrap nor is it entered into the scrap warehouse.
Therefore, we valued the steel input for this component from the
market-economy source reported by Luoyang and not as scrap.
Comment 32: Reported Amounts for Pallets for Luoyang
Luoyang maintains that in the Preliminary Results the Department
correctly concluded that the pallets used to ship the subject
merchandise were reported in kilograms. Luoyang contends that it
provided the requested per-unit amount of packing materials in its
revised factors of production database. Therefore, Luoyang argues that
the Department should continue to use these data for the final results.
[[Page 63859]]
Timken argues that based on Luoyang's confusing descriptions of the
data, it is unclear whether the pallets were reported in kilograms, on
a per-kilogram basis, or on a per-unit basis, and that the Department
must ascertain what was actually reported and make any necessary
correction to the final results.
Department's Position: We agree with Luoyang. In the Preliminary
Results, we assumed that Luoyang's usage of pallets was reported on a
per kilogram basis. Upon further review, the pallets used by Luoyang
were reported in kilograms. Therefore, we are not changing our
treatment of Luoyang's pallet valuation.
Comment 33: Imported Steel for Tolled Bearing Production
Respondent CMC argues that it appears the Department erroneously
applied surrogate values rather than the actual costs of imported steel
which was used by one of its suppliers through a tolling arrangement.
Citing a memorandum issued in conjunction with the Preliminary Results
(see Memorandum to Richard Moreland: ``Market Economy Inputs,'' dated
June 30, 1998), CMC notes that the Department indicated that it would
use the price actually paid for this imported steel when calculating
CMC's margin in the Preliminary Results. CMC asks the Department to use
the imported price in its final results.
Department's Position: Contrary to CMC's assertion, we did, in
fact, use the price of the steel imported by CMC to value steel for
this producer. We have modified the description in the log of the
margin program to more clearly reflect the use of this value.
Comment 34: Imported Steel for One of CMC's Suppliers
Timken argues that the Department should not apply an imported
steel value to reported steel factors for one of CMC's suppliers, as
CMC provided no evidence that this steel was imported. Further, Timken
notes that it appears that the Department did not use the most recent
database submitted by this supplier in its preliminary calculations.
Respondent CMC agrees with Timken that the Department used the
wrong data submission in its preliminary calculation. CMC argues,
however, that the Department should use the value of imported steel
value for this factor.
Department's Position: We agree that we erred in our Preliminary
Results by using the wrong database, and we have corrected this for the
final results. We have continued to value steel factors for this
producer using the surrogate value for steel. CMC did not provide any
support for its claim in earlier responses that this supplier used
imported steel, and, further, CMC reclassified this steel as
``domestic'' in its most recent data submission.
Comment 35: Surrogate packing costs for boxes
In our Preliminary Results, we calculated surrogate values for the
packing materials using Indian import statistics. Wafangdian argues
that the Indian import statistics for wooden crates (which is one of
several types of packing material used by TRB producers and exporters)
included an aberrational figure, the cost of crates imported from
Germany. According to Wafangdian, the cost of the German crates was not
only extraordinarily high compared to other imported crates, but also
substantially higher than Indonesian surrogate values for packing
materials. Wafangdian, therefore, asks the Department to exclude the
German value from its calculation of the surrogate packing cost.
Timken agrees that the calculation of the surrogate packing cost is
erroneous, but not for the reason claimed by Wafangdian. Timken notes
that, while the Department's calculation is in ``Rs. per kilo,'' Indian
import data for wooden crates are recorded in kilos only for April and
May 1996, whereas later import statistics are recorded in number of
units. Therefore, Timken says, the Department should use only the
import data for the period April-May 1996.
Department's Position: We disagree with Wafangdian that the German
prices should be excluded from the calculation. Because we do not have
specific information on the sizes of the boxes being imported, it is
inappropriate to selectively exclude certain imports from the
calculations. Therefore, we believe it is appropriate to use the
average value for all wooden crates within HTS category 4415.1000 in
its entirety.
We agree with Timken with respect to the reporting of the value in
the Indian import statistics and we acknowledge that the numbers
reported for April 1996--March 1997 are labeled as number of units.
However, we question whether this was simply a labeling error, given
the inconsistent treatment of Nepal's exports to India. In that case,
the data did not change from one reporting period to the next; however,
in one instance the figures are reported in kgs and in another they are
reported in units. Moreover, it is not appropriate to only use April
and May 1996 data, as Timken has suggested, since these data are
outside of the POR. Therefore, to confirm that we are using data
reported only in Rs/kg, we have obtained the same Indian import
statistics for HTS category 4415.1000 for the months June 1996 through
January 1997. The monthly statistics for June 1996 through January 1997
are all reported in kgs. Therefore, for these final results, we used
only data that are clearly labeled as Rs/kg and we calculated a POR
average of 116.31 Rs/kg. Since these data are contemporaneous with the
POR, no inflation adjustment is necessary.
Comment 36: Surrogate for boxes used by Wafangdian
Wafangdian argues that the Department should use Indonesian import
statistics to value its wooden boxes (HTS 4415.10110), rather than
Indian import statistics, because this figure is more specific to the
plywood boxes used by Wafangdian during the POR.
Department's Position: We have not adopted Wafangdian's suggestion.
There is no evidence on the record that indicates that the boxes used
by Wafangdian are more like the boxes covered by Indonesian import
statistics than those covered by Indian import statistics. Therefore,
we have continued to use Indian import statistics for valuing the
wooden boxes used by Wafandian.
Comment 37: Inappropriate use of facts available
Chin Jun claims that the Department inadvertently resorted to facts
available for models where FOP data were available. Chin Jun argues
that these models were produced by ZX and that the Department,
therefore, should use ZX's FOP data.
Department's Position: We agree with Chin Jun that ZX's FOP data
should be applied to the appropriate corresponding U.S. sales. We have
reviewed our calculations and made the necessary changes.
Final Results of the Review
As a result of our analysis of the comments we received, we
determine the following weighted-average margins to exist for the
period June 1, 1996, through May 31, 1997:
------------------------------------------------------------------------
Margin
Manufacturer/exporter (percent)
------------------------------------------------------------------------
Wafangdian.................................................. 0.00
Luoyang..................................................... 3.20
CMC......................................................... 0.03
Xiangfan.................................................... 33.18
Zhejiang.................................................... 0.05
Wanxiang.................................................... 0.00
Liaoning.................................................... 0.02
Premier..................................................... 7.21
[[Page 63860]]
Chin Jun.................................................... 0.04
ZX (the new shipper)........................................ 0.00
PRC Rate.................................................... 33.18
------------------------------------------------------------------------
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. With respect to
export price sales for these final results, we divided the total
dumping margins (calculated as the difference between NV and export
price) for each importer/customer by the total number of units sold to
that importer/customer. We will direct Customs to assess the resulting
per-unit dollar amount against each unit of merchandise in each of that
importer's/customer's entries under the relevant order during the
review period. Although this will result in assessing different
percentage margins for individual entries, the total antidumping duties
collected for each importer/customer for the review period will be
almost exactly equal to the total dumping margins.
For constructed export price sales, we divided the total dumping
margins for the reviewed sales by the total entered value of those
reviewed sales for each importer/customer. We will direct Customs to
assess the resulting percentage margin against the entered Customs
values for the subject merchandise on each of that importer's/
customer's entries during the review period. While the Department is
aware that the entered value of sales during the POR is not necessarily
equal to the entered value of entries during the POR, use of entered
value of sales as the basis of the assessment rate permits the
Department to collect a reasonable approximation of the antidumping
duties which would have been determined if the Department had reviewed
those sales of merchandise actually entered during the POR.
The following deposit requirements will be effective upon
publication of this notice of final results of administrative review
for all shipments of TRBs entered, or withdrawn from warehouse, for
consumption on or after the date of publication, as provided by section
751(a)(1) of the Act: (1) The cash deposit rates for the PRC companies
named above will be the rates shown above, except that for exporters
with de minimis rates, i.e., less than 0.50 percent, no deposit will be
required; (2) for all remaining PRC exporters, all of which were found
not to be entitled to separate rates, the cash deposit will be 33.18
percent (the proceeding's highest margin); (3) for non-PRC exporters,
Premier and Chin Jun, the cash deposit rates will be the rates
established above; (4) for non-PRC exporters of subject merchandise
from the PRC, other than Premier and Chin Jun, the cash deposit rate
will be the rate applicable to the PRC supplier of that exporter. These
deposit requirements shall remain in effect until publication of the
final results of the next administrative review.
This notice also serves as a final reminder to importers of their
responsibility under 19 CFR 353.26(b) 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 the only reminder to parties subject to
administrative protective orders (``APO'') of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with 19 CFR 353.34(d) or conversion
to judicial protective order is hereby requested. Failure to comply
with the regulations and terms of an APO is a violation which is
subject to sanction.
This administrative review and this notice are in accordance with
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR
353.22.
Dated: November 9, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-30739 Filed 11-16-98; 8:45 am]
BILLING CODE 3510-DS-P